Portfolio blogger

Saturday, May 26, 2018

How to deal with "illiberal" corruption?

Two issues keep the debate around the new Multiannual Financial Framework (MFF) going: one is about how to find a mechanism to react to governments which do not comply with the Copenhagen Criteria, i.e. infringe democratic and/or rule of law principles (the infringement of democratic principles is more indirect as the sheer outcome of elections favours the governments of Hungary and Poland - although in Poland the tide may turn - but the circumstances under which these governments win the votes are at least dubious) without resorting to the famous (or rather notorious) Article 7, which is rightly called the "nuclear option" as it is very strong and virtually impossible to implement. It has to be noted also that this "nuclear option" is not directly so nuclear as it strips a country from its voting rights but leaves all other right untouched - of course after this the other member states can vote other sanctions if they are in line with general law.
The other question is also raised in the context of the projects in Hungary where the government is distributing EU funds with an extreme speed - leading to suboptimal decisions in itself - and favours its cronies in this distribution.
As it seems that - at least in Hungary - these two negative phenomena go hand in hand - and the concentration of power and hollowing out of all checks and balances really ensures that cronyism and corruption cannot be brought to court or hindered any other way, including wide publicity, the two questions are mixed together.
Proposals are tabled which would make EU funds conditional on rule of law criteria. In terms of proper use and avoidance of fraud, joining the European Prosecutor's Office is favoured. On the other hand, soon a new Financial Regulation will be voted which will simplify the disbursement of EU funds.
EU structural funds are an important source of economic development, a positive factor in the image of the EU and also help cohesion between the countries (also by enabling that their economic development approaches them to each-other - they are also called cohesion funds). I totally agree with Markko Markkula, president of the (European) Committee of the Regions, who emphasised the importance of these funds in an interview already serving as a preparation to the fight around the new MFF, arguing that the cohesion funds should not be cut. A recent article (and one of a leading Hungarian commentator who can also not be suspected of being on the side of the present Hungarian government, arguing that austerity will not break the government of Orbán) warns that the cut of funds can be counterproductive.
So what?
My proposition is that the decisions (including acceptance of projects and procurement) should be more centralised and also more controls should be applied, covering the cost of these from the funds made available to the country in question. These controls should also depend on whether the coutry joins the European Prosecutors' Office.
This would of course require additional resources which is always difficult to achieve but even more difficult now when EU sources are decreasing due to the Brexit. Therefore the structural funds should be used for this purpose. This would not be such a sensitive cut as what is proposed in the framework of the new "conditionality" proposals. Also, joining the European Prosecutor's Office should be the precondition of applying the simplifications in the new Financial Regulation.

Thursday, April 19, 2018

Some wider aspects of the Selmayr nomination

What is the outcry against - not the nomination itself but - the way Martin Selmayr was nominated to the position of the Secretary General of the European Commission? His personality and ways certainly play a role but everybody agrees, at least publicly, that he is suitable for the post. He gained both acclaim and enmity not just as a devote European (what is not always the way to please member state representatives) but also as an efficient or rather effective operator, who could be ruthless and manipulative at times. Politically speaking, however, his power will be more moderate while he is expected to shake up the apparatus of the Commission. Some parts and ways of it are namely too slow and too bureaucratic. This will no doubt benefit the EU as a whole but can also strengthen the position of the Commission in the sensitive balance between the three main institutions, the Council, the Parliament and the Commission.
Surprisingly after that, everybody talks only about the procedure, not the person. Heads of cabinet were parachuted to director and director general positions already several times (including the head or cabinet of the previous president of the Commission, Barroso). The trade unions always loudly complained every time this occured but this never hit the threshold of attention of anybody outside the Commission.
Apart from this concrete case, deeper unclarities are reflected in the debate. The general rule in the EU public service is that a post has to be filled by competition when a person is promoted into it. Moving officials or even managers "horizontally" can be done directly. Members and heads of cabinets of commissioners (as opposed to assistants of MEPs) are officials. They have, however, a political role and their direct nomination to senior management posts (director and director general) suggests that their seniority is higher than that of other officials commanding a team of comparable size. If these assumptions hold, the only complaint could be about the timing and the secrecy - which hollowed out the nomination right of the Commission as a body given the importance of the position. Leaving that aside, there are two questions concerning the justification of the above way of nomination: the equivalence of a cabinet post to another management post and then nomination of persons in a similar grade without competition.
Let me first mention a case for the "parachuting" of cabinet members and heads. Not nly Commissioners but also judges of the  European Court of Justice and members of the Court of Auditors are delegated by the member states and their mandates expire in different points of time. One new candidate declared already before the nomination to want to bring totally new own staff and thus alo members of the cabinet would lose their jobs. As members of the cabinet are public servants, their job security has to be maintained and there is no reason why they should be forced to accept a position junior to their previous one, by the way, this would be a waste of their talent and experience. A competition in this case would just mean insecurity for them and then further search.
Should cabinet members and heads be public servants? They need to navigate not only the political arena but also the organisation and experience and knowledge of this organisation is a significant asset as well as the knowledge acquired in a cabinet is for the organisation when they return to it. Their status can ensure professionality, objectivity and also continuity. On the other hand the basic question is how their status has or has not to be influenced by tue Commission becoming more political. This change as declared by president Juncker when he came in but the Council and the Parliament neither approved nor disapproved this. When they don't want to treat the cabinets as public service but as a political team, they mqy subscribe to a politicisatin of the Commission to a degree even Juncker didn't foresee.
The other question concerns nomination policies and competition. Here the first argument would be that even when Selmayr is the best person for the job, he didn't get the chance to demonstrate it. And this is the case for all nominations of a person of the grade ofmthe new position. I can see only one argument in favour: this makes compulsory mobility (which can be subject of a separate discussion but let's take it as granted) of management staff. In a lot of commercial organisations there is another case of nomination which is not subject to competition: the nomination of the immediate number two, like the deputy. Peters principle aside, there are a number of cases where the person has demonstrated sufficient knowledge and capabilities to take over and the superiors want to nominate the person. There is an infinitely slim chance that an external candidate can beat the internal one as almost all objective and subjective factors are pointing to the same direction.
Thus, if we want to be coherent, it has to be decided whether cabinet members and heads wre to be treated as officials, what their equvalence to managers is and whether moving "horizontally" without competition is fair and practical. I also propose, however, to consider opening the posibility of nominating the immediate subordinate of a manager without competition. As explained above, the chances of an external to win are minimal and therefore the energy wasted in preparing their application and the wohle selection process could be used  for better purposes.

Sunday, October 22, 2017

Equal pay with locals for posted workers is hypocritical, not helping social justice and economically not rational

Two discussion are going on concerning free movement of people (workers) in the EU: on social support and other allowances to workers and their families (and workers who become jobless) who moved to work from a "poorer" or "lower wage" or "lower cost" country and about the so-called "posted workers", who keep their employment status in their original country but their company moves them to work in another one - also exploiting the difference between wage and price levels. That this is good for consumers by decreasing prices, no one can deny. The plans for reform, howver, are not coherent in these two domains.
While if they have to pay - family and education allowances - governments want to pay less to workers in their countries who have their families in cheaper countries, when others have to pay, i.e. foreign enterprises, they ignore that posted workers do not give up their roots, flats, contacts in their mother countries, they are temporarily in their country of posting. Therefore the slogan "equal pay for equal work", if taken by purchasing power, does not hold.
Who would benefit from the proposed modification? Not the posted workers, they would lose their jobs. The local enterprises would have more demand for their work, this could raise prices. This price increase would not benefit the local workers, if the argument that posted workers harm local industry, holds, as then there would be just a return to normal employment. They would, however, suffer from higher prices as consumers. If the EU wants more social justice, it should favour consumers, not the companies employing them. In particular not one group of companies over another by limiting competition.
Finally, what about the single market? The Services Directive was watered down by the same interests which are at work to amend the posted workers directive, therefore there is no free market in services to protect. Obstacles are in the Directive and in implementation (e.g. administrative difficulties to have qualifications recognised in the “regulated professions”). Therefore I would suggest to Eastern-European governments that when they accept the amendment, they should only do it only for sectors where services are completely liberalised. It would of course help if the Commission would already take these considerations on board when making its proposal.
While writing this, I found the article from Bruegel, a renowned  think tank, titled "EU posted workers: separating fact and fiction". It explains that in 2015, there were around 2 million work postings in the EU, which is 0.65% of the labour force and 0.9% of total employed people in the EU.
This is not an immense threat to employment in the receiving countries but more important for the sending countries (according to the same article, their share in Polish domestic employment is 2.5% but it has to be mentioned that Poland sends out most - almost a quarter of total - posted workers). This share also seems small, but losing their job may be a tragedy for the posted workers themselves and a lethal blow to the companies as well. Thus, to increase employment by fraction of a percent (from the arguments above it follows also that due to the decrease of demand caused by the increase in prices not all posted jobs will be filled with locals, i.e. the "positive" impact will be smaller), lives and companies will be ruined. This does not look like solidarity, which is one of the main values of Europe.