President Barroso’s European Commission has been in place for almost six months but commentators are not convinced by its leadership or the action it has taken to tackle the sovereign debt crisis

Leading think tanks have slammed the European Commission’s slow legislative response to the financial crisis saying it is weaker now than it has been in a long time.

Bruegel senior fellow Nicolas Veron says the fast adoption of the Dodd-Frank Bill in the US “puts a harsh spotlight” on the slow pace of the EU’s legislative response to the crisis.

But he says this is not simply down to President José Manuel Barroso’s five-month-old College of Commissioners; it more generally highlights shortcomings in the EU policy formulation process. He says: “The Commission has also been at fault for poor initial drafting, especially in the case of the AIFM directive but perhaps in other projects as well.”
Open Europe research director Mats Persson says the Commission is politically weaker now than it has been in a long time.

He says: “It has been somewhat sidelined by the crisis, with the bigger states having to take the lead, while the Commission has been more involved in the more boring, day-to-day running. It has pushed the legislative agenda quite aggressively, but at the moment, it is politically weak.”

But Centre for European Policy Studies chief executive Karel Lanoo says he thinks the Commission has responded fairly well to the crisis in forcing regulation through.

He says Europe was to some extent earlier in forming policies and legislation than the US but that this was held back because of the more complex legislative mechanism of the EU.

However, Lannoo says the subsequent sovereign debt crisis has been a “rude wake-up call” for the Commission.

“It was not really doing its job properly in terms of budgetary surveillance, so there was a finger pointing game, but in the end I think the Commission was to blame for not having followed that up sufficiently.

“You had the whole sovereign debt crisis, and they said the surveillance was diminished by the French and German action to water down the growth stability factors in 2004.”

Persson says the Commission was sidelined in its response to the sovereign debt crisis and it came down to Germany, France and a few other big countries to take charge. He believes the Commission has done as well as it could under the circumstances.

The new Commission ran into political difficulties early on as its approval was delayed until February. This was caused by Bulgaria’s initial candidate, Rumiana Jeleva, who was forced to withdraw her candidature due to political opposition over her suitability for the role after allegations about her financial interests.

The failure of the Lisbon Strategy during the previous Commission’s mandate meant that a new strategy had to be developed.

President Barroso’s answer to these challenges was the Europe 2020 Strategy. In this strategy, the Commission focused on the main aim of building a sustainable future based on smart, sustainable and inclusive growth. The strategy stated that “stronger economic governance will be required to deliver results”, and argued the need “to define a credible exit strategy, to pursue the reform of the financial system, to ensure budgetary consolidation for long-term growth, and to strengthen coordination within the Economic and Monetary Union”.

The 2020 Strategy received a mixed political reaction as the Alliance of Liberals and Democrats for Europe welcomed the proposed improvement to the Lisbon strategy, but criticised it for lacking the means to bring about the changes that Europe needed. The Party of European Socialists complained that “Mr Barroso has not matched the aspirations with the reality of a strong political vision”.

President Barroso and the Commission have been working with the European Council and Parliament to co-ordinate Europe’s response to the financial crisis and to enact legislation to prevent a crisis reoccurring.
This activity was illustrated in March when President Barroso called for the creation of a Euro Area “instrument for coordinated assistance to Greece”, and urged European leaders to act.

President Barroso and the Commission were also heavily involved in the creation of the European Financial Stabilisation Mechanism in May. President Barroso stated that the Commission was “seizing the moment to reinforce economic policy coordination and ensure more fiscal discipline in Europe”.

But Lannoo says he thinks the European Central Bank has been tackling the problems of the euro on its own and that the Commission is not seen to be defending the euro, despite it being an area of shared responsibility between the two institutions.

In terms of the Commission’s priorities for the rest of the year, Lannoo thinks it should respond rapidly to what is going on and be “extremely vigilant”.
He says: “ The priorities should essentially be to regain confidence, confidence in the financial regulatory setting and in Europe as a whole, but certainly also for the euro.”

Persson does not think the Commission should rush to produce legislation, but instead should take its time to produce legislature that stands up to scrutiny.

He says: “I think that since the financial crisis they’ve wanted to produce some new legislature, but if they rush it through too quickly it could end up having a worse long-term effect.”

Veron believes the priority is to finalise the supervisory package and the set up of the European Supervisory Authorities.

He says: “This is crucial and a necessary condition for several further regulatory steps, as the debates on rating agencies and derivatives regulation illustrate.

“After this, the key priority is certainly the issue the Commission calls ‘crisis management and resolution’, ie, tackling moral hazard in the financial system.”