March 18, 2011 / 9:01 AM / 9 years ago

SPECIAL REPORT-How lobbyists rewrite Europe's laws

Weisgerber says she helped eliminate many of the provisions in a chemicals law known as Reach, measures that she believes threatened Bavarian industry. “You can turn a law on its head as was done with Reach where there were more than 1,000 amendments,” says the 34-year-old Bavarian. “I was personally responsible for inserting more than 100 of them.”

At least one MEP may have gone too far. This week, Austrian parliamentarian Ernst Strasser admitted that he had accepted an offer of money by an undercover journalist posing as a lobbyist to put forward amendments to a law. He insists he had suspected a hoax, accepting the offer only to find out who was behind it. No money changed hands, his spokesman said on Friday. Austrian prosecutors are now investigating.


Just as lobbyists turned to Weisgerber on chemical law, so too has the banking lobby, swamping MEPs with proposals to soften new rules on finance.

“You know the members of parliament who are industry-friendly,” says one banking lobbyist, speaking openly only on condition of anonymity. “You build up the relationship and you know that they will put forward your amendments. Many of the MEPs are lazy. They are writing legislation about areas that they do not know about.”

The industry’s assistance is discreet but powerful. “Often clients do not want the public to know that they are the ones behind the amendments,” says the banking lobbyist. “It is a difficult thing to explain.”

Almost four years after the start of the banking and debt crisis, just three EU laws have been passed to regulate finance, a modest achievement in the eyes of some experts and even officials.

One of the few significant changes has been a bank bonus code to cap cash windfalls. It was introduced by MEP Arlene McCarthy, and survived intense fire from investment banks.

But McCarthy was forced to make concessions in a separate fight, on rules to hike the capital that banks must set aside to trade the sort of repackaged loans whose unravelling sparked the banking crisis.

The proposed law alarmed banks around Europe, including Deutsche Bank, one of the globe’s biggest investment banks and a leading player in debt trading. Once branded a giant hedge fund, Deutsche feared tougher capital requirements would force the fire sale of its balance-sheet portfolio including loans, derivatives and debt worth almost 2 trillion euros, according to people involved in writing the law. Hugo Baenziger, Deutsche’s top risk manager, travelled regularly from the group’s skyscraper headquarters in Frankfurt to Brussels, visiting British diplomats and others to build a pro-industry alliance.

Banks also teamed up with parliamentarians who succeeded in pushing through a delay to the rules, originally foreseen for early 2011, until 2012.


Jean-Paul Gauzes, an influential conservative who was also instrumental in writing rules for hedge funds, and Olle Schmidt, a Swedish parliamentarian, backed the industry line and proposed delaying the regime by amending the law.

The amendments those two MEPs put forward correspond closely with those written by the Association for Financial Markets in Europe (AFME), Europe’s chief investment banking lobby group which represents Deutsche, Goldman Sachs, Barclays and others.

In a March 2010 email from Brussels-based lobby group Fleishman Hillard to a parliamentarian, an executive wrote that he believed Gauzes had been persuaded to propose AFME’s changes. Shortly after the email, seen by Reuters, Gauzes did just that.

“For me, it’s not a problem,” says Gauzes. “Why should I write amendments that are worse than those of the industry?

“These are very technical matters. They must be written precisely. The lobbyists write it much better than I do.”

“We are used now to seeing lobbyists provide off-the-peg amendments,” says McCarthy. “These remarkably turn up, at times in triplicate, from certain members.”

That’s just fine, says one senior lobbyist. “You cannot expect industry to call ‘stop’. People are busy earning money. It’s like we are the river and they put boulders in our way but we just flow around them.”


Former journalist Giles Merritt believes companies are entitled to their say. To counterbalance what he calls the “bleeding hearts with very loud voices”, he set up an industry forum for European policy debate called Friends of Europe. “You cannot have an industrial and economic strategy without picking the brains of industry and business,” he says.

Others like Gauzes are more relaxed, saying lawmakers are free to make their own decisions. Olle Schmidt says he would never support a legal change he did not agree with.

“I’m not ashamed,” says Gauzes, commenting on industry amendments he has proposed. “I don’t get money or women. Maybe a bottle of champagne at Christmas but that’s it.”


Banks also often turn to Brussels’ think tanks, Bruegel and the Centre for European Policy Studies. Both take money from companies to help cover their costs — including individual salaries which insiders say reach 200,000 euros. One quarter of CEPS corporate members are from the finance industry. Bruegel received more than 800,000 euros — almost a quarter of its budget — from corporates including Deutsche Bank and Goldman Sachs. Both deny the sponsorship influences their views, which often shape EU policy. “If industry were to compromise us, I may as well close CEPS tomorrow,” says Karel Lannoo, who heads the think tank. Bruegel co-founder Nicolas Veron says less than 10 percent of its funding comes from the sector: “Our opinions often diverge with the financial industry.”

The distinction blurs further when companies sponsor specific reports, some of which cost up to about 150,000 euros a pop. Respected academics can also be hired for such research to lend it extra weight at a cost of up to 5,000 euros a day. “We commission reports and if we don’t like the findings we get them to change parts of the report or we just don’t publish it,” says another financial lobbyist.

In 2007, for instance, CEPS produced a research paper on the benefits of savings banks to the financial system. The report was sponsored by German savings banks, who co-own the country’s seven landesbanks, all of which bar one turned to the state for help in the financial crisis.

“We are kind of independent,” says one CEPS staff member, also asking to remain anonymous so they could speak frankly. “The pressure can be quite intense. So you have to be diplomatic.”


But with little counterbalance to industry, many say the debate and the legislation are skewed in its favour. “We’re losing the battle,” says one European official in charge of writing finance law.

Sven Giegold, a German parliamentarian in Brussels, is a vocal critic of industry’s influence. The Green MEP, who collects industry post in a plastic bag labelled “hazardous lobby waste”, has set up a group to rally lawmakers to protest against banks’ influence.

The Marshall Fund’s Stokes goes further. “Appearances matter,” he says. “Even the appearance of conflicts can threaten the legitimacy of the parliament. They are one scandal away from a huge black eye.”

Editing by Simon Robinson and Sara Ledwith

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