06/07/2011 What the July plenary session has in store for us
During the last plenary session before the summer break the parliamentarians will be dealing with issues that will influence the future of Europe and its economy. On the agenda among other things: the framework for risky financial practises, the budget, GMOs and European citizenship.
With regards to the economy, the framework for risky market practises will be discussed on Monday July 4. In the member’s sights: credit default swaps (CDS), short selling and other derivative products, with the presentation of two reports.
The Pascal Canfin (Greens- EFA) report suggests the abolition of CDS on the sovereign bonds of states. Specifically, assurances against the risk of default on bonds. So, if you buy bonds and they dramatically drop in value, you will be insured. Furthermore, it is possible to buy the insurance without buying the bond. Henceforth, owners of CDS have an interest in the bonds to which the insurance is linked to defaulting. It’s like insuring your neighbour’s house before setting it on fire.
Moreover, the more a CDS is in demand, the more its price increases, as it seems that the assured risk is very high. When this relates to state bonds of countries in difficulty it can have a serious consequence: further increase of the price of borrowing.
Short selling is also targeted in this report. This practise consists of gambling on the price of shares, borrowing and then selling straight afterwards. Then you can buy them again at a lower price, then cash in the shares, pocketing the difference in value. In some cases the broker has not yet acquired the shares when he sells them; this is called naked short selling, and this is what the Canfin report seeks to abolish.
The second report, by Werner Langen (EPP), criticises what he calls the lack of transparency around transactions linked to financial derivative products. To combat this he proposes the creation of an institution that would verify that all involved parties fulfil their commitments. In this way it would be easier to identify where the risk lies.
On of the other important issues that the European deputies must deal with is that of the long term EU budget (2014-2020). It will be a key issue for the Union in the coming years: what means will it have at its disposal to implement its objectives, especially within the framework of the 2020 EU strategy? The budget commissioner Janusz Lewandowski will be present to debate the Commission’s proposals, within the difficult context of general austerity in Europe.
Then there is the question of citizenship. European elections are often avoided by the electorate, for whom European issues are not always clear, as campaigns often have national emphasis. This plenary session will examine the suggestion of ‘re-europising’ the European elections. The idea: beside the national list you would have a European list of 25 candidates. So with the second voting paper the electorate could chose additional deputies, bringing their total number to 776.
Finally, the members will have to deal with the issue of GMOs: should they leave states the options of banning the use of genetically modified organisms within their borders? If so, should they be able to cite environmental reasons? Such a decision would reflect the position of European citizens: according to Eurostat, only 21% think that GMOs pose no risk.