fasten your seat belts the eu Parliament elections

Estimates vary, but most pollsters are predicting that  as many as one in five of the European Parliament’s seats could go to so-called anti-EU populist and nationalist candidates, once voters in all 28 countries have had their say after the polls close on 25 May.

In Britain, the UK Independence Party is expected to make gains, while in France it’s the National Front, and in Italy, you have La Lega Norde (Northern League) and the Five Star Movement (M5S), the party headed by comedian/activist Beppe Grillo.

The shift in the dynamics of the European Union is likely to continue as the summer progresses, as a new president of the European Commission is due to be elected in July, to succeed José Manuel Barroso. It will be the first time the Commission’s president is chosen by the European Parliamentarians rather than by the EU member states.

What it will mean for our industry

The question those in Europe’s financial services industry are naturally asking, therefore, is how, once they bed into their new jobs, these newbie euro-sceptic and/or nationalist MEPs ultimately will deal with the existing and, many say, over-large body of regulation that their predecessors have left them with.

It is a good question. Because MEPs from such parties tend to arrive full of passion for the cause their party advocates: in this case, some variation of fairly unadulterated euro-scepticism/pro-nationalism.

But once they are on the inside of the Louise Weiss building in Strasbourg – the most important and largest of the various buildings in three European cities these MEPs will come to know well during their five-year terms in office – some observers are predicting that their euro-sceptic leanings may begin to falter, as they begin to understand the issues better.

For they will be hearing from organisations like mine – the Fédération Européenne des Conseils et Intermédiaires Financiers (FECIF) – for example, that over-regulation by the MEPs they are replacing is at least partly responsible for Europe’s chronic unemployment. They will also be told, by us and others, that Europe’s financial services sector is the one that has suffered the most from the regulatory tsunami that has taken place over the past five years. (See table, below.)

They will be shown data that reveals that more than 10% of Europe’s almost 500 million people are currently unemployed. They will hear from FECIF that an estimated 150,000 European financial intermediaries have been forced out of business by over-regulation, with a knock-on loss of roughly 500,000 additional administrative jobs.

Of course, whether we and other pro-business lobbyists  will manage to convince this particular cohort of new MPs to take a more financial services industry-friendly approach, and even to begin to remedy some of the problematic regulations left by their predecessors, remains to seen. But we certainly intend to do all we can to encourage it.

A fundamental question these MPs will face is one that governments everywhere are wrestling with: how to reconcile the needs and demands of an increasingly global world, in which people and businesses operate across borders, with legitimate and deeply-rooted ideas about democracy, nationalism and peoples’ rights of self-determination.

In the meantime, it should be noted, as the British academic and historian Niall Ferguson observed recently in the Financial Times, that despite all the talk about the importance of the anti-EU and pro-nationalist candidates in the coming election, there is a widespread view that “most voters will back mainstream [European] parties” when they actually cast their ballots.

“Unlike in the 1930s, but as in the 1870s” – two similar periods in history, when deep economic crises, like the one Europe is still attempting to pull itself out of, were followed by political backlashes – “the centre [in 2014’s European Parliamentary elections] will hold,” Ferguson predicted.

If, then, the new European Parliament emerges largely centrist but with a strong and passionate undercurrent of anti-EU populism and nationalism, what are the chances that we will see the changes we are hoping for in terms of legislation?

Encouraging signs

On the positive side, the European Commission just recently has shown that it is aware that the time has come to change its strategy, and that there is a need to begin to dramatically reduce the administrative burden on people and businesses that it has helped to create.

The most problematic regulation, as we see it, was introduced by well-intentioned and possibly panic-stricken EU politicians in the wake of the global financial crisis of 2008. They continued adding to it after the Eurozone crisis struck in early 2009, after 10 central European and Eastern European banks were forced to seek bailouts, and Greece’s banks and its government were revealed to be in particularly bad shape.

But last autumn, outgoing commission president Barroso called on Brussels to be “less interfering”, and more mindful of the costs of its regulations on EU businesses and citizens.

Antonio Tajani, one of the six European Commission vice presidents, has also become outspoken on the tsunami of post-financial crisis EU regulations recently, with a call for a “regulatory fitness programme’, or REFIT, to assess their impact.

For our industry, though, the problem of over-regulation is particularly complicated, because of the importance in financial services of being able to operate across national borders – and the often conflicting determination of individual countries to oversee their own markets and in particular, to set their own tax rates.

National regulators in these countries complicate the situation still further with their bias in favour of large institutions and against intermediaries, whose business they don’t really understand; and by their lack, in many cases, of democratic process, as they go about wielding their legislative powers.

The result has been that any semblance of a   single market held together with harmonised legislation has been lost.

What’s more, democratic principles are at risk, and private life and private data are increasingly endangered.
(This, in fact, was the courageous and correct judgment of the European Court of Justice in April, when it halted an EU programme on retaining user internet data, citing privacy and human right concerns, arguing that “by requiring the retention of those data and by allowing the competent national authorities to access those data, the [relevant legislation] interferes in a particularly serious manner with the fundamental rights to respect for private life and to the protection of personal data”.)

The unprecedented case had been brought against the European Commission by theHigh Court of Ireland and the Constitutional Court of Austria.

Hanging on

While the election ritual plays out over the next few weeks and months, we and our members at FECIF will have little choice but to wait and watch, contributing where we can to the better understanding of the new crop of lawmakers once they are in place.

We represent 230,000 individual practitioners now, down from 265,000 just five years ago, who in turn are members of 19 national trade bodies located in 18 EU member states. We also have 19 corporate members, from 18 European Economic Area-member states. (This group includes some 27 EU member states plus Iceland, Liechtenstein and Norway.)

Our mission will be to educate the newbie MEPs on how our industry works, where their regulatory input is welcome and even to be encouraged, and where their predecessors have got things badly wrong in the past.
We look forward to working with the rest of the industry on this, and invite you to get in touch with us – if you haven’t already – as soon as possible.

Vincent J. Derudder is the former chairman (now honorary chairman) of the Fédération Européenne des Conseils et Intermédiaires Financiers (European Federation of Financial Advisers and Financial Intermediaries), as well as chief executive of Nucleus Euro-Advisers, a private investment company based in Luxembourg, and a member of the independent expert group committee of the European Commission on EUSD revision.