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Tobacco Creates New East-West Divide in Europe

June 20, 2013 by Leave a Comment

Led by Poland, which also happens to be one of Europe’s biggest tobacco producers, a bloc of former Communist countries is fighting a rear-guard action against the measures, hoping at least to save slim cigarettes that are popular with many smokers, often women.

The concern of the rule drafters is that slim cigarettes add an allure that attracts young women to smoking and that menthol cigarettes make it easier for young people of both sexes to start, and get hooked on, smoking.

But Poland stands to lose tobacco industry jobs from the proposed law. Some Polish politicians also worry about seeming highhanded to their sizable number of smokers, an estimated one-third of the population.

“It’s about freedom to a large extent,” said Roza Grafin von Thun und Hohenstein, a center-right Polish member of the European Parliament, who is known as Roza Thun.

Ms. Thun said she supported the health impulses behind the draft legislation, but after listening to objections from voters at a meeting in Krakow she decided the rules should be relaxed. “People said, ‘When are you going to prohibit us from drinking wine or vodka, or stop us using white sugar? Maybe you will also tell us to go to bed early because going to bed late is also unhealthy.’ ”

The proposed rules would also require that pictures of smoking-related medical problems and written health warnings cover 75 percent of the front and the back of cigarette packets. This provision, though, may be scaled back after haggling among the European health ministers who will be debating the rules in Brussels.

Any new regulations would require the approval of the European Parliament before becoming law.

Tobacco has been a troublesome issue for the European Union’s executive arm, the European Commission, which has run public health campaigns to cut smoking but only recently removed direct agricultural subsidies for growing tobacco.

In December, the commission came up with the proposed tobacco rules. They are supported by Ireland, which holds the European Union’s rotating presidency and argues that the legislation would save lives and money.

“Approximately 700,000 Europeans die every single year of tobacco-related causes,” Ireland’s health minister, James Reilly, said in a speech this year. “Smoking is the largest avoidable health risk in Europe, causing more problems than alcohol, drug abuse and obesity.”

The public health care cost attached to smoking in Europe is an estimated 25.3 billion euros ($33.4 billion) each year, Mr. Reilly said. He cited recent studies showing that 70 percent of smokers in Europe began their habit before age 18.

A particular worry behind the proposal is that thinner or menthol-flavored cigarettes look and taste less harmful than others, giving people a misleading impression that they are safer.

In Poland, menthol cigarettes make up 18 percent of Poland’s cigarette consumption, with slim cigarettes adding an additional 14 percent, according to the Polish government.

“I think we should not be too dogmatic,” she said. “We are dealing with human beings, their addictions and their habit. We should help the younger generation not to smoke, but I think we won’t achieve anything with a hard line.”

Premyslaw Noworyta, director of the association that represents Polish tobacco growers, said the industry supported 60,000 jobs, many in areas with little alternative employment. Only Italy grows more tobacco in Europe than Poland.

“For us tobacco growers, this is a catastrophe,” Mr. Noworyta said, adding that demand would simply switch to the black market.

A study by the firm Roland Berger, commissioned by Philip Morris International, predicted that if the legislation passed, the European Union would lose 70,000 to 175,000 jobs and that the black market would thrive.

The report also projected a drop in tax revenue in the European Union of 2.2 billion to 5 billion euros.

“Particularly strong effects will occur in countries with large tobacco sectors, such as Germany, France and Poland,” the report said. “Countries with high demand for slim or menthol cigarettes, such as Bulgaria or Poland, will experience disproportionate losses.”

Article source: http://www.nytimes.com/2013/06/21/business/global/tobacco-creates-new-east-west-divide-in-europe.html?partner=rss&emc=rss

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European Ministers Clear Trade Deal

June 14, 2013 by Leave a Comment

The breakthrough, which came after 13 hours of tense talks, should enable Britain to hail the start of the trans-Atlantic trade discussions when the leaders of the Group of 8 biggest economies hold a summit meeting on Monday in Northern Ireland.

“The formal launch of negotiations between the world’s two largest trading blocs is now imminent,” Vince Cable, the British business secretary, said in a statement shortly after the deal was announced. “Achieving an agreement is in all our interests and would deliver a much-needed boost to the economies of all involved.”

The divisive issue of shielding films, TV shows and other audiovisual services from competition could be debated again at a later stage, and that promises more wrangling ahead between European nations over what to offer the United States in exchange for lower tariffs and streamlined regulations.

Although the French position could be scaled back, the fact that the other 26 trade ministers in the European Union acceded to France’s demand could make negotiations with the United States that much more difficult, given the protectionist impulses on both sides of the Atlantic that are likely to come into play.

A trade pact would aim to lower barriers between the world’s two biggest trading partners. But before formal talks can start, the European Union’s 27 trade ministers needed to reach a unanimous deal to give the European Commission, the bloc’s executive arm, the formal authority to start the negotiations.

The decision in Luxembourg was a preliminary victory for France, which fought hard for months to protect Europe’s so-called cultural exception, which is, in practice, a thicket of quotas and subsidies for audiovisual productions that promote locally and regionally produced content.

“We are satisfied because we have the exclusion from the mandate for everything that is to do with audiovisual,” Nicole Bricq, the French trade minister, told a news conference. The guarantee was “written in black and white” in the agreement, she said.

The European Union, which is plagued by low growth and high unemployment, broadly favors a trade pact with the United States to bolster the economy and generate new jobs. But the drawn-out negotiations in Luxembourg were a stark reminder of how the bloc’s members still are reluctant to set aside national priorities and to make collective decision-making a reality.

The main sticking point on Friday was France’s demand to exclude audiovisual services, including future digital services, from the talks.

Britain, along with countries including Spain and the Netherlands, was concerned that such an exclusion would prompt the United States to require protections of its own.

The exclusion of audiovisual material from a trade deal would especially disappoint American technology and media companies, including the online movie distributor Netflix, which want easier access to European markets.

The deal that emerged was a classic European accommodation allowing a flagship initiative — a trans-Atlantic trade pact — to move forward while leaving decisions on the thorniest questions, like how to manage digital services, for a later date.

The compromise leaves the European Commission with the option to make a proposal, once the talks with the United States are under way, to use audiovisual services as a bargaining chip so long as all 27 member states agree that the advantages are sufficiently attractive.

“There is no carve-out on audiovisual services,” Karel De Gucht, the European Union trade commissioner who will lead the negotiations with the United States, told a news conference.“We are ready to discuss it with our American counterparts and to listen to their views on this issue.”

In a sign of the bitterness that nearly led to the collapse of the talks on Friday, Ms. Bricq, of France, accused some member states of pandering to American demands to keep the audiovisual industries as a bargaining chip.

And, earlier in the day, in a thinly veiled reference to the European outcry over recent disclosures that the National Security Agency in the United States had gained access to online data from many of the biggest Internet companies, she added that “current events unhappily remind us” of American influence over the online world.

How much progress Europe and the United States can make is an open question. Tariffs are already low, and the main goal — harmonizing regulations — is likely to pose a huge challenge for negotiators.

There are also questions about their differences over regulations on a host of industries, including new technologies, car safety, pharmaceuticals and financial derivatives.

Article source: http://www.nytimes.com/2013/06/15/business/economy/european-trade-ministers-debate-terms-of-us-talks.html?partner=rss&emc=rss

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Policy ‘Troika’ for Europe Financial Woes at Odds

June 7, 2013 by Leave a Comment

Throughout much of Europe’s seemingly unending economic crisis, Mr. Rehn and the I.M.F. chief have been an inseparable part of a curious policy-making ménage à trois known as the “troika,” a trio that also includes the European Central Bank.

The tensions at the heart of this intimate but unwieldy arrangement, however, have now burst into the open with an unusual bout of finger-pointing over policies that have pushed parts of Europe into an economic slump more severe than the Great Depression and left the Continent as a whole far short of even Japan’s anemic recovery.

The blame game, initiated by a highly critical internal I.M.F. report released this week in Washington, has put a spotlight on a question that has lurked in the shadows throughout the troika’s efforts to get a grip on Europe’s economic mess: Is it time for a divorce?

Speaking Friday at an economic conference in his home country of Finland, Mr. Rehn, the usually phlegmatic commissioner of economic and monetary affairs, sounded like a put-upon spouse in a messy breakup. “I don’t think it’s fair and just for the I.M.F. to wash its hands and throw dirty water on the Europeans,” he said.

He was responding to assertions by the I.M.F. that the European Commission, the union’s executive arm, had blocked proposals back in 2010 to make investors share more of the pain by writing down Greece’s debt and, more generally, had neglected the importance of structural reforms to lift Europe’s sluggish economy.

Simon O’Connor, Mr. Rehn’s spokesman, said the report had made some valid points, but he derided as “plainly wrong and unfounded” a claim that the commission had not done enough to promote growth through reform. On this issue and events in Greece, Mr. O’Connor said, “We fundamentally disagree.”

Left-wing politicians who have long denounced the troika as an alien and unaccountable force are muttering “told you so” and complaining that putting policy in the hands of a triumvirate of unelected institutions could never work.

“The troika is constructed in such a way that it is untouchable, and that is the end of democracy,” said Udo Bullmann, a Socialist member of the European Parliament’s Economic and Monetary Affairs Committee from Germany and a strong critic of austerity measures that have formed the core of the troika’s policy prescription for Europe’s ailing economies.

“What is this troika?” asked Mr. Bullmann. “It has no address and no telephone number. Who do you talk to?” He said the troika was designed to diffuse and thus dodge responsibility. “Decisions are made in a nontransparent and nondemocratic way so that nobody has to take the blame,” he said.

Charles H. Dallara, a former United States Treasury Department official who represented the banking industry in negotiations with the troika over Greece, said that the I.M.F. and the European Commission were never as united as they often seemed and were bound to come to blows at some point.

“It is very difficult to have three cooks in the kitchen all the time. That is just life,” said Mr. Dallara, who now works for a private equity company based in Switzerland. “You need one institution driving negotiations. You don’t need three.”

The idea of yoking three together to address Europe’s troubles dates back four years to when it became clear that Greece, the weakest member of the 17-nation zone that uses the euro, would need a bailout to stave off bankruptcy. Northern European countries, particularly Germany, demanded that the I.M.F. play a role in order to share both the cost of a bailout and the blame for imposing tough terms.

Jack Ewing contributed reporting from Frankfurt, and James Kanter from Brussels.

Article source: http://www.nytimes.com/2013/06/08/world/europe/policy-troika-for-europe-financial-crisis-has-splits.html?partner=rss&emc=rss

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Luxembourg Agrees to Help Fight Tax Cheats

April 11, 2013 by Leave a Comment

The decision follows mounting international pressure on Luxembourg to end its policy of banking secrecy which critics argue has helped people hide money in the country from tax authorities.

Starting in 2015, the government said it will set up an automatic exchange of information about interest payments made to European Union citizens with bank accounts in Luxembourg in order “to ensure taxation according to the laws” of the customer’s home country.

The country added that the fiscal regime for U.S. citizens “will be dealt with in a bilateral agreement under negotiation between the governments of Luxembourg and the United States.”

But the government added that said the capital gains tax for those who live in the tiny country of just half a million people remains unchanged at 10 percent and that “those residents will enjoy bank secrecy as it exists today.”

Luxembourg has the highest level of income per individual in Europe, largely because of its huge financial industry which has more than 3 trillion euros ($4 trillion) in assets.

The growth of Luxembourg’s financial sector was initially fueled by lax regulation, banking secrecy and low taxes, a cocktail that made it a popular tax haven and money-laundering spot. Though the country later changed many of its laws following pressure by its European partners, its critics have continued to argue that the financial industry still lacks the necessary transparency.

Wednesday’s announcement is likely to increase pressure on Austria, the EU’s only other holdout on providing tax information. However, Austria’s opposition to greater transparency seems to be fading after Chancellor Werner Faymann indicated Tuesday the country might be ready to negotiate on the matter.

“We hope that they will be able to follow Luxembourg,” said Emer Traynor, a spokeswoman of the EU Commission, the 27-nation bloc’s executive arm, referring to Austria.

Switzerland, which is not an EU member, also takes pride in its culture of banking secrecy, but was pressured into negotiating some bilateral tax agreements with the U.S., Germany and others.

“Tax havens must be eradicated in Europe and in the world, because this is needed to save jobs,” French President Francois Hollande said in Paris.

The discovery that his former budget minister — the man in charge of outing tax cheats — had lied about secret bank accounts in Switzerland and Singapore for months, Hollande acknowledged, “was a mortal blow to me.”

Trying to counter the political headwinds from the scandal — and the discovery of another close aide’s offshore accounts last week — the Socialist president on Tuesday announced a range of new measures to enhance his country’s banking sector’s transparency.

“It will no longer be possible for a bank to hide transactions in a tax haven,” he insisted.

The publication of details of several wealthy people’s offshore bank accounts by several international media last week, some of which included references to shell companies based in Luxembourg, reinforced the calls for change in the country. Finance Minister Luc Frieden first hinted at a change to Luxembourg’s refusal on automatic information exchanges Sunday.

Luxembourg’s 141 banks — many of which are subsidiaries of foreign banks — hold assets worth about 22 times the country’s annual economic output of 44 billion euros.

The country is also the world’s second-largest center for investment funds, with about 3,800 funds holding assets worth 2.5 trillion euros ($3.2 trillion).

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Associated Press writer Sylvie Corbet in Paris contributed reporting.

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Article source: http://www.nytimes.com/aponline/2013/04/10/world/europe/ap-eu-luxembourg-banking-secrecy.html?partner=rss&emc=rss

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