The EU has adopted a strategy to see the 27 member states (post-Brexit) expand potentially to 33, in or after 2025. CAMEC is concerned that democracy and Rule of Law values are not safely established in all six applicant states from the Western Balkans; nor will they be, by the mooted 2025 proposed accession date.
The European Parliament kicks off its statement of values thus: " The European Union’s fundamental values are respect for human dignity and human rights, freedom, democracy, equality and the rule of law. These values unite all the member states – no country that does not recognise these values can belong to the Union. "
As Jo Leinen, a respected federalist MEP (S&D, Germany) has said (of the so-called Visegrád Four): there is "danger of a split not only on single issues but regarding the democratic nature of the European Union...[including those who]... see the European Union only as a source of structural funds". If this can be said of four of the key EU member states from Eastern Europe, over a dozen years after their Accession, how much greater is the risk among the current Balkan applicant states?
Five existing EU members (Cyprus, Greece, Slovakia, Spain, Romania) do not even recognise one applicant, Kosovo, as an independent state, which is not a good start. Meanwhile serious accusations of ‘state capture’ are levelled at Macedonia, Montenegro (which expels anti-corruption campaigners) and Albania. The latter can almost be accused of being a crime syndicate with a flag. Serbia brings its own unique issues (not to mention the requirement it must recognise co-applicant Kosovo). CAMEC notes the comments of the EU High Representative for Foreign Affairs and Security Policy that: "...either the region will move together, or no one will move towards the EU.
Independent research has found that across the 6 countries there are weak justice systems and law enforcement; elements of state capture; and the media and civil society are under threat. Critics may argue there has been an unseemly rush to bring the Western Balkan 6 into the EU; perhaps because of some existential threat (that if the EU does not welcome them, a malignant Russia will extend its influence in the Balkans).
Outside the Western Balkan 6, nowhere is the Russia-EU tussle for influence, despite an astonishing lack of Rule of Law, more marked than in Moldova. Analysis suggests core parts of Moldova’s civil administration now operate at the behest of private interests, on a scale remarkable even for Europe’s ‘wild East’. Despite this unpromising background, the EU engages with Moldova, whose government sees membership as its goal.
CAMEC does not oppose EU expansion to include new members from the Western Balkans. However, these applicant states should only be allowed to join if they demonstrably have democracy, freedom of expression and the independent Rule of Law.
Smaller EU states, if only for capacity reasons, are uniquely challenged particularly in trying to ensure large, complex financial players based in their countries operate within the Rule of Law.
When Latvia’s ABLV bank recently went into liquidation, the real loser was the European Central Bank (‘ECB’). The ABLV scandal wasn’t spotted by Latvian regulators; nor the ECB, which still relies upon data from eurozone member state central banks. Even before the ABLV scandal erupted, critics said the ECB’s regulatory role was not perfectly conceived or executed.
The eurozone’s central bank still has some way to go to be the banking regulator the eurozone needs and deserves, even as some are braced Bulgaria will announce it wants to join the eurozone, even while its banking sector is a concern.
Meanwhile, Malta – which has a disproportionately large financial sector relative to its overall economy - has been criticised for being reluctant to tackle money laundering or an alleged “culture of impunity and fiddling between political and economic elites”. Even the European Commission says of Malta: “ensuring effective financial supervision remains a challenge”.
Effective and equal eurozone-wide compliance needs the ECB needs to take over all the functions of eurozone member states’ central banks. No disrespect to the eurozone’s smaller members but their financial, legal and political elites comprises such a small number of people, it can make them susceptible to vested interests.
This isn’t a problem just of ‘new Europe’. The 'bad banks' created by Ireland after the global financial crisis have so many questions to answer they need EU-level investigation to reassure that serious member state maladministration did not take place. IBRC and NAMA (Ireland's National Asset management Agency, at the time it was created, breathlessly described as "the biggest property company on the planet") pose a public policy question as to whether there was maladministration, either in the way assets were subsumed into IBRC/NAMA, or in the way they were sold.
Could the haste (then celebrated) with which IBRC and NAMA sold off their debt assets have led to errors (legal, ethical and in pricing)? If so, the full consequences may not yet have become fully apparent to the Irish taxpayer. Almost all of the buyers of these Irish loan books are now making immense profits, essentially subsidised by the Irish tax-payer, while paying no Irish tax on them. To be clear, this isn't to suggest anything illegal necessarily happened in Ireland: but it is bad public policy.
It is both impractical, and undesirable, to let the vested interests of a smaller EU member states’ financial-political elites investigate themselves. At CAMEC we believe there needs to be European-level, candid and fearless regulation of Europe’s financial sector.
The battle against maladministration and vested interests applies also to the giants of the EU. The VW emissions testing scandal is an extraordinary indictment of corporate culture at the heart of Europe’s second-largest* (post-Brexit) business, and some argue the German government has rendered itself a lobbyist for the vested interests of German big business.
Only the USA has really taken tough action against VW; meanwhile in the European Union – perhaps lent on by the German government – a much more softly-softly approach has been taken. In fact, it has become recently clear that VW’s huge surge in sales in China means even the scale of the US fines for Dieselgate are ‘just a cost of doing business’ for the car giant.
The shocking revelation of VW’s vile torture of monkeys, in a bizarre and incredibly distasteful ‘experiment’ that was part of its Dieselgate cover-up operation, says something pretty damning about German corporate culture. Today, VW even denies it had a duty to disclose the possible financial damage of its emissions tests manipulations to its shareholders, as the firm doubles-down, circles the wagons and resists legal claims. And yet still the German government has not ‘thrown the book’ at VW.
Unlike in the USA - the courts in Europe (and notably in Germany itself) have disappointed European consumers. Meanwhile the EU Commission – upon which EU citizens depend to defend their rights and interests – has merely asked VW to “engage in a dialogue at the European level”. One cannot help but conclude that the sheer size and thus power of VW means it can face down the EU, with the collaboration of the German government.
Of course, this is an area where, sad to say, Germany has form, whether it is its automotive sector using bribery to gain dominant market share in countries like Greece; or the extraordinary bribery ‘slush fund’ Siemens operated around the world. Indeed, whether it is VW, Siemens in Russia or elsewhere around the world, one “common thread among the raft of corporate scandals is that the German government has not been at the forefront of exposing or investigating them”.
If member states cannot or will not tackle the misbehaviour of their biggest businesses, CAMEC believes it is essential that the European Commission takes firm action, even if the businesses concerned come from the EU’s most powerful member states.