Protection of the Communities' financial interests - Fight against fraud - Annual reports 2005 and 2006 (debate)
The next item is the report by Mr Musotto, on behalf of the Committee on Budgetary Control, on protection of the Communities' financial interests - Fight against fraud - Annual reports 2005 and 2006.
rapporteur. - (IT) Mr President, Commissioner, ladies and gentlemen, I should like to begin by thanking Mr Kallas for his valuable cooperation with Parliament during its work. I am likewise grateful to OLAF, in the person of the Director, Franz-Hermann Brüner, for its unstinting support and for the vital work it does, which is far from easy. Finally, I would thank all my colleagues for their helpful contributions, as well as all the national bodies and institutions that have cooperated with us in this arduous task, especially - if I may - the Italian Guardia di finanza, whose approach in this field has been highly professional.
Protection of the Communities' financial interests is a subject of capital importance which affects us directly as States and as citizens; it must therefore be tackled with all due rigour and determination.
Today's resolution is intended as a practical response to the alarming phenomenon of Community fraud. The data gathered...
(The President interrupted the speaker to reprimand some Members who were causing a disturbance)
Thank you, Mr President. We are talking about transparency and there is also a need for common courtesy.
Today's resolution is intended as a practical response to the alarming phenomenon of Community fraud. The data gathered are worrying: in the areas of own resources, agricultural expenditure and structural actions, irregularities notified in 2006 totalled EUR 1 143 million, compared to EUR 1 024 million in the previous year. The statistics reveal an ever-increasing number of irregularities.
I would however point out that a large number of irregularities does not necessarily imply a high level of fraud; it may also demonstrate that the supervisory arrangements in place are effective and that there is close cooperation between the Member States and the Commission. In its annual report for 2006, the Commission rightly emphasised the importance of such cooperation for prevention purposes and for recovery work. So far, the statistics have relied on very diverse national structures with different administrative, judicial, supervisory and inspection systems.
In particular, we consider it unacceptable that Spain and Germany have not been forwarding information on irregularities to the Commission in electronic form, despite an obligation on all Member States to do so. The Community rules and the obligations arising from the fight against fraud must be implemented in the same way by all countries. To this end, closer cooperation between Member States and the Commission is vital to protect the Community's financial interests, which must be perceived as common interests going beyond those of individual states.
Greater synergy is required between the supervisory authorities and local administrations in terms of coordinating and exchanging information. Keeping the organisation and disbursement of funds at central level necessitates complex implementation arrangements and increases distances between the financial authorities and the final beneficiaries.
Simplification of the rules is another fundamental point touched upon in the report. The 2000-2006 programming period in fact proved that overly complicated rules contributed to the irregularities detected.
Finally, despite a slight improvement in recovery activity, recovery is still a problem which causes immense damage to the Community budget. In particular, a period of 39 months between the time when an irregularity is committed and the time when it is notified to the Commission is unacceptable, as such a delay makes recovery more difficult if not impossible.
Vice-President of the Commission. - Mr President, Mr Musotto's report covers two years of efforts to improve the protection of the financial interests of the European Union. A sound system of financial management needs to focus on expenditure and the control and fighting of irregularities, and especially those committed with fraudulent intent.
The report contains many of the same preoccupations as the discharge report, with the protection of financial interests being viewed, of course, as a core element of sound financial management, but the focus is different.
I would like to warmly thank the rapporteur, Mr Musotto, for a very focused report, which concentrates on the main issues and makes many calls on the Commission to strengthen efforts.
Allow me to comment on four of them. Firstly, the role of Member States: the report makes use of the wealth of figures and statistics on irregularities by Member States, and their financial impact. It does not hesitate to point out that some Member States perform better than others. I would stress once again that a high number of irregularities does not necessarily mean a high level of fraud, but it can be a good indicator of effective and thorough controls.
When I presented the Commission report in July, I emphasised the need for Member States to ensure a correct, complete and timely communication of data on irregularities. A good flow of information between the Member States and the Commission is essential for effective recovery and joint action against fraudsters. Many of them are doing this, but for some there is still room for improvement. The Commission, with the support of the European Parliament, will not shy away from reminding them of their responsibility.
I fully agree with the invitation expressed in the report for the Council to take up the annual reports and consider them at ministerial level. The EU's financial management system is complex, because responsibility is shared with the Member States. The increased focus on the national declarations, placing responsibility for spending with the Member States, should go hand in hand with cooperation over tackling irregularities and fighting fraud.
I very much welcome the report's focus on systemic and general issues rather than on individual cases, for which, as you know, OLAF is independent in its investigations.
The Commission fully agrees with the European Parliament on the need to analyse in greater depth the structures existing in Member States in charge of combating irregularities, to support them and facilitate cooperation and the exchange of information. This will be taken up in the 2008 report. This year's Commission report highlights the topics of risk analysis and risk management, exclusion databases and early-warning/whistleblower tools. In addition, the report examines the steps taken by Member States to improve recovery of amounts not collected or wrongly paid, as well as the mechanisms under national law for recovery by offsetting. The report also contains information on amounts recovered and the financial corrections, in particular when a payment has not been made in conformity with Community rules.
The role of organised crime, such as the Mafia, in undermining the EU's financial interests is a subject close to the heart of the rapporteur. OLAF has contributed to the Organised Crime Threat Assessment (OCTA) produced by Europol. I am happy to report that I have asked both bodies to continue to cooperate on the matter.
Value added tax and customs fraud is where the big money is. Sadly, it is an area where cooperation with Member States is often difficult. I will be very brief, and refer to what I will say on the Newton Dunn report, and thank the European Parliament for its ongoing support in underlining the useful role that cooperation at EU level can bring in this area.
My fourth and last comment will be on the revision of the OLAF regulation. The Commission tabled a proposal in this regard in May 2006. I remain convinced that it raises the main important issues relating to the effective functioning of the anti-fraud office, namely the flow of information, procedural rights and the complaints mechanism, the role of the supervisory committee and, more generally, governance and accountability. I very much hope that we can enter into interinstitutional discussions on finding solutions in the very near future and make progress on these important points.
The Musotto report reiterates the desire to group together anti-fraud legislation. From a political viewpoint I fully support this, but technically it will be a challenging task. The Commission will be ready to forward the requested analysis to the European Parliament by May this year.
draftsman of the opinion of the Committee on Regional Development. - (CS) Mr President, ladies and gentlemen, we have before us a report on the protection of the financial interests of the EU with the somewhat equivocal subheading: 'Fight against fraud'.
The actual focus of the report is not fraud as such, but rather irregularities. While fraud presupposes malicious intent, an irregularity can result from negligence or incorrect accounting procedures. In delicate areas such as financial relations within the EU such terminology, should be used circumspectly.
As the rapporteur for the Committee on Regional Development, I regret the increase in the number of irregularities detected in projects financed from Structural Funds. This reflects negatively on some Member States and their internal control mechanisms. Difficulties on the part of these countries should not, however, become a reason to re-evaluate the existing system of decentralised controls governing the use of Structural Funds. The responsibility is evident; it is individual and as such it also has to be enforceable.
Attaining an appropriate level in financial control mechanisms in individual Member States is the first necessary step. The following step is to ensure the recovery of sums unduly paid. A possible approach to this could be the suspension of regular payments to those Member States procrastinating over returning amounts paid under irregular circumstances.
The existence of imperfect control mechanisms has the potential to undermine confidence in the Structural Funds system and could cast a negative light on the EU as a whole.
Furthermore, we need controls with greater openness and transparency. I would therefore like to express my support for the European Transparency Initiative, according to which information on beneficiaries of assistance from Structural Funds would be published. As we are talking about managing public funds, certain demands should be placed on the beneficiaries of such assistance.
A prerequisite of a better assessment of control systems is closer collaboration with the Court of Auditors, which has to date been lacking. Whilst it is true that reports from the Court of Auditors make for tedious reading for the European institutions, this should be all the more reason to devote more attention to them, and is certainly preferable to burying one's head in the sand and avoiding responsibility.
draftsman of the opinion of the Committee on Agriculture and Rural Development. - (FI) Mr President, Francesco Musotto has produced an excellent report on the annual reports of the European Anti-Fraud Office 2005-2006, and I want to express my sincerest thanks for that. The number of irregularities notified by the Member States rose in 2006 to the equivalent of EUR 1 143 million. Of this, the European Agricultural Guidance and Guarantee Fund accounts for an amount of EUR 87 million. Although this is just 0.17% of the total for agricultural expenditure, EUR 49.7 billion, it nonetheless has to be viewed seriously. Approximately a third of these irregularities were cases of direct fraud.
With the new Regulation the Member States will be able to recover unjustified payments of aid more easily than before. That is why the Committee on Agriculture and Rural Development and the Committee on Budgetary Control consider it regrettable that the level of recovery of this aid remains low. The Commission should speed up the recovery process and if necessary apply corrective measures. Both committees also assure the Commission of their full support in rigorously applying the option of suspension of payments if the Commission does not have absolute guarantees that the Member State which is the beneficiary of funds has a reliable management and control system.
(Applause)
on behalf of the PPE-DE Group. - (DE) Mr President, Commissioner, ladies and gentlemen, the EPP-ED Group is responsible for the report on the fight against fraud for the first time and we are very grateful to Mr Musotto for making OLAF's work and the cooperation with the Member States the focus of his report. He had to work very hard, having to contend with 630 pages of statistical material from 2005 and 2006 on the fight against fraud. His review reveals a very mixed picture and I believe that we really need to take action here. Uncovering irregularities does not appear to be a very important issue for the Member States. This is apparent from the fact that, yet again, the Council is absent from this very important debate, despite the fact that as the second arm of the budgetary authority, it should be concerned about what is happening to the taxpayers' money, which it is responsible for managing and disbursing.
The rapporteur proposes taking formal steps against Germany and Spain for their violations of EU law. Spain is only providing paper information about irregularities. Moreover, this information is extremely sketchy, as is apparent from the 18th Structural Funds report.
Germany is a very specific case. It takes longer to provide the information than the other Member States, and it is the only country which does not disclose names. How can OLAF do its job without names? The fraudsters are hiding behind data protection here, for the fact is, Mr Březina, that between 15% and 20% of the irregularities have some kind of fraudulent background. Germany is also putting obstacles in the way of OLAF's investigative work at local level, notably in cases of customs offences and export refunds. We are calling on the Commission to report on every Member State and its willingness or lack of willingness to cooperate, and to do so by the time the next OLAF report is due.
From our Group's perspective, the forthcoming reform of OLAF's legal basis must be utilised, first and foremost, to improve the working conditions in OLAF's cooperation with the Member States. I would like to express my warm thanks to OLAF itself and to the staff who are working in a very difficult area. I think that the outcomes really do stand up to scrutiny. However, I am also convinced that these outcomes could be improved through better cooperation with the Member States.
on behalf of the PSE group. - (HU) Mr President, Mr Vice-President, ladies and gentlemen, the European Parliament considers protection of the European Union's financial interests to be one of its most important tasks since, like all parliaments, it has the right and the duty to monitor expenditure. Moreover, the view that EU funds are inadequately looked after is increasingly widespread in Europe, so we also have a political debt to the public, to our constituents and to our taxpayers in this regard.
We put this legislative and political obligation into practice primarily by means of the discharge procedure, but in addition to this we have been producing regular reports on the protection of EU financial interests and the fight against fraud. Our aim in doing so is not to create a sensation or cause a scandal, but to expose the situation objectively and resolve any problems.
I would like to take this opportunity to congratulate my fellow Member, Mr Musotto, for this excellent report, and to express my gratitude to the Commission Vice-President, Mr Kallas, and OLAF Director-General, Mr Brüner, for the constructive cooperation they have demonstrated in this area too.
Despite the fact that these high-level reports are greeted with much appreciation year on year, we in the European institutions sometimes feel as if we are tilting at windmills, since the findings of the reports encounter resistance on the part of the Council, with the result that the Commission has not been able to put the necessary measures in place for years.
We believe that the weakest link is the attitude of Member States, since in some Member States - our fellow Member Mrs Grässle spoke just now about Germany in this connection - there is a failure to recognise how very important it is to ensure that EU funds are spent in accordance with the rules, that expenditures are subject to scrutiny, and that any amounts unduly paid are recovered.
We consider it particularly lamentable that VAT fraud in the form of 'carousel' transactions is becoming increasingly widespread throughout Europe, to the extent that we have no global figures on the amount involved, although some estimates suggest that it may be around 35-40% of the EU budget. It is time to take resolute action in this regard too, both in the interests of managing European affairs and in the interests of public opinion. Thank you very much.
on behalf of the UEN Group. - (PL) Mr President, as I take the floor on behalf of the Union for Europe of the Nations Group regarding protection of the Communities' financial interests, I should like to draw attention to the following issues. Firstly, there has been a significant increase in the sums affected by irregularities in the area of own resources, EUR 328 million in 2005 and EUR 353 million in 2006, compared with EUR 212 million in 2004. I should also mention the increase in irregularities in the area of structural actions: EUR 703 million in 2006 compared with EUR 601 million in 2005.
Secondly, there has been a marked reduction in the sums affected by irregularities in the area of agriculture. In 2006 the figure was EUR 82 million, compared with EUR 102 million in 2005. This reduction is worthy of particular note because very often expenditure on agriculture involves huge numbers of beneficiaries - farmers - who often have to cope on their own with the complicated procedure of accounting for the funding received.
Thirdly, I would like to highlight the statement in the report that some of the main reasons for the emergence of irregularities in budgetary expenditure are the complicated programming principles and ineffective monitoring and control methods.
Fourthly, the call for greater transparency when awarding resources should also be noted.
An important feature of this transparency is a commitment by the Member States to publish information on projects and beneficiaries of resources originating in all Community funds.
Mr President, the Commissioner said the same thing: the report does indeed overlap with the discharge procedure. In this sense, too, this debate is a warm-up act for the hearing next week with Commissioners Špidla and Hübner. We know the figures for reported irregularities. They do not tell the whole story, of course, but they do tell us a lot about the problems reported in the policy areas of own resources, agriculture and the Structural Funds. The report mentions a total of EUR 1.1 billion worth of reported irregularities and the trend is upward. We are back to the level of 2002, following better figures in 2003, 2004 and 2005. Agriculture is doing relatively well.
The problem sectors are clearly own resources and the Structural Funds: own resources accounted for EUR 325 million of reported irregularities and the Structural Funds accounted for EUR 700 million. Within the Structural Funds, five Member States accounted for 84% of the reported irregularities. Anyone who is interested can read which countries they are in Mr Musotto's report. It really is quite remarkable. It also has to be remembered that in the period before 2006, another EUR 1 billion of resources had yet to be recovered and that the Court of Auditors says that 12% of the Structural Funds in 2006 could not be paid out. This is the context in which the present discharge procedure is taking place and it is a cause of great concern to us. We will come back to this.
As far as own resources are concerned, the problem of cigarette fraud is being tackled properly. We had the agreement with Philip Morris. There is a new agreement with Japan Tobacco, which should deliver a lot of money and will also bring about a reduction in smuggling. The main problem area in own resources is the VAT 'carrousel' transactions. The figures are quoted: enormous amounts are involved, running into billions of euros. An investigation by the British House of Lords highlights this further. I am pleased that Parliament is tackling this. The Committee on Economic and Monetary Affairs has already organised a hearing and the Committee on Budgetary Control will do the same on 4 or 5 May. I hope that I, as rapporteur, will be able to produce as good a report on the VAT carrousels as my report on cigarette fraud.
on behalf of the IND/DEM Group. - Mr President, this report is a long catalogue of failure. It graphically illustrates how the amount of fraud, described as 'irregularities', is steadily rising and that attempts to deal with it are failing. It openly admits that fraud in 2006 in the areas of own resources - agricultural expenditure and Member States' structural actions - totalled EUR 1 143 million. It was EUR 922 million in 2003, so in just four years fraud has risen by over EUR 200 million.
I would remind everyone in this institution that these are not meaningless sums of money, but taxpayers' money. The EU is funded by its citizens, including hard-pressed taxpayers in the UK. They deserve better than this for their money. Governments of all Member States should be saying 'enough' already, and these appalling figures provide all the more reason why the government of my country should honour its manifesto commitment to give the British people a referendum on the Lisbon Treaty.
(DE) Mr President, it is no secret that the European Union has been battling for years to get its finances under control. We fund major companies which then relocate from one Member State to another, while small and medium-sized enterprises go away empty-handed. Indeed, the EU often does not appear to know who it is actually funding and who is pulling its strings. In my view, a register of lobbyists is long overdue.
The numerous irregularities also leave a bitter aftertaste, especially when they have a direct connection to the EU's institutions. In this context, freezing the EU funding for Bulgaria until the cases of corruption have been cleared up sends out an important signal. There is also the fact that some Member States apparently have little interest in recovering funds that have been paid out incorrectly. If cases from the 1990s are only now being closed, then obviously things are moving far too slowly in the EU.
(FI) Mr President, I want to thank the rapporteur, Mr Musotto. He has done a very thorough and excellent job. This report is crucially important, and the fight against fraud is something over which the confidence of the public is either won or lost. I think there are three very important problems contained in this report which need to be put right.
First of all, it is intolerable that some countries do not even provide information on agricultural expenditure. Germany and Spain are prime examples of this, and Germany does not even provide details of the individuals and companies which the European Anti-Fraud Office would definitely need in order to be able to address these matters. This is obviously something we cannot allow: all Member States must obey the rules. If a few big countries set a bad example, the situation does not look very good.
The second issue is that notification of irregularities can take up to 39 months - more than three years. That is far too long and does not inspire trust in the notion that the Member States are acting with sufficient vigilance.
The third issue, which is very interesting and important, is that specialised and organised crime is also occurring in this area. This is now so serious that all measures need to be taken to cut this sort of crime.
This is a very important report and every effort needs to be made to improve the situation in order to gain public confidence.
(Applause)
(DE) Mr President, ladies and gentlemen, I would like to express my sincere congratulations to the rapporteur. It is not an easy task, coming in new to such a comprehensive dossier, and I think we can be proud that Mr Musotto has done such a magnificent job. I think we can say this with confidence today, given that there are no amendments to this report for tomorrow. That, too, is a tribute to the rapporteur.
Secondly, it is apparently of no interest whatsoever to one of the budgetary authorities to find out what is happening to the taxpayers' money. Once again, the Council is shirking its responsibility. Whenever we talk about how European taxpayers' money is being spent and try to seek solutions to difficult issues, the Council simply absents itself. However, we have seen - and this brings me to the issue of what will happen with the discharges in our committee - that for years in the field of agricultural policy, where we have been resolute in our action and developed systems to control direct payments, irregularities have decreased.
In structural policy, on the other hand, where nothing has been done and where we have sat back and watched events unfold for years, the figures have gone up and up. This has been apparent for years, and has repeatedly featured in the fraud reports for years. Commissioner Kallas will see in the 2006 discharge that this is a problem and we will expect him to take action and not just sit back and watch.
That is why I would like you, Commissioner, to say this to those Member States which behave as if the rules that we have all devised do not apply to them, and this is also what the rapporteur says, with the full support of all the previous speakers: we want you to say, 'okay, we will put 10% of your funding on ice. It will form a reserve, and you can have the money once you have taken appropriate action'. That is a very practical demand from Parliament. It is not a plan of action; it is practical action. This is what we expect from the Commission, and then we will be very satisfied.
Once again, congratulations to the rapporteur.
Mr President, like the other speakers, I would like to congratulate the rapporteur on what is a very important report.
I am prompted to take part in this debate because of the focus on agriculture. Other speakers have said that there has been an improvement in terms of the controls and inspections, particularly when it comes to money given to farmers, and there is now the transparency initiative to publish what farmers are getting.
One of the difficulties for those in the farming community is that they believe very often they are guilty until proven innocent. Obviously, none of us can or will condone fraud, and because there is fraud in the EU budget there is a very poor public perception of the European Union and how it accounts for the money collected. If the public understood the European budget better, they might clamour a little louder for us to be harder on fraud.
It is important to stress the difference between fraud and irregularities, of which many are discovered, because they are very different. We cannot punish ourselves for irregularities, but we should punish fraud against the Community budget. This is an issue involving the Member States - as the last speaker said - because all the Member States signed up to the European Union in good faith and have pooled resources in certain policies, and it is up to us to ensure that the money we have pooled is well spent and that there is no fraud against the public purse.
Member States which are light on fraud, and take a light-touch approach, need to be punished in some way, but it is very important that Member States that perform well in this area are not penalised. It is therefore important for the Commission to take action at Member State level.
I shall finish by reiterating the very important point that, on the farming side, there is now a very strong feeling among those who farm that they are sometimes guilty until proven innocent. That is unacceptable, and we therefore need to be careful to get the balance right.
- (NL) Mr President, thank you for allowing me to speak again. Anyone who follows me in my political office and my statements knows that I am a critical politician and that I am also highly critical of the European Union but that I am still very strongly pro-European. I cannot therefore ignore the words of Mr Clark, who has meanwhile left the room. Like all Eurosceptics, Mr Clark uses half truths, complete lies and lots of oversimplifications on a frequent basis. He talked in his speech, for instance, of several million euros worth of fraud, while the report clearly states that we are dealing with irregularities. He invariably substitutes 'fraud' for the word 'irregularities'. That is crass, because that is not what it says in the report.
Secondly, he talks as if every disaster that befalls us comes from the European Union. I would just like to ask Mr Clark to read the report of the British House of Lords on VAT carrousels. Then he will see that his own authorities have not managed to put a stop to this VAT fraud. We are talking about GBP 3.5 to 4.5 billion of fraud a year. That is more than GBP 10 million a day! That is significantly more ...
(The President cut off the speaker)
(RO) Congratulations on Mr. Musotto's report. I consider that many irregularities from 2003-2006 would have the support of changing the rule of presentation of the Framework Programme 6, for instance, as compared to Framework 5. In Framework 5, the B party was anonymous and any reference to the country and to the person behind the project was penalized. In Frameworks 6 and 7, the anonymity disappeared. In Framework 8 is it possible to no longer resort to this system of advanced submission of projects?
(DE) Mr President, thank you for giving me the opportunity to speak again. I would like to thank Mr Bösch, not only for his praise of our rapporteur, but also for his fairness and help. Mr Bösch has been dealing with the fraud report for many years. Now we have this honour, and I think it is a great sign of strength in the Committee on Budgetary Control that we are in agreement here.
We have focused our full attention on the Member States. The Commission should also take with it the message that we want to help to bring this lack of clarity to an end. If we look at the figures on the recovery of funds, we see that we are dealing with a very wide range of opinions. That is why we are having this discussion as part of the current discharge procedure. Consequently, I really must ask the Commission to have the courage to say if it does not know certain things, so that we can help. I think that if we tackle the issue together, then together, we will be successful. Once again, very many thanks to Mr Bösch.
Vice-President of the Commission. - Mr President, I would like to thank the honourable Members for their comments on this report. We consider the report to be very focused and constructive. I have just two remarks on an issue raised by very many of you - namely, what is irregularity, what is fraud, and how should one approach recovery?
I can say that we have had one preliminary meeting with the relevant people at the Court of Auditors, and tried to harmonise the understanding of what is what. That will probably also help in all our future debates on discharge, and of course all the three reports - including the next one - are all very closely interrelated.
Secondly, I have raised this issue with the Council Presidency, and asked it to consider this parliamentary report during its proceedings, by which I mean to discuss this document within the framework of Ecofin. I hope it will do that. We will definitely, after the vote on this report, when it becomes an official document, also try to initiate this discussion in the Council, including at the level of the relevant subcommittees.
rapporteur. - (IT) Mr President, ladies and gentlemen, allow me firstly to thank all my colleagues for their kind words, and especially Mr Bösch whose earlier work laid the foundations for my own report.
I should like to emphasise a few points, the main one being the meeting of minds with Commissioner Kallas, particularly as concerns the nature of the regulatory mechanisms governing the disbursement of funds. The Commission has made an undertaking here. One important aspect underscored by Mr Kallas is that the more difficulties and complications there are, the harder it becomes to understand the rules and the easier it becomes for organised crime above all and for all forms of unlawful activity to move into these grey areas. Therefore simplification and, even more, a closing of the gap between those disbursing the sums of money and the beneficiaries is another means of achieving clarity, transparency and ease of understanding of the whole system.
The problem of recovery is a very real one. The procedures are too lengthy, and the capacity to punish those who defraud the European Community must be ensured by some kind of security or guarantee, to be applied through the banks. It is essential to devise methods of ensuring disbursement and, especially, of making it possible to recover these sums and hence assisting, improving and facilitating the speed of recovery.
I believe that, thanks to the cooperation, good will and political commitment of all of my colleagues, we have done a crucial job of work. There can be no doubt that this cooperation, this willingness and desire to stamp out a phenomenon that does enormous damage to the European Community is motivated solely by political concerns.
Of course, the absence of the Council has not made matters any easier; the presence of a representative would have enabled us to find out what the Council thinks. But Parliament is absolutely united and unanimous on these principles, and we therefore believe that we have done something positive which gives us hope for the future.
The debate is closed.
The vote will take place on 19 February 2008.
Written statements (Rule 142)
in writing. - (HU) Mr President, ladies and gentlemen, congratulations on this report, which highlights not only the successes of the recent past, but also some lamentable shortcomings and long-standing debts.
For me this report is very topical because in Hungary a decision has been made to establish a national anti-counterfeiting body. This body will primarily have a coordinating function linking the Hungarian Patent Office, other government agencies and actors in the economy, including functions connected with European Union-related data services.
We need to prepare ourselves for a long and futile battle. Knowledge - whether protected or in the public domain - is becoming increasingly widely accessible. A car on display in one room can be copied in the space of 5 minutes in the room next door. The result will not be any worse, just cheaper: it is up to us to decide whether to go ahead and buy the more expensive item anyway. We have to decide whether we are willing to pay for the intellectual achievement, the innovation, even if we have the option of choosing the secondary product or service that has no value added.
To do this requires considerable awareness and commitment. We cannot expect individual citizens to recognise these connections and make decisions based on values if our legislators or governments are unable to do so.
It is particularly important to reduce the number of irregularities relating to use of EU funds to below the tolerable error rate: fraud of this sort makes the European Union as a whole look ridiculous when it involves EU funds being used in a manner that contradicts the declared aims of the EU.


17. 2009 discharge: European Railway Agency (


Corrections to votes and voting intentions: see Minutes


Agenda for next sitting: see Minutes


13. Protection of pigs (codified version) (vote)
- Wallis report


Opening of the sitting
(The sitting was opened at 09.05)


18. The EU Policy Coherence for Development and the 'Official Development Assistance plus concept' (
Before the vote on paragraph 34:
Madam President, I propose that after the words 'introduction of an international financial transaction tax', three words be added: 'at global level'. It seems to me this will make more sense. Thank you very much.


International Financial Reporting Standards and the governance of the International Accounting Standards Board (debate)
The next item is the report by Alexander Radwan, on behalf of the Committee on Economic and Monetary Affairs, on International Financial Reporting Standards (IFRS) and the Governance of the International Accounting Standards Board (IASB).
rapporteur. - (DE) Madam President, the subject matter of the report before us would seem, at first glance, to be highly technical. It concerns so-called accounting standards in the European Union and worldwide, particularly for small and medium-sized companies. It may very well be the type of subject that is discussed now in the European Parliament and then takes several years to begin to affect the economy and ordinary people. At that stage the cry will go up that nobody knows where these standards come from or who is responsible for them. Nor will anyone know why they have to be applied.
The objective is to achieve a single set of global accounting standards, particularly for public limited companies. We support that objective. The argument we hear advanced for it is that we need 'high quality standards', and this House considers itself the only forum empowered to set those high quality standards. However, in these times of turbulence on the financial markets, it is astonishing to hear the same people who previously argued for the principle of 'fair value' now questioning that principle and asking, too, whether a 'market to market' approach still makes sense if we no longer have a market. The very people who let the genie out of the bottle are the ones now asking whether we are on the right track.
The only people responsible for these standards are the people sitting in the offices of this private organisation in London, who are undoubtedly influenced in making their standards by the desire to keep themselves in a job. My report, on which we are to vote today, therefore concerns not just the impact on small and medium-sized companies, but also the fundamental question of who makes rules for whom, and who supervises the application of the rules.
The first issue to address is that of governance: how transparent is this organisation? In other words, how transparent is its funding? There are certainly hidden interests here. The members of this committee, who are demanding transparency and always try to portray the market as transparent, should make at least a modicum of effort to comply themselves with the transparency requirements they lay down for the market! My impression so far is that this organisation fights with every means at its disposal to avoid transparency in any form.
Who takes the decisions about financing and the choice of personnel for specific posts? Why are individuals appointed? Is it about regional balance? Is it about inter-sector balance? The current project concerns IFRS for small and medium-sized companies, so it is fair to ask who represents small and medium-sized companies. Who knows about small and medium-sized companies? And another thing: why are IFRS for small and medium-sized companies actually on the agenda right now? Who sets the agenda?
Commissioner McCreevy and Sir David Tweedie have also been asked many times, over a number of years, why we are actually doing this. Several years down the line we now know why we are discussing IFRS for small and medium-sized companies in Europe: it is because of requests from South Africa and Brazil. What a marvellous answer! We know quite well that the focus of all this is not South Africa or Brazil, but rather the European market, where there will be a lot of money to be made if SMEs are required to introduce something like this. So these are the issues at stake in the matter of governance - and some initial, positive steps have been taken.
But all the bodies that are to be set up in the future will be assessed according to whether the people who belong to this supervisory organisation and have to answer questions about it at political level - and they could include a Member of the Commission - will also have the power to shape new developments. It is not enough for them simply to be notified of proposals.
One of our aims is convergence. We must take care, however, that the interpretation of convergence does not slip from Europe's grasp, to be replaced by the SEC's interpretation. In Europe today we are sufficiently familiar with the way the US stock exchange is supervised. We should not be so naïve as to leave the business of supervision to the Americans. What we want is therefore what we have already called for: IFRS as Europe understands them and not as this board dictates.
Small and medium-sized companies are the ones affected here, and I have to say, without mincing my words, that the ideas on the table today are too complicated and too difficult. I would also warn against taking the voluntary approach. I am wearing my Bavarian national costume today and a good old Bavarian term comes to mind here: it is 'hinterfotzig' and it means something like 'through the back door'. We know very well - despite all the denials and the acquiescence - that IFRS for small and medium-sized companies will be introduced to the European market through the back door, via a small number of Member States. We will then hear the same voices calling for a single set of standards, and they will proceed to foist their standards on the market - standards which are too complex, which nobody understands and nobody wants - purely because there is a market opportunity. What we have here is a case of a minority trying to impose its will on a majority at global level, and it is unacceptable!
Member of the Commission. - Madam President, I would like to thank the Committee on Economic and Monetary Affairs and in particular the rapporteur, Mr Radwan, for the considerable work that has gone into this comprehensive report.
It raises important issues for the future development of European and indeed global capital markets. In this brief intervention I cannot address all the issues raised in the report. Let me therefore focus on three points. One, governance issues; secondly the EU's input to the International Accounting Standards Board, the IASB; and thirdly the project to develop an accounting standard for small and medium-sized enterprises.
On IASB governance, your report rightly highlights the fact that our shared objective is to develop high-quality global accounting standards. The EU's decision to require listed companies to use international accounting standards was a bold and visionary step towards this objective. A single set of globally accepted accounting standards would provide significant benefits for our companies, our capital markets and our economy.
We must continuously strive to ensure that international accounting standards remain relevant in the face of changing economic circumstances and that they represent the interests of all stakeholders in a balanced manner. To ensure that these conditions can continue to be met, progress should be made as a matter of priority in three areas.
Firstly, the accountability of the International Accounting Standards Committee Foundation (IASCF), needs to be enhanced, in particular towards public authorities. The latter should play an active role in the selection and appointment of trustees. In this respect, the proposal that I, together with my counterparts in the US SEC, the Japanese FSA and the International Organisation of Securities Commissions, made last November goes in the direction advocated by your report.
Secondly, we need to look at how the IASB's agenda-setting process can be improved. In particular, the process through which priorities are set needs to be made more open and more transparent.
Thirdly, the IASB's due process should be enhanced, mainly by ensuring that standards are subject to a full impact assessment before they are adopted.
Your report makes constructive suggestions about these and related points. The forthcoming review of the IASCF's constitution provides the opportunity to implement the necessary reforms. The committee will pursue them in consultation with this House, the Member States and our international partners.
Now, turning to the EU's input to the IASB. Your report argues that the EU needs to strengthen its capacity to make its views on accounting matters heard at the international level. I agree. In particular we should seek means to ensure that the views of European stakeholders, especially proactive input to the IASB's agenda-setting process, can be put to the IASB in a more timely and coherent manner.
I see this as an evolutionary rather than a revolutionary process. We should build on the European Financial Reporting Advisory Group and I am ready to pursue this as a matter of urgency, including the possibility of using funding from the Community budget to support such a structure.
I must, however, sound a clear and unambiguous warning. This structure will in no circumstances become an embryonic European standard-setter, nor can there be any question of developing European interpretations of international accounting standards. Europe must and will remain part of the movement towards a single set of globally accepted accounting standards. Anything else would damage the international competitiveness of our companies and our capital market.
Turning now to the IASB's project to develop an accounting standard for SMEs, let me begin by stating that the Commission currently has no legal basis to endorse this standard. Moreover, we have never made any commitment to take over whatever standard the IASB produces. We would only do so if we were genuinely convinced that the IASB produces a standard that meets the interests of European users.
The IASB has not yet finalised its project. However, at this stage the Commission's views are clear. The current exposure draft published by the IASB remains too complex to provide a satisfactory accounting framework for European SMEs, especially for smaller companies. Our focus remains the simplification of the regulatory environment for SMEs, including in the accounting area.
draftsman of the opinion of the Committee on Legal Affairs. - (DE) Madam President, ladies and gentlemen, the IAS system makes sense for big listed companies that operate worldwide. That is why, during Parliament's last term, we decided, on the Legal Affairs Committee's proposal, to adopt the IAS Regulation.
The ultimate aim - as Alexander Radwan has said - was indeed to achieve convergence, at least with the USA and if possible worldwide. The system makes no sense in the case of small and medium-sized companies because, as a rule, they have no need of international financial markets, no need of Wall Street and the rest. For that reason alone, the necessity of developing IFRS for small and medium-sized companies is highly questionable.
On top of that - and I think Commissioner McCreevy was entirely right here - the current proposal is for nothing more than a slimmed-down version of what are, by any measure, extremely complicated international standards, entirely unsuited to the structure of small and medium-sized companies in Europe. They are particularly ill-suited to family companies, which have been run by their owners for several generations; which have already written off property belonging to them; and in which the application of fair-value rules would simply encourage greed and, in the end, could very well jeopardise the companies' chances of survival.
On the other hand, we must be realistic. Ultimately, the question of accounting standards for SMEs in Europe will not be exempt from some form of pressure for harmonisation. Our demand is for comparability, at least within the Single Market. So I think it is important that we should seriously consider how to develop European alternatives to the proposals from London, with the aim of achieving greater standardisation in this area too - but standardisation that is sensible and appropriate for SMEs and geared to the long term, rather than short-term valuation.
I have one further point to make about the IAS bodies. There is a real problem here, as Alexander Radwan has outlined. There may be a certain geographical balance but there is no balance in terms of economic weight. Europe is by far the largest bloc, the largest region in which the IAS rules apply. That is why we must have a commensurate say, and we simply cannot be compared with somewhere like Australia. Australia carries the same weight as a middle-sized EU country or, indeed, a big region like North Rhine-Westphalia. The balance needs to be improved in this respect.
on behalf of the PPE-DE Group. - (NL) Madam President, first of all my compliments to Mr Radwan on getting this thorough report completed. It was under discussion up to the very last minute. In its final form it is a report that is clear, but sometimes critical too. The rapporteur is convinced that the IASB's democratic accountability has to be improved and I am glad to see the IASB taking this criticism on board.
The Chairman of the Trustees, Mr Gerrit Zalm, indicated recently in the European Parliament that he was open to suggestions and ready to put forward proposals on adapting the structure. The IASB is working on IFRS standards for small and medium enterprises. I agree with the rapporteur that IFRS are too complex and too expensive for SMEs. I also believe that encouraging the voluntary use of IFRS by SMEs would carry the risk of them being introduced into Europe by the back door. In my view there has to be differentiation according to company size. It is a good thing to have big multinationals, banks and insurance companies which operate worldwide producing their annual accounts to a single standard. But small and medium-sized enterprises in Europe should have their own standard.
The IASB has achieved much in respect of internationally listed companies and accounting standards for them. If SMEs are now saying that cost and effort can be just as well managed using more than one standard, we cannot have a single standard being imposed from the top down. It is also very important that the interests of investors and of transparency should be considered too. Policy is there to facilitate, to ensure that there is sound, transparent and cost-effective information on business performance. I think the proven benefits of IFRS can also benefit European equity markets, certainly if the Americans exchange their US GAAP system for IFRS. Comparability here can be very beneficial to international investors and stakeholders. The idea behind IFRS thus deserves to be supported by the European Parliament.
on behalf of the PSE Group. - (FR) Thank you, Commissioner, for managing to come to Strasbourg. Thank you also to the rapporteur, in your Bavarian costume. I think we worked very well together, and the way in which it was possible for various people's amendments to be incorporated in your report is proof of that.
First of all, I should like to make three points about accounting standards. It seems to me that, in terms of the governance and operation of the body responsible for setting these accounting standards, we are in an unusual situation. There are many forms of standardisation. Not all of them have such a strong impact on financial stability, or on the issues, in terms of power and governance, as accounting standards have. What is happening today is an important event, a passage to adulthood.
When these accounting standards were formulated, perhaps by auditors who worked amongst themselves, they basically prepared the ground very well. Nowadays these accounting standards are international. They are used and applied by everyone and so the question of governance is crucial.
How does the body responsible for setting these accounting standards fit in with international governance, in relation to democratic bodies, bodies that legitimately represent State power, and the European Union in particular?
The second point we need to look at in regard to governance is of course the balance between those bodies. What is the geographical balance, what is the balance in the representation not just of those who draw up the standards, but also of those who will have to use them?
The third point is financing. How are these bodies to be financed? Might the idea of a levy on businesses, which would be coordinated by regulatory bodies, be worthwhile? Could they be financed by government, by the European Community? We hope that the Commissioner will be making some strong proposals on that point.
The fourth question in regard to those bodies is the programme. Is it right for them to develop the concept of fair value when we know the effects that can have on financial stability? Is it right for this body to develop an SME programme that Europe does not need? Is it right that, on this issue of standards for SMEs - just because, as our rapporteur has said, South Africa or Australia might need them - the Commissioner did not make sure that Europe had a say in those bodies. It is absolutely essential, as a first step, that Europe should make sure it is there to represent the strength of all the Member States and the voice of Europeans, in the IASB, the IASCF and IFRIC. Commissioner, that is your responsibility. We are expecting strong proposals from you on that point.
on behalf of the ALDE Group. - Madam President, IFRSs are being adapted by more and more countries, so their value and importance is growing. This brings with it a need to strengthen accountability and transparency of the IASB, which may not have been so obvious at its inception. I welcome moves in that direction, but I regret that some parts of this report present criticism in a negative way, rather than acknowledging changes that are under way and pointing the way forward. So several of my amendments aim to be more forward-looking, highlighting the advantages and benefits, alongside the need for further adaptation, both to the standards themselves and the IASB that oversees them. However, unnecessary politicisation of technical issues must be avoided. IFRSs are an important tool for advancing comparability across borders and reducing burdensome requirements for companies reporting under different regimes, but it would be useful if presentation of financial statements lent itself more easily to other comparison purposes. However, it may well be the case that tools such as XBRL tagging can develop that. I have to thank Ms van den Burg for organising an interesting presentation on that subject last week.
The SME proposals cause concern in several quarters. To me they look more like a tool for medium entities, perhaps on their way to full public reporting, so they may merit their own separate consideration in that light or on a voluntary basis. But - as you have said, Commissioner - as yet they are far too complex for the majority of ordinary SMEs.
Madam President, I commend my colleague Mr Radwan for a very well written report. I hope the Bavarian national dress he is wearing here this morning is not indicative of a change in political direction.
The adoption of the IFRSs in January 2005 has brought great benefits to the European Union by making accountancy requirements simpler across borders and financial statements easier to compare across countries, competitors and industries, enhancing the work of regulatory oversight, banking and capital markets. International financial reporting standards are now being used or are being adopted in more than a hundred countries, including Australia, South Africa and others.
I support the calls for increased transparency, effectiveness and accountability over the IASB. The report points to the fact that 17 months had passed before the IASB appointed a new chairperson. This cannot be acceptable. The IASB is a private, self-regulatory body which has been given the role of rule-maker and it is only right that we demand increased accountability and oversight because of that. We should also be careful about calling for the establishment of extra EU structures to deal with the interpretation and application of IFRS standards. Why is it needed? What will it do?
On the subject of EU-US convergence, there has been great progress made in this area and in the EU-US accounting road map. Last year, the US President, the President-in-Office of the European Council and the President of the European Commission signed a joint EU-US statement which undertook to promote and to seek to ensure conditions for the US generally accepted accounting principles and the IFRSs to be recognised in both jurisdictions. This is very welcome.
With regard to the application of the IFRSs to SMEs, SMEs are small and smaller. I feel it might be better to make it optional so as to ensure flexibility, rather than prevent its application outright.
(NL) Madam President, I must echo the compliments paid to Mr Radwan, not least because his report has enabled us to have a very interesting debate on the conflicts between legislation and self-regulation, especially at world level.
I appreciate that our aspirations place us in a quandary. On the one hand we want these international standards, applicable worldwide, but on the other hand we insist on our authority as co-legislator to judge the substance of those standards and to discharge our duty as co-legislator responsibly. I think the European Parliament has shown latterly that it does that.
To my mind the key lies in timely consultation, in a balanced consideration of the interests of all stakeholders, including third-party interests of employees, local authorities, suppliers and so on (because adequate financial reporting benefits more than just money providers alone), and a sound assessment of the consequences. The Commission has a weighty responsibility here. And in the immediate future these things must be done on behalf of small and medium-sized enterprises. We can make this a really worthwhile project for the EU.
Lastly, I have two comments which are also relevant to another report which we shall be voting on in our next part-session, Mr Lehne's report on a simplified business environment for companies. Here too I have taken the line that rules are not just for companies, money providers and the accountants who earn their living from them, but also for employees and other groups. So we must not meddle with the quality of the rules. I have advocated that the rules should in any event be applied to delisted companies and off-balance activities. I hope you will agree that there is also work for the IASB to do in that area.
I will end by repeating my heartfelt endorsement of the XBRL standard. As you are aware, the US SEC is about to take a decision making this mandatory. I urge you to think about how Europe should respond to this, and encourage you to draw up a roadmap for Europe accordingly.
Madam President, there are issues with the transparency and governance of the International Accounting Standards Board (IASB), but it has accepted this criticism and acknowledged the need to change. Steps have been taken and more are planned: publication of feedback statements, explaining the reasoning behind its decisions, pushing cost-benefit analyses and enlargement and more active involvement of the board of trustees. It bent over backwards to communicate with Parliament.
Mr Radwan's report is much improved from earlier versions and I believe the positive amendments from the PPE-DE and ALDE Groups will further improve the text today.
I would like to thank the rapporteur because, although we have had our differences, he was willing to compromise in certain areas on this governance aspect. Unfortunately, I am unable to agree with him on the issue of International Financial Reporting Standards for SMEs. The IASB was asked to draw up a simplified version for SMEs. Mr Radwan's report declines to acknowledge that this could also be useful in the European Union. In fact, with the proposal still only at the drafting stage, the report proclaims that it will definitely not benefit EU companies.
Yet we have been told repeatedly that it will be optional and is designed for those growing SMEs which aim to become public listed companies. Small enterprises with no aspirations beyond their local markets need not take it up. An opinion survey last September found that a clear majority of European SMEs, including German SMEs, considered the benefits outweighed any disadvantages and would improve financial reporting.
The efforts of the IASB to develop global accounting standards of a high quality are a major and welcome contribution to the European and world economies and, frankly, I think we should be applauding them.
(ES) Madam President, the requirement since 2005 for publicly traded companies to use the IFRS (International Financial Reporting Standards) for their consolidated financial statements has been a wide-ranging and hugely influential political initiative.
About 100 countries are using the standards and their globalisation has provided comparability and transparency, thereby increasing the confidence of operators, creating a more level playing field and strengthening market discipline.
The proposal contains two great challenges relating to governance. On the one hand, the private entity, which has been setting worldwide voluntary standards since 1973 on a corporate and professional basis, now finds itself in a position of huge responsibility entailing a change in its nature, procedures and composition in order that it can become a transparent, controllable institution, with a legitimacy reflecting its new role.
It is necessary to recognise and coordinate the activities of all the public and private interests concerned and at the same time to secure the organisation's financing and independence in the setting of standards. Furthermore, the organisation must be integrated into international governance.
It is also necessary to strengthen European accounting governance by adopting a more proactive and integrated approach to the preparation, approval, implementation and assessment of standards. It is vital to improve the conceptual framework of standards, and to bear in mind that they are neither neutral nor academic and can produce both winners and losers. Likewise it is important to assess their effects and ensure their compatibility with European strategy, to learn from financial upheavals and to regulate the accounting standards of administrative concessions in a balanced way.
The financial accounting arrangements for SMEs will need to be simple and be linked to their exploitation of the internal and global market. These matters are covered by Mr Radwan's report, which has achieved broad consensus and comes at a very opportune moment in terms of the upcoming review at the end of 2009, envisaging the creation of a supervisory body and altering the composition of the Standards Advisory Council before next year.
(DE) Madam President, Commissioner, Mr Radwan, ladies and gentlemen, I warmly welcome this report and this debate because I think we are probing some really sensitive issues, and we are doing so on a genuinely cross-party basis.
Several points emerge very clearly from what has been said. Firstly, we need a single set of standards for public limited companies, but we do not want to lump all companies together. Secondly, while we are not rejecting specific rules tailored to SMEs, the framework for those rules must be established by us, by the European Union. Thirdly, the measures currently proposed are too complex and too expensive, they are of no use to SMEs and for those reasons we must reject them. Fourthly, we are still awaiting satisfactory answers to the questions of who makes what rules for whom, and who supervises the process. There is no democratic legitimacy; there is no differentiation of approach; no account has been taken of the justifiable wishes of SMEs; and the system of democratic supervision is inadequate.
Fifthly, in taking a stance on this issue or trying to answer these questions, it is often forgotten that two-thirds of the workforce are employed in the private sector in family-owned companies, and the majority of those family-owned companies are SMEs that do not seek finance from the capital markets. This is a point we need to remember when we are confronted with proposals that would treat all companies alike.
Thank you for this worthwhile debate!
Madam President, paragraph 30 of our motion for a resolution points out that financial statements do not simply serve the needs of investors but also other stakeholders.
As we also draw attention to the need for EU law changes in paragraph 41, I rise to remind the Commissioner that this Parliament has voted that any changes to the fourth and seventh Company Law Directives should include a requirement for social and environmental reporting by companies.
I draw to his attention such requirements in South Africa, in France's law on new economic regulations, as well as the recommendations of the Prince of Wales's Accounting for Sustainability project from my own country, the UK.
In the mean time, and in addition, I would like to ask the Commissioner, following the 2001 Commission recommendation on environmental issues in our new accounts, whether the Commission could issue a similar recommendation on social issues in accounts. I would also like to ask the Commissioner to press the International Accounting Standards Board to include social and environmental aspects in its planned publication of a management commentary. The Commission may or may not want to call this corporate social responsibility, but perhaps today we can all agree to call it accounting for responsible companies.
(ES) Madam President, the recent financial crises have shown the importance of high-quality accounting standards for the proper functioning of the markets.
This being the case, it seems to me that another lesson of the crisis is that there is a certain asymmetry between the stated importance of accounting standards and the nature and operation of the private entities responsible for setting, producing and interpreting those standards.
Mr Radwan's report is therefore correct to point out that the first matter to be dealt with is that of governance. In my view he has put forward intelligent and realistic proposals about the need for the institutions representing the Union to be more proactive in this process of setting standards which are to be incorporated into the Community legal order, also concerning the internal operating rules of those private entities. Greater transparency, safeguards to prevent conflicts of interest and broader geographical representation are some of the proposals which Mr Radwan has put forward.
The second aspect dealt with in the report is the matter of small and medium-sized undertakings. We have emphasised here in the House the need to reconcile two objectives: simplification and reduced cost of accounting procedures for SMEs and the provision of adequate information for market players.
The last point covered by Mr Radwan - and one with which I concur - is the need for global standards in a global environment. Therefore it is extremely important to reach agreements with the other major world financial markets, notably the United States.
This calls for greater dynamism and a more significant role for the European institutions, including this Parliament and all those listening today.
(DE) Madam President, I can entirely endorse what our colleague has just said. The underlying premise here - and Mr Radwan pinpoints it in his report - is that an institution without a political mandate should nonetheless lay down a relatively large body of measures affecting the economy, some of which are binding. It is not enough to call for improved governance, or better framework conditions; political bodies also need to become more involved in this matter than they have been in the past. What we are doing here in Parliament constitutes a step in the right direction, but further steps must be taken.
There is also another aspect to consider. What is done here at the level of a regional organisation - in this case the European Union - should also be mirrored in the global context. So it is not a simply a matter of seeking to apply these rules to our region of the world alone.
(LT) Madam President, as my colleague has already mentioned, this report deals with who is responsible for what in the accountability process. Parliament's role is quite significant, and I believe that we should have this function too. However, I would like to express some doubt regarding the consideration of every technical detail and establishing standards. I do not find the description of the method of assessment and evaluation of realisable and non-realisable assets completely acceptable. That is why I doubt we should interfere, whether this is good or a bad method. We should wait for the experts to carry out the assessment. Meanwhile, the review of the standard of non-realisable assets and consultations on this issue has already started. Only then should we make our decision. I therefore suggest that we do not support the proposal in Article 30(e) or that in Article 42.
Madam President, could I have assurances from Commissioner McCreevy that the single set of global accounting standards - with the consequent drive for increased standardisation of procedures - will in no way increase the justification, or even the requirement, for an EU common consolidated corporation tax base?
Member of the Commission. - Madam President, I would like to thank Members for their comments. It was certainly a very wide-ranging debate with diversity of views on many of the issues and we have taken note of them.
I would like to emphasise again that high-quality international accounting standards are crucial for the effective functioning of both the European and global capital markets. The process through which these standards are developed should therefore be subject to robust governance. It should be characterised by a high level of transparency and it should ensure a balanced consideration of stakeholder interests.
The IASCF and the IASB have over recent years implemented significant reforms of their internal procedures but I cannot deny that further improvements are necessary. Moreover, I recognise that we in Europe should better organise ourselves to guide and provide input to the IASB standard-setting process. In short, even if the IASB's governance and due process were perfect, international accounting standards will only meet the needs of European stakeholders if their views are presented in a coherent, a convincing and a timely manner.
Nearly all speakers referred to the question of IFRSs for SMEs and I repeat again that there is no legal basis for its endorsement in Europe at present. If we were to do so, it would need codecision with the European Parliament. Can I just repeat, as I have said many times about IFRSs for SMEs, when the IASB was going about this particular work I made it quite clear in a number of speeches that they should not assume that there was going to be automatic endorsement from the EU for this particular project. We would only recommend it if it was simple and effective and met the needs of SMEs.
They were told that when they were doing their work. Their first exposure draft has been presented. I then took the opportunity of telling them that it did not meet those criteria and in the present state of affairs I could not possibly even consider recommending it for SMEs because it was neither simple nor effective. That remains my position but, in line with what others have said and Mr Purvis in particular, it would probably be a good thing if there was a simple effective IFRS for SMEs - but only on that particular basis.
The idea is a good one. I do not want to knock the idea at all, but I am not going to endorse now or in the future anything for SMEs that is just more complex and which no one understands. It is not needed. I take this opportunity of repeating again in Parliament what I have said on many occasions about this.
Ms van den Burg mentioned the question of XBRL. We are working with the securities regulator to get consensus on the technical standards for business data and as a result of this dialogue the Commission may take further measures aiming at interoperability of regulatory information systems. XBRL could allow investors to take full advantage of IFRS. Any steps towards requiring the use of XBRL in the European Union should be subject to a thorough impact analysis, including the economic assessment of costs and benefits.
I have also discussed the matter with the SEC Chairman, Mr Chris Cox, during my recent visit to the United States and I support keeping this agenda point in our regulatory dialogue with the US authorities for the future. These standards will need to be internationally accepted, technologically independent and interoperable.
It is a very exciting development and I know Ms van den Burg has recently had exposure to all this. I took the same opportunity myself some months ago - getting experts to show me how it actually works. I think it is something that is quite revolutionary and something to be welcomed, but we will not do anything about it just yet until we have done other work.
Mr Mitchell made an interesting point. I think the importance of what he said was that we do not want the IASB to come and say 'an EU body or any other body'. We want to be an internationally accepted body - because this goal is well worth pursuing - and it needs to be an independent body. I think that should be taken as read, but with proper input from the various stakeholders.
May I remind everybody in the European Union that it was the EU which gave the IASB such importance. We were the largest jurisdiction to say as from 2005 that the IFRS would become the rule for listed companies. It was some years ago that this decision was made, together with the European Parliament, and that in itself gave greater importance to the IASB and to the process.
I would say - and I have said this repeatedly to the IASB also - that road testing - you can call it impact analysis - should be done before standards are adopted, particularly by the IASB, and with input from the EU and other bodies as well. We should not be waiting until the standards are endorsed by the IASB. We had the job here of either agreeing to them or rejecting them. We do not have the role of changing them. I think that they should be road tested enough beforehand to see if there are going to be problems, rather than finding out about serious problems after the whole IASB process has been gone through. We made this point repeatedly to the IASB. Hopefully, I think the new governance structures have been appreciated by most of us.
I accept that more work needs to be done in this particular area but that will lead to fewer problems in the future. Hopefully we will arrive some day at a situation where these things will be more or less automatic and not cause any great headaches for anybody because all the work will have been done previously. We will not have difficulties then.
rapporteur. - (DE) Madam President, Commissioner, ladies and gentlemen, thank you very much indeed for this debate, in which the main thrust of the report has certainly received support and alternatives have been outlined in various areas.
I should like to pick up on two things. There is one point on which I am sure we all agree, and it has been made repeatedly today by speakers who fully support this general development, namely that the IFRS organisation has now taken some action, for example on governance issues, as a result of the pressure applied by this House - by the European Parliament - and by the European Union. There are times when we need to be quite blunt - and I am aware that some of my female colleagues have criticised me in that regard - because certain individuals who have appeared before this House in recent years have occasionally given the unmistakable impression that the European Parliament is of little interest to them. How little progress there has been is clear from the proposal on governance, where it is suggested that the future supervisory bodies may take advice only from persons they have appointed. All I can say is that anyone required in future to report to a parliament on how he or she voted on a particular point should make sure that a share of responsibility and a say in policy-making is part of the package. That is the first point.
How little commitment there is on the matter of impact assessments is clear from current discussions, in which the IFRS organisation is still refusing to conduct them.
Turning to the question of standards for SMEs, I have something to say to all those who believe we should introduce them on a voluntary basis. Inspired here by John Purvis - John, this is for you - I intend to quote an independent commentator. Peter Holgate, a partner in PricewaterhouseCoopers, writing in the German edition of the Financial Times, said the following:
'I don't take the European position all that seriously. Even if they end up not endorsing it, various countries could adopt it in their national generally accepted accounting principles. If a few major players do that you have it brought in by a different door even if the EC doesn't want to play ball.'
At the end of the day, this means you have to assume that, once a few states have adopted these standards, you will have them imposed on a compulsory basis throughout the European Union. Such is the strategy of this organisation. PricewaterhouseCoopers has already indicated that they see this as a business model. That is why we need our own European set of standards for SMEs: we can build on the IFRS if that is appropriate but if it is not, then we will develop our own standards. It is the Commission's responsibility to ensure that we do not have standards foisted on us through the back door, which nobody wants but which would then become generally binding.
The debate is closed.
The vote will take place today at 12 noon.
Written statements (Rule 142)
(The sitting was suspended at 11.55 a.m. and resumed at 12 noon)