Brussels disarray stalls key rulings

BT and Bernie Ecclestone are among those hit by confusion at the heart of Europe, says Hilary Clarke

THE ENTIRE financial world is probably, like the rest of us, watching the current shenanigans over allegations of nepotism and fraud at the European Commission in Brussels with bemusement, but not much else.

Most of the accusations concern mismanagement of humanitarian aid efforts and projects designed to support Africa and the Middle East. So, unless you are a contractor to one of the programmes in question, Britain itself is unlikely to be directly affected.

Yet the crisis is causing a policy paralysis in the corridors of the commission's Breydel headquarters that could delay a number of policy issues and decisions related to the financial world, not least regulatory approval for decisions on mergers and acquisitions.

There are a number of British companies waiting for approval from the EU's Competition Commissioner, Karl van Miert, for recent joint ventures and takeovers. The engineering firm, Siebe, is awaiting the green light for the proposed purchase of its rival, BTR, to create the world's largest maker of factory controls and automation equipment. Initial clearance is also required for Electricite de France's pounds 1.93bn proposed purchase of London Electricity. Both decisions are overdue as the EU executive clears its desks while fighting for its very life.

Then there is the proposed joint venture between BT and AT&T of the US to form a joint venture to provide telephone, internet and data services for corporations that is undergoing a probe by Brussels anti-trust regulators. BT is expecting a decision by the autumn.

There are even bigger mergers by European or US companies awaiting approval. Among them are the French oil company Total's planned purchase of Belgium's Petrofina, and the battle between the racing supremo Bernie Ecclestone and Brussels over plans to float Formula One.

"They [the European commissioners] are worried about survival at the moment, not competition cases," said one EU official.

There are two possible outcomes to next week's European Parliament vote on a motion of censure of the 20-member EU executive. The worst scenario for the President of the European Commission, Jacques Santer, and his posse of unelected commissioners is that two-thirds of parliamentarians decide to condemn them and they are sacked. If that were the case, there would be a complete leadership void in Brussels until EU member states appoint their replacements.

That, however, seems unlikely to happen unless the majority socialist group at the European Parliament changes tack and votes for the censure. More likely is that the current commission will be allowed to limp to the end of its term. But the furore has taken its toll on morale in Brussels.

"People are very depressed," said a Commission official. "It might almost be better to be censured than to bleed to death until the end of 1999. At least we'd have a new college and could start afresh."

Low morale could also effect other important policy issues due to be tackled by the commission this year; and that factor will have a major impact on business life throughout the EU. Now that the euro is entrenched, the commission should be leading the debate on how member states which joined the single currency continue to converge their economies by co- ordinating budgetary targets.

Then there is the thorny issue of taxation. It is up to the EU executive to come up with policy initiatives on such issues as a common corporate tax policy and the harmonisation of withholding tax rates. Paralysis at its heart would further complicate matters.

Whatever the outcome of next week's vote, the whole episode underlies the need for reform of the EU Commission as an institution. The body is more or less the same as the one that was formed when the EU had only six members and was concerned largely with farming subsidies and the coal industry. There are now 15 EU members, and many more knocking at the door, and the brief has expanded enormously. The commission is drawing up options for an overhaul of the way it operates that the new president - and it is unlikely to be Jacques Santer - will have to act upon. Business must hope, and will doubtless work to ensure, that those reforms will take its needs into account.