Barroso on the Spot Before European Council Nomination

People have been grumbling over the last year or so that Barroso’s presidency of the European Commission has been too much influenced by hope of a second term, and that he has leant over backwards not to upset the big member states. I’m not convinced of the evidence for that, but the Commission president has certainly been put on the spot now.

The European Council is expected to give its provisional endorsement for Barroso’s reappointment later this week, but President Sarkozy has threatened that this decision is conditional on the candidate’s good behaviour. Indeed, the French president says that the appointment might need further confirmation after the coming into force of the Lisbon Treaty, when ratification in the European Parliament would require a majority of members and not just a simple majority of those voting.

When Sarkozy and Chancellor Angela Merkel gave their conditional approval to Barroso on June 11 they were speaking from a position of strength following their strong showing in the European Parliament elections, in dramatic contrast to British prime minister Gordon Brown who could hardly be weaker and whose party suffered a bitter defeat in the polls.

So what does Sarkozy want? Tighter regulation of financial markets for one thing, with stricter regulation, for instance of hedge funds, derivatives markets and rating agencies. He wants policies which at least purport to show that the era of Anglo-Saxon dominance of these markets, which many perceive as the root cause of the recession, has been weakened for good.

Commission proposals based on the Larosière Report may not go far enough for Sarkozy, although the Brits are fiercely opposed to giving responsibility to the European Central Bank for the European Systemic Risk Council, while firms in the City of London run an intense campaign claiming that new rules will impose unacceptable constraints on their business and force them to move outside the EU.

The broader concern of the French president will relate to the nominations and portfolios of commissioners.  The internal market job, including financial services, is a key one. Competition policy is another. Neither Charlie McCreevy nor Neelie Kroes are favourites of Sarkozy. Barroso will have to tread carefully in selecting candidates for a new college.

The approach of the newly elected European Parliament raises other doubts. Will MEPs choose to await ratification of Lisbon before endorsing anyone as Commission president? Will Barroso achieve the simple majority he needs if there’s a July vote? And where will the Conservatives stand with their 25 GB plus two Ulster seats? If they don’t vote for Barroso, for whom will they vote?
The Conservative position could be especially crucial in the debates over the new financial services legislation, when the Commission’s new proposals come to the Parliament during the forthcoming autumn and through 2010.

As a group outside the EPP the Conservatives are likely to forfeit any influence they might have had in shaping policy towards light touch regulation – an influence which was extremely strong in the previous Parliament.  There will no doubt be those within the EPP who will be inclined towards tougher regulation. Without the presence of the Conservatives their views may well prevail, carrying the group with them. It would certainly be a strange irony if the defection of the Conservatives from the EPP played directly into the hands of the French President!