Many European parliamentarians and those involved in Europe’s pension industry have had the chance to digest the occupational directive agreement before it heads back to the parliament for a second reading.
But what was lauded back in July as a breakthrough has now become less celebrated and many MEPs and those affected have turned the heat on it claiming the compromise in Council, although effectively passing the directive, has left it flawed.
Finnish MEP Piia-Noora Kauppi, a member of the European Peoples Party, confirms that many financial institutions and lobby groups have contacted the parliament. “The majority of market participants that have contacted us are not happy with the common position on the directive.”
Kauppi herself, once a supporter of the compromise, is also having second thoughts. “At first I felt that the common position, as it was adopted in the council, might be acceptable for the European Parliament. We were led to believe that it was prudent man plus with a proper transition period and after that transition period, that we would see a fully operating single market.
“When I read the common position I was really disappointed as it wasn’t as near to the parliament’s first reading as I first thought. In some aspects the common position is written in such a way that it does not open the market at all. It’s not really an improvement to the situation at the moment.”
One of Kauppi’s complaints lies with the prudency rules. As the directive is at the moment, a regulator has the ability to impose, if it wants, the same rules on funds belonging to multinationals in the country as it can on its own pension funds. “It’s not really opening up markets much because the prudency rules are restrictive and the transition periods are long,” says Kauppi.
The EFRP has emerged as less than happy with the directive. Permanent representative of the EFRP Chris Verhaegen says the intervention by the council means pension funds will no longer get what she describes as a full European passport. “The commission text was what I’d call a mini-passport but now it is a ‘reduced’ mini passport in the sense that member states, when they have restrictions on investments for their own nationally-based institutions will also be able to impose them on cross border providers.
“That goes against the home country control which is the key concept for the European passport- you have one regulator, you have one supervisor to report to and you provide services across border according to your home rules.”
She says that the compromise has spoiled this but that it might have to be accepted. “We think that if the compromise is the only one that is politically possible, then we can live with it but not for a particularly long time.
“A second step has to be taken though. If you want to impose certain restrictions that operate on your territory on your own-based and supervised institutions, all fine and well with us. But don’t impose it on providers from cross borders.”
At the moment the directive remains with the Council. Its political agreement of July was still circulating as IPE was printed and had yet to be translated and legally formalised. Austrian MEP Otmar Karas, who is likely to be reappointed rapporteur for the second hearing, confirms he has yet to see the final position back from the council.
At present the Danish presidency is working with member states to find a common position and Karas says that they should receive the completed document at the end of October. A second reading should then start at the beginning of November and Karas is confident they will reach an agreement early next year. He describes the July 4 position as a good basis from which to start but says that some of the social issues, including biometric risk and the question of the participation of employers, need tackling.
Assuming Karas is reappointed rapporteur, he will have more of a job to get the directive passed. Says Verhaegen: “the rapporteur has to build a consensus in his own party and then find allies to have a majority. Mr Karas achieved a majority in the first reading by making a compromise with the socialist party. But we don’t know what the strategy will be this time in parliament.”
Leonardo Sforza, head of research and EU affairs at Hewitt in Brussels, says the priority is just to pass the directive and recognise it as a compromise. “Trying to include social issues will not work. This is a directive based on prudent man, this is not a directive based on pan European schemes- it’s a financial services directive,” he says.
Sforza is full of praise for the Spanish and their ability to reach the now rather maligned compromise. “The question is now whether the parliament will have the maturity to accept the directive. If they embark on a complete revision, we will have lost all momentum. Greece takes up the presidency next and is unlikely to make it a political priority.”
The Parliament may have the maturity but first it has to convince some of its members. Getting it passed the second time round is trickier than the first reading and will require 314 votes, in other words support from the socialist element of the parliament and some of the smaller political groups.
If it is possible to make partisan generalisations then the socialists are more likely to accept the directive as it. But there are now those keen on reworking the common position and its likely compromises. Says MEP Kauppi: “we cannot make totally new proposals but for those proposals we had in the first reading, if they are not fully respected by the common position of the council, we should retable them.
If this fails then the directive has to go to conciliation which includes a small delegation of the parliament, of the Council and of the Commission. If the directive has to go to conciliation, says Kauppi, then so be it. “It has been such a long process getting to where we are that I don’t think that after 12 years of making a directive we should make a bad one.”
Bad one or not, it’s unlikely to produce European schemes. Says Chris Verhaegen: “I don’t this directive will be the last one in the occupational pensions field because there is not the real full European passport and that’s what you need for the mobility of the workforce and getting down the cost of management.”