ECON Committee shake-up in 2019

The 2019 European elections will bring tremendous changes to the European Parliament. How large will Eurosceptic political groups become? Which alliances will be required to pass legislation and keep the EU functioning? The ECON Committee, of vital importance for the financial industry in the legislative process, is likely to face significant changes in its composition and functioning.

Here, we explore what the next ECON Committee might look like following the European elections and Brexit and analyses what its first challenges will be with regard to unfinished legislative business and the appointment of MEPs to key positions. We also outline the overall change in the political dynamics and finish with an analysis of how Hume Brophy could assist you in navigating these changes and adapting your advocacy strategy.

 

1: High turnover expected in the ECON Committee

 

Change in leadership positions

The Chair and the four Vice-Chairs of the Committee will change. The current Chair, Roberto Gualtieri (S&D, Italy), is expected to seek re-election but the support for the Italian Socialist Party is not strong and he may therefore struggle to return as an MEP. As for the Vice-Chairs, many will change. Brian Hayes (EPP, Ireland) has taken up a position in the private sector and will not be running again. Kay Swinburne (ECR, UK) cannot run for another term due to Brexit. Peter Simon (S&D, Germany) and Ludek Niedermayer (EPP, Czech Republic) may also struggle in their re-election bids.

Similarly, many current ECON Coordinators are unlikely to return. S&D Coordinator Pervenche Bères has decided not to seek re-election. Former ALDE Coordinator Ramon Tremosa was asked to leave the ALDE group as a result of his support for the Catalonian separatist movement which was at odds with the other Spanish members of the group. Therefore, only one remaining Coordinator, Sven Giegold (Greens, Germany), is likely to return as the Coordinator for his group.

Many reputable and experienced ECON MEPs who have considerable influence in the Committee are choosing to retire or return to domestic politics. These include Burkhard Balz (EPP, Germany), who left to take a position in the German Central Bank, Jakob von Weizsäcker (S&D, Germany) who was appointed chief economist at the German finance ministry in early 2019, as well as Werner Langen (EPP, Germany), Olle Ludvigsson (S&D, Sweden) and Gunnar Hökmark (EPP, Sweden). In addition, as a result of the ongoing Brexit negotiations, the European Parliament will probably not see British MEPs return. In the ECON Committee, British MEPs in general have been open to industry feedback and have wielded influence in negotiations.

All in all, only a limited number of the current MEPs in the ECON Committee who are very active and who experienced the post-crisis regulatory overhaul of the last ten years, are likely to be a part of the next ECON Committee. Markus Ferber (EPP, Germany) has a good chance of being re-elected in his constituency in Bavaria. As the rapporteur on MiFID II and IFR/IFD, his expertise in financial services legislation makes him likely to have an influential position in the Committee, such as EPP coordinator.

Another face familiar to the industry is Othmar Karas (EPP, Austria) who heads the list of his party (ÖVP). He has been instrumental in the negotiations on the CRR/CRD and the ESAs review. It is not clear, however, whether he will want to sit on the ECON Committee again. Sophie in‘t Veld (ALDE, Netherlands) and Sirpa Pietikäinen (EPP, Finland) are also likely to return. Sirpa Pietikäinen has shown leadership in sustainable finance as co-rapporteur on the framework to facilitate sustainable investments and shadow rapporteur on disclosures. These will be important policy areas for the next legislature. Paul Tang (S&D, Netherlands), rapporteur on the digital tax, CCTB, disclosures and securitisation files is seeking re-election and, if he succeeds, he could get a prominent position.

Given their experience and expertise, these MEPs are therefore expected to be leading figures in the next ECON Committee.

Below is an overview of the ECON MEPs running again, their chances of being re-elected or not, and the ones who decided not to stand for re-election. This list is not exhaustive and focuses on the most active current MEPs.

 

 

New MEPs, new profiles

Many newly elected MEPs are not expected to have strong institutional networks, or to be familiar with the legislative files handled by the ECON Committee, especially as regards the post-crisis financial services reforms. In the candidate lists that have been made public so far by political parties, numerous candidates have not been active at the national or European level. While this relatively clean canvas certainly provides an opportunity for industry representatives to paint a fresher picture, it is clear that some MEPs will be more receptive to industry help than others.

 

An expanded mandate for the next ECON Committee?

There might be some changes in the structure and mandate of the next ECON Committee. The TAX3 Committee, which currently has dealt with tax evasion, unfair state tax practices and money laundering, recently discussed the idea of a more permanent home for debating taxation issues. Following continued revelations over the last five years (including LuxLeaks, the Panama Papers and the Paradise Papers), this Special Committee was set up in early March 2018 with a twelve-month mandate. Some MEPs sitting on this Special Committee are convinced of the need for a permanent committee, but the question is whether it should be independent or, as the Committee’s final report of 27 February recommended, a sub-committee of ECON.
The decision on whether to change the competences of Committees will rest with the Conference of Presidents, composed of the European Parliament President and the political group leaders. Negotiations on this issue will have to be monitored closely in June.

 

2: First challenges of the new ECON Committee

 

Appointment process

Within weeks of the elections, individual MEPs will be allocated to Committees. These decisions are based on a combination of the preferences of each MEP and the size and weight of their political groups. A committee constitutive meeting is expected to take place on 8 July.
The first ECON Committee meetings will then take place on 22-23 July. During the first meeting, the Chair and four Vice-Chairs will be elected for a term of 2.5 years. The European Parliament will commence its business as usual in September/October 2019 with ECON Committee meetings taking place on 4-5, 12 and 23-24 September. The ECON Committee is then expected to hold its hearings for the relevant European Commissioners designate on 2-3 and 7-8 October.

 

Unfinished business

Several legislative files will not be completed by the end of this parliamentary term. Those which have completed their first reading, which includes approval at plenary level, remain valid after the May elections; the newly-elected European Parliament cannot reopen them. However, everything else is deemed unfinished business and lapses unless the Conference of Presidents, on the recommendation of the Committee, takes a decision to resume existing work in the new term. The Conference of Presidents, as the sole functioning body that bridges the two mandates, plays an instrumental role at the beginning of the new term.
Recommendations to the Conference of Presidents to resume unfinished legislative work will depend on the composition of the next European Parliament and the political priorities of the biggest political groups. It may also depend on whether the rapporteur and shadows on the file have been re-elected. If the work done in Committee on a file resumes and the rapporteur and shadows have not been re-elected, MEPs from the same political group could be appointed. In addition, if a new proposal by the European Commission is expected, unfinished business may not resume.

 

3: Overall change in the European Parliament’s political dynamics

 

The European elections will bring changes in the way coalitions are formed following declining support for “mainstream” political parties and a rise in conservative and far-right tendencies.

The end of the grand coalition?

The two major political groups, EPP and S&D, currently enjoy a combined majority of 55% in the European Parliament. This grand coalition has allowed the groups to compromise with each other to get legislation approved. After the elections their combined numbers will probably not secure an absolute majority:

  • The EPP group (which currently holds 29% of the seats) will likely remain the largest political group, but a significant number of voters are expected to transfer their support from candidates in the EPP to ALDE or Eurosceptic and more conservative political groups. Following Hungarian Prime Minister Viktor Orban’s recent anti-Brussels campaign and hard-line stance on immigration, the future of the Fidesz party’s 12 MEPs in the EPP is uncertain.
  • The S&D group (which currently control around 25% of the seats) is expected to lose a considerable number of seats following the decline in the popularity of left-wing parties across the EU and following Brexit (19 UK Labour MEPs sit in the current S&D group).

These developments will have an impact on the way political alliances are concluded to pass legislation. The EPP and S&D will have to work more closely with ALDE, ECR and the Greens, if they wish to achieve constructive pro-European coalitions:

  • The ALDE group will play a decisive role in building a pro-European parliamentary majority as it is expected to win a larger number of seats compared to the 2014 European elections, regardless of whether French President Emmanuel Macron’s La République en Marche decides to join.
  • The Greens are also expected to become a more influential political force in the next European Parliament, probably at the expense of the S&D, as they were recently encouraged by good outcomes in regional elections in Germany, Belgium and Luxembourg. Their two lead candidates, Bas Eickhout and Ska Keller, have already warned that the Greens would only join an EPP-led coalition if the EPP promises fundamental changes in its programme.
  • As for the radical left, we do not expect any major changes in popularity. The GUE currently has 51 seats.

 

 

Uncertainties regarding the organisation of political groups to the right of the EPP

The major change in the European Parliament’s political dynamics is expected to come from the right of the political spectrum. Conservative and far-right parties are likely to surge in popularity in a number of Member States, such as Matteo Salvini’s Lega in Italy, Marine Le Pen’s National Rally in France, the AfD in Germany, the FPÖ in Austria and the PiS in Poland. These parties will play a material role in the reshuffle of political groups in the European Parliament and have seen recent increases in popularity in the Member States that send sizeable numbers of MEPs such as Germany (with 96 seats), France (79), Italy (76), Spain (59) and Poland (52).

It is still unclear who will form political groups with whom in the new Parliament. The way deals will be struck will depend heavily on the number and size of the groups to the right of the EPP and on whether they can or are willing to work together to form a coherent unit and concrete political influence:

  • The ECR group, which is currently the third largest political group, will lose its 18 Conservatives after Brexit, but could prove an attractive alternative home for conservative MEPs in the context of the nationalist tightening in some right-wing parties. The French party Debout la France and the Dutch party Forum for Democracy have both announced their intention to join the ECR group following the European elections. Other major political parties which are already members of the group include PiS in Poland (expected to increase its number of MEPs), the New Flemish Alliance (N-VA) in Belgium, the Civic Democratic Party (ODS) in the Czech Republic, the Swedish New Democrats and the Danish People’s Party.
  • The EFDD group, which currently includes UKIP, the 5Star movement and the AfD among its members, is not certain of being able to survive following UKIP’s departure. The positioning of the very diverse 5Star movement within the next European Parliament is still unclear as it may look for alliances with the left-wing or even with the ENF. In addition, many national parties in the EFDD have only one MEP, which reinforces the group’s fragility.
  • The future of the ENF may depend on the Lega of Matteo Salvini, who currently sits alongside the Austrian FPÖ and the French National Rally but is exploring alliances outside the far-right political grouping before making a decision. Indeed there have been recent talks of an alliance between Salvini and Poland’s governing PiS, which is a member of the ECR group.
    It remains to be seen after the elections whether the political parties ally into 2 or 3 groups. This will depend on whether they are able to come to a common understanding of joint policy goals, which should not be taken for granted given the wide diversity of views among them and their leaders’ charismatic and strong personalities. It could also depend on how ‘anti-establishment’ they wish to be.

A broad alliance of these groups seems currently unlikely to emerge. However, if MEPs are able to organise themselves, they may be able to form an “anti” bloc on certain issues. This could in turn slow down the approval of the new European Commission this summer, as well as the passage of EU legislation. As a result of more political bargaining between groups to reach a majority, we should prepare for less predictable policy outcomes.

 

Reminder on political groups in the European Parliament

What makes a political group?
A political group needs a minimum of 25 MEPs, elected in at least one-quarter of the Member States – that’s currently seven countries but six after Brexit.

Why do political groups matter?
A group that meets the criteria above benefits from:

  • Funding to cover staff and administrative costs
  • Appointment to influential positions, ie: Committee Chairs, Vice-Chairs, rapporteurs, group coordinators, etc.
  • Allotted speaking time

 

How can Hume Brophy help you navigate these changes?

 

Significant turnover and a high degree of political unpredictability face the next European Parliament. The ECON Committee will not be spared. Change is inevitable and our advice is simple: financial services industry players should be prepared for upcoming challenges and seek ways to turn them into opportunities.

Organisations will need to review and adapt their narrative and messaging to the new context, and be ready to explain their role and purpose to a new cohort of politicians in a constructive way. We at Hume Brophy can help you stay on top of the changes and transition, and can assist you in developing a smart and tailored approach to the new ECON Committee.

 

Contact us to discuss further: brussels@humebrophy.com. Tel: +32 (0)2 234 6860