In many legislatures, December is the month that things get done. Legislation is hurried through and outstanding issues that were stumbling blocks for months are miraculously agreed. Brussels is no different. The annual last-minute Christmas rush has seen a raft of legislation pushed through the EU system this week.
Next year's European elections have given an added impetus to events, with officials keen to progress as much legislation through the complex European legislative process as possible before the end of the current European Commission and Parliament's tenure next summer.
This week the revised tobacco directive was finally agreed between the European Parliament and member states. The law, which has been negotiated against a background of intense lobbying, paves the way for EU-wide laws on tobacco packaging. Crucially, the directive permits countries to introduce standardised packaging. This may offer a welcome layer of legal security as Ireland braces itself for possible challenges from tobacco companies against its plans to introduce plain packaging for cigarettes.
Audit industry overhaul
Also agreed this week was an overhaul of the audit industry, which seeks to end the perceived over-familiarity between auditors and their clients that many believe contributed to the financial crisis.
The rules, which will come into effect in 2016, introduce mandatory rotation of auditors and restrictions on the kind of services auditors can offer companies whose accounts they review.
The new legislation could have profound implications for Ireland, given the dominance of the "big four" accountancy firms, many of which signed off on the accounts of Irish banks that later failed spectacularly. Anglo Irish Bank – which init- iated legal proceedings against its auditor, Ernst & Young, last year – was name-checked in the commission's original proposal on the reforms.
But it is the new rules on banking union that have dominated officialdom in Brussels in recent weeks, as finance ministers rush to meet their self-imposed deadline of year-end to reach agreement.
With any decision on the Single Resolution Mechanism needing sign-off by the European Parliament, member states need to agree their own position so that trilateral negotiations can begin in the new year.
Last night, agreement on the single resolution authority that would decide when and how to wind down problem banks appeared to be close, after the smaller group of 17 euro zone finance ministers reached agreement in the early hours of yesterday morning on a “backstop” to help banks that run into trouble – though the details of how such a measure would work remain unclear.
Similarly, the draft proposal for a Single Resolution Mechanism hammered out a week ago remains vague, with concerns about the voting structure of the resolution body and its implications for decision-making, as well as uncertainty on how the €55 billion fund will be built up. In this sense, the decision to halt talks last week in Brussels without clinching the final sign-off may have been to Germany’s detriment.
The assurance that ministers were going to return to the issue at this week's emergency Ecofin meeting allowed a vacuum to build up over the past week in which Germany has been blamed for insisting on too many concessions and changes. Criticism of the proposal has emanated from the European Commission, which is dismayed at the increase in powers for member states in the plan, and ECB president Mario Draghi, who warned that the "decision-making may become overly complex, and financing arrangements may not be adequate".
“We should not create a Single Resolution Mechanism that is single in name only,” he said on Monday.
Central theme of 2013
The tension between Brussels and Frankfurt on the one hand and Berlin on the other, which has surfaced over the single resolution authority for European banks, has in fact been a central theme of 2013, with Berlin clashing with the commission and ECB on several issues. This week, as Angela Merkel began her third term in office, Brussels and Frankfurt seized control of that narrative.
Whether this will pressurise Germany to yield further ground on banking union remains unlikely. Ultimately the latest plan for a resolution authority rests closer to Berlin’s ideal than Brussels, in its restriction of the commission’s power and its commitment to pool the resolution fund only gradually.
In the long term, however, the hints of frustration that surfaced this week could be a disquieting sign of the tensions that may characterise Germany’s relationship with the EU in the coming years.