Charlie McCreevy, EU commissioner for the internal market and services, tells Karina Robinson of his fight against growing protectionism.
“Oh God, she definitely wants to get me sacked!” exclaims the European Union commissioner for the internal market and services, covering his blushing face with his hands, on being asked whether the EU would be better off without France.
He continues: “On the other hand the French would say the EU would be far better off without the UK!” Guffaws of laughter from Charlie McCreevy, a much-respected former Irish minister of finance who fits well with the freemarket, liberal Barroso European Commission.
But, on a more serious note, he then makes the point that neither people nor countries are static. “You must remember – look at what has happened in every member state, look at the UK. I remember the kind of economics applied in the UK in the 1960s and 1970s. There are politicians in the Labour Party in the UK saying things now that are natural to them. If they had said them in 1972 or 1973 they would not have been allowed into the Labour Party. Member states don’t stay the same and it is the same within the EU.”
He adds: “I can wake up many days and get very frustrated by the attitude of many of the member states. But you have to fight harder.”
Old versus new Europe
As he points out, eight of the 10 new member states look towards the UK/Irish economic model rather than the one more closely aligned to that of the countries that US defence secretary Donald Rumsfeld called “old Europe”, despite their historical ties and despite coming from regimes that had total control of economic activity.
The impossibility of predicting change – yet the need to welcome it – is a recurring theme with a man who began his professional career as a chartered accountant but found the lure of politics stronger. At the age of 28 he was first elected to the Irish Parliament.
His political career makes him empathise – although not sympathise – with the gold-plating of EU regulation. When a directive has to be transposed into national law, ministers and civil servants will often want to use that opportunity to update related aspects of national law and/or to cross every “t” and dot every “i”.
“Consequently you end up with the final piece of legislation in the member state and you hear many people criticising Brussels, whereas maybe only a certain portion of the law relates to a directive and the rest to national things,” he says, sitting in his office in the Berlaymont building in Brussels.
Gold plating
One of the aims of the White Paper on Financial Services Policy issued in December was to ensure member states transposed EU regulation without weakening or gold-plating it – the latter being something financial institutions complain about. But Mr McCreevy admits he has no power to prevent this. Rather, the fulfilment of that White Paper aim depends on a new mood in Europe towards better and lighter regulation.
“In the Commission [and in many member states] better regulation has become the theme song. So, hopefully, all of this means there is going to be less gold-plating because the cost of regulation is having a disproportionate effect on business,” he says in his Irish accent.
The problem for him and for the other liberal commissioners is the innate contradiction between their instinctive desire for a light touch, and their desire for a fully functioning single market where unbiased competition will allow the best companies to win and consumers to profit from choice. This is because a light touch is not enough: many protectionist governments need to be forced to forgo their nationalist policies. The Commission’s only weapons are regulation and infringement proceedings, which can ultimately lead to the European Court of Justice.
Thus before Christmas the Commission took the first step towards challenging the 2005 actions taken by the Italian authorities in the bids for two local banks by Dutch group ABN Amro and Spain’s BBVA by sending a letter of formal notice. The Bank of Italy’s controversial governor, Antonio Fazio, has come under fire from members of the Berlusconi government, let alone foreign banks and commentators, over his actions.
Thus, also, Mr McCreevy agrees with competition commissioner Neli Kroes that Brussels needs more power over in-country mergers to stop the creation of “national champions”.
“There is undoubtedly, as I have said before, a wind of protectionism sweeping across Europe. And the reason some of the ‘old’ member states, as you classify them, have that particular view, is due to lack of economic activity and high unemployment. Now, you can either embrace change or oppose it.
“The more natural thing is to oppose change. But we just can’t keep things as they are because the average unemployment rate in Europe is nearly 9% and in some countries is a lot higher than that.”
He calls this profound discrepancy between EU members about how to deal with the 21st century “a tension, I suppose, rather than a battle”.
On the regulation front, banks are concerned that the White Paper mentioned the setting up of an expert group to identify problems with opening and moving bank accounts cross-border. They are also fretful about possible action on cross-border investment funds and cross-border mortgage lending. Their apprehension is that more regulation is in the offing, when these are not areas where there will be high demand from consumers.
On top of all this is the Directive on Markets in Financial Instruments, known as MiFID, which involves more legislation and is costly for banks to implement.
Cross-border choices
But Mr McCreevy is unrepentant. He says there may possibly be some legislation on the mortgages market, since a report concluded there are 48 separate obstacles to cross-border business, while there is probably a need to update the 1982 directive on cross-border investment funds. And even if a majority of the population will stick to local providers in all banking areas, “the purpose… of all this is to ensure there is a true internal market in financial services and that people can avail [themselves] of the opportunities across borders if they so wish”.
And with MiFID “the benefits are going to accrue over time”, he argues.
When it comes to cross-border bank mergers, several reviews are taking place at EU level looking at amending the banking directive and ensuring member states’ laws do not constitute obstacles. Proposals are expected in the first half of this year. “I think – hope, I hope – some people recognise it may not necessarily be a bad thing if there was more cross-border [bank activity],” says Mr McCreevy.
One of the problems in this area as well as others has been the different visions and reporting requirements of regulators in the home and host countries of banks. “I know what most of the big banks in Europe would like: to only ever have to deal with one single regulator.
“But politically speaking, for the foreseeable future, there is not going to be a single European regulator. It won’t be agreed to by the member states.
“What we have been doing is bringing in clearer rules and having more cooperation between regulators and perhaps over a period of years people will all say we will move forward.”
Horse drawn
Mr McCreevy’s natural bonhomie overcomes what can be the rather turgid subject matter of regulation and red tape. But it is when the subject moves to his hobbies, including horse racing, that he sits on the edge of his seat. “I come from County Kildare which we regard as the headquarters of the horse industry in Ireland. I came from a family that likes to have a bet, a gamble,” he says.
Do you still gamble, I ask, with the raised eyebrows of a journalist unused to hearing top officials confess to such – albeit legal – hobbies. “Bet? Oh yes, of course… My mother did it, we went as children to it [the racing]. It is part of my life.”
As for his plans at the end of his term in four years, he says he is not looking for another term as EU Commissioner, but with a young family to support from his second marriage he says he will be looking for work.
“Maybe working for The Banker,” he muses, without serious intent. “My son’s nanny gets paid more than me,” I say. “That won’t keep me going. Okay, that is out,” he laughs.
The Banker looks forward to interviewing Mr McCreevy in 2011 in his new role, holding a portfolio of non-executive roles in major European financial organisations.
