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ISSUE 54 page 2

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EP moves to regulate hedge funds further as it cracks down on risky transactions
 NOT CONTENT WITH PASSING STIFFER regulation on hedge funds in areas such as licensing and takeovers (see our last issue), the European Parliament has approved proposals to tighten up on practices like credit default swaps and short-selling. In a report to the Economic and Monetary Affairs Committee Pascal Canfin, a French Green MEP, explained that short-selling involves borrowing shares and selling them, later buying them back and returning to the original owner. If the price falls in the meantime the speculator makes a profit on the difference. A credit default swap (CDS) is a kind of insurance for a lender. If a company, or a country, fails to pay back a loan and the lender has bought a CDS, the insurance company will re-imburse the money. While these financial deals can be seen as having positive effects in stimulating share dealing and reassuring investors, further problems arise with so-called ‘naked’ short-selling and CDS. Here the seller hasn’t yet borrowed the shares that are being sold and the CDS-buyer insures against a default on a loan which they haven’t lent.

Member States like Greece, making insurance more costly and Greek bonds seem more risky than they were. In the event the committee voted to prohibit only the purchase of sovereign debt CDSs by anyone who hasn’t lent to the country concerned or one of its major companies.‘Naked’ short-selling however would only be allowed for one trading day, at the end of which the shares must have been borrowed. In addition the seller would have to identify where they were coming from and have a guarantee that they will be lent before the deadline.
Mr. Canfin commented ‘Of course the ban on naked CDS will not solve the fiscal problems of Greece or Ireland. Nevertheless ... you can choose to add fuel to the fire or put water on it’. MEPs and officials from Member States will now discuss a deal on the proposals so that the full parliament can vote on them. If they are successful the regulation could come in next year.

Pascal Canfin MEP

According to Mr.Canfin ‘it's a bit like taking out insurance on your neighbour's house, giving you the incentive to burn it down and collect the insurance’. In both cases the speculator only makes money if  the outcome is bad for the real economy: shares go down and companies and states default on loans.
The report advocates banning ‘naked’ transactions as they are believed to have exacerbated the run on banks during the original financial crash, when short-sellers borrowed huge numbers of bank shares and dumped them on the market, and the subsequent sovereign debt crisis when speculators bought CDSs against default by

 

 

Bargaining round-up

THE CONTINUING EU-WIDE DEREGULATION OF postal services has had serious repercussions in the Netherlands. Following the Dutch government’s opening of the market in 2009 the previous monopoly provider TNT Post, faced with competition from companies such as Sandd and DHL GlobalMail, attempted to sack full time staff and replace them with flexible workers delivering post for a few hours each day. Proposed job losses had reached 11,000 by Spring 2010 but, after unions had threatened strike action, TNT offered to guarantee the jobs of all existing employees for three years in return for a 15% wage cut. However this was unacceptable to FNV and CNV trade unions who staged industrial action that resulted in a new offer of 4,500 redundancies, about a quarter of the delivery staff, without the pay decrease. Further sporadic strikes have now led to a new agreement which will involve 2,300 staff losing their jobs. The company has promised to place these workers with an external secondment company so that they will not have to claim unemployment benefit. This scheme is dependent on money from the government which has already condemned the ‘race to the bottom’ in the industry.
EVEN IN SWEDEN, WHICH IS CURRENTLY REGISTERING record increases in economic activity, youth unemployment remains a big problem.  The IF Metall metalworkers’ union has tried to do something about it by signing an agreement with employers’ associations in the mining, chemicals, steel and engineering industries. The aim is to improve the skills of people under 25 and help them to enter the labour market. The social partners believe that Sweden will face an increasing shortage of skilled workers due to an ageing population. Although employers will be able to recruit young people on 12-month contracts at 75% of the minimum wage, they will have to provide tutoring and training as part of an individual development plan. There has been criticism that the plan will drive down wages but the union points to penalty clauses that will prevent exploitation
LITHUANIAN EMPLOYERS AND TRADE UNIONS and the government are all keen to renew the country’s national agreement, which was last signed in 2009, but they have different reasons and preferred outcomes. Prime Minister Andrius Kubilius wants to crack down on the shadow economy and encourage small businesses to stimulate job creation. Employers would like to reform the social security and education systems while unions are more concerned to index pay to inflation and raise the minimum wage. Despite these differences all parties would like to see any deal fully implemented, which they say did not happen in 2009.

Working Time Directive: unions, disappointed with Commission proposals, want to negotiate

ONE OF THE LONGEST RUNNING SAGAS in the EU book of legislative initiatives is the revision of the Working Time Directive which has been under consideration since 2003. Following the first-ever failure of a conciliation process between the European Parliament and the Council of Ministers in 2009 (see issue 47), it was the job of the Commission to find a way forward and they carried out two wide-ranging consultations on the views of employers and unions. One reason why things could not be left as they were was the need to take into account the judgements of the European Court of Justice that made all ‘on-call’ hours, often used in the health sector, part of working time under the directive. This has led some Member States to complain of the costs of employing more staff to comply, although the Commission’s report into its implementation found that several countries have practices which are still not fully within the legislation. Because this was seen as the most pressing problem the Commission offered an option of a ‘focused’ revision that would just deal with the on-call problem and the associated issue of compensatory rest. The other option was a comprehensive review of the existing directive to take into account not only the controversial opt-out, which now allows workers in 16 Member States to choose to exceed the 48-hour maximum week, but also new working practices such as greater flexibility, more employees with multiple contracts and more with control over their own hours.
The second stage of the consultation ended in March and the European Trade Union Confederation, although very much in favour of the comprehensive option, responded negatively to the proposal to keep the opt-out if greater flexibility of hours result in a decline in its use. Instead the ETUC has decided to ask for direct negotiation with employers’ organisations. Nine months will now be allotted for the social partners to come up with a deal on the directive revision. However it stresses that ‘health and safety at work cannot be subordinated to ... financial considerations’ and maintains that the end of the opt-out, on-call work being working time and maximum working time being counted by worker and not by contract are key demands

 




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