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P 201809Z NOV 08
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INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCNMEU/EU INTEREST COLLECTIVE

UNCLAS SECTION 01 OF 03 BRUSSELS 001763 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR U/S MCCORMICK, A/S LOWERY, DAS ERIC MEYER 
AND DAS MARK SOBEL 
NSC FOR JOHN HERMANN, TED POSNER AND KRISTINA KVIEN 
STATE FOR E, EEB, EUR/ERA 
PLEASE PASS TO USTR 
 
NOT FOR INTERNET DISTRIBUTION 
 
E.O. 12958:  N/A 
TAGS: EFIN ECON ETRD EIND EINV EUN
SUBJECT: MCCREEVY ON G-20 AND EU RESPONSE TO THE CRISIS 
 
REF: (A) BRUSSELS 01738; 01744 and 01757 
 
¶1. (SBU) Summary. EU Internal Market Commissioner 
McCreevy told Ambassador Silverberg November 20 that: 
 
-the G-20 Leaders Summit accomplished as much could be 
expected given the U.S. Presidential transition; 
-it was still unclear how the EU will implement the 
G-20 action plan; 
-the Commission is working on an EU stimulus package; 
-the EU will likely provide financial support to the 
European auto industry; and 
-he will attend the next TEC in Washington. 
 
McCreevy also provided a brief update on the status of 
recent Commission financial services proposals, 
including on insurance company capital requirements, 
credit rating agencies, deposit guarantees, hedge funds 
and private equity, and credit derivatives.  End 
Summary 
 
G-20: HOW THE EU WILL FOLLOW UP IS UNCLEAR 
------------------------------------------ 
 
¶2. (SBU) Ambassador Silverberg met with EU Commissioner 
for Internal Market and Services Charlie McCreevy on 
November 20.  McCreevy noted that the G-20 Leaders 
Summit accomplished as much as could be expected given 
that President BushQs term will soon end and President- 
elect Obama made it clear that he would not be bound by 
the results of the summit.  In any case, the November 
15 Summit was always planned as the first in a series 
of summits, not as a singular event.  The next meeting 
is planned for April 30.  McCreevy assumes it will be 
held in London, given that the United Kingdom will be 
the Chair of the G-20 at that point, and that its 
purpose will largely be to review progress on the steps 
called for by the November 15 Summit. 
 
¶3. (SBU) The Leaders Summit called for a large list of 
steps to be accomplished by March 31.  It is unclear 
who will do what within Europe.  The Finance Ministers 
are quite busy dealing with their own economic issues. 
The European Commission does not have a Ministry of 
Finance as such and is not a member of the Financial 
Stability Forum.  However, many of the steps the G-20 
called for require action on the part of the European 
Commission.  It is currently unclear how this will be 
resolved. 
 
SARKOZYQS JANUARY CONFERENCE 
---------------------------- 
 
¶4. (SBU) McCreevy noted that the conference on 
financial reforms recently announced by President 
Sarkozy for January 7-8 is a bit odd.  While the 
attendance of several high-profile economists gives it 
an academic flavor, Heads of State will also reportedly 
attend.  It is unclear how well such a mix will 
function.  In any case, it is poor timing as, with the 
Obama Administration not yet in office, it is unlikely 
to accomplish much. 
 
EU STIMULUS PACKAGE? 
-------------------- 
 
¶5. (SBU) McCreevy noted recent press reports that the 
EU will launch a EUR 114B economic stimulus plan Q an 
amount roughly equal to 1 percent of EU GDP.  (Note: 
Other reports quote German officials as stating that 
the package could be as much EUR 130B.) McCreevy is, 
however, unsure how the EUR 114B figure was determined. 
The European Commission does plan to announce a 
stimulus initiative next week.  The exact nature of the 
initiative is currently unclear Q perhaps an outline of 
a stimulus package with principles which Leaders could 
endorse at their European Council meeting in mid- 
December.  Any EU stimulus plan is highly unlikely to 
include U.S.-style tax rebates.  While there may be an 
agreement to reduce VAT by one percentage point, it is 
 
BRUSSELS 00001763  002 OF 003 
 
 
unlikely that it would actually be implemented by most 
member states Q QSuch a commitment is not worth the 
paper it is written onQ, McCreevy commented. 
 
¶6. (SBU) McCreevy noted, however, that it is difficult 
for the European Commission to actively promote a 
fiscal stimulus as it is not a government and does not 
have significant discretionary expenditure.  The size 
of the only significant Commission expenditure program 
Q on agriculture Q is fixed. (Note: The CommissionQs 
budget is limited to 1.03% of GDP and must be 
balanced.)    Financial and economic policy rests with 
the member states.  Thus, any EU Recovery Plan will not 
be binding on member states. 
 
EU SUPPORT FOR AUTO INDUSTRY LIKELY 
----------------------------------- 
 
¶7. (SBU) McCreevy inquired about the prospects for 
further government assistance for the U.S. auto 
industry.  He emphasized that the auto industry has a 
large presence in Europe Q counting for 14 percent of 
employment in Germany, for example.  While noting that 
any government assistance to the European auto industry 
would fall under EU state aid rules, he felt that it 
was likely there would indeed be a package of 
assistance for the auto industry Q and perhaps industry 
more generally.  While this aid will face difficulties 
under EU state aid rules, if there is not a broad 
European support package, individual member states will 
act anyway. 
 
FINANCIAL SERVICES REFORMS 
-------------------------- 
 
¶8. (SBU) McCreevy reviewed the status of several of the 
recent proposals by the European Commission on 
financial services: 
 
-Solvency II: Some supervisory aspects of the Solvency 
II proposal to reform insurance regulation are proving 
surprisingly difficult.  COREPOR decided with a 
qualified majority to abandon the group support 
provision in the proposal.  [Note: Group support is the 
proposal where by insurance companies would no longer 
be required to maintain separate capital in 
subsidiaries in individual member states.  Insurance 
companies would be allowed to maintain an overall level 
of capital which would be determined by the home 
country regulator.]  The European Parliament has 
already approved the version containing group support 
and the European Commission is resolved to maintain it. 
The next few weeks will see difficult negotiations to 
resolve this issue. 
-Credit Rating Agencies: The European CommissionQs 
recent proposal to regulate Credit Rating Agencies will 
require Qa fair wind to make it out of the current 
European ParliamentQ. 
-Private Equity / Hedge Funds: The European Commission 
will, as it is required to do, respond to European 
Parliament reports calling for increased regulation of 
private equity and hedge funds.  It plans to respond 
next month.  McCreevy noted that regulation of hedge 
funds and private equity funds are being linked, but 
should not be. 
-Credit Derivatives:  The European Commission recently 
held a meeting with industry to discuss efforts to set 
up a clearing / settlement facility for credit 
derivatives.  He expects the Commission to publish a 
proposal on this issue by the end of the year. 
-Deposit Guarantees: Although the EU Directive on 
deposit guarantees has not yet been revised, most 
member states have already gone ahead and raised their 
limits on deposit guarantees to EUR 100,000, as called 
for last month by EU finance ministers.  There is 
substantial disagreement, however, over the 
CommissionQs proposal to require deposit payouts within 
three days in the event of intervention.  Many member 
states argue that three days is unfeasible.  McCreevy 
believes that a compromise of 5-6 days will eventually 
 
BRUSSELS 00001763  003 OF 003 
 
 
be reached. 
 
¶9. (SBU) Regarding the bank support schemes introduced 
by most EU member states, McCreevy noted that, although 
the Commission had given rapid initial approval under 
state aid rules, this approval is only for an initial 
period of six months.  Under state aid rules, the 
Commission will review plans of member states after six 
months and expects to see realistic long-term 
restructuring plans in order to give continued 
approval. 
 
TEC: MCCREEVY PROMISES TO ATTEND 
-------------------------------- 
 
¶10. (SBU) McCreevy promised Verheugen that he would 
attend the TEC.  So, he will be there whenever it is 
scheduled. 
 
SILVERBERG