Do Obama and the Democrats Walk in Lock-Step With Europe's Socialists on Regulatory and Tax Policy??

http://www.ipsnews.net/news.asp?idnews=45762

ECONOMY: EU Divided Over Regulation


Analysis by David Cronin


Inter Press Service


February 13, 2009


BRUSSELS, Feb 13 (IPS) - The global recession has exposed the ideological fissures at the highest level of officialdom in the European Union.

Joaquin Almunia, the European commissioner for economic affairs, expressed a widely held view Feb. 11 when he declared a "need for more ambitious regulation" of financial services, implying that the way this sector has largely been exempt from stringent rules has contributed to the near collapse of the international banking system.

But Almunia, a Spanish Socialist, does not hold the portfolio in the European Commission, the EU's executive arm, which would enable him to come forward with the kind of proposals he deems necessary. Instead, responsibility for this area belongs to Charlie McCreevy, the single market commissioner, who has emphasised his antipathy to far-reaching regulation.

Since taking up his current post in 2004, McCreevy has repeatedly recited the mantra 'less is more'. "For far too long the EU has been adopting rules at EU level, simply for the sake of having rules at that level," he told a conference in Cape Town during 2007. "Once adopted the rules have been left to gather dust on the statute book. My approach is a different one. We should adopt fewer, better quality rules and then devote our energy to making sure they are properly enforced."

Irishman McCreevy is studying a range of options for how hedge funds should be regulated, and has been tasked by the Commission with presenting a plan for doing so before elections to the European Parliament this coming summer. Yet while he has invited comments from all interested parties as part of a 'public consultation' exercise, he has maintained that he would prefer to see these investment funds subject to voluntary codes of conduct, rather than binding laws.

[EVEN WE AGREE THAT HEDGE FUNDS MUST BE REGULATED AND THAT THEIR OFF-BALANCE SHEET BOOKKEEPING PRACTICES & 'UNCOVERED' SWAP TRANSACTIONS, IN PART, LED TO THE CURRENT FINANCIAL DEBACLE. THE QUESTION IS HOW TO EFFECTIVELY REGULATE THEM TO MINIMIZE SYSTEMIC RISK.]

Some economic analysts have contended that hedge funds are at least partly culpable for creating the sub-prime crisis in the U.S. and for endangering banks on this side of the Atlantic by engaging in a highly speculative activity known as short-selling. Nonetheless, McCreevy said in late 2008 that hedge funds generally play a positive role in modern finance.

"I think he is finding it very hard to accept that his beloved unregulated market has failed," said Poul Nyrup Rasmussen, the former Danish prime minister and now a Socialist member of the European Parliament. "He has certainly been trying to delay and where possible avoid regulation on hedge funds and private equity. I can't say what lessons he has learned from the crisis but he does not seem to have changed his dislike of market regulation, which is a pity because practically everyone else has realised that better regulation is unavoidable and necessary. I suspect we will encounter further efforts by him to put off regulation."

Although hedge funds were banned in Germany until 2004 because they were considered too risky, McCreevy encouraged their development in Ireland, where he was finance minister from 1997 to 2004. And by the time their global value was estimated at 2.5 trillion dollars in the summer of 2008, the International Financial Services Centre in Dublin stood alongside London and New York as one of the major onshore centres of hedge funds in the world.

"Mr McCreevy behaves like a lobbyist for the hedge fund industry," says Peter Wahl from World Economy, Ecology and Development (WEED), a German anti- poverty group. "He has an extremist position and is a full believer in the casino style of capitalism that has now collapsed."

["WEED (World Economy, Ecology & Development) http://www.weed-online.org/themen/english.html was founded in 1990 as an independent non-governmental organisation with offices in Berlin and Bonn. Weed is active in the areas of International Financial System and Debts, International Trade and Investment Policy, European and International Environmental and Development Policies.

Globalisation is a process with tremendous historical implications. It is not only an economic process but also has political, cultural and social dimensions. Globalisation changes the structures of the world economy and international relations and affects the everyday life of people everywhere. So far, globalisation has been following the paradigm of neoliberalism: liberalisation, deregulation, privatisation and free market access have been the dominant dictum. The results are many losers and only a handful of winners. Social justice and ecological sustainability are being subordinated to the interests of Global Players, shareholders, investors and creditors. WEED is not going to accept it that is why it exists.

WEED stands for a different kind of globalization and campaigns for a change in international economic and environmental policies. Justice, human rights and the environment have to be put before profits. WEED sees itself as a consistent lobby for justice in North-South relations - in Germany, the EU and in international institutions such as the IMF, the World Banks, the WTO and the UN. Our goal is to raise awareness of the negative impacts of globalisation, to develop concrete alternatives and to contribute to their implementation. For doing so WEED analyses and evaluates processes of decision-making in the world economy and proposes alternatives to prevailing politics; provides professional expertise for social movements and other actors of the civil society; takes part in public campaigns and mobilises civil society interventions proactively, approaches decision makers in politics and economy and demands the realisation of sustainable policies.

WEED cooperates in national and international networks like ATTAC, IFI-Watchers, Seattles to Brussels Network, Social Watch, Erlassjahrkampagne (jubilee Germany) as well as with unions and many more partner organisations as EURODAD."]

[WEED promotes the 'negative' paradigm of sustainable development' described on the main ITSSD website].

In recent years, McCreevy has publicly identified with the chief architects of market fundamentalism. In December 2005, he praised Margaret Thatcher for how she had "economically transformed" Britain as its prime minister in the 1980s. And he quoted Milton Friedman, intellectual guru to the late U.S. president Ronald Reagan, as well as to the Chilean military dictator Augusto Pinochet, to support his contention that tax competition between nations is healthy.

In December last year, a United Nations conference in the Qatari capital Doha recognised the kind of tax competition McCreevy favours as a major contributor to global poverty. U.S. President Barack Obama has also promised to crack down on tax havens.

[ONE MUST BE CAREFUL HERE WITH THE MEANING OF WORDS. TAX MINIMIZATION IS PERFECTLY LEGAL, WHILE TAX EVASION IS NOT.]

According to the World Bank, up to 800 billion dollars in untaxed capital leaves poor countries or economies in transition each year, frequently because multinational firms have received tax breaks from the host countries. This dwarfs the 100 billion dollars that such countries receive in annual development aid.

Accountancy firms have been accused of providing invaluable advice to companies about how they can conceal their profits and thereby evade tax. The four biggest firms with global reach - PricewaterhouseCoopers, KPMG, Ernst & Young and Deloitte - have all paid huge settlements in recent times after they were sued for breaching financial rules. Yet McCreevy, himself an accountant by training, has recommended that the four (joined together in the International Accounting Standards Board) should effectively set the rules that companies listed on the EU's stock exchanges should follow. This has thwarted moves to introduce the kind of international system deemed vital by anti-poverty campaigners to tackle tax evasion: one where every multinational firm has to state what profits it makes and what taxes it pays in every country where it operates.

[IT IS ABSURD TO INSINUATE THAT LEGAL, FINANCIAL AND TAX ADVISERS HAVE A RESPONSIBILITY TO ENSURE THAT THEIR CLIENTS PAY & REPORT THE HIGHEST LEVEL OF TAXES POSSIBLE!! IT IS, HOWEVER, ARGUABLE, THAT MANY ACCOUNTING RULES FOLLOWED BY PUBLIC COMPANIES DO NOT ACTUALLY PROVIDE THE TRANSPARENCY AND ACCOUNTABILITY THAT LEGISLATORS AND REGULATORS HAVE SOUGHT. MORE REGULATION DOESN'T MEAN BETTER REGULATION. HERE, MR. MCGREEVY IS CORRECT AND THE SOCIALISTS ARE WRONG.]

"Published accounts will always be like bikinis - much more interesting for what they conceal than for what they reveal," McCreevy has said. "The view that more frequent reporting by companies increases transparency is one about which I am deeply sceptical."

John Christensen from the Tax Justice Network differs: "The IASB is a private company. By and large, it is manned by and controlled by the big four accounting firms and their clients. It doesn't generally consult outside the four. McCreevy is very closely connected to the four, he comes out of that background. And he doesn't buy into the idea that there is a legitimate interest in corporate information outside the investor community.

"There is not necessarily any financial conflicts of interests. But I'm afraid McCreevy is seen as representing the interests of the International Financial Services Centre in Dublin. Dublin is competing with other tax havens like the Isle of Man and Jersey. It is pushing lax regulation and McCreevy is seen as part of that problem of lax regulation." (END/2009)