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Debates
Tuesday, 13 January 2009 - Strasbourg OJ edition

15. Question Time (Commission)
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  President. – The next item is Question Time (B6-0001/2009).

We are going to deal with a series of questions addressed to the Commission.

 
  
  

Part one

 
  
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  President.

Question No 30 by Colm Burke (H-0992/08)

Subject: Ten years of the euro

In light of the recent celebrations to mark the tenth anniversary of the adoption of the euro, can the Commission comment on the key lessons learnt in terms of the coordination of fiscal policy across the euro area, especially in light of the recent financial and economic crisis?

 
  
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  Joaquín Almunia, Member of the Commission. − While the experiences with budgetary coordination have, overall, been positive, some lessons can be drawn. The analysis of the first 10 years reinforces the case for strengthening the effectiveness of budgetary surveillance in good times. It also shows the need to address broader issues which may affect the macroeconomic stability of a Member State and the overall functioning of economic and monetary union.

Fiscal policy coordination should better guide national budgetary behaviour over the whole cycle – that is, both in good times and in bad times. Increased attention should be paid to monitoring public debt developments while medium-term budgetary objectives should be strengthened to address implicit liabilities. All these kinds of developments call for deeper budgetary surveillance.

But surveillance should also be broadened to take account of developments within Member States that may affect budgetary sustainability, such as the growth of current account deficits, persistent inflation divergences, persistent divergences in the evolution of unit labour costs, or trends of unbalanced growth.

Surveillance must build on the existing instruments. The key instruments for fiscal policy surveillance and economic policy coordination are clearly anchored in the Treaty and, indeed, in the Stability and Growth Pact.

The recent adoption of the European economic recovery plan by the Commission on 26 November last year also breaks new ground as far as governance and budgetary coordination is concerned.

It highlights the Commission’s role as a catalyst for short-term emergency economic stabilisation policies. Based on our own economic assessment, the Commission has quickly set up a fully fledged and quantified economic response to the economic slowdown. The Commission’s quick delivery is a response to the clear risks of bigger-than-ever national economic policies at this juncture.

The recovery plan recognises the inherent division of tasks embedded into the EU economic policy framework. Since Member States are responsible for budgetary policy, the Commission set a global target for additional fiscal stimulus, taking into account the amount needed to kick-start the EU economy as a whole.

Member States are free to devise the size and composition of their respective fiscal stimulus. It now implies challenges in terms of coordination and surveillance of the implementation of national measures. The Commission and the ECOFIN Council will jointly monitor the implementation of the national measures in compliance with the principles laid down in the recovery plan.

Looking forward, judicious implementation of the fiscal surveillance framework will anchor expectations of future fiscal developments. Together with the strengthening of national budgetary frameworks and rules, and the implementation of reforms curbing the rise in age-related expenditure, this will ensure that sustainable positions are restored.

It thus contains adverse effects of expectations of rising deficits and debt on risk premia and private consumption and investment.

 
  
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  Colm Burke (PPE-DE). - Commissioner, I very much appreciate your reply. In view of the fact that we have a common monetary policy, but given the ongoing problems, do you see a greater role for the Eurogroup, while respecting the taxation policies in individual states? Do you think that the implementation or the adoption of the Lisbon Treaty would in any way affect that area in relation to taxation? I think the important thing is that we need to work together. How do you envisage new ways of trying to generate stimulus in economies of the EU countries?

 
  
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  Joaquín Almunia, Member of the Commission. − What is the role of the Eurogroup? As you know, the Eurogroup is right now, and will continue to be after the Lisbon Treaty comes into force, an informal body. So, the Eurogroup cannot adopt formal decisions even when they relate only to euro-area members belonging to the Ecofin Council.

But over the past three or four years, since we began with the presidency of Jean-Claude Juncker, in particular, in January 2005, the Eurogroup has improved the content of the discussion agenda. Members of the Eurogroup together with the Commission and the ECB discuss this deeper budgetary surveillance and broader economic surveillance that I mentioned in my introductory remarks. The Eurogroup often discusses other issues concerning the external role of the euro and the external dimension of euro are.

Tax issues, as you know very well, are a very delicate issue. According to the present Treaty but also according to the Lisbon Treaty in the future, tax decisions require unanimity at EU level, and I do not foresee any kinds of changes in the decision-making framework in the near future.

 
  
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  Jörg Leichtfried (PSE).(DE) Commissioner, I am interested in the following point. Over the last 10 years the Eurogroup has been a huge success and, particularly during the most recent crisis, other countries have expressed an interest in joining the group. Is the Commission already planning which countries could possibly become members in future? Are there other countries interested in joining the euro area because being a member has proved to be so worthwhile?

 
  
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  Nils Lundgren (IND/DEM). – (SV) Firstly, I would like to ask the following question: if it has been so successful over the last 10 years, why do Italy and Greece, to take two examples, have a 10-year treasury bond rate that is a couple of percentage points above that of Germany?

Secondly, why is Sweden’s 10-year interest rate 0.4 percentage points lower than Germany’s, and Finland’s 0.6 percentage points higher, when both are well-managed countries?

 
  
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  Joaquín Almunia, Member of the Commission. − As you know, Slovakia joined the euro zone on 1 January this year, so we now have 16 of the 27 EU Member States participating fully in the EMU and sharing the same currency. Who will be the next? It is not up to the Commission to answer that question. It is up to the candidates who wish to join the euro area to apply. At the present time we know which EU Member States would like to join the euro area as soon as possible but unfortunately do not fulfil all the criteria required by the Treaty – the Baltic states, Hungary and others – and we know that there are two EU Member States, namely the UK and Denmark, that got an opt-out so that they can be excluded from the responsibility of all EU Member States to prepare themselves and their economies to join the euro area one day.

I do not know who will be the first to join the euro area after Slovakia. It could perhaps be one of the two Member States with an opt-out. It is possible that in the coming months Denmark, for instance, might decide to no longer have an opt-out and to apply to join the euro area. In fact, Denmark fulfils all the criteria to join the euro area according to the Treaty, but it is up to the Danish authorities, the Danish Parliament and maybe the Danish citizens in a referendum, to decide.

This morning we were commemorating here the 10th anniversary of the euro. I am sure that in the next 10 years all – or almost all – the EU Member States will join the euro area because, in these times of crisis during this difficult economic period, the advantages of being a member of the euro area have increased a great deal. Those who have not yet joined the euro area realise that the advantages are much bigger and much more important than the responsibilities they must bear as members of the euro area, or the difficulties.

Regarding your remarks, if I were in your position I would not argue against the euro area in terms of interest rates. Ask Denmark what has happened with their interest rates during this period of crisis. Denmark is a non-euro-area member whose currency is linked with the euro and whose Central Bank closely follows the decisions of the European Central Bank. The markets are not rewarding those who are not in the euro. They are putting higher risk premiums on them.

 
  
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  President.

Question No 31 by Paulo Casaca (H-1016/08)

Subject: Collapse in dairy prices on the EU market

According to a Commission working document dated 21 November 2008 on monitoring price trends, annexed to the communication on food prices in Europe (p. 9), between October 2007 and October 2008 the price of butter on the EU market fell by 30%, while that of powdered milk decreased by 40%. Both prices thus appear to be descending unstoppably towards the intervention levels.

Does the Commission believe that the content of its proposal drawn up a year ago on raising the milk quotas, as approved by Parliament and the Council, should be maintained unchanged in the face of these market trends?

Does the Commission believe that the limits existing under the current rules as regards intervention for powdered milk and butter are likely to be sufficient to prevent disastrous consequences for farmers’ incomes, as in a region like the Azores where farmers’ activity is totally dependent on the market in dairy products such as those mentioned?

 
  
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  Mariann Fischer Boel, Member of the Commission. − I shall start by describing what the situation looked like just a few years ago. We all remember that the dairy sector was very stable with very few price fluctuations, but over the last few years the situation has changed dramatically. Firstly in 2007, I remember clearly in August and September, we saw huge increases in dairy prices and then we experienced last year the same or an even worse reduction in prices, so the situation today is that prices are very close to intervention prices and in some parts of Europe even below intervention.

I can assure Members that I am extremely concerned at the quick deterioration of the European dairy market. We have support measures in place that can be activated to support the dairy sector and we have already taken action.

Contrary to the normal situation, where the private storage scheme for butter is normally activated on 1 March, we have decided to activate the scheme from 1 January, which means that the production that has taken place in December is also eligible for this scheme. Intervention buying or granting export refunds are other instruments that are available to support the dairy sector or the dairy market efficiently.

With regard to the intervention system starting in March – and therefore also covering the production that will take place in February – butter and skimmed milk powder may be purchased until the end of August. First, for fixed quantities at fixed prices, followed then by a tendering system should the situation so require.

I would also like to remind you of the situation back in 2007. I think we all remember the immediate and quick reaction that was witnessed by the European Parliament, by the Council, by Member States, that put enormous pressure on me to increase immediately – yesterday rather than tomorrow – to increase the quotas to ease the situation on consumer prices.

I would also like to speak out very clearly today to try to stamp out misunderstandings which are circulating that the increase in milk quotas is to be blamed for the very weak dairy prices that we see today. The reality is that despite the 2% quota increase that took place after April this year, the production of milk has actually fallen. That is what we see now, due to the fact that an increase in quotas is a possibility for Member States or for farmers to produce but it is certainly not an obligation. This shows clearly that dairy producers are reacting to market signals.

The relatively small changes that we have seen in the quota system can therefore in no way explain the market volatility that we are seeing. The lower demand from consumers is probably a reaction to the high prices that we saw last year as consumers then tried or wanted to step out of the high-quality high-priced dairy products. Then, of course, there is the economic climate in which we find ourselves these days. For the same reason it is important that we do not fool ourselves and think that by micro-managing the dairy market we decide for the whole sector. The conclusion must be that the quota system has not been able to deliver market stability in the market place.

Concerning the question of the Azores, the Portuguese authorities have used any opportunity to ask for increased milk quotas for the islands because of the fact that the Azores seem to be extremely competitive and seem to be benefiting from the increased production. I am quite sure that the larger quotas, and the ultimate end of the quota system, will benefit the Azores’ dairy sector. That will be the case, I think, even in spite of the fact that those beautiful islands are quite remote and milk has to be moved around between nine islands.

To conclude, I can assure Members that I will manage our dairy policy instruments in a responsible way with a view to ensuring an effective safety net for the dairy sector.

 
  
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  Paulo Casaca (PSE). (PT) Thank you for your clarifications, Commissioner. I regret that I am unable to share your optimism regarding how these increases in permitted production levels will benefit the Azores’ production.

I can assure you that these effects – according to a magazine published this week, they are already estimated at a drop of more than 60% in the world market price of powdered milk since August 2007 – are having a profound effect on the incomes of farmers in the Autonomous Region of the Azores, and certainly also in several other parts of Europe. These measures, which I hope will turn out to have some effect, have still had no impact. That is why, Commissioner, I was asking you to devote your full attention to this situation.

 
  
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  Mariann Fischer Boel, Member of the Commission. − You know that I am always very happy to have a dialogue and a discussion with you on the importance of the agricultural sector and also on the Azores.

We find ourselves in a situation today where the market is extremely difficult. This is not only the case for the Azores, but is the general situation in Europe, where we have to realise that prices are decreasing to a level that we would never have imagined just six months ago. I can only assure you – and I think that you believe in my ability to find the right solutions at the right time – that this is going to be the way that we will manage the system under these circumstances.

 
  
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  Mairead McGuinness (PPE-DE). - Happy New Year to the Commissioner, although the news is not good on dairying.

Could I specifically ask you, Commissioner – because you have alluded to some of the factors which have resulted in the price fall – given that we were not clear on why prices rose so dramatically, is there a detailed analysis as to why prices have fallen so dramatically? Are you confident that the reforms of the health check are sufficient in view of all this uncertainty? Lastly, is a safety net enough if we erode producer confidence and they drop milk production, as is happening now?

 
  
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  Mariann Fischer Boel, Member of the Commission. − Firstly, I think there are various reasons for the situation of very low milk prices.

Perhaps the biggest reason is the fact that the Russian market is of huge importance for the European Union and just recently we have seen a huge devaluation taking place in the economic sector in Russia, which means that prices for the Russian consumer have increased dramatically. I do not know the exact figures, but the devaluation is at least 50%. The consequence has been that the possibility of selling our products in Russia has been receding dramatically. There is also, as I said, the consequence of the high prices we saw in 2007, where people stepped back a little from the high price of dairy products – and obviously they have not returned. And then there is the situation today with the uncertainty in the general economic situation.

Ms McGuinness asked whether we think that what we did in the health check is good enough. The fact is that the health check does not start until 1 January 2010, with all the different tools available to support the different sectors. We have seen during the discussions that we have new challenges and we have reserved the modulated money for those new challenges. But these are not effective in 2009. That is why we have proposed to the European Parliament, the Council, and the Ecofin Council to spend some of the so-called unused money – EUR 5 billion in total from agriculture, and for the rural development policy it is specifically EUR 1.5 billion – now, in 2009. It is then in the hands of Parliament and the Council to see whether it is possible to spend some of this money.

If you remember the list of the new challenges, the dairy sector was also mentioned. Therefore, I hope that there will be an understanding in Parliament as well to trigger some of this money to be used not exclusively but also on the challenges facing the dairy sector.

 
  
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  President.

Question No 32 by Johan Van Hecke (H-1018/08)

Subject: Microcredits

In May 2008 Commissioner Mariann Fischer Boel proposed reallocating EU funding that was previously used for export subsidies, price support and the storage of surpluses to microcredits, to enable farmers in the developing countries to buy seed and fertiliser. Microcredits are unquestionably a major aid in combating poverty and an instrument for achieving the millennium goals. Back in April 2008 Parliament called in a Written Declaration for more resources to be released for microcredit projects.

What practical action has the Commission so far taken to follow up that proposal?

 
  
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  Jim Allister (NI). - Is it not the practice to take two supplementaries after the questioner, and did I not indicate right at the outset of the question to the Commissioner that I had a supplementary question to ask?

Why was it not called?

 
  
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  President. – Mr Allister, I was not at all aware that you had a question to ask. If I had known, I would of course have given you the floor.

 
  
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  Jim Allister (NI). - With respect, your staff indicated that my request had been noted. So, if your staff were aware of it, then, by implication, you were aware of it.

Why were you not informed?

 
  
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  President. – I am sorry, according to my staff, no one saw you.

 
  
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  Louis Michel, Member of the Commission.(FR) Madam President, ladies and gentlemen, the discussions between Parliament and the Council on the adoption of the regulation establishing a European food facility led to the decision not to use the funds available under heading 2 of the budget to finance this facility, contrary to what was proposed by the Commission. However, the Regulation of the European Parliament and of the Council, adopted on 16 December 2008, did provide for a budget of EUR 1 billion under heading 4 of the budget for the period 2008-2010. It will be used to fund measures supporting agriculture and food security in the developing countries worst hit by the food crisis. Microcredit features largely in many of these measures, as well as others aimed at strengthening agricultural and rural production. Parliament will have the right to examine the programming of the work funded by this facility, in accordance with the provisions of the comitology regulation. I am able to tell you that an initial package of approximately EUR 300 million, involving 24 to 25 countries, will be presented in February, while the general plan for the use of the entire facility will in any case be presented by the Commission and adopted by 1 May 2009.

The Commission is in favour of developing microcredit and microfinance institutions more generally. In addition to credit, the latter offer a wide range of financial services, including savings, insurance products, money transfers and payment systems. The Commission is committed to helping the most disadvantaged individuals and those with low incomes to access these financial services. It believes that the greatest barrier to the development of financial systems for the most disadvantaged is not the lack of funding, but rather a lack of institutional and technical capacity. That is why the Commission is focusing its efforts mainly on strengthening the institutional powers of microfinance operators. In addition, where access to capital proves to be a significant limitation for microfinance institutions, for example where a microfinance institution wants to develop its services in rural areas, the Commission can fund the capital needs of these institutions through specialised financial institutions such as the European Investment Bank (EIB), using credits to grant loans or to contribute to the capital. In certain cases, where new microfinance institutions are created, the Commission may also decide to provide funding for these start-ups through specialised NGOs. Moreover, on the basis of these comparative advantages, the EIB manages microfinance operations within the general framework of the facilities funded by the EU budget, namely the FEMIP (Facility for Euro-Mediterranean Investment and Partnership) in the case of the Mediterranean region, or via the European Development Fund, which is the investment facility for the African, Caribbean and Pacific States.

 
  
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  Johan Van Hecke (ALDE).(NL) Mr President, all of us here have welcomed the decision to earmark EUR 1 billion for the poorest farmers in the countries which have been hardest hit by the food crisis, but my personal regret is that the Commission’s proposal to employ unused agriculture funds for this purpose has come to nothing, as a result of pressure from certain Member States and also from one section of Parliament.

As the Commissioner said, the Commission attaches great importance to microloans as an effective instrument for combating poverty, but recently some questions and criticism have been raised, specifically as to their accessibility. People are saying that this is an urban instrument to which rural areas have no access.

My question to the Commission is: has an overall evaluation of this instrument been carried out?

 
  
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  Louis Michel.(FR) We are of course, as I said, working on preparing the mechanism that should allow us immediately to employ the financial resources that have been set aside for this purpose.

In my view, neither the nature of the funds nor their origin presents a problem in terms of capacity. It is clear that, even in the case of rural projects, there will be no problem at all. I can therefore reassure you on this subject; there should be no difficulty and, in any case, the concern you feel will be largely addressed, as you will see, in the first package, which will come at the end of February and also in the general plan, which will be available by 1 May at the latest.

 
  
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  Jörg Leichtfried (PSE).(DE) I have only one brief question. Have you considered putting in place certain controls on these microloans to encourage people to focus on fair trade or organic cultivation and do you believe controls of this kind to be useful? Or are you of the opinion that it really does not matter whether requirements of this kind are implemented or not?

 
  
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  Louis Michel.(FR) Clearly I cannot get involved in the direct management of developing countries. Developing countries generally have extremely fragile policies on these things. I think I have understood the heart of your question and I believe the approach you suggest sounds promising, in principle. I can see what you would hope to achieve by it, too. Perhaps I might look again at this issue and try to incorporate it into the current discussions, and then come back to you to see how we might arrange it.

I imagine you are thinking of incentives that would enable us to direct certain policies much more towards small family farms, and so on. I think that organic farming, in a number of developing countries, is undoubtedly an option, provided that it would be possible to create sectors. However, this is just off the top of my head. If we can create a sector, in a country where there is a surplus of agricultural production at any given time, that could of course represent an interesting diversification, with good added value. Anyway, I can clearly see that your suggestion is useful and I promise to involve you so that you can work with my staff to see how we can incorporate it into our discussions.

 
  
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  Mairead McGuinness (PPE-DE). - Is the Commissioner concerned that the issue of global food security, which is part of this question, has slipped down the political agenda because of the global economic crisis? What action is the Commission taking to ensure that it is high on the political agenda, because 30 000 children are still dying of hunger and starvation on a daily basis?

 
  
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  Louis Michel.(FR) I am sometimes surprised by certain questions, and not because we are not talking about these things and working on them every day. Your question implied that the Commission does not appear to be keen to pursue the work that was largely in fact begun by the Commission, with Parliament’s help and support.

Rest assured; I have to tell you that this is an interesting point since the fact that prices have fallen since the food crisis a few months ago could lead some to believe that the problem has been solved. Although they have gone down, prices will not return to the relatively low level they were at before. You are therefore right to highlight this and to point out that the food crisis is still ongoing and will remain a real problem for many years. You may be assured that I will be monitoring this matter very closely; it will not be forgotten.

 
  
 

Part two

 
  
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  President.

Question No 33 by Marian Harkin (H-0970/08)

Subject: Reforming the budget

The outcomes of the Commission’s public consultation on ‘Reforming the budget – Changing for Europe’ called for the Commission to enhance the effectiveness and efficiency in the delivery of the budget by increasing transparency and public access to it. In addition to this the recent publication of the Court of Auditors’ Report 2007 made various recommendations in terms of cost/risk balance, monitoring and reporting, simplification of instruments, and improving the information and control provided by Member States. Can the Commission comment on what steps it will take to address the main results of the public consultation and the Court of Auditors’ Report in terms of increasing performance and minimising administrative burdens?

 
  
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  Dalia Grybauskaitė, Member of the Commission. − I have two questions today on the budget reform, one more general and one more concentrated on agricultural matters. I am very happy to have at least two questions because we were asking for more interest from Parliament.

In response to the first question, this is more general and concerns more the delivery and efficiency of European budget delivery. Part of the public consultation concentrated specifically on how to make delivery of the European budget more efficient, faster, simpler and more transparent. The public consultation has made a strong call for the improved effectiveness and efficiency of the European budget, in particular through the simplification and proportionality of the administrative budget and control.

In this context, a number of issues were identified, some of which are already taking concrete shape in the Commission. Among those initiatives which are already in place is the European Transparency Initiative. Thanks to this initiative, the Commission has already provided a first response to the need for increased openness and accessibility to the budget.

Some other issues mentioned in the consultation deserve our serious attention. The first is the integration of expenditures currently outside the budget – the so-called budgetisation of the funds. This would obviously increase synergies, legitimacy and administrative simplification, but we have not been very successful over the years. You are aware of this with regard to some funds. The responsibilities of the Member States are another important element. It is important to further strengthen the responsibilities of Member States, who manage over 80% of the European budget, particularly in areas under shared management. A clearer allocation of responsibilities between Member States and the Commission is needed. This will also hopefully be partly improved if we have the Lisbon Treaty in place.

The third element is the rigidity of our budget. The current European budget is still rather too rigid, recent examples being the negotiations for the food facility or the European recovery plan, especially in the current environment. Then we have problems with the gas supply in Europe where we are not able to deliver or have an agreement between the Member States to invest in future projects such as interconnections or gas storage. That again shows how much we need to invest in the European budget’s operational capacities to react.

The third group of problems which has been mentioned in the consultations concerned minimising the administrative burden. The Commission has also already made various commitments. In the action plan towards an integrated internal control framework, the Commission has committed itself to making proposals for simplified rules on cost eligibility issues. This includes extending the use of lump sums or flat-rate payments wherever this is appropriate. In its recent communication on tolerable risk, the Commission proposes to redefine the control system in terms of risk objectives and an acceptable level of error. We hope for the support of the Parliament in these political discussions and later in negotiations with the Council.

The Commission looks forward to the Parliament’s support in general in rationalising and simplifying budget delivery and then in examining future legislation in general. I thank you for the questions. This is the least attractive question we usually receive because it is sometimes treated as being too technical. No matter how good the political decisions being made are, good politics can fail if we do not have efficient delivery mechanisms.

 
  
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  Marian Harkin (ALDE). - Thank you for your comprehensive reply, Commissioner. You spoke about the responsibility of Member States. Can you specify the progress being made in simplifying the basis of calculation of eligible costs and making greater use of lump-sum payments, particularly in the area of the structural funds?

My second question relates to the consultation document itself and the largely negative response to agriculture. If we look at the consultation document, it lists tomorrow’s challenges as diversity, scientific and technical progress, the knowledge economy, climate change, energy security, but it does not mention food security. So, is the negative response to agriculture unduly influenced by the document itself?

 
  
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  Silvia-Adriana Ţicău (PSE).(RO) I would like to mention the fact that 2009 is the European Year of Creativity and Innovation.

We also have another priority, climate change. We must not forget that, as part of the European economic recovery plan, the need to finance priority infrastructures, such as those for energy and transport, are also a priority.

How is this reflected in the budget reform?

 
  
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  Dalia Grybauskaitė, Member of the Commission. − So, three additional questions.

On the structural funds and what we are already doing: In negotiations with Parliament in agreeing the 2009 budget, we already agreed and have made a declaration that we will accelerate the absorption and we will make the decision-making process more flexible for Member States, including on how to use structural funds. This is also included in our recovery plan. It is important, and we calculate that it will help to accelerate use of structural funds of about EUR 6 billion in 2009 alone. It is our obligation to Parliament and we also agreed it with the Member States in Council, who supported these efforts.

Therefore, two packages of changes in regulations have passed from the Commission and I hope it is already somewhere in Parliament, at least in the Committee on Regional Policy and Planning, and in Council and we hope that it will be passed very fast for Member States to use it.

On food security and CAP relations: It is very interesting to hear your question and I can imagine what questions I will receive from other Members. It is a very sensible question on CAP in general. We have received a lot of criticism in the consultation process on the quality of CAP, not against the policy but against the quality and capability to react and help on time.

The policy is quite expensive by its very nature and that is how the participants mainly perceived this policy. And of course you are absolutely right, it is our understanding that this policy, in the near future and medium term, will be changing to investing more in environmental and health aspects, including food security. That is how we probably will see the medium-term future.

But, of course, not everything suited all participants. We tried to be as objective as possible. We published all consultation materials. It was discussed in the November conference chaired by President Barroso and everything is published, including our research on think-tank inputs, all consultation materials and our summary. So it is public; it is available. It is not yet our opinion. We tried to be objective and not to affiliate ourselves with an opinion, but we wanted to see the public’s reaction. We wanted to give you an objective opinion on how we are seen from outside with our policies or budget, and for us to use it for our future preparation of the political decision.

On the third question on priorities, you are absolutely right. Everybody is discussing this. We know what we need to do. Member States know, governments know, but do not always agree when it comes to money. Negotiations on budget finalisation usually centre on juste retour negotiations. Who returns the same? Especially now during this downturn in economy – when we have such serious problems in energy and in the external world – especially now we need again to concentrate and not forget that the strategic goal, which we need to perform all together, Commission and you, is to prepare the strategic paper on budgetary reform.

 
  
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  President.

Question No 34 by Mairead McGuinness (H-0996/08)

Subject: EU budget reform

Is the Commission satisfied that the recent public consultation ‘Reforming the Budget, Changing Europe’ reflects the view of the majority of European citizens; or is the ‘one message’ gathered from ‘hundreds of voices’ really reflective of the whole of EU opinion?

What are the key conclusions that can be drawn and what does the Commission consider will be the big shifts in EU spending in the future?

Specifically, what does the Commission expect to be the key reforms of spending on agriculture?

 
  
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  Dalia Grybauskaitė, Member of the Commission. − The question was given to me with the main emphasis on the agricultural outcome of agricultural consultations, but more general elements have been included in the question so I would like to start with some general remarks.

As regards the consultations which we launched, we have been very satisfied because it was the first time in European history that the debate took place so openly, with all those who were capable and willing participating in the process. We had a huge input from NGOs, governments, think-tanks, civil society, and that was very useful to us and will be useful to us.

It reflects, of course, a very wide range of opinions and perspectives that cannot be reduced to one or two particular messages, but the contribution largely endorsed the Commission’s general approach on the budget reform aiming at a strategic vision to maximise the European value added from any euro spent in the European budget. They offer criteria to flesh out the notion and views on how to balance the stability and responsiveness of the European budget.

Many contributors agree that the budget has evolved significantly over time, but only few are fully satisfied with the current budget structure. The consultations convene a sense of priorities in terms of challenges that Europe has to address, with climate change, global competitiveness at the top of the list.

Contributions also propose a range of possible reforms concerning specific spending policies, the financial system and the way the budget is being delivered. More detailed information, as I have already mentioned, is available on the Commission websites.

Finally, on agriculture, the consultation shows a relative growth consensus on the need to further reform CAP. Some consider it best to continue reform along the same lines as the earlier reform health check, or mid-term review, others favour more radical changes. Most contributors emphasise the necessity of turning CAP into, or concentrating on, competitiveness of European agriculture, responsiveness to climate change, food safety and quality requirements, and other environmental objectives. Opinions differ, however, on the nature and extent of the change that is needed.

The Commission’s expectations with regard to key spending areas, especially in agriculture, are subject to ongoing work based on consultation, technical assessment, scientific inputs and sectoral policy discussions. They will be part of the political response that will follow later this year. The Commission will then prepare our strategic paper, and I very much hope that we will be able in cooperation with you to perform our duty together.

 
  
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  Mairead McGuinness (PPE-DE). - Thank you, Commissioner, not only for your response but also your comments in relation to Marian Harkin’s words on food security. I think it is a big gap in the market.

Let me draw your attention to the report I drew up and which was voted through in this Parliament today by an overwhelming majority of people supporting the CAP and its role in global food security, and to the discussion we had about falling dairy farm incomes. We need to have some reality check here on those who suggest wild reforms. We are talking about food for European citizens and incomes for those who live and manage the rural environment. I would like you to bear those in mind as we go forward.

 
  
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  Göran Färm (PSE). – (SV) I have a short question to ask the Commissioner. I took part in the Commission’s excellent conference in December on the mid-term review of the budget. At this conference, the Commissioner gave an excellent and proactive speech on the importance of tabling proposals for amendments now. However, we are now hearing rumours that there will be no proposal on the mid-term review of the budget until after the European Parliament elections and after the German federal election in September. My question is simple: will the Commissioner table a proposal for a mid-term review of the budget before the summer or not until after the German federal election?

 
  
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  Justas Vincas Paleckis (PSE). (LT) Commissioner, I would like to thank you for your precise and open answers and to say that discussions on budget reform have been ongoing for some time, already more than a year. What is the influence of the financial crisis on these discussions? I would also like to know whether any ways out will be sought while reforming the budget, so that in future we can avoid financial crises like the one we are experiencing now?

 
  
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  Dalia Grybauskaitė, Member of the Commission. − Concerning a reality check, I agree fully that any decisions we make, especially strategic ones, need to be very politically responsible. We should not change the best, but we need to get rid of what is old or not very effective.

Concerning the mid-term review, I think there is a misunderstanding. We have never been asked to prepare a mid-term review of the European budget. We have been asked to prepare the full-range budget reform paper by the end of 2009, and it is up to us to decide the timing – where politically it is more proper or where we can have a more efficient and effective response. Personally, I would like it to be prepared earlier – maybe in the spring. But I have to take a serious reality check because we have elections, perhaps the ratification of the Lisbon Treaty etc. We should not waste a good proposal and allow operational events to overshadow it. Let us leave it to President Barroso to decide on the final date, but we are ready and this Commission is ready to do its job.

(LT) Mr Paleckis, your questions are really very important, very deep, I might even say so deep and important that not even the whole European budget would provide an answer. In truth your questions are strategic, whereas no budget could react effectively now or in the future to the sort of financial crisis which has occurred.

The European budget represents just 1% of gross domestic product, but the financial crisis was largely caused not because of a lack of money, but perhaps I would say because of supervision issues, the globalisation of the financial system, its monopolisation and many other reasons.

The European budget, like the budget of a very small international organisation, has no doubt a certain selection of instruments, but it really is not large. That selection largely consists not of actual finances or money, but rather regulating measures, control measures, recommendation measures, also including in the field of macroeconomic policy. This is probably even more important than how much money we actually have or can inject.

At the moment we really have the Globalisation Adjustment Fund, we have the flexibility instrument and others, but they are not really efficient or effective. It was precisely for this reason that in our recovery plan the Commission proposed investing those EUR 5 billion in strategic structural changes to energy inter-connections and other energy infrastructure projects and so far countries are in no hurry and are not very willing to discuss this matter.

The crisis itself shows that investing in strategic energy projects and other strategic joint European projects is extremely important. I hope very much that this crisis will be one of those lessons, which Europe should take very seriously. I also hope that it will help to concentrate and in future use the European budget where we can gain most benefit, as it is far too small to cover everything and solve everything.

Therefore, it is not easy to answer your very general questions, but as I mentioned, I hope very much that this crisis situation in the world and the economic recession, which can now been seen throughout Europe, should really help politicians invest more in European strategy.

 
  
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  President.

Question No 35 by Seán Ó Neachtain (H-0972/08)

Subject: Cybercrime

With ongoing advances in technology and more and more people using the Internet, it is becoming increasingly difficult to police the Internet. What is the Commission doing to fight against cybercrime at EU level?

 
  
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  Jacques Barrot, Vice-President of the Commission.(FR) Madam President, to answer Mr Ó Neachtain’s question, the Commission has pursued a policy on combating cybercrime for many years, in close cooperation with the Member States and other European Union institutions.

There are four ways in which the Commission helps to fight cybercrime: by encouraging cooperation between Member States, by facilitating public-private partnerships, by developing various legal instruments, and lastly by engaging in cooperation with third countries.

The 2007 communication entitled ‘Towards a general policy on the fight against cyber crime’ enabled the Commission to promote information sharing in the field of cybercrime between Member States’ law enforcement authorities, either bilaterally or through Europol.

Member States must designate permanent contact points through which other Member States can request assistance or information. The Commission also helped to draw up the Council conclusions on a strategy to combat cybercrime, adopted last November.

This strategy proposes a series of measures aimed at fostering cooperation between Member States to fight against crimes such as child pornography, terrorism, attacks on information systems and fraud. A platform for reporting offences detected online must be put in place to centralise cyber-offences so that they can be collated by Europol.

At the same time, the Commission is developing a partnership policy between law enforcement authorities and the private sector to take action against cybercrime.

The Justice and Home Affairs Council of 8 December 2008 made recommendations on public-private cooperation against cybercrime. The Commission also wants to set up a European financial coalition against commercial images of child pornography. The purpose of this coalition is to unite the efforts of various public and private parties to combat the production, distribution and sale of images of child pornography on the Internet.

Lastly, the Commission played a large part in drafting laws laying down minimum standards for harmonising applicable criminal legislation. This is the case with Framework Decision 2005/222/JHA on attacks against information systems and Framework Decision 2004/68/JHA on combating the sexual exploitation of children and child pornography.

The Commission is now looking at how to update and implement these instruments.

I will conclude by saying that we must keep in mind that the Internet is a global information network. The European Union cannot regulate it on its own. That is why the Commission hopes to encourage international cooperation in this area and will be organising a meeting this year with international organisations and EU agencies to try to coordinate the respective activities of these bodies.

That is my answer to Mr Ó Neachtain.

 
  
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  Seán Ó Neachtain (UEN).(GA) Madam President, I would like to thank the Commissioner for that answer. I would like to ask you a supplementary question, Commissioner. As regards cyber-bullying or denigration, which mostly affects young people who use social sites such as Bebo and Facebook, the denigration or bullying committed against young people on those sites should be stopped. What does the European Union intend to do to ensure that the community draws more attention to this bullying?

 
  
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  Silvia-Adriana Ţicău (PSE).(RO) I would like to ask what measures the Commission is considering for enabling Member States to adopt the Council of Europe Convention on Cybercrime, what action plan the Commission is considering for making improvements and fighting against cybercrime and also what measures you are considering for digital signature interoperability.

 
  
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  Den Dover (PPE-DE). - If I could welcome the answer given so far by the Commissioner but also ask him to make sure that human rights in this field are kept in mind at all times. In other words, I am all in favour of stamping out cyber crime, but can we make sure that internet companies are not, with police authorities and the like, too heavy-handed in dealing with the public who are using the internet for their own pleasure?

 
  
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  Jacques Barrot.(FR) Madam President, you are right, and I will answer the question on human rights and the fight against cybercrime straightaway. We must indeed pay very close attention to ensure that there is a commitment to respect human rights when combating cybercrime; I would even go so far as to say that we must enforce respect for human rights.

Within the Stockholm multiannual programme, running from 2010 to 2014, we will introduce an entire heading on combating cybercrime with, as I have said and would say again to Mr Ó Neachtain, the aim of having the Observation Centre within Europol, which will allow us precisely to better coordinate the monitoring of national institutions responsible for supervising questionable sites, from which child pornography is distributed to particularly vulnerable audiences. You are right; we must also learn the way in which young people are enticed to certain sites, leaving them at risk of being attacked in some way by the creators of these sites and those who visit them. That is what I can tell you. I would like to say again that this in fact represents a complete strategy to be conducted in an even more purposeful way than in the past, in light of our greater understanding of the risks of the web.

I also have high hopes of the European financial coalition against commercial images of child pornography. We will bring together the different public or private bodies in order to tackle the production, distribution and sale of images of child pornography on the Internet, and also try to locate and apprehend the criminals. If we reach agreement on the funding in the comitology procedure, I hope to launch this coalition in February 2009. I thank Parliament for all the support it will be able to give on this matter.

 
  
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  President.

Question No 36 by Liam Aylward (H-0978/08)

Subject: Terrorist threats

We saw last November the terrorist attacks in Mumbai, where many EU citizens’ lives were threatened. In light of the Madrid and London bombings in 2004 and 2005 respectively, it is clear that we are under threat from similar attacks on the EU. Can the Commission tell us what we are doing to strengthen and enforce information exchange between Member States’ police forces to respond to such attacks?

 
  
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  Jacques Barrot, Vice-President of the Commission.(FR) Madam President, I will answer Mr Aylward. The key to effectively combating terrorism and other forms of serious crime is to ensure that the right people have access to the right information at the right time, which is a huge challenge at European Union level.

We have tried to promote and facilitate effective information sharing between the police forces of the various Member States. The Framework Decision of 18 December 2006, known as the Swedish decision, which all Member States had to implement by mid-December 2008, that is, very recently, creates a common legal framework for the rapid exchange of information and intelligence between Member States’ law enforcement authorities.

This Framework Decision stipulates that, when the police force of a Member State receives a request, it must be handled using the same criteria as those applied to national requests. That is one way in which we are addressing this issue.

Another example is the ‘Prüm’ Council Decision of 23 June 2008 which sets out a detailed mechanism for exchanging specific types of data, including fingerprints, DNA profiles and information linked to vehicle registration, all of which can lead to successful criminal investigations.

Under the Prüm Council Decision, Member States grant each other limited access to their DNA and fingerprint databases in order to check for matches. This is very useful as this Council Decision makes for extremely effective sharing of DNA and fingerprints.

Europol also has a crucial role to play. The Europol Information System, EIS, enables Member States to find out whether the law enforcement authorities of other Member States hold any information needed at operational level. Of course, for Europol to play its part, the Member States must contribute to the EIS satisfactorily.

It goes without saying that we must now plan new measures for information sharing in the next five-year programme that will succeed the Hague programme. This five-year programme will need to guarantee a coordinated, consistent approach to information sharing, and should incorporate a European Union strategy on information management. However, of course, information sharing also raises concerns about the protection of personal data.

The strategy must allow an overall approach to information sharing that meets the needs of the police and is based on the interoperability of IT systems.

That is my answer to Mr Aylward.

 
  
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  Liam Aylward (UEN). - I would like to thank the Commissioner for his reply. In a very brief supplementary question, what is the European Union doing to confiscate the assets of terrorists within the Union, and can the Commissioner outline how many criminal assets bureaux are currently in operation in the European Union?

 
  
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  Avril Doyle (PPE-DE). - I would like the Commissioner to indicate whether he is getting full cooperation between all 27 Member States in relation to information exchange between police forces. If not, which countries are taking a different line, and has the Irish Government requested any opt-out in this particular area?

 
  
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  Paul Rübig (PPE-DE).(DE) Commissioner, I would like to ask you whether there is a security and safety policy relating to terrorist threats against nuclear power stations.

 
  
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  Jacques Barrot.(FR) We are currently in the middle of a study on the confiscation of assets generated by this illegal activity. In particular, Judge Jean-Louis Bruguière has been given the task of monitoring the SWIFT terrorist finance tracking programme. His findings will be available soon. The European Union has benefited from information produced by the terrorist finance tracking programme, and Judge Bruguière has been responsible for checking that it has all been done in compliance with data protection. I can say that this will, in the long term, help us to confiscate the assets of a number of individuals who have made illegal profits.

As for information sharing, I have already told you that the Europol information system could be much more effective if the Member States were to contribute information in a more trusting and transparent manner. We will work on this. Indeed, it is one of my chief concerns to build up this trust between the various intelligence bodies in the Member States, so that we move towards more effective exchange of information. I have not heard anything about an opt-out clause in this field. I think I have more or less answered your questions.

Regarding the threats to nuclear power stations, the Commission has also proposed a text designed to allow for improved surveillance of key infrastructure, which obviously includes nuclear power stations.

 
  
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  President.

Question No 37 by Armando França (H-0979/08)

Subject: EU immigration policy

Given that EU immigration policy should have a major humanitarian element and guarantee respect for human rights; that it should help promote integration measures rather than repressive measures, and likewise measures designed to put the rights and obligations of immigrants on an equal footing with those of nationals and to encourage cooperation between the Member States and between the latter and the countries of origin; that it should promote solutions which strengthen intercultural dialogue and respect for differences, for minorities and for freedom, and whereas the French Republic has already signed protocols with various African countries, specifically Congo-Brazzaville, Tunisia, Benin, the Mauritian Islands, Senegal and Gabon, with a view to encouraging development and the possibility of legal immigration, what back-up and support has the Commission provided for those Member States which wish to initiate such processes?

 
  
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  Jacques Barrot, Vice-President of the Commission.(FR) In answer to Mr França’s question, the Global Approach to Migration adopted by the European Union in 2005 aimed to provide a more adequate response to the challenges that migration poses to the EU as a whole. This global approach is based on improving dialogue and cooperation with third countries in all aspects of migration, to build a partnership for better migration management.

In order to give practical content to the Global Approach to Migration, the Commission supports cooperation initiatives with third countries, in the areas of migration and asylum. Examples of this include the Aeneas programme, which funded over 100 projects from 2004 to 2006, or the Migration and Asylum programme that succeeded it, which was allocated a budget of EUR 205 million for the period 2007-2010.

From the initiatives chosen in the context of an annual call for proposals, many are put forward and implemented by the Member States in collaboration with third countries. Let us take an example: on the basis of the Aeneas programme, the Commission funds a Hispano-Moroccan project managing seasonal immigration between the provinces of Ben Slimane in Morocco and Huelva in Spain. This programme also supports cooperation between Spain and Colombia for developing circular migration. Similarly, we funded the temporary return to Cape Verde of highly qualified Cape Verdeans who live in Portugal, to inform and train potential emigrants in their home country. In addition to these measures, geographical financial instruments such as the European Development Fund and European Neighbourhood and Partnership Instrument also help to give practical expression to the Global Approach to Migration. For example, the European Commission recently backed the creation of the Migration Information and Management Centre in Mali, a project that a number of Member States are very involved with.

Furthermore, as part of the global approach, the Commission proposed new tools to encourage partnership with third countries and to develop greater synergies between Community action and that of the Member States. We now have the mobility partnership, a new tool being introduced by the European Union, at present on a pilot basis. These mobility partnerships are a means of developing dialogue and cooperation between the Union and third countries in the areas of legal migration, development, and the prevention and reduction of illegal immigration. We have signed the first partnerships with Cape Verde and with the Republic of Moldova, detailing specific offers of cooperation. For instance, under the partnership with Cape Verde, Portugal proposed signing a new protocol extending the scope of an existing protocol on the temporary migration of Cape Verde workers, to provide work in Portugal. Other available tools include migration profiles, which consist of analyses of the migration situation in a given country, and cooperation platforms to bring together, in the third country in question, country representatives and the main funding providers concerned with migration. We have put in place a cooperation platform in Ethiopia, on the initiative of the United Kingdom, and we are planning another for South Africa.

Lastly, the Integration Fund and the Return Fund can of course help Member States to introduce pre-departure measures in third countries to assist potential emigrants in finding work in their country of destination, and facilitate their civic and cultural integration, or, on the reverse side, to introduce short-term support measures for returnees.

There you have it, Mr França, I wanted to give you a whole series of examples, but most importantly I would like to say that I am completely convinced of the need for Europe to manage migratory flows through this global approach that links migration and development and genuinely enables concerted migration management. This is the direction we should be taking, I believe, and it will make Europe’s migration management an example for the world to follow.

 
  
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  Armando França (PSE). - (PT) Mr Barrot, I agree with you; I agree with your dissatisfaction. In truth, we must be dissatisfied with all these measures, which are sweeping.

The truth is that illegal immigration to Europe continues. The trafficking of human beings continues. There are areas in which there is a lot of immigration, specifically the Mediterranean and heading for Italy. France has come forward with a set of important bilateral cooperation agreements, but other Member States have not been doing so. The Commission must carry on without losing its enthusiasm for this policy of cooperation and aid for Member States …

(The President cut off the speaker)

 
  
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  Colm Burke (PPE-DE). - Mr President, the question refers to EU policy having a major humanitarian element and guaranteeing respect for human rights. Just recently in Ireland someone was being deported even though the person’s daughters would be subject to female genital mutilation.

Has the Commission encouraged Member States to adopt a common position on this? In some states in Europe it is still not illegal, and would the Commission encourage Member States to adopt a common position on dealing with this very difficult issue?

 
  
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  Jacques Barrot.(FR) Firstly I would like to assure Mr França that I will, of course, do my utmost to now develop the global approach through mobility partnerships between the Union as a whole and third countries. You are right, some Member States have concluded bilateral agreements, but this should also be the case for the whole of Europe, and you were right to emphasise the risks of illegal immigration caused by a failure to organise legal migration successfully.

Next, the case that you mentioned, Mr Burke, is a case that clearly shows the wisdom needed in return policy. There can be no case for returning people to third countries where their life or their person will then be in danger. We must therefore conduct this policy wisely.

I do not wish to go back over the Return Directive. It has been controversial, but it does, however, provided it is properly transposed in the Member States, enable us to monitor to some extent the way in which these return policies are managed.

I do intend, in any case, to keep a close eye on this matter.

 
  
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  President. – Questions which have not been answered for lack of time will be answered in writing (see Annex).

 
  
  

Part three

 
  
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  President.

Question No 51 by Emmanouil Angelakas (H-0983/08)

Subject: Opening up of ‘closed’ professions

In pursuit of the single market objective of the free movement of persons, goods and services, the Commission is encouraging the opening up of ‘closed’ professions in those Member States where they exist, which in general terms is a move in the right direction.

Are there cases in which the closed professions could remain so, provided they successfully serve society as a whole by providing services without creating problems? What are the possible negative repercussions of opening up some closed professions? Has the Commission carried out studies into the impact on local communities, particularly in regions with specific features (e.g. mountain and island regions, etc.)?

 
  
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  Charlie McCreevy, Member of the Commission. − Firstly I should clarify that the Commission does not pursue as a general objective the opening of closed professions. However, in the context of its internal market policy, it considers that the legitimate need for Member States to regulate certain activities has to be reconciled with the need to ensure the free movement of professionals throughout Europe.

It goes without saying that better quality and wider choice in professional services must have a positive effect on the entire EU economy. To this end, the Services Directive obliges Member States to screen their national legislation for requirements applied to certain professions, such as quantitative and territorial restrictions, in order to evaluate their appropriateness in the light of conditions established in the case-law of the European Court of Justice. By 28 December 2009 Member States will have to present to the Commission their report on the results of this screening and evaluation exercise. This will give them an opportunity to identify the possible negative repercussions of opening up certain closed professions and justify any restrictions.

On the basis of these national reports, the Commission and all Member States will undertake the process of mutual evaluation and will examine and discuss changes introduced in Member States’ legislation as well as any requirements that would have been maintained. On 28 December 2010 the Commission will present a summary report to the European Parliament and the Council on the results of this mutual evaluation process. Obviously, requirements to think about specifically regulating the professions will be discussed in this context. In addition, again with the aim of ensuring the functioning of the internal market, infringement proceedings have been opened whenever national rules are found to impose discriminatory or disproportionate restrictions in the area of regulated professions as regards, for instance, access to ownership, incompatibilities or compulsory tariffs.

Finally, the Commission’s work in the field of competition also seeks to stimulate appropriate patterns of review of the existing professional rules within each Member State, as provided for in the two Commission reports on competition in professional services. National competition authorities are invited to check, in the light of competition rules, whether a regulation has clearly defined both a public interest objective and the least restrictive means of achieving that objective.

 
  
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  Emmanouil Angelakas (PPE-DE).(EL) Madam President, Commissioner, I realise that what the Commission is trying to deal with is the creation of a single internal market and the free movement of professionals.

On the other hand, there are certain professions which I called ‘closed’ and which can only be exercised once a sum of money has been paid. I refer to taxi licences, which in many Member States of the European Union are costly, and the profession of pharmacist, which is exercised under demographic and distribution measures. I should like to hear the Commissioner’s thoughts on this issue.

 
  
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  Paul Rübig (PPE-DE).(DE) Are you of the opinion that local knowledge and regional regulations should be a basic requirement to ensure that these professions can be carried out accordingly?

 
  
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  Avril Doyle (PPE-DE). - I am not sure if bookmakers and tote operators and operators of the pari-mutuels qualify under the professions, but certainly in terms of the single market and free movement of services it is an issue. Where is this debate at? I do know that the Commission’s offices have been involved and I am still receiving quite a lot of vexed representation in this area. Secondly, as regards recognition of the professional qualifications directive and the whole area of mutual evaluation which the Commissioner referred to, are any problems likely there? Are we comparing like with like if we are opening up professions in one Member State to another?

 
  
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  Charlie McCreevy, Member of the Commission. − There are two separate issues being spoken about here by the various Members who have addressed this subject. One is the scope of the Services Directive; the other is the regulation of professional qualifications. The Services Directive has in its scope all of the services in the European Union with certain limited exceptions. The question about pharmacists was raised by Mr Angelakas. He may be aware that we do have some infringement proceedings against some Member States in this particular area.

On the question of mutual evaluation which is required under the Services Directive, each Member State has to go through all its rules and regulations before 28 December this year and then we will have a mutual evaluation to see what is proportionate and what is not.

The question that Mrs Doyle raises is that of gambling infringements. She will be aware that we have, in one form or another, some actions pertaining to at least 15 Member States at this particular time. There has been court jurisprudence on this particular matter. Gambling is a service that comes under the scope of the Services Directive like everything else, and these matters have to be addressed. There are various stages of proceedings against Member States in this area. We are also inundated with lots of other possible infringements in this area.

 
  
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  President.

Question No 52 by Georgios Papastamkos (H-0984/08)

Subject: Credit rating agencies

The Commissioner responsible for the internal market and services, Mr Charlie McCreevy, recently stated the following in connection with the regulation of credit rating agencies. ‘I want Europe to play a leading role in this sector. This proposal goes further than the rules existing in any other jurisdiction. These very exacting rules are necessary to restore the confidence of the market in the ratings business in the EU.’

Will the Commission say why it did not propose the adoption of a more exacting regulatory framework at the stage preceding the financial crisis?

 
  
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  Charlie McCreevy, Member of the Commission. − The Commission has closely followed the activity of the credit rating agencies (CRAs) over the past few years. Following the European Parliament’s resolution on credit rating agencies in February 2004, the Commission considered very carefully what legislative measures would be necessary to regulate the activities of credit rating agencies.

In line with the advice received from the Committee of European Securities Regulators (CESR) in March 2005, the Commission adopted in 2006 a communication on credit rating agencies. In this communication the Commission concluded that various financial services directives, combined with self-regulation by the credit rating agencies, on the basis of the IOSCO Code of Conduct, the methods for CRAs could provide a satisfactory answer to the major issues of concern in relation to credit rating agencies. It is stated that this approach would require continuous monitoring of developments by the Commission.

In addition, the Commission asked CESR to monitor compliance with the IOSCO Code and to report back on an annual basis. At the same time, the Commission indicated in the communication that it might consider putting forward legislative action if it became clear that compliance with EU rules or IOSCO’s Code was unsatisfactory or if new circumstances were to arise, including serious problems of market failure or significant changes in the way credit rating agencies are regulated in other parts of the world.

The financial crisis shed a new light on CRAs. Since August 2007 the financial markets worldwide suffered from a major confidence crisis. This financial crisis is a complex phenomenon involving multiple actors. The credit rating agencies are close to the origin of the problems that have arisen with subprime markets. The crisis highlighted poor performance by credit rating agencies. An explanation could be found in the unsatisfactory way the agencies managed their conflicts of interest, the lack of quality of the methodologies they issue, insufficient transparency around their activities or the inappropriate internal governance in the agencies.

The subprime crisis demonstrated that the framework for the operation of credit rating agencies needs to be significantly reinforced. That is why in June 2008 I announced that the Commission would take regulatory action in this area and on 12 November 2008 the College adopted the proposal covering regulatory activity of credit rating agencies with the agreement of this Parliament and of the Council.

 
  
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  Georgios Papastamkos (PPE-DE). - (EL) Madam President, Commissioner, you personally said in reply to a question of mine in 2006 that, in keeping with the recommendations of the Committee of European Securities Regulators, the Commission would not be tabling any new legislative proposals in the credit rating agency sector.

The massive financial crisis occurred and now here you are telling us that we need a stricter legislative framework. We do indeed need a stricter regulatory framework. My question is: do you acknowledge that the Commission’s regulatory reflexes were sluggish in this matter?

 
  
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  Eoin Ryan (UEN). - I know that the Commission has put forward proposals on credit rating agencies and other initiatives that address instability in financial markets to try and ensure that a similar crisis does not reoccur such as CRD, deposit guarantee schemes and Member State balance of payments.

Could I ask him, what proposals does the Commission plan to put forward to encourage growth and competitiveness in the real economy, especially in the SME sector which is particularly important now as more and more European economies are experiencing recession?

 
  
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  Charlie McCreevy, Member of the Commission. − In reply to Mr Papastamkos, let me refer to the report in 2005. We did say at that particular time that we would keep the activities of credit rating agencies on watch, and in 2007, when the subprime crisis reached its peak, I met with the credit rating agencies and expressed our dissatisfaction as to how we perceived they had conducted their affairs.

The questioner will be aware that in December 2007 I wrote to CESR and to ESME for further advice as to what I should do in relation to certain areas. I made quite clear in speeches and in comments at that time that leaving the status quo as it was just not an option.

As a consequence, we came forward with the Commission proposal in 2008 and that mater is now being debated by Parliament and the Council of Ministers. I think that in the past, when keeping the activities of the credit rating agencies under review, I made it quite clear that we would consider the matter in the light of changing circumstances. And in the words of a person in the last century, far more famous than me – when the facts change, we change too. And that is what has occurred.

Mr Ryan, as to what we will do in the areas of financial regulation to which he has alluded – the proposals on credit rating agencies and the capital requirements directive – he put forward a legitimate question concerning what the European Union was doing to address the problems in the real economy because although the changes to do with financial regulation has undoubtedly been timely in areas where there was a lacuna in financial regulation, it in itself is not going to galvanise and kick start the European economy.

Mr Ryan will be aware that in the past couple of months the Commission was at the centre of coordinating the approach of financial stimulus which was adopted by the European Council at its December meeting. Of course it still remains the prerogative of Member States to affect their own financial stimulus if they deem it appropriate because those matters remain the prerogatives of the Member State governments. But the Commission in responding to that stimulus package also committed some funding within our remit and coordinated with the agreement of the other European players as to how we will kick-start things there.

I remember even before that we did adopt in the Commission some initiatives which should help to stimulate small business activity in the SME sector – such as the Small Business Act, such as the European Private Company Statute – and hopefully they will contribute in some small way to assisting in the turn around of the general economy in the European Union.

 
  
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  President.

Question No 53 by Gay Mitchell (H-0990/08)

Subject: Financial crisis

In the light of the ongoing financial crisis, has the Commission changed the rules of the internal market in order to make it easier for individual Member States to take protective action concerning their economies and industry?

 
  
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  Charlie McCreevy, Member of the Commission. − At this time of financial crisis and economic recession, both European governments and the European institutions need to show determination and flexibility, as mentioned by President Barroso in the preface to the recently adopted European economic recovery plan.

To show this flexibility, the Commission will, for instance, put in place a simplification package to speed up decision-making on state aid, allow for the use of accelerated procedures in public procurement in 2009 and 2010 for all major public projects, and request that Member States take corrective action in case of any excessive deficit in timeframes consistent with economic recovery to allow their economies to adjust.

However, this flexibility does not mean that the Commission has changed or will change the rules of the internal market. A modernised approach to policies set out in the single market review of November 2007 needs to be pursued further as foreseen.

The 16 December 2008 progress report called ‘The Single Market review: one year on’ highlights a series of recently adopted measures that will help create the conditions to relaunch the European economy. They include, most of all, stronger contractual rights to enhance consumer confidence, lower costs and administrative burdens, and a single company statute for SMEs. It is also evident that we need to restructure the European regulatory and supervisory framework in order to minimise the risk of future crises.

Over the year, we have been working alongside Parliament and the Council to, among other things, increase protection for bank depositors, dissuade banks and other financial institutions from taking excessive risks in the future and better regulate the credit rating agencies. The rapid adoption and implementation of these proposals is elementary. We need to demonstrate that Europe can provide concrete answers.

Over the coming months, the Commission will formulate in a comprehensive manner how the current regulatory and supervisory framework should be further reformed to bring back stability and confidence. We should strive for a more stable system that does a correspondingly better job in providing opportunities to trade, hedge, diversify and pool risk, allocate resources and mobilise savings. This calls, among other things, for better cooperation and coordination between national regulators and supervisors, as well as avoiding any protectionism.

To foster longer economic growth we need to reduce the cost of capital and to enhance capital allocation. It will clearly require a further strengthening of the internal market.

This flexibility certainly does not mean any changes to the single market principles. On the contrary: at a time of financial economic downturn, both European governments and European institutions need to hold firmly to the principles of the single market. It is essential that any measures to tackle the crisis are guided by the fundamental freedoms and the principles of non-discrimination and proportionality. For instance, a framework for national rescue plans is already in place to prevent any negative spill-over effects amongst uncoordinated national actions.

A level playing field which has benefited Member States’ consumers and businesses so much since 1992 needs to be maintained and safeguarded. This is essential as any measure which would undermine the single market could further aggravate the impact of the financial crisis on the wider economy.

 
  
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  Gay Mitchell (PPE-DE). - I hope the Commissioner’s voice gets a little bit better. Let me thank the Commissioner for his reply and say to him that I am glad to hear that protectionism is not on the way back because that would indicate that there is not going to be a recovery. There will be a recovery in Europe.

Could I invite the Commissioner to start talking about that recovery? The most hopeful thing we have heard in some time were the comments made by President Trichet reported in today’s press, where he said that he could see a recovery coming in 2010. Could I invite the Commissioner to start talking about the future so that we do not lose hope and also to talk about the opportunity there is for Europe to become more competitive while this particular crisis is ongoing?

 
  
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  Brian Crowley (UEN). - Madam President, I would like to thank the Commissioner as well for his response and advise him that a drop of whisky, some hot water and a slice of lemon is very good for clearing the throat.

With regard to your answer, and in particular concerning the economic recovery plans and so on, what has been highlighted over the last number of months has been that coordinated action is the only response that can deal with the present financial crisis. The question I want to ask is whether any plans have been made or any initial contacts been made with the incoming American administration – the Obama administration – to see what further coordinated action at financial level is required?

 
  
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  Charlie McCreevy, Member of the Commission. − I undoubtedly agree with Mr Mitchell when he says that protectionism is not the answer. But I am sure that there are many Member States which probably see a possible opportunity to engage in some protectionist measures, but I would say two things on that.

Firstly, we will be vigilant in enforcing EU law in order to prevent any measures which are contrary to the rules of the European Union.

Secondly, I would say to those Member States: if people believe in that particular approach, it would be my view and I know that of Mr Mitchell that that would prolong the duration of the economic downturn. But there have always been differences of opinion regarding this particular approach and there are probably many Members on other sides of this House who would not agree with either myself or Mr Mitchell.

I also agree with Mr Mitchell that it would be appropriate to balance all this negative talk of economic downturn – which there is – with a sense of realism and not to be overly pessimistic. I am afraid that in the world in which we live – whether it is in the Member State we know best or in other Member States – there has always been a predisposition to concentrate maybe overly on the negativity of the economic downturn. Now we have to balance this with realism because there has to be realism in economic forecasting as well and people will have to be realistic. But there is a balance to be struck between being overly pessimistic and being realistic. Confidence is a very fragile thing and it takes a long time to recover it and it can be gone in a flash.

So, I welcome the comments of the President of the European Central Bank in today’s paper as to the scene in the next couple of years. But, as I said, there should be this balance and people should be aware of where this balance should be struck.

Mr Crowley asked a legitimate question as to what arrangements we have made to discuss these economic and financial matters with the US administration. There is a very strict protocol in place in the United States, as you are undoubtedly aware, even for people who are in the transition administration as to what is done by them and they guard it religiously.

But as soon as the new administration is in place, we will be in contact with the new Treasury Secretary. We already have a lot of fora in which we discuss matter, such as the Transatlantic Economic Council, the Financial Markets Regulatory dialogue, which are ongoing the whole time. As soon as the new Obama administration takes office next week, we will be making contact with our new counterparts in that regard.

 
  
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  President. – Questions which have not been answered for lack of time will be answered in writing (see Annex).

 
  
  

(The sitting was suspended at 7.30 p.m. and resumed at 9 p.m.)

 
  
  

IN THE CHAIR: Diana WALLIS
Vice-President

 
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