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Open Europe embraces digital change

Posted by on 18/12/14
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Reforming rules on in-work benefits doesn’t require treaty change

Posted by on 11/12/14
Following David Cameron's speech on immigration, much has been made of his comments that the package of measures he proposed to reform EU free movement would require treaty change.

In some cases, the speech was ambiguous about what exactly was being proposed. For example, did Cameron really say EU migrants will need a job offer before coming to the UK? This is important because it has legal implications regarding whether some, all, or none of the proposals require treaty change, changes to secondary EU legislation or simply changes to domestic law. Although, politics will of course also play a major part.

In addition, some have questioned whether the proposal, outlined by Professor Damian Chalmers and our Research Director Stephen Booth and adopted by Cameron, to limit EU migrants' access to in-work benefits for a certain period of years could be achieved without treaty change, as the authors claim.

Today we have published  Chalmers' and Booth's assessment of the legal implications of the measures proposed in the Prime Minister's speech and a restatement of the case for why access to in-work benefits can be restricted via amendments to EU legislation rather than a treaty change.

Safe to say much of this is legally complex, but below is a summary of a summary of a longer legal note by Professor Damian Chalmers, which you can read in full here.

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David Cameron's speech can be divided into four broad types of demand:

1. Four-year restriction on EU migrants’ access to in-work and child benefits

David Cameron mentioned two proposed reforms:

a) “once they are in work, they won’t get benefits or social housing from Britain unless they have been here for at least four years.”

This could be achieved via amendments to EU legislation: This is the most legally complex of the proposals but we argue that it does not require Treaty change for two reasons. Firstly, access to in-work benefits is currently granted in EU law by virtue of a piece of secondary legislation, rather than by the Treaty article on free movement of workers. Secondly, the Treaties grant considerable discretion to the EU legislature (the Council of Ministers and the European Parliament) to place restrictions on access to such benefits provided that the legislation facilitates free movement more generally (which the relevant Directive would continue to do), the restrictions are based on objective criteria and are not disproportionate to the objectives they pursue.

b) “If their child is living abroad, then there should be no child benefit or child tax credit at all no matter how long they have worked in the UK and no matter how much tax they have paid.”

Depending on what is sought this could be achieved under domestic law or amendments to EU legislation but if the objective is a hard and fast residence requirement this could be achieved via amendments to EU legislation rather than Treaty change.

2. Tighter restrictions on EU jobseekers

David Cameron mentioned two proposed reforms:

a) “We want EU jobseekers to have a job offer before they come here and to stop UK taxpayers having to support them if they don't.”

This depends on exactly what is proposed. If he meant that any EU citizen must have a job offer before they can come into the UK, this would certainly require Treaty change.

However, read in combination with the pledge to “stop UK taxpayers having to support them”, the proposal is better interpreted as suggesting that no social benefits will be granted to jobseekers. EU law already establishes that jobseekers are not entitled to social assistance and therefore such a reform would not require changes to EU legislation.

b) “We also want to restrict the time that jobseekers can legally stay in this country. So if an EU jobseeker has not found work within six months, they will be required to leave.”

In principle, the UK can already do this under its domestic law. EU law only grants a right of residence for more than three months to those who are employed, self-employed, and economically self-sufficient as well as their family members.

However, the ECJ has ruled that individuals cannot be expelled as long as they “can provide evidence that they are continuing to seek employment and that they have a genuine chance of being engaged”. While the onus is on the individual to prove this, clarifying what this condition means could be achieved by amending EU legislation. A hard and fast six month deadline would likely require Treaty change.

3. Abuse of free movement

David Cameron mentioned two proposed reforms:

a) “stronger powers to deport criminals and stop them coming back…and tougher and longer re-entry bans for all those who abuse free movement including beggars, rough sleepers, fraudsters and people who collude in sham marriages.”

Those deported at the time of conviction can be refused re-entry under existing EU law. Indeed, the German government has said it will use its domestic law to impose re-entry bans of five years for those who commit benefit fraud. The potential difficulty is for those EU citizens with family in the UK, who may be able to appeal deportation under the rights to family life guaranteed by the European Convention on Human Rights.

In the case of significant criminal offences where the individual has served a long prison term, the deportation may be several years after the offence, and it is open to the individual to argue that they are a reformed character. This poses difficulties as the individual threat to public policy must be a present threat. Albeit this requirement is currently imposed by an EU Directive, we believe that, if the provision were repealed, there is a strong chance that the ECJ would reinstate it as a Treaty requirement.

b) “We must also deal with the extraordinary situation where it's easier for an EU citizen to bring a non-EU spouse to Britain, than it is for a British citizen to do the same. At the moment, if a British citizen wants to bring, say, a South American partner to the UK, then we ask for proof that they meet an income threshold and can speak English. But EU law means we cannot apply these tests to EU migrants.”

This would likely require Treaty change: There are a number of judgments where the ECJ has stated that refusing to grant a non-EU national family member residence would violate the Treaty because it would discourage the EU citizen from exercising their rights to free movement.

Alternatively, it would be possible for new EU legislation to harmonise requirements on family reunification between EU citizens and non-EU nationals, so that the latter could only join the EU citizen in another member state if they meet certain requirements. However, this would entail harmonisation in an area (non-EU migration) where successive UK Governments have sought to limit the EU’s influence. Concern to prevent marriages to citizens from other member states being used as a vehicle for marriages of convenience can be addressed through tightening up existing EU legislation.

4. Tighter restrictions on migration from new EU member states

David Cameron proposed:

“So we will insist that when new countries are admitted to the EU in the future, free movement will not apply to those new members until their economies have converged much more closely with existing Member States.”

The UK could use its existing veto over new countries joining the EU to insist on these terms.




40 days and 40 nights of Jean-Claude Juncker

Posted by on 10/12/14
By Andrew Duff Juncker’s first forty days of his five year mandate have been anything but uneventful. But Juncker and his team will need lots of good luck to avoid real trouble ahead.

La dangereuse course au temps de D Cameron

Posted by on 04/12/14

Que se passe t il entre les Britanniques et l’Europe ? ou plus précisément entre David Cameron leur premier ministre et l’Union européenne ? en annonçant vouloir limiter l’immigration entre européens, ce dernier a jeté un pavé dans la mare, une nouvelle bombe contre l’union européenne.

Plus qu’un bras de fer, c’est une vraie confrontation, qu’entame David Cameron avec l’Union européenne, un rapport de force avec les autres états membres et surtout avec les citoyens de l’Union. Car en souhaitant limiter la circulation et l’installation des Européens sur le territoire britannique, officiellement pour des raisons sociales, il porte un coup à la citoyenneté européenne, à son concept et à ses contenus. C’est très lourd car la citoyenneté européenne est un des fondamentaux de l’Union européenne.

Veut il vraiment quitter l’UE ?

C’est en tout cas la menace qu’il brandit depuis plusieurs années. Il annonce même un référendum sur le la question du maintien ou  non du Royaume-Uni dans l’UE. Mais en même temps il ne prend pas de risque. Car son référendum n’aurait lieu qu’en 2017 après les élections législatives et… seulement si sa majorité est réélue. Autrement dit, si les conservateurs perdent les élections il n’y aura pas de referendum.

Des conservateurs anti européens ?non pas seulement. le Royaume-Uni connait une poussée tes forte du parti anti européen d’extrême droite UKIP. Mais c’est un parti qui, s’il a des députés au Parlement européen n’a pas réussi a s’associer avec d’autres mouvements similaires dans les Etats membres. Il n’y a pas, par exemple, d’alliance avec le Front national. Mais, il y a également des eurosceptiques au sein d’autres partis en grande Bretagne. Notons toutefois, que les chefs d’entreprises, les militants travaillistes et centristes sont pour, non seulement un maintien dans l’Union mais pour un approfondissement. Ils sont dans une stratégie opposée à celle de Cameron.

Quelle est la strategie de  Cameron?

A mon avis il en a plusieurs. Une première est d’obtenir ce qu’il appelle «  un nouvel accord avec l’UE ».  Son idée est clairement affichée d’avoir  un nouvel «équilibre entre Bruxelles et Londres ». Mais alors il remet en cause le Traité de Maastricht et de fait l’appartenance du RU à l’UE.

Une autre est de faire patienter les anti européens et les eurosceptiques. Il sait au fond de lui que son pays ne peut quitter la Communauté des Européens. il ne veut pas non que les britanniques aient  a se prononcer par un vote pour ou contre l’Europe. Il sait que le jeu est dangereux. Ce que le Royaume-Uni perdrait en quittant l’UE. Ce serait irréversible et surtout il pourrait être pris au mot.

En repoussant le referendum après 2017, il espère que l’opinion changera et reconnaitra l’intérêt communautaire. Il lui faudra alors aller plus loin. et sans doute faire un pas vers la monnaie unique.

Les européens réagissent

Chez les Européens la coupe commence à déborder. Il y a comme un certain ras le bol de la position des Britanniques. Leur souci « c’est eux et jamais l’intérêt communautaire ». Des voix s’élèvent pour signifier que l’on ne laissera pas le Royaume-Uni détruire l’Europe. C’est le cas, par exemple, du ministre des affaires étrangères polonais.

 

Une question est désormais dans les esprits : “jusqu’à quel prix sommes nous prêts à payer pour garder le Royaume uni dans l’Union“? Pas si cher que cela finalement. Et Cameron le sait. Sa marge de manœuvre est réduite. Car pris au mot, son referendum il peut le faire maintenant et ne pas attendre 2017. L’Union, quand à elle, avec ses nouveaux dirigeants, au Conseil, à la Commission et au Parlement continue à avancer et pourrait bien connaître en peu de temps un nouveau regain d’intérêts.

 

6 arguments Cameron can make to help his EU free movement reform

Posted by on 03/12/14
Polish Europe Minister Rafał Trzaskowski's comments on Monday's Newsnight, where he said David Cameron’s plans to stop EU migrants from claiming benefits for the first four years after they arrive in Britain would be a "red line" for Warsaw, were widely cited in the UK media, much like Polish Ambassador Witold Sobkow's response to our initial report which heavily influenced Cameron's immigration speech.

As expected all along, Poland will be the biggest single obstacle to the changes.

Some of the reluctance is understandable. Following Poland's accession into the EU after having spent too long on the wrong side of Europe's historic dividing lines, Poles understandably do not want to accept anything that smacks of 'second class' status within the EU. While many Poles may privately think the proposals are reasonable, they also expect their government to stand up for the interests of Poles abroad, and any Polish government will find this hard to sell domestically, including a Law and Justice-led one (the issue has already lead to interesting discussions within the ECR group).

So how should Cameron deal with this? Here are six arguments he can make:

1. These reforms are the best way to let free movement stand: Cameron defended the principle of free movement in his speech and he did not pledge to impose an 'emergency brake' or quotas despite substantial domestic pressure, as to his credit Trzaskowski recognised. This reform package will allow the UK to stay signed up to free movement rules - a key Polish objective.

2. The UK cannot become a contribution-based system overnight: We hear this argument a lot out of Warsaw: "If the UK is concerned that its welfare model is too open, it can re-design it to bring it into line with those on the continent - tomorrow if it so wished. It can be done unilaterally and has nothing to do with the EU."

There are several problems with this position. Re-organising the UK's entire welfare system would be an absolutely massive undertaking - politically, economically and administratively. It would basically involve re-writing the UK's entire postwar settlement. This may or may not be desirable, but it simply won't happen any time soon, especially as a result of EU pressure. For one, the UK public won't have it.

Cameron could even bat the ball back in Warsaw's court by arguing that "It would be super-easy for you to adopt more ambitious emissions reductions. You just need to replace your dependence on coal with renewable energy, and you're in line with the rest of the EU. It can be done unilaterally and has nothing to do with the EU."

3. The UK shouldn't have to choose between keeping its welfare model and staying in the EU: The logical extension of the argument above is that only a French or Germany style insurance system is compatible with EU membership. Clearly, giving the EU an effective veto over such a sensitive area is not politically sustainable - in addition to being awfully discriminatory against the UK. Changing the rules around in-work benefits on the other hand is a pragmatic way to in effect bring the UK into line with continental systems without challenging the country's entire political order.

4. Poles and other EU migrants in the UK could be worse off under such a system: Ironically, if the UK were to adopt a continental model and scrap in-work benefits and tax credits for low-wage earners entirely, it would hit EU migrants in the UK much harder than the introduction of a temporary qualification period as it would permanently reduce their income. Is this really a more desirable outcome from the perspective of the Polish government and other opponents of Cameron's proposals?

5. Workers on low wages do not contribute significantly to the welfare pot: While the vast majority of EU migrants come to the UK to work and make a positive contribution to the UK economy, as our research showed, workers on low-wages pay very little in income tax and national contributions due to the UK's generous tax free allowance (£10,000 per year and rising) and national insurance contributions threshold (£153 per week). This means that far from funding their own benefits, these workers, especially if they have dependent children, can actually be a net burden on the public purse. Furthermore, despite their misleading name, tax credits in the UK are a cash benefit funded via general public spending and are not correlated to individuals' tax payments.

6. The principle enjoys widespread public support across the EU: The basic principle of establishing a link between contributions and right to access benefits enjoys wide-spread support in other EU member states as the YouGov polling below demonstrates:


Finally, tone is also vital. Cameron made a big mistake by singling out Poles earlier this year leading to the deterioration in relations as revealed in the leaked Wprost tapes, a mistake which he avoided making again in his immigration speech last week. The rules will apply to everyone from the rest of the EU and not one particular group or country. 

Sarkozy wins back party leadership, but road to French presidential election remains very long

Posted by on 01/12/14
Nicolas Sarkozy took a further step on the road to his political comeback over the weekend, as he won back the leadership of France’s centre-right UMP party. The former French President secured 64.5% of votes in an online survey of UMP members, finishing well ahead of former Agriculture Minister Bruno Le Maire (29.2%) and outsider Hervé Mariton (6.3%).

Sarkozy was always going to win, but the outcome is most certainly below what he was hoping for. In 2004, he had sailed through the leadership election with over 85% of the vote. Still, he holds again the reins of his “political family” – to use his own words – and has already made at least two interesting announcements:
  • The UMP will change name before the next round of local elections in March 2015. 
  • He will set up a committee of former UMP prime ministers to help him manage the party – although the idea has reportedly not gone down particularly well with François Fillon, one of the former prime ministers supposed to sit on this committee. 
On this blog, we have noted how Sarkozy’s political comeback has the potential to really spice up the French debate over Europe. The former French President has this year repeatedly spoken of returning half of the EU’s powers to national governments. He also wants to scrap the EU’s passport-free Schengen travel area in its current form and replace it with a more selective ‘Schengen II’, which could only be joined by countries adopting the same immigration policies.

Sarkozy’s political strategy looks pretty clear: take a tougher, more ‘realist’ stance on Europe and immigration to stop the UMP losing voters to Marine Le Pen’s Front National. What is far from clear at this stage, though, is whether the new line will draw unanimous support from the rest of Sarkozy’s party.

Another important point to keep in mind is that the victory in Saturday’s party leadership poll does not automatically make Sarkozy the centre-right candidate for the 2017 French presidential election. A separate ‘primary election’ is due in 2016, when Sarkozy is going to face at least one much tougher rival: former French Foreign Minister Alain Juppé.

How that duel will end is anyone’s guess, but recent opinion polls suggest that Juppé would have a better chance of victory in case of an ‘open primary’ – where members of smaller centrist parties can vote alongside with UMP members to elect a single centre-right presidential candidate. Sarkozy has so far spoken in favour of an ‘open primary’, although he looks reluctant to involve the Democratic Movement (MoDem) in the exercise. The centrist party led by François Bayrou actually endorsed François Hollande in the run-off of the 2012 presidential election against Sarkozy, and Bayrou has made no secret of his support for Juppé as the centre-right candidate in 2017.

Finally, Sarkozy remains (directly or indirectly) involved in a series of pending legal cases that may well dog his campaign.

The road to 2017 is still very long. 

Objectifs et actions de la Commission Juncker.

Posted by on 29/11/14

Quels sont les objectifs et quelles vont être les actions de la Commission Juncker ?

Extraits de la chronique RCF du 12 novembre 2014

D’abord redonner des couleurs a une Union inquiète et fébrile. La montée des nationalismes est, avant d’être une source d’inquiétude pour le système démocratique européen, le résultat d’un immobilisme et d’une incapacité à faire de l’Union une puissance plutôt qu’un simple marché. Le défi est là pour Juncker qui qualifie lui même “sa” Commission de celle de “la dernière chance”.

Pour y arriver il a définit devant le Parlement européen 10 priorités et ouvert 5 grands chantiers. L’ensemble tournant autours de trois axes principaux: Compétitivité et emploi en Europe, une Europe au service de ses citoyens et capable d’agir sur la scène internationale.

On n’est pas étonné de voir que la croissance est inscrite dans le projet de la nouvelle commission.

Elle en est même le thème central. il y a aussi une poursuite dans la mise en oeuvre depuis 2010 de la stratégie de réponse aux crises de 2008 et 2009. Une croissance qui se veut intelligente en utilisant les leviers de l’éducation, de la formation et du numérique, durable en agissant sur l’environnement, la biodiversité et l’énergie et inclusive car il s’agit de réduire la pauvreté et les inégalités sociales qui de développent dans les 28 états membres de l’Union européenne.

 

Cameron’s speech: The response (so far) from around Europe

Posted by on 29/11/14
The big speech has been delivered - you can read our response here, but below we round up the reactions from around Europe - remember, the changes Cameron set out today based on Open Europe's research will require agreement from other EU leaders.

European Commission

A Commission spokesperson said after the speech that:
"These are UK ideas and they are part of the debate. They will have to be discussed without drama and should be discussed calmly and carefully."
This is a welcome shift from the dark days of Viviane Reding and Laszlo Andor.

Germany

No German politician has been brave enough to put their heads above the parapet yet but the German media headlines aren't exactly helpful:

Spiegel online goes with “Demands to Brussels: Cameron blackmails the EU”, ARD’s headline is “Cameron's demands: EU membership is only conditional”, Focus titles their article “With these demands Cameron blackmails the EU”.

This list could easily be continued -the actual substance of Cameron’s speech has been crowded out in most parts of the German media landscape. We suspect that might change though when it becomes clearer that Cameron may just have saved free movement. 

Poland

As we saw with the Polish Ambassador's response to our report on Monday, this is a delicate issue, with Warsaw ultra-sensitive to any measures that are seen as "discriminatory". Cameron wisely prepared the ground by discussing his speech with Polish PM Ewa Kopacz whose office today issued a statement which which argued that:
"Poland will not agree to changes undermining the principles of the EU's single market, specifically the free movement of people... which should as such be maintained in its current form."
This can be seen as a holding position - the Polish government is holding its cards to its chest although former Polish Europe Minister Mikolaj Dowgielewicz was more forthright, tweeting that:
"Cameron's plan will definitely not pass in its entirety at the ECJ. But this will already be after the UK elections. Weak response by the Commission." 
Czech Republic

The response by the Czech Europe Minister Tomas Prouza is the toughest we've seen so far - he suggested that Cameron wanted to tax people differently according to their nationality - even though tax credits is a cash subsidy and are not correlated to tax paid. He also tweeted a picture of Czech WWII pilots who fought in the RAF pointing out that they hadn't "worked" in the UK for over 4 years.

Most EU leaders seem to be holding fire though. Plenty of other reactions to come no doubt...



The UK’s EU policy, progressive meltdown and rejection of `bankers’ bonus’

Posted by on 27/11/14
by Graham Bishop, EU Political, Financial, Economic and Budgetary policy expert and founder of www.grahambishop.com /// The pace of collapse seems to be accelerating – and the commercial consequences for the UK may well intensify correspondingly, especially for the City of London. The timeline of the divergence between the UK’s attitude to the EU and [...]

Why Cameron should stay clear of an ‘emergency brake’ on EU free movement

Posted by on 27/11/14
David Cameron's 'immigration speech' is expected to take place very soon.

As we have noted several times, one of the options that he potentially could go for is an "emergency brake" - the ability to impose temporary restrictions on the number of EU migrants who come to the UK.

We can see why this would be appealing politically - but we fear that if Cameron does announce something like this, without having a clear vision for how it would work exactly in practice, it could turn into another net immigration target. Sounding very good in an election manifesto - but ineffective in practice.

We've made this point a few times but to elaborate, here's why:

An emergency brake would be targeted at flows of new EU migrants not the existing stocks. UK Ministers have previously spoken about the need to manage “destabilising flows” – however, this remains a vague term that could mean many different things. Pinning down what would constitute a destabilising flow could prove incredibly tricky. For example, the graph below shows that current flows are not proportionately higher than previous flows and remain small as a share of the workforce (relevant for their impact on wages). In general, if the bar is too high, the mechanism will never be used. If too low, the brake would become a long-term rather than temporary measure – a de facto limit – and be tremendously hard to negotiate in Europe.

Source: ONS
It is very difficult to codify objective criteria for pulling an emergency brake – particularly any that apply to the UK’s current situation. The UK economy is booming, unemployment is falling, EU migrants have high employment rates and the UK takes less EU migrants per head than several other EU member states. All these most obvious criteria won't work for the UK. It's hard to claim to be the best performing economy in Europe and simultaneously claim to have a 'crisis' so bad that special treatment is required. It would also be impossible to predict all the future challenges migration could pose.

Source: Eurostat
Possibly the most compelling argument the UK could use at the current time is that certain local areas are facing high pressures on public services and housing supply. However, restricting EU migration to certain areas of the UK would be very difficult to administer in practice, while national restrictions would be a disproportionate response to local problems. The impact of migrants is also hard to discern in exact terms given other domestic policies regarding housing and local services.

What the UK would effectively be asking for is a ‘time out’ from EU migration – which is largely a result of understandable political pressures. However, this necessarily makes the criteria for pulling the ‘emergency brake’ politically arbitrary – and in turn tougher to negotiate in Europe. There's not a government in Europe, it now seems, that doesn't have a populist challenge. Should Spain be granted dispensation too?

It's also difficult to sell at home. There are precedents in EU law for restricting either free movement of persons or the other EU freedoms. So in that sense, an emergency brake wouldn't be completely out of character for the EU. All of the existing 'brakes', however, are policed by the European Commission and the European Court of Justice – would a domestic audience be happy with such an arrangement? Furthermore, at the very best the brake is likely to be temporary and may only delay flows rather than actually reduce them. It would have to be activated for a very long time in order for it to really reduce net flows in the long-term.

In addition, if ‘cost of living’ is to be cited as a reason for pulling the emergency brake, it means accepting that there is a ‘cost of living crisis’ – a move that would any UK Government would be politically loathed to make in public.

If someone can come up with a criteria for how to capture all the potential variables, then we're open to suggestions. But it would be foolish to announce such a big policy on such loose grounds. As we've argued repeatedly, writing the headline first, and the policy later, rarely works.

Coming Soon: Another Cameron Speech

Posted by on 26/11/14

The Prime Minister is to make another much anticipated Big Speech about Europe. This time, the theme is immigration – or, rather, how to stem the alleged tide of EU citizens exercising their lawful right in accordance with Article 21 TFEU to move to and reside freely within the United Kingdom. David Cameron has already told his party conference that he promises to go the Brussels to ‘sort it’, and that unless immigration is curbed, Brexit looms. Other party leaders and eurosceptic think-tanks have already made their bids on the matter, most recently my own party leader Nick Clegg in the Financial Times.

Making a reality of EU citizenship

Few British commentators are versed in EU law. It would be better if they were. Article 21, for example, says nothing about ‘workers’ but refers to ‘every citizen of the Union’ having the ‘right to move and reside freely within the territory of the Member States, subject to the limitations and conditions laid down in the Treaties and by measures adopted to give them effect’. No secondary law is therefore required to permit an EU citizen to move to live in Britain. Of the Treaty-based conditions relevant to free movement, the most important is to be found in Article 18 TFEU which says that: ‘Within the scope of application of the Treaties, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited’. Article 20 spells it out further: ‘Citizens of the Union shall enjoy the rights and be subject to the duties provided for in the Treaties. They shall have, inter alia, the right to move and reside freely’ across the EU. Other articles of EU primary law (such as Article 3(2) TEU and Article 31 of the Charter of Fundamental Rights) confirm and reinforce the centrality of the principle of free movement and its direct effect. In fact, freedom of movement is the most important element of the proud concept of EU citizenship. If one were looking for one of the EU’s ‘red lines’, look no further.

Maintaining the single market

Then there is the internal market, which is defined in Article 26 TFEU as ‘an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties’. So there is an economic reason why people should be enabled to be as mobile as the goods they produce, the services they provide and the money they make. For many years it was a bane of economists that European labour was too immobile, and that the single market would never become a reality unless and until it was exploited by people on the move. Since the fall of the Berlin Wall, however, migration has been churning across Europe. Although immigrant labour is always disliked by the poorer, less-educated indigenous working class, the overall effect of immigration in terms of GDP is widely acknowledged to be beneficial. Business and the welfare state in Germany and the UK, in particular, have relied on immigrant labour for many decades, and this trend will not be reversed as their own communities age. Migration across the EU also serves as an automatic stabiliser, as a new study by Bruegel has explained: the valves of labour flow are just as reversible as the inter-connector gas pipelines that cross the continent. Many young Poles and Irish, for example, return home (plus savings and education) once the balance of economic advantage shifts.

Helpfully, the EU treaties lay down provisions so that ‘freedom of movement of workers shall be secured within the Union’ (Article 45 TFEU). Discrimination on the grounds of nationality over pay, recruitment, ‘and other conditions of work and employment’ is abolished. Recruitment is to be facilitated and job exchange is to be actively encouraged, especially for the young. Migrant workers who are sacked or retire have the right to stay. Administrative obstacles and qualifying periods which form ‘an obstacle to the liberalisation of the movement of workers’ are prohibited (Article 46). The same clause provides for EU laws to be enacted to regulate all these matters, including the management of supply and demand in the labour market ‘in such a way as to avoid serious threats to the standard of living and level of employment in the various regions and industries’. EU legislation is required to ensure the provision of social security for ‘employed and self-employed migrant workers and their dependants’ (Article 48).

Social welfare

The variety and complexity of contributory and non-contributory social welfare systems across Europe, both in-work and out-or-work, make the ensuing EU legislation mightily complicated. As Steve Peers reminds us, there is much litigation in the European Court of Justice. But the basic legal situation is clear: EU law on the equal treatment of migrant workers has direct effect. Member states retain discretion as to their own social security systems, but each and every EU citizen must be treated in an equal way under the provisions of national employment or welfare law. The definition of ‘worker’ embraces those seeking work and those who lose their jobs, students, service providers and the self-employed, as well as their dependents. EU citizen migrant workers must be catered for without discrimination under the appropriate laws of the host state. It follows that any tightening of social welfare qualifications applied by a host state to EU migrants must also apply to its own nationals. As the recent case in Leipzig confirmed (Dano), benefit tourists do not profit under EU law. But self-sufficient persons can live wherever they choose within the EU – as millions of Britons have decided to do in sunnier climes, without let or hindrance.

When making his speech, Cameron will surely advise his audience that, while changing EU secondary legislation on migrant workers is possible, it would still need to be consonant with EU primary law in respect both of EU citizenship and the internal market. He might usefully add that all EU legislation needs to obtain a qualified majority in the two chambers of the EU legislature, Council and Parliament, so it really has to be crafted (by the European Commission) in the general interest of all states and citizens. In the absence of a destabilisation of the British welfare state, chronic industrial collapse or a threat to public security, Cameron and his colleagues will find it hard to substantiate the anti-immigration case they have so glibly launched. Bending EU law to suit the narrow or partisan interests of one state will not wash.

Changing the Treaties is a good idea for other reasons, but not this one. Stopping immigration will damage the economy. Reducing the rights of migrant workers is illiberal. Blunting the force of EU citizenship is uncivilised.

andrewduff@andrewduff.eu

@AndrewDuffEU

UK looking down and out on banker’s bonus cap challenge

Posted by on 23/11/14
It’s a bad start to what looks as if it could be a very challenging day for the UK government with UKIP looking likely to win the by-election in Rochester and Strood.

This morning the European Court of Justice (ECJ) Advocate General Niilo Jaaskinen issued his opinion on the UK’s challenge against the EU’s banker’s bonus cap and it does not make good reading for the UK. Jaaskinen suggested that “all the UK’s pleas should be rejected and that the Court of Justice dismiss the action”. The key points of his reasoning are:
  • The legal basis of the legislation cannot be challenged since remuneration in this sector “impacts directly on the risk profile of financial institutions”, since these operate freely across the EU this can have impacts on markets across the EU.
  • Jaaskinen “accepts that the determination of the level of pay is unquestionably a matter for the Member States”, but since the law is just a stipulation of the ratio and not a direct cap on pay, there is still flexibility to set pay levels.
  • The delegation of power to the European Banking Authority (EBA) is “valid” since it is “merely empowered to elaborate non-binding draft measures” – i.e. create technical standards.
  • There has been sufficient notice of the legislation to allow firms time to adjust to the new rules.
A fairly comprehensive rejection, but there are a few points which we believe have been overlooked or under discussed, laid out below.
  • One of the UK’s main arguments is that this law will result in higher fixed pay which makes remuneration less flexible and raises fixed costs for banks, thereby undermining any attempt to improve financial stability. This issue is not addressed at all in the opinion. Furthermore, while the opinion addresses the issues of remuneration impacting risk and the fact that fixed pay can still vary it does not look at how the two can interact. It is clear that as a result of this fixed pay will increase substantially but there is no question of how this impacts stability. This may be more an economic/financial point but given the issues are discussed separately their interaction should also be examined.
  • The ruling could also have interesting implications for EU jurisdiction when it comes to the rate of pay. Variable pay is very loosely defined. For example, standard overtime paid at double the hourly rate could theoretically fall under EU jurisdiction by the definition used here. This highlights the importance of this ruling as a step into an area which the EU has previously largely steered clear of and the potential precedence it creates. This could develop in many unknown ways in the future.
  • There is no mention of the UK’s claim that this violates international law or is extraterritorial since it applies to all employees of EU banks no matter where they are based. We noted this may not be entirely a legal issue for the ECJ but it deserves some attention. Related to this, it remains unclear whether third countries firms operating in the EU will be forced to institute similar caps if there are to be deemed ‘equivalent’ under rules coming in under MiFID II in 2016.
  • One of the weakest points seems to be on the powers transferred to the EBA. Control over technical standards, particularly here, should not be dismissed lightly. The regulation deals in very broad strokes and leaves significant interpretation for the technical rules – including the exact level of the cap and who it will apply to. This power is being borne out right now with the EBA passing judgement on the way in which the rules are being implemented and whether ‘allowances’ count as variable pay. The EBA retains significant power to judge how the rules are being implemented and adjust the technical standards if it think the spirit of the rule is not being followed.
  • In general, the combination of the ECJ and EBA seem overly focused on the UK (accepted the UK has been pushing the issue as well). But looking at the legislation which Germany has passed on this issue, there are serious questions over how it has implemented the rules. Germany has exempted anyone covered by collective bargaining from all the remuneration requirements of CRD IV, including the bonus cap. This is because collective bargaining is a constitutional right in Germany and cannot be overridden. While it’s not clear how many people this applies to, the principle is concerning and it is a significant exemption. Why this does not merit examination while the use of allowances as a de facto exemption does is not clear.
What happens now?
  • The full ECJ ruling will come early next year and is likely to be in line with the opinion – although the ECJ did previously ignore Jääskinen’s opinion on short selling where to leant towards siding with the UK.
  • The EBA will publish updated guidelines and technical standards in the new year which will incorporate its concerns about allowances. At this point the UK will likely find itself squeezed by both the EBA and ECJ and could face punishment if it is not seen to be implementing the rules properly. The UK could of course refuse, but given the high profile nature of the issue it could escalate the situation. One option for the UK would be to point to other infringements such as the German example above.
  • In terms of the bigger picture, though not a huge issue on its own, this will be another ruling which plays into the hands of those who wish to see the UK exit the EU. It also continues to add to concerns over the role of the ECJ and its ability to be an impartial arbiter, particularly on financial services – an aspect which will likely be crucial if the UK is to remain an EU member both in the short and long term.

Labour turns its attention to restricting EU migrants’ access to in-work benefits

Posted by on 18/11/14
Iain Duncan Smith's opposite number, Labour's Rachel Reeves, has written an interesting piece on EU migrants' access to welfare for the Mail Online, in which signals an important shift in Labour's policy.

Last week we noted that IDS had set out that he wanted to restrict EU migrants' access not simply to out-of-work benefits but also in-work benefits such as tax credits - something that our Research Director Stephen Booth and LSE Professor Damian Chalmers proposed in a recent Open Europe pamphlet.

Reeves sets out three proposals to reform the EU rules on access to welfare. Firstly:
"We believe that it is right to extend the period that EU jobseekers need to live and support themselves in the UK before claiming out-of-work benefits from three months to two years."
This had been hinted at by senior Labour figures before. But, for the first time, Labour have said they also want to address in-work benefits:
"We must also look at the role of in-work benefits. It is far too easy for employers in Britain to undercut wages and working conditions by recruiting temporary workers from elsewhere in Europe on very low pay and with no job security, knowing that the benefit system will top up their income." 
"So while some have said that we cannot negotiate changes to benefits paid to people in work, I am determined to look at how we can deliver reform in this area too."
As we have noted before, restricting access to this low-wage welfare supplement could reduce the incentive to migrate to the UK for the lowest paid jobs as the UK's system of in-work benefits can make a significant difference to the incomes of the lowest paid.

And thirdly, Reeves has said:
"We will work with European countries to end the absurdity of child benefit and child tax credits being claimed for children living in other countries."
This is near unanimous consensus among all the main parties on this point.

The change in stance on in-work benefits is significant and would have the biggest impact, and it is therefore interesting why this wasn't given top billing in the article?

IDS sets out broad strokes of reforms to EU free movement

Posted by on 13/11/14
The Telegraph has an interesting transcript of an Iain Duncan Smith interview with LBC Radio, which outlines the Government's current thinking on EU migration and which might signal the types of reforms that David Cameron is weighing up before delivering his promised speech on immigration in the aftermath of the Rochester and Strood by-election.

Here's what the Work and Pensions Secretary said, following this week's European Court of Justice ruling on access to benefits:
"This is about people who want to enter a country and have no prospects of work and are not intending to work, so that is stopping and shutting the door to them as we have done." 
Essentially, IDS says that the ECJ's ruling runs with the grain of the domestic changes the UK has already made to restrict access to out-of-work benefits. But he is clear that he wants to go further:
"The next problem is people who come to work, and then can claim full tax credits even though they have made no contribution. And that is the point I am making... countries shouldn’t have to do that. They shouldn’t have to support people who are coming over here, who have made no contribution." 
This is very much along the lines of what our Research Director Stephen Booth and Professor Damian Chalmers proposed in their pamphlet on EU migration and national welfare systems - a re-write of EU legislation to enable national governments to restrict access to non-contributory benefits for up to three years.

And, thirdly, IDS suggests that:
"And the third area which you talked about…is that the issue around freedom of movement isn’t that you don’t want to stop freedom of movement, but what you want to be able to say is: ‘sometimes there are limits that communities can absorb people and the pressure on public services and housing and stuff like that’." 
"European rules need to take recognition of the pressure that puts on local communities, and that’s really part of the negotiation."
This last point is perhaps the most interesting as it suggests that the option of some form of 'emergency brake' on EU migration is still under consideration.

As we have said before, there are many ways in which such a mechanism could operate, and it might just be negotiable, although this would be a much taller ask than reforming the rules around access to welfare.

Cameron’s flawed understanding of a ‘vast’ amount

Posted by on 11/11/14
By Kevin Hannon Mr Cameron is appalled at the 'vast' amount as he called it being asked of the UK as its extra contribution to the EU. Putting the £1.67 billion EU contribution into perspective and context to show the real scale of the economic issue makes clear that our Prime Minister, Mr Cameron, has a strange notion of what is 'vast'.

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