Finishing line in sight
AA key part of the overall European project is a fully integrated European financial market and the blueprint for this is the Financial Services Action Plan. This plan – of which the pension funds directive is a component – was adopted four years ago and is now, according to internal markets and taxation commissioner Frits Bolkestein, almost complete.
Depending on which report you read, an integrated European financial services market could boost gross domestic product by up to 1.5%. The FSAP must be adopted by 2005. There are just six measures still pending, including three legislative proposals – on takeover bids, investment services and company prospectuses.
“We have travelled a significant distance since the adoption of the Financial Services Action Plan in 1999,” the commissioner says. “Eighty percent has already been delivered.”
But the final 20% is bound to involve some hard bargaining at the legislative level – and time is running out.
But, as with all deadlines, there is a now scramble to get it all tied up in time. Says Bolkestein: “The clock is ticking.” He adds: “Now that we are in sight of the finishing line, a final and sustained effort is required to close the outstanding political discussions: to adopt the six remaining measures as soon as possible and to create a modernised, more efficient regulatory structure.”
“Most of the Commission proposals are on the table: it is now up to the European Parliament and the member states to ensure that European businesses and consumers can reap the benefits of financial integration” the Commissioner says. There would be a “huge economic prize” – a direct windfall gain of at least e130bn for the financial services sector.
And, as the European Parliamentary Financial Services Forum – a high-level group of MEPs and industry figures – makes clear “there are only nine months left to complete the legislative aspects of the FSAP”.
Indeed, the final cut-off date for the adoption of the relevant legislative measures is April 2004 – given the European Parliament elections in June 2004 and the enlargement of the European Union.
“Some tricky and long-term dossiers have yet to be completed, including: the Takeover Directive; the Prospectus Directive; the revision of the Investment Services Directive; and the third Capital Adequacy Directive,” the MEPs’ forum says in a recent report on the FSAP.
The forum, whose steering group includes members of the European Parliament’s key Economic and Monetary Affairs Committee, says dryly: “As we look at what needs to be done in the agreed timeframe we can at least conclude that the European institutions are faced with a real challenge.”
For his part, the commissioner says it is important to stay focussed on the big picture and not get distracted by “analysis paralysis”. As demonstrated with the pension funds directive, when Parliament and the Commission have a mind to, they are able to push measures through quickly and to widespread approval.
Although the overall goals of the FSAP are clear, a key question must be: when would we know when a single market had been achieved? What indicator does one use to measure that?
Bolkestein counters that by saying, in effect, that we’ll know it when we see it. He tells MEPs that one would know when the conditions for trading in the financial services market are as simple and inexpensive as elsewhere.
So, what’s the exact status of the plan at the moment? In June the Commission published its eighth progress report on the FSAP. It concluded that “the overall financial outlook strengthens the political case for integrating financial services within the EU”. Progress, it said, “remains on the right track”. Under the Greek presidency, the plan has achieved what the Commission terms “tangible political progress”. A total of 34 of the 42 original measures have now been finalised.
“Europe is now close to creating a comprehensive framework based on effective single market freedoms and common objectives, implemented using principles-based rules,” the Commission argues.
The cut-off date of April 2004 for the adoption of the legislative proposals of the FSAP was set at the European summit in March. “Legislation which has not been finally adopted by then could be significantly delayed,” the Commission warns.
There has been undeniable progress towards the FSAP. Last December saw the adoption of the Market Abuse Directive as well as, or course, the adoption the Pension Funds Directive in March. March also saw amendments to the fourth and seventh Company Law Directives.
January 2003 saw political agreement reached at the Council level on the Directive on Taxation of Savings Income, while a common position has been agreed on the Prospectus Directive. March also saw the Commission present a proposed directive on transparency for listed companies.
So, there’s a lot going on. The hope will have to be that it’s not too much for the system to handle. And let’s hope the final product is worth all the wrangling.