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EU FINANCIAL SERVICES..................... ............................................................ .............................................. 2

I.BANK COMMISSION TO CONSULT OVER DETAILS OF SHORT SELLING ......................................................... ....... 2II.HOW TO IMPROVE FINANCIAL INSTITUTIONS' CORPORATE GOVERNANCE ........................................................ 2

EU INTERNAL MARKET ...................................................... ........................................................... ................. 2

I.PREPARING FOR EUROPEAN SUMMIT AND TASKFORCE MEETING ..................................................... ................. 2II.COUNCIL REAFFIRMS NEED FOR EACH COUNTRY TO TIGHTEN ITS BELT AS APPROPRIATE ................................ 3

EU HEALTH ......................................................... ............................................................ .................................... 3

I.MEMBER STATES SPLIT OVER GIVING HEALTHCARE INDUSTRY LONGER TO PAY ITS BILLS ............................... 3II.PUBLIC CONSULTATION EXERCISE ON USE OF ICT FOR ELDERLY ................................................... ................. 4

EU SOCIAL AFFAIRS......................................... ............................................................ .................................... 4

I.EUROPE'S UNIONS FLEX MUSCLES AGAINST AUSTERITY PLANS........................................................ ................. 4II.COMMISSION DECISIONS IN CASES CONCERNING BELGIUM,ITALY AND SLOVAKIA ........................................ 5III.PARLIAMENTARY COMMITTEE CALLS FOR EUROPEAN YOUTH GUARANTEE AND EUROPEAN QUALITY

CHARTER ON TRAINEESHIPS.................................................... ........................................................... ................. 5IV.AMIC TO PUSH CORPORATE GOVERNANCE WITH EU PAPER......................................................... ................. 6V.ECON REVISES PROPOSED DERIVATIVES RULES ......................................................... .................................... 6VI.EC ISSUES GREEN PAPER ON CORPORATE GOVERNANCE ..................................................... ........................... 7

VII.EC WARNS ITALY OVER PENSION AGE DISCRIMINATION.................................................... ........................... 7VIII.AMENDED EU DIRECTIVE TARGETS RISK IN BANK BONUSES ...................................................... ................. 8IX.ABP AND EC MOVE CLOSER TO ELIMINATING 'DISCRIMINATORY' TAX LAWS ................................................ 8

ECONOMY ........................................................... ............................................................ .................................... 9

I.TO MAKE EUROPE MORE ATTRACTIVE,VAN ROMPUY WANTS ECONOMIC GOVERNANCE AND TARGETED

GROWTH STRATEGY....................................................... ........................................................... ........................... 9II.GERMANY,AUSTRIA AND PORTUGAL SENT TO EUROPEAN COURT OF JUSTICE OVER DISCRIMINATORY TAX

RULES ........................................................ ............................................................ .............................................. 9

EVENTS AND COURT CASES........................................................ ........................................................... ..... 10

I.2ND

ANNUAL TRANSATLANTIC CONFERENCE...................................................... ............................................ 10

II.B

ARROSO MEETSE

UROPEAN SOCIAL PARTNERS......................................................... .................................. 10III.SOCIAL INCLUSION INDICATORS, HEALTH AND PENSION INEQUALITIES AND SOCIAL SECURITY ON COUNCIL

AGENDA FOR 7JUNE ...................................................... ........................................................... ......................... 10IV.EUROPEAN COURT OF JUSTICE CALENDAR" .................................................... ............................................ 11

IN DEPTH ANALYSIS .................................................. ........................................................... ......................... 12

I.TO MAKE EUROPE MORE ATTRACTIVE,VAN ROMPUY WANTS ECONOMIC GOVERNANCE AND TARGETED

GROWTH STRATEGY....................................................... ........................................................... ......................... 12II.SOCIAL INCLUSION INDICATORS, HEALTH AND PENSION INEQUALITIES AND SOCIAL SECURITY ON COUNCIL

AGENDA FOR 7JUNE ...................................................... ........................................................... ......................... 14

Table of Contents

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EU Financial Services

I. Bank Commission to consult over details of short selling

On Wednesday 2 June 2010, EU Internal Market Commissioner Michel Barnier said that the EuropeanCommission would be opening a public consolation exercise the following week on short-selling,examining transparency, scope of certain short-selling to be banned (securities or bonds), harmonisingMember States' legislation and EU coordination of the various measures. New EU legislation may bepublished in September (a timing requested by Germany). To the surprise of other EU countries,Berlin recently banned naked short-selling of sovereign debt and is deciding whether to extend theban to other products. (02/06/2010 Agence Europe)

II. How to improve financial institutions' corporate governance

Although corporate governance was not directly responsible for the economic crisis, the EuropeanCommission believes that the lack of control contributed to excessive risk-taking by banks and otherfinancial instructions and has therefore opened a period of reflection (until 1 September 2010) oncorporate governance and pay policy in financial institutions. Unveiling the European Commission'sGreen Paper on Wednesday 2 June 2010, EU Internal Market Commissioner Michel Barnier said thefinancial crisis had shown that a lot of directors were unfit for purpose, as diplomats put it. The GreenPaper looks are four areas - the role and powers of management boards; risk management; the role ofexternal auditors; and the role of shareholders. The Commission will present a policy document afterthe summer break and this may lead to new legislation being unveiled early in 2011. A second GreenPaper will be adopted early next year to examine corporate governance in companies listed on thestock exchange and private companies (not on the stock exchange). To give boards of managers a

greater role in financial institutions, the Commission is consulting stakeholders on the option ofrestricting the number of companies any one individual on a management board can work in to, forexample, three, and the option of ensuring a diversity of advice. The idea of separating the jobs ofChair and Chief Executive Officer is also being mooted for financial bodies. When it comes to riskmanagement, the Commission believes that the authority of the person responsible for riskmanagement on a board has to be boosted and be put on a par with the financial director. A riskcommittee could be set up on management boards to make public statements about the financialinstitution's risk policy. Pay and bonuses. The Commission will be looking at implementation of its two2009 recommendations requiring publicly quoted company directors' pay to be linked to the company'sperformance (see EUROPE 9892). The Commission is examining whether to publish EU legislation inother areas, restricting stock options and golden parachutes, for example. (02/06/2010 AgenceEuropeEU Internal Market

I. Preparing for European summit and taskforce meeting

EU27 finance ministers will be meeting in Luxembourg on Tuesday 8 June for an ECOFIN Council toprepare for the upcoming European summit. At the Monday 7 June 2010 Eurogroup meeting,eurozone finance ministers will fine-tune the Financial Stabilisation Mechanism devised on 9 May (seeEUROPE 10137), deciding on various issues which remained under discussion (see EUROPE 10141).A discussion will then be held on economic governance at the taskforce chaired by Herman Van

Rompuy Other issues. Several other issues will be decided upon on Tuesday without debate, like(a) a conclusions document on the way public policies can best ensure sustainable and sufficient

EU Financial Services

EU Internal Market

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retirement pensions. The ministries will repeat their support for a three-pronged approach: - rapidlyreducing debt levels; - increasing productivity and employment rates; and - changing pensions,healthcare and long-term care systems; (b) general guidelines on changes to the EuropeanInvestment Bank's mandate for action outside the EU, as part of the mid-term review. The ministerswill approve the activation of an optional 2 million suggested in 2006 when the total amount of EIBfinancing outside the EU was decided for 2007-2013. The additional 2 million will be used to tackleclimate change in eligible countries. Other changes involve the Council allowing the EIB to fundprojects in Iceland, Libya, Belarus, Cambodia and Iraq. The formal decision will be made by theCouncil of Ministers and EP in codecision; and (c) general guidelines on a draft Regulation to improvethe quality of statistics used in the excessive deficit procedure, which would give Eurostat the power toaudit countries' statistics. Following the European Commission's unveiling of draft legislation to thiseffect (see EUROPE 10078), the Council lays down the conditions for any methodological visits that

might be made by Eurostat, giving examples of when they would be appropriate. The EP, which isbeing consulted on the issue, will state its views at the July plenary. (04/06/2010 Agence Europe)

II. Council reaffirms need for each country to tighten its belt as appropriate

The EU's state economic recovery exit strategy states that member states shall start to consolidatetheir public finance next year at the latest, explains a report to be published by the ECOFIN Council onTuesday 8 June and then submitted to EU heads of state at the European Summit. The documentpoints out that in line with their individual situation, a number of countries have already started reiningin public spending (under pressure from the market, especially Spain and Portugal), adding thatgreater detail and credibility are required for countries' budget adjustment plans in general: a delicatebalance must be struck between averting adverse market dynamism through frontloading and securingthe conditions most conducive to successful fiscal consolidation by taking into account countries'specific conditions.' All the countries covered by excessive deficit proceedings say they will get their

budgets back to within the 3% cut-off point in the required timeline, but some will have to step up theirplanned structural adjustments if they are to actually achieve this. The budget consolidation processwill differ from one member state to the next, the report points out, but all member states should takefurther measures, where required, to achieve their budget objectives within the deadline (2010 or2011). Such measures must be permanent and focus on spending (income-based measures will beless effective because of their negative impact on growth). Member states will also have to achievetheir medium-term objectives of moving towards a balanced budget in a reasonable timeframe, addsthe report. (04/06/2010 Agence Europe)

EU Health

I. Member states split over giving healthcare industry longer to pay its bills

Progress is slow in the talks at the Council of Ministers over the draft amendment to EU Directive200/35/EC on invoice payment deadline. One of the stumbling blocks is whether some industries, likehealthcare, should be given longer than the normal 30 day deadline for public authorities to pay theirbills. In a compromise bid submitted to the member states' delegations earlier in the month whichEUROPE has seen, the Spanish Presidency introduces exemptions to the general 30-day rule. Over athree to five-year transition period, healthcare industry public authorities would have 60 days to paytheir bills. Twelve member states (Germany, Austria, Denmark, Estonia, Finland, Ireland, Italy, theCzech Republic, the Netherlands, Poland, Slovenia and Sweden) and the European Commissionoppose the idea of industry sector-specific exceptions. France is pushing strongly for derogations for

state hospitals so that they always have 60 days to pay their bills. Six member states (Belgium,Bulgaria, Cyprus, Greece, Poland and Romania) support France in this. The European Parliament's

EU Health

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internal market committee supports the French view (see EUROPE 10128). The Spanish Presidencyalso suggests that parties should be able to mutually agree to not abide by the general 30-day rule forcontracts for the buying and selling of land and buildings and the supply of financial services to raisecapital, and also when granting public contract under public competitive tendering when publicauthorities negotiate the terms of contracts with potential private partners. When it comes to penaltiesfor public authorities that do not meet their payment deadlines, the Spanish Presidency scraps theidea of levying a surcharge of 5% of the amount due that was initially suggested by the EuropeanCommission. The EP suggests the same thing. Backed by Denmark and Lithuania, the Netherlandssuggests a 2% surcharge to a maximum of 50,000, in addition to damages for costs arising fromchasing the overdue invoices. The Spanish Presidency has set a range of amounts for damagesdepending on the size of the overdue invoice in question. MEPs suggest a fixed 40 for damages.Earlier this month, the European Parliament postponed voting in plenary on the draft report by Barbara

Weiler (S&D, Germany) because it wants to reach agreement with the Council of Ministers in firstreading. It is hard to say at this stage whether the EP and Council of Ministers will bring this off.(28/05/2010 Agence Europe)

II. Public consultation exercise on use of ICT for elderly

On Thursday, the European Commission launched a consultation exercise, inviting citizens,businesses and researchers to share ideas on how best to use information and communicationstechnologies (ICTs) to help older Europeans live more independently, and, more generally, toestablish new ways of putting ICTs at the service of the most vulnerable members of society. Theconsultation will be led by a high-level panel established to advise the European Commission on thefunctioning of the Ambient Assisted Living joint programme. The panel is chaired by former EuropeanCommissioner Meglena Kuneva. The public consultation, which will run until 1 July 2010, is the firststep towards meeting the target of doubling the take-up of independent living arrangements for the

elderly by 2015. (04/06/2010 Agence Europe)EU Social Affairs

I. Europe's unions flex muscles against austerity plans

Italy's six-million strong CGIL union announced a nationwide stoppage on June 25 to be preceded byprotest rallies around the country two weeks earlier, while Greece's private sector union GSEE said itwould strike next month against pension reform. While Portugal's largest labour group girded for a

mass protest through the streets of Lisbon on Saturday, Spain's unions kept up their threat of ageneral strike as talks with the socialist government over labour reform remained deadlocked.Pressure on MadridPressure on Madrid to push ahead with the reforms grew on Friday after ratingsagency Fitch cut Spain's credit rating to AA-plus from AAA on Friday, saying it expects a very sloweconomic recovery in the next few years as a result of fiscal austerity measures. Fitch said it won'tdowngrade Spain's ratings again in the next 12 months despite an expected deterioration in publicfinances. The unions have already promised a public sector strike over pay cuts. As workers in all fournations resist government attempts to push through painful budget cuts, the leader of Greece's GCEEsaid he would lobby counterparts around Europe to take joint action, a call quickly supported by Italy'sleft-wing CGIL. "In this moment we need initiatives at a European level," CGIL leader GuglielmoEpifani told Reuters on Friday, adding this will be his union's position at a meeting of European unionsin Brussels on 1 June. Portugal's CGTP union confederation said its rally this weekend was only thefirst step in protest at an austerity plan including tax hikes and a freeze on civil servants' pay. "It's a

stage of a continuous struggle that will intensify," Armenio Carlos, a member of the CGTP's national

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leadership committee, told Reuters. "We're leaving all options open, including calling a nationalgeneral strike." Austerity spreading An increasing number of European countries are announcingausterity measures to placate nervous bond markets in the wake of Greece's debt crisis. Spain,Portugal, Britain, Italy, Holland and France all announced new steps in recent weeks. While unionshave tended to respond with hostility, complaining that the poor and public sector workers are beingmade to pay the cost of the mistakes of the rich, analysts say the chances of co-ordinated protests allover Europe are slim. They point to divisions in trade union movements in some countries, includingItaly and Portugal, while in northern Europe, voters already angry at having to bail out Greece areunlikely to tolerate disruptions caused by any show of solidarity. In Italy, CGIL chief Epifani was bitterthat the country's other main union confederations, the CISL and the UIL, were not joining the plannedfour-hour stoppage around the country. "All around Europe the unions strike together, and it's strangethat we in Italy have the most unfair budget and two unions that support it," he told Reuters. Despite

the growing strike calls in southern Europe, there are also signs the appetite for protest among unions'members may be limited. In Greece, whose debt crisis sparked the austerity drive around Europe, amarch last week drew only half the crowd seen in protests on 5 May, while in France the governmentsignalled it would push ahead with plans to raise the pension age after weak protests. "The publicsupport just isn't there," said David Lea, Western Europe analyst at Control Risks. "The unions willneed to take some action to avoid accusations of irrelevance but it will be limited." (31/05/2010Euractiv.com)

II. Commission decisions in cases concerning Belgium, Italy and Slovakia

On Thursday 3 June, the European Commission took a stance on three cases, two of which pertain toequal treatment in the employment field (Belgium and Slovakia) and the other to equal pay (Italy).Thus: (1) The Commission decided to close the case against Belgium for failing to communicatenational measures to implement European Union rules against gender discrimination in employment

(Directive 2006/54/EC - recast). The proceedings had been opened in September 2009 because theauthorities had failed to communicate the transposition of EU legislation in the German-speakingcommunity. In reply to the Commission's reasoned opinion sent in March 2010, Belgium put the matterright, thus allowing the Commission to close the case against it. (2) The Commission took further legalaction against Italy to bring it into line with the EU Court of Justice ruling of 13 November 2008 (CaseC-46/07) whereby different pensionable ages for male and female civil servants violates the principleof equal pay. Following infringement procedure brought by the Commission, Italy introduced new rulesto comply with the Court's ruling. In a complementary letter of formal notice under Article 1601 of theTreaty on the Functioning of the European Union (TFEU) and adopted on Thursday, the Commissionmaintains that provisions taken by Italy - under which retirement age for female employees wouldincrease gradually and only be equalised at the same age as men in 2018 - are inadequate and thatdiscriminatory treatment continues. (3) The Commission sent a reasoned opinion to Slovakia after itincorrectly implemented EU rules against gender discrimination in employment, vocational training,

promotion and working conditions (Directive 2002/73/EC) into national legislation. The final date fortransposing the directive into national law was 5 October 2005. (04/06/2010 Agence Europe)

III. Parliamentary committee calls for European Youth Guarantee and European Quality Charteron Traineeships

In order to promote young people's access to the labour market, the employment and social affairscommittee suggests the Council and Commission should present a European Youth Guarantee togive every young person in the EU the right to a job, an apprenticeship, further training or a jobcombined with training, if they have been out of work for six months. This is the idea set out in thereport by Emilie Turunen (Greens/EFA, Denmark), adopted by 42 votes in favour, one against and 4abstentions by the parliamentary committee meeting in Brussels on Thursday 3 June under thechairmanship of Elizabeth Lynne (ALDE, UK). MEPs also call on the Commission and Council to

develop a European Quality Charter on Traineeships in order to ensure the educational value ofthese traineeships and to avoid exploitation. This charter should lay down time limits on internships, aminimum allowance based on the standard of living costs of the place where the internship takes

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place, and social security benefits. In order to allow young people to become financially independent,MEPs call on member states to guarantee young people a decent income. The committee sees somenational laws as discriminatory as they prevent young people from being financially independent. This,for example, is the case in the United Kingdom where the minimum wage is lower for the young, inFrance where there is limited access to the active solidarity income, and in Denmark where youngpeople receive reduced unemployment benefits. Emilie Turunen points out that, in the context of thecurrent economic crisis, the rate of unemployment for young people increases faster than the averagerate. In December 2009, 5.5 million young people under the age of 25 were unemployed in the EU,which corresponds to 21.4% of all young people. The vote on this report will be held in EP plenarysession in July 2010. (04/06/2010 Agence Europe)Economy

IV. AMIC to push corporate governance with EU paper

The Asset Management and Investors Council (AMIC) is working on a corporate governance paper inconjunction with the European Union. The aim of the paper is to encourage asset managers toaddress corporate governance issues and increase their transparency to clients. Corporategovernance is one of the biggest topics concerning institutional investors in Europe, according to BobParker, AMIC chairman and senior advisor at Credit Suisse. But while the asset management industryshould have been more aggressive in terms of corporate governance it cannot be blamed for thefinancial crisis alone, he said. Parker says the other main issue is the securities valuation of illiquidassets or assets in illiquid markets. It is a very difficult but hot subject at the moment, he said. One isquestioning whether everyone is correctly pricing the securities in their portfolio, such as Spanishsavings banks valuing the real estate assets in their portfolio. What are they valuing and why? Parkerhas also identified an ongoing trend in asset allocation towards absolute return products and passiveindexation, particularly in illiquid markets. In less liquid markets, investors want to employ activemanagers, while in liquid markets such as the US they tend to use indexation. The gold market is a

good example of that, he said. The alternatives industry is all over the place. There is a lot of interestin infrastructure by pension funds, but there are also a lot of walking wounded in the private equityindustry at the moment. An AMIC working group is also in the process of setting up a charter onprivate banks, which is expected to be published in late July. AMIC was set up in 2007 under theauspices of the International Capital Market Association (ICMA) to represent the global assetmanagement industry and investors on a supranational basis. Its members include asset managers,pension funds, banks, insurers, sovereign wealth and hedge funds. (02/06/2010 IPE.com)

V. ECON revises proposed derivatives rules

The European Parliaments Economic and Monetary Affairs Committee (ECON) today voted (02 June)in favour of a compromise version of its proposed new legislation for over-the-counter (OTC)derivatives. Nearly all members showed support for rapporteur MEP Werner Langen's revised

wording, which sought to distinguish between derivatives used as a "risk management tool for hedginga real underlying risk" and those "used solely for speculation". Langens revised proposals, which weresupported by ECON members voting 43 for, with only one against, called for better regulation ofderivatives, and in particular OTC derivatives by the use of trade repositories and centralised datastorage, the use and the strengthening of central clearing houses, and the use organised tradingvenues. Despite this, pension fund sources indicated that anxiety was being expressed by thepensions industry over the danger of being lumped together with speculators when the final version ofthe legislation is published. While corporate interests are being given understanding, pension fundsare yet to see same treatment, it was said. Werner's recommendations included a call, as a matter ofpriority, for credit default swaps (CDS) to be made subject to independent central clearing and for asmany derivatives as possible to be settled centrally by central counterparties (CCP). It was alsosuggested that individual types of derivative with cumulative risks should, if necessary, only beconditionally authorised, or even, on a case-by-case basis, prohibited. Members also voted for the

need for sufficient capital and reserves should to cover CDS "in the case of a credit event. TheEuropean Commission is expected shortly to issue the results of a public consultation prior topublishing its own proposals for the legislation, expected in July. (02/06/2010 IPE.com)

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VI. EC issues green paper on corporate governance

The European Commission plans to require institutional investors to publish their voting andengagement policies and records, and "adhere to stewardship codes", a green paper on corporategovernance has revealed. The draft regulations, which are open to consultation until 1 September2010, have been issued in response to "numerous failings" by financial institutions, such as insufficientoversight of senior management by boards, a lack of independence and authority in risk managementfunctions and a failure by shareholders to exercise control of management. Recommendations fromthe Green Paper on Corporate governance in financial institutions and remuneration policies also include anenhanced role of supervisory authorities in the review of corporate governance structures, making therole of chief risk officer equal to chief financial officer, and separating the functions of chief executiveand chairman. On the recommendation relating to shareholder behaviour the Green Paper stated:"Shareholders' lack of interest in corporate governance raises questions in general about theeffectiveness of corporate governance rules based on the presumption of effective control byshareholders for all listed companies. Similarly, engaging shareholders presents a real challenge forfinancial institutions". To motivate shareholders to engage with institutions, the document highlighted arange of topics for focus, including voting disclosure, the use of discussion platforms to strengthenshareholder cooperation and adherence to stewardship codes of best practice. One of the generalquestions raised by the consultation was whether respondents believed shareholder control offinancial institutions was "still realistic" following the recent failings. The role of supervisory authoritiesin relation to corporate governance was also under review, including proposals to create a duty forsupervisory authorities to check the correct functioning and effectiveness of the board of directors, andto regularly inspect the risk management function to ensure its effectiveness. It also noted thatcooperation between supervisory authorities on corporate governance of cross-border financialinstitutions "should be strengthened, particularly within colleges of supervisors but also in the contextof future European supervisory authorities". The scope of the paper is initially limited to financialinstitutions, such as banks and life insurance companies, given these institutions "present specificfeatures which differentiate them from listed companies in general". But the Commission said it"recognises that issues relating to corporate governance of listed companies more generally alsodeserve to be addressed and has started work to this end. A further Green Paper will follow in theautumn." Michel Barnier, Internal Market and Services Commissioner, said: "I am convinced that truecrisis prevention starts from within companies. If we are to prevent future crises, financial institutionsthemselves need to change. "We need to ensure more effective internal controls. Promote better riskmanagement. Strengthen the role of supervisory authorities. And existing rules on sound remunerationpolicies should be implemented quickly to help curb excessive risk-taking." Liz Murrall, director ofcorporate governance and reporting at the UK's Investment Management Association (IMA) said: "Wewill be carefully reviewing the proposals. Although the main focus appears to be on banks and lifecompanies, it is important that a "one size fits all" approach is not adopted and that the differences in

the underlying systemic risks that particular financial institutions pose are recognised." (03/06/2010IPE.com)

VII. EC warns Italy over pension age discrimination

The European Commission has warned Italy it needs to comply with a European Court of Justice(ECJ) ruling to equalise pension ages for civil servants or it may face another court hearing. In 2008the ECJ ruled that Italy's civil servant pension scheme managed by INPDAP (national providenceInstitute for the Employees of Public Authorities) was discriminatory by applying different pension agesfor male and female workers. The ruling followed on from an infringement process on the issueinitiated by the Commission in 2005. Italy announced in June 2009 it would be taking measures togradually equalise the ages by 2018, but the Commission has now issued the country with a letter offormal notice requesting compliance with the judgement because the current proposals "allowdiscriminatory treatment to continue". In a statement, the Commission noted the ECJ had confirmed

several times that civil servants' pensions must be considered as pay and as employer pensionschemes, and in June 2009 the Commission issued an earlier letter of formal notice against Italybecause it had failed to comply with the ruling. Italy stated last year it had introduced new provisions

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that would phase in an equal pension age for staff working in public service by 2018. The retirementage for female employees would increase gradually and only be equalised at the same age as men whose legal retirement age is fixed at 65 in 2018. However, the Commission has since argued thataccording to EU case law "this transitional measure continues to apply discriminatory treatment and istherefore inadequate". It stated: "The Commission has therefore decided to issue an additional letter offormal notice to Italy under Art 260(1) TFEU asking the Italian authorities to comply with thejudgement". Should Italy still fail to take what the Commission deems appropriate action, the next stepcould be for the country to be taken before the ECJ again, which may result in a second ruling with afinancial penalty for the member state. (04/06/2010 IPE.com)

VIII. Amended EU directive targets risk in bank bonuses

A new version of the EUs Capital Requirements Directive, due to be voted on this month, will place

limitations on banks in relation to their remuneration packages, and could make them less risky asinvestments for pension funds. The amended directive applies risk criteria to bonsues, whereby, ifpayouts represent more than 25% of total surplus revenue, shareholders would have the right to voteon the split of that surplus between capital remuneration and dividends. The draft legislation includespenalties on sanctions in the case of a breach of these requirements and banks remunerationpolicies. The proposed rules could render banks safer investments for pension funds, although theycould also potentially reduce the rate of return financial institutions produce. One pension fundcommented that banks have been very risky havens in the past and that the proposed measuresfrom Brussels were running more in less in parallel with those from the Basel Committee on BankingSupervision. Support for improvements to risk management of the remuneration in important financialinstitutions has come from the Association of British Insurers (ABI). The association stated that poorremuneration practices may have contributed to the current financial crisis situation. It placed blameon the Basel II Directive, which created perverse incentives for banks to take on leverage, which the

banks naturally reacted to and rewarded staff for. The ABI added: The regulatory framework must bereformed in this respect. The new draft Capital Requirements Directive (CRD III) will come up for aCommittee vote in the European Parliament on June 14. Rapporteur for the draft Arlene McCarthy hasdescribed a need for radical action to put in place long term rules to ensure a responsible and fairbanking system, to restore consumer confidence and to tackle once and for a all the issue of bankersbonuses and remuneration practices. If the Committee vote gains support as is expected aconfirmation will follow in plenary, expected in July, which would give an indicative entry into force inEU jurisdictions in early 2011. (04/06/2010 IPE.com)

IX. ABP and EC move closer to eliminating 'discriminatory' tax laws

Unequal tax treatment of foreign pension funds in the EU took a step closer to being eradicated thisweek after ABP claimed it had made a breakthrough with the Norwegian government and the

European Commission (EC) referred Germany to the European Court of Justice (ECJ) over its existinglegislation. Norway is the latest country to return dividend tax paid by ABP, which has now claimed60m in dividend tax payments from several countries, including Sweden, Denmark, Germany,Austria, France, Italy, Spain and Portugal. The 210bn civil service pension fund said it had claimedback 3m from the Norwegian government, a figure that could eventually rise to 10m, as part of itsongoing campaign to win back dividend tax paid on investments in foreign juridictions. Meanwhile, theEC has referred Germany to the ECJ over its dividend tax legislation, which it says discriminatesagainst overseas pension funds. Last October the Commission requested that Germany amend itslegislation, but the deadline for this has now been passed. Commission considers such legislation tobe inconsistent with the fundamental European Treaty freedom to move capital. If a member statelevies a higher tax on dividends or interest paid to foreign pension funds, these funds might bedissuaded from investing in companies in that member State, the EC stated. It is the latest in a line of14 infringement proceedings by the Commission against member states. Proceedings against three

Czech Republic, Estonia and Slovenia have since been closed, following rectification of thediscrimination, while four Finland, Portugal, Spain and Germany are awaiting a determination fromthe ECJ. ABP recently won important court victories in Spain and France. The French high court ruled

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that French legislation must be adjusted in order to cancel the unequal treatment of non-Frenchpension funds. ABP said the Inland Revenue of France was currently considering whether the Dutchscheme complies with the conditions for exemption of dividend tax. In Spain the court of justice ruledthat the dividend tax for foreign pension funds hampers free movement of capital and is thereforeconflicting with EU legislation. But ABP revealed that Spanish authorities had lodged an appeal, whichhas so far blocked repayment. Recent rulings have increased our conviction that the difference intreatment between local and foreign pension funds is not justified, ABP stated. Pension consultancyTowers Watson welcomed the Commissions referral of Germany to the ECJ as a move towards alevel playing field for pension funds in Europe. Having largely eliminated unlawful tax discrimination inrelation to contributions payable to a foreign pension fund, the European Commission is determinedto remove discrimination in the area of dividend and interest payments, said Dave Roberts, seniorconsultant at Towers Watson. (04/06/2010 IPE.com)

Economy

I. To make Europe more attractive, Van Rompuy wants economic governance and targetedgrowth strategy

On 2 June, European Council President Herman Van Rompuy opened the 8th World InvestmentConference (WIC) in La Baule, France, the theme of which is Europe's attractiveness in a changing

world. In a speech hailing the measures taken by the European Union to overcome the crisis with theeuro, Van Rompuy made clear his determination to put economic governance in place in the EU toavoid the budget's running out of control and enhance the credibility of the euro, and to make his markon the European Council to speed up reform, promote long-term growth by making Europe moreattractive and to ensure the future of the European model.In depth analysis page: 12

II. Germany, Austria and Portugal sent to European Court of Justice over discriminatory taxrules

On Thursday 3 June, the European Commission decided to sent three member states, Germany,Austria and Poland, to the European Court of Justice for infringing EU tax legislation. A) Austria willhave to explain why its rules require foreign banks and some foreign investment funds to appointAustrian-established tax representatives. B) Dividends paid by German companies to German

Pensionskassen are subject either to a reduced rate of withholding tax or the Pensionskassen canget a partial refund of the withholding tax paid, but this does not apply to pension funds establishedelsewhere in the EU. Dividends received from foreign pension funds are taxed more heavily thandividends from German pension funds (Pensionsfonds). Germany will have to explain to the Court ofJustice why it operates a discriminatory tax system. C) Portuguese rules tax more heavily dividendpayments to foreign companies (withholding taxes of up to 20%) than those paid to companies basedin Portugal (which are tax-free or subject to a very low rate of tax). Based on case law (the DenkavitRuling, Case C-170/05), the Commission is sending Portugal to court. Belgium. Belgium is being sentthree reasoned opinions (written warnings) requiring it to changes its rules. A) People resident for taxpurposes pay a 15% tax on dividends paid by Belgian companies, mostly owned by individuals, butdividends paid by similar companies established abroad have to pay 25% tax. B) Belgian investmentcompanies pay no tax on interest and dividend income from Belgium, but foreign investmentcompanies have to pay a withholding tax of 15% or 25% on interest and dividend income from

Belgium. C) Belgium is required to change its legislation applying 6% value-added tax (VAT) on theprovision of housing and certain building work. The lower rate applies to the first 50,000 with the

Economy

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remaining amount being subject to the standard VAT rate of 21%. The Commission believes thismeasure is being applied across the board but EU rules only allow reduced-rate VAT to apply to thistype of service supplied as part of a social policy and therefore challenges the legality of a memberstate artificially separating off a section of a tax base to which lower VAT applies, while keeping thenormal VAT rate for the rest. (03/06/2010 Agence Europe)Events and Court Cases

I. 2ndAnnual Transatlantic Conference

AEIP along with its North American partners, the National Coordinating Committee for MultiemployerPlans (NCCMP) from the USA and The Multi-Employer Benefit Plan Council (MEBCO) from Canada,will hold the 2

ndAnnual Transatlantic Conference on 09 - 10 June 2010 in Brussels. The overall aims

of this conference are to develop a transatlantic view on four specific issues effecting social protection.This transatlantic view will then be pushed at the different national levels, aiming to prepare thedifferent heads of state to have a harmonized approach to social protection during the G20 summit.The four issues to be covered during the conference are: 1. the impact of the financial crisis oncollectively managed pensions funds and the transatlantic reaction; 2. solvency, sustainability andadequacy of pensions in North America and Europe; 3. a transatlantic comparison of healthcare andits reforms; 4. policies of health and safety at work. Moreover, the conference will outline thechallenges faced by social protection in the USA, Canada and Europe and propose possible solutions

which would benefit all actors. To register please send an email to info@aeip.net.

II. Barroso meets European social partners

European Commission President Jos Manuel Barroso will be meeting the general secretary of theEuropean Trade Union Confederation (ETUC), John Monks, and the director general ofBusinessEurope, Philippe de Buck, on Friday 4 June during a working breakfast to discuss socialdialogue in Europe in the current context. During the meeting, the trade union delegation - composedof John Monks, Jol Decaillon (ETUC Deputy General Secretary), Bernard Thibaut (General Secretaryof the CGT, France), and Yannis Panagopoulos (President of the GSEE, Greece) - will reiterate itspositions on austerity measures and on the need for growth in Europe (see EUROPE 10148). It willalso set out its priorities, namely: (1) The EU needs a recovery plan to stimulate growth through itsown development, as well as strong industrial policies based on a low-carbon approach and the use ofnew technologies. (2) It is urgent to bolster fiscal coordination at European level. (3) The EU must

press on with its efforts to tighten financial regulations and develop new taxation revenues such as atax on financial transactions. The delegation will give the results of its executive committee on 1 and 2June in Brussels, during which ETUC decided to begin a campaign against cuts in public spendingand in favour of growth. A Euro-demonstration will be held in Brussels on 29 September this year.(03/06/2010 (Agence Europe)

III. Social inclusion indicators, health and pension inequalities and social security on Councilagenda for 7 June

In Luxembourg at the start of next week, the Employment, Social Policy, Health and ConsumersCouncil (EPSCO) will prepare its contribution to the European Council of 17-18 June with regard to thenew Europe 2020 strategy for jobs and growth. On Monday 7 June, employment and social policyministers will seek agreement on an EU target and appropriate indicators for promoting social

inclusion, in particular through poverty reduction. Spanish Labour and Immigration Minister CelestinoCorbacho Chaves and Equality Minister Bibiana Aido will chair discussions. The Commission will be

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represented by Employment, Social Affairs and inclusion Commissioner Lszl Andor. Tuesday 8June will be devoted to health issues.In depth analysis page: 14

IV. European Court of Justice Calendar"

Date Case Language Courtroom

HearingC-236/09

Association Belge des ConsommateursTest-Achats and Others - Social policyCourt of Justice - Grand Chamber

FR New GreatCourtroom

Tuesday01/06/201009:30

Reference for a preliminary ruling - Cour constitutionnelle (Belgium) - Validity ofArticle 5(2) of Council Directive 2004/113/EC of 13 December 2004 implementing theprinciple of equal treatment between men and women in the access to and supply ofgoods and services (OJ 2004 L 373, p. 37) - Gender used as a criterion in assessingrisks and in the calculation of premiums and insurance benefits on the basis ofactuarial data and precise relevant statistics - Life assurance contracts -Permissibility and justification for a difference in treatment?

OpinionC-89/09

Commission v France - Freedom ofestablishmentCourt of Justice - Second Chamber

FR New GreatCourtroom

Wednesday02/06/201009:30

Failure of a Member State to fulfil obligations Infringement of Article 43 EC Rulesconcerning the operation of bio-medical analysis laboratories National legislationlimiting shareholdings by shareholders not carrying on a professional activity to 25 %of authorised capital Prohibition on holding capital in more than two companiesoperating jointly one or more bio-medical analysis laboratories Restrictions on thefreedom of establishment which may be justified by the objective of protection ofpublic health and are proportionate? Advocate General : Mengozzi

OpinionC-118/09

Koller - Freedom of movement forpersonsCourt of Justice - Fourth Chamber

DE New GreatCourtroom

Wednesday02/06/201009:30

Preliminary ruling Oberste Berufungs- und Disziplinarkommission Interpretation ofCouncil Directive 89/48/EEC of 21 December 1988 on a general system for therecognition of higher-education diplomas awarded on completion of professionaleducation and training of at least three years duration (OJ 1989 L 19, p. 16) Applicability of the directive in the case of an Austrian national who, on the basis ofthe confirmation of his Austrian degree as equivalent and of additional study at aSpanish university for less than three years, was registered with a chamber oflawyers in Spain and, after exercising his profession in Spain for three weeks, appliesto be admitted to the aptitude test in order to qualify as a lawyer in Austria on thebasis of the authorisation to exercise his profession in Spain Advocate General: Trstenjak

Thursday03/06/2010

Judgment

C-487/08

Commission v Spain - Free movement

of capitalCourt of Justice - First Chamber

ES New Great

Courtroom

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09:30 Failure of a Member State to fulfil obligations Infringement of Articles 56 EC and 40EEA Different treatment given to dividends distributed to domestic and foreignshareholdersAdvocate General : Mazk

OpinionC-242/09

Albron Catering - Social policyCourt of Justice - Third Chamber

NL Courtroom III -Level 6

Thursday03/06/201009:30

Reference for a preliminary ruling Gerechtshof te Amsterdam Interpretation ofArticle 3(1) of Council Directive 2001/23/EC of 12 March 2001 on the approximationof the laws of the Member States relating to the safeguarding of employees rights inthe event of transfers of undertakings, businesses or parts of undertakings or

businesses (OJ 2001 L 82, p.16) Company with all the personnel of a group ofcompanies which makes it available to operating companies of the group accordingto their needs Transfer of the activity of an operating company outside the group Classification Advocate General : Bot

HearingC-458/08

Commission v Portugal - Freedom ofestablishmentCourt of Justice - First Chamber

PT Courtroom I -Level 8Jeudi

03/06/201014:30

Failure of a Member State to fulfil its obligations Infringement of Article 49 EC Construction sector Licence required in order to carry on activity in that sector

Hearing

C-175/09

Axa UK - Taxation

Court of Justice - Third Chamber

EN Courtroom III -

Level 6

Jeudi03/06/201014:30

Reference for a preliminary ruling Court of Appeal Interpretation of Article13B(d)(3) of Sixth Council Directive 77/388/EEC of 17 May 1977 on theharmonisation of the laws of the Member States relating to turnover taxes Commonsystem of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1) Exemptions Scope Meaning of service that has the effect of transferring fundsand entail[ing] changes in the legal and financial situation Collection, processingand onward payment services for traders credits from customers Payment plansfor dental care

In Depth Analysis

I. To make Europe more attractive, Van Rompuy wants economic governance and targetedgrowth strategy

On 2 June, European Council President Herman Van Rompuy opened the 8th World Investment

Conference (WIC) in La Baule, France, the theme of which is Europe's attractiveness in a changingworld. In a speech hailing the measures taken by the European Union to overcome the crisis with theeuro, Van Rompuy made clear his determination to put economic governance in place in the EU to

In Depth Analysis

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avoid the budget's running out of control and enhance the credibility of the euro, and to make his markon the European Council to speed up reform, promote long-term growth by making Europe moreattractive and to ensure the future of the European model.

Improving Europe's attractiveness. Europe's attractiveness is no longer taken for granted. I am notonly talking about the attractiveness of the European way of life for citizens. I'm also talking aboutEurope's attractiveness to investors and entrepreneurs. In fact, it is this double attractiveness whichmakes our continent unique. Europe's message to the world is that one can have both: economicgrowth and social justice, efficient political decisions and democratic accountability, adaptation to thetimes and preservation of one's heritage, a good place to invest and to live. I am convinced that theworld will move in the direction of the European model, sooner or later, he said, though warning,Knowing that without robust economic infrastructure, the model is unsustainable. Using the results of

the Ernst & Young annual barometer published on the same day (see related article) to back up hisarguments - results which demonstrated that, in 2009, Europe remained a favoured destination forforeign direct investment, behind China - Van Rompuy said that attractiveness was not only a matterof labour costs and taxation, but also stability, a viable regulatory framework, a well trained populationand access to a large and sophisticated market.

The euro test. In the face of the crisis in confidence in the euro, decision-making was complicated,but it was not blocked, the president of the EU Council said, expressing satisfaction that the EU hadbeen able to overcome three major difficulties: firstly, that the treaties made no provision forinstruments to manage such situations, secondly, that Greece, for domestic political reasons, onlyasked for aid on 23 April, and thirdly, that the German constitutional court's very strict interpretation ofthe treaty ban on bail-outs means that Germany can only intervene ultima ratio. Despite thesedifficulties, the EU's ability to act was evident once Greece had made its request for aid, Van Rompuy

went on, noting that action was in two stages, with, first of all, negotiation among the member statesassociated with the IMF of a 110 bail out, subject to conditions, for Greece, then, when the risk ofcontagion developed, with the adoption of a safeguard mechanism for the eurozone in the form of a750 billion package. Following the meetings of eurozone leaders and of eurozone finance ministerson 7 and 9 May, all the European institutions and member states assumed their responsibilities, hewent on, pointing out that the Central Bank had changed its policy towards sovereign bonds, that twomember states had immediately announced further efforts to reduce their deficit and that others hadfollowed their example.

Economic governance, an imperative. These initiatives, Van Rompuy said, could be seen as awhole, a common European effort. These actions clearly show that the EU is able to act decisively.They also show the strong political will to defend our currency and to guarantee economic stability,insisted the man who is working for an economic government of Europe and the Eurozone to avoid

any future sovereign debt crises. He said he was leading a task force, made up of the financeministers of almost all EU member states and representatives of the European institutions, includingECB President Jean-Claude Trichet, which was focusing on three priority areas: stronger budgetarydiscipline through strengthening of Stability and Growth Pact rules with improved early warningprocedures and new sanctions, a system to monitor differences in competitiveness between memberstates, which includes sanctions, and better crisis management, with enhanced political cooperationand coordination across all three. Everyone, he went on, now understood the need for strongeconomic governance in the EU and in the eurozone, We are working on it, he said, ruling out therisk of a further recession as a result of the budgetary austerity measures. The euro is afundamentally sound currency. Eleven years of low inflation - under 2%, nearly perfect balance ofpayments and an average budget deficit half the size of those of our major partners. Now we needconvergence in economic development and policies to underpin the credibility of our current currency,he added.

A targeted strategy for growth. All EU leaders know the reforms needed, Van Rompuy said.

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Discussion, he said, was less about what had to be done than how to get there. Aims on paper had tobe translated into real political commitments, he said, highlighting the pressure he was bringing to bearso that the European Council of 17 June 2010 will agree on a new growth and employment strategywhich focuses on five quantifiable economic objectives: research and development (R&D) andinnovation, education, employment, climate and social inclusion. He also said that the Council wasbacking the European Commission on completing the internal market. Ahead of the G20 meeting inToronto, the Council president said the EU had to be a more effective international player. The EUhas learnt the lesson in Copenhagen: the EU is not just the institutions in Brussels, but all the memberstates together. No EU member state is a global player any more. There is no future for vanity of acountry alone. (03/06/2010 Agence Europe)

II. Social inclusion indicators, health and pension inequalities and social security on Councilagenda for 7 June

In Luxembourg at the start of next week, the Employment, Social Policy, Health and ConsumersCouncil (EPSCO) will prepare its contribution to the European Council of 17-18 June with regard to thenew Europe 2020 strategy for jobs and growth. On Monday 7 June, employment and social policyministers will seek agreement on an EU target and appropriate indicators for promoting socialinclusion, in particular through poverty reduction. Spanish Labour and Immigration Minister CelestinoCorbacho Chaves and Equality Minister Bibiana Aido will chair discussions. The Commission will berepresented by Employment, Social Affairs and inclusion Commissioner Lszl Andor. Tuesday 8June will be devoted to health issues.

EU 2020 strategy: ministers will seek:

(1) agreement on appropriate social inclusion indicators. This target entails the definition of areference aggregate at EU level, i.e. the measurement of the population at risk of poverty or exclusion.This population is defined according to three indicators: at-risk-of-poverty (living with less than 60% ofthe national median income); material deprivation (experiencing at least four of the nine defineddeprivation situations); and people living in a jobless household (population defined in relation to zeroor very low work intensity over a whole year). Ahead of the June Summit, the Presidency invitesministers to respond to two questions: Can you support the formulation of the EU target and therelated indicators as presented by the Social Protection Committee? Do you consider that lifting atleast 20 million people out of poverty or exclusion by 2020 would be both ambitious and realistic?

(2) a general approach on guidelines for member states' employment policies as part of the integratedEurope 2020 guidelines. In a letter to the chairman of the EPSCO Council, the chairman of the SocialProtection committee (SPC) says that the proposal of Europe 2020 integrated guidelines supports the

aim of guideline 10 (Promoting social inclusion and combating poverty) as a major reflection of thesocial dimension of the new strategy. The SPC says that, in monitoring of progress in social inclusionand poverty reduction, it will capitalise on the expertise gained through the open method ofcommunication in the area of social protection and social inclusion. The SPC intends to provide itscontribution on the forthcoming proposal on the European Platform against Poverty, which isproposed in the new EU 2020 strategy.

In its contribution, the Employment Committee says it will highlight the main labour market bottlenecksat EU level and will help member states identify theirs at national level with a view to drawing upnational reform programmes. It also calls on the Commission to present a proposal on the overallgovernance of Europe 2020 in time for the preparation of the national reform programmes. It willexamine how to make the social clause provided for in the Treaty operational in terms of the Europeanemployment strategy and says that structural funds should, where appropriate, support initiatives toachieve full employment and inclusive labour markets.

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Other items on the EPSCO agenda: ministers are expected to:

(1) approve the Social Protection Committee opinion on solidarity in health: reducing healthinequalities in the EU. The chairman of the SPC will present the joint interim report on pensions by hiscommittee and the Employment Committee;

(2) adopt Council conclusions on: - sustainable social security schemes for decent pensions and socialinclusion; - new skills for new jobs: the way forward - ministers will take note of a contribution from theCommittee on this issue; - active ageing; - making progress on Roma integration;

(3) adopt a Council resolution on the new European framework on handicap;

(4) reach political agreement on: - coordination of social systems with six non-EU countries (Algeria,

Croatia, Former Yugoslav Republic of Macedonia, Israel, Morocco and Tunisia); - a Council regulationon extending EU rules to the nationals of the third countries;

(5) take note of a progress report on a Council draft directive on equality of treatment regardless ofreligion, handicap, age and sexual orientation. (02/06/2010 Agence Europe)