Priorities of the European Union: evidence from the Ambassador …€¦ · discussing the priorities of the Czech Presidency are: • Regulation of the banking sector (Q 2) 6 PRIORITIES

HOUSE OF LORDS

European Union Committee

8th Report of Session 2008–09

Priorities of the European Union:

evidence from the Ambassador of the

Czech Republic and the Minister for

Europe

Report

Ordered to be printed 21 April 2009 and published 28 April 2009

Published by the Authority of the House of Lords

London : The Stationery Office Limited £price

HL Paper 76

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Our Membership The Members of the European Union Committee are: Baroness Cohen of Pimlico Lord Plumb Lord Dykes Lord Powell of Bayswater Lord Freeman Lord Richard Lord Hannay of Chiswick Lord Roper (Chairman) Baroness Howarth of Breckland Lord Sewel Lord Jopling Baroness Symons of Vernham Dean Lord Kerr of Kinlochard Lord Teverson Lord Maclennan of Rogart Lord Trimble Lord Mance Lord Wade Lord Paul

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CONTENTS

Paragraph Page Introduction 1 5

Appendix: Recent Reports from the Select Committee 7

Oral Evidence Rt Hon Caroline Flint MP, Minister for Europe and Mr Andrew Dalgleish, Head Europe Strategy Group, Foreign & Commonwealth Office Oral evidence, 11 November 2008 1 Written evidence 10 Supplementary written evidence 11 Further supplementary written evidence 12 Further supplementary written evidence 12 Further supplementary written evidence 12 HE Mr Jan Winkler, Ambassador of the Czech Republic and Mr Miroslav Kolatek, Deputy Head of Mission Oral evidence, 20 January 2009 15 Rt Hon Caroline Flint MP, Minister for Europe and Mr Ananda Guha, Deputy Head, Europe Strategy Group, Foreign & Commonwealth Office Oral evidence, 3 February 2009 24 NOTE: References in the text of the report are as follows: (Q) refers to a question in oral evidence

Priorities of the European Union: evidence from the Ambassador of the Czech Republic and the Minister for Europe

Introduction

1. In recent years it has been our practice to take evidence regularly from the Ambassador of each incoming EU Presidency country. It has also been our recent practice to take evidence from the Minister for Europe after each European Council.

2. Accordingly, in this Report we make available for the information of the House the oral evidence given to us by Caroline Flint MP, Minister for Europe, on 11 November 2008 and 3 February 2009, and by His Excellency Mr Jan Winkler, Ambassador of the Czech Republic, on 20 January 2009. We also make available supplementary evidence provided by the Minister for Europe.

3. The Committee wishes to express its sadness at the untimely death of His Excellency Mr Jan Winkler on 16 February. The Chairman has signed the Czech Embassy’s Book of Condolences on behalf of the House.

4. The key topics in the evidence from the Minister for Europe discussing the European Council of 15–16 October 2008 are:

• Climate change (QQ 3–4)

• Russia (QQ 5, 7–9, 13–14)

• Middle East Quartet (QQ 6, 10–11)

• Georgian Situation (Q 12)

• Ukraine (Q 15)

• Eastern Partnership (Q 16)

• Enlargement and the Balkans (Q 17)

• Financial crisis (QQ 18–19)

• Financial regulation (Q 20)

• Stability and Growth Pact (QQ 21–22)

• Eurozone membership (QQ 23, 25)

• G20 (Q 24)

• Communicating the role of the EU (QQ 26–27)

5. The key topics in the evidence from the Ambassador of the Czech Republic discussing the priorities of the Czech Presidency are:

• Regulation of the banking sector (Q 2)

6 PRIORITIES OF THE EUROPEAN UNION

• Gaza (Q 3)

• Hamas (Q 4)

• Energy security (Q 5)

• Eastern Partnership (Q 6)

• Working Time Directive (Q 7)

• EU Social Policy (QQ 8–9)

• Copenhagen Climate Change Conference (QQ 10–12, 14)

• Kyoto Agreement (Q 13)

• Common Agricultural Policy (Q 15)

• Better Regulation (QQ 16–17)

• Pesticides Directive ( QQ 18–21)

6. The key topics in the evidence from the Minister for Europe discussing the European Council of 11–12 December 2008 are:

• Budgetary Stimulus Measures (Q 1)

• European Investment Bank loan package (Q 2)

• Doha Development Round (QQ 3–6)

• G20 (Q 7)

• Northern Rock (QQ 8–10, 14–16)

• State Aid Rules (QQ 11–13)

• Copenhagen Climate Change Conference (QQ 17, 31–33)

• Technological Assistance in tackling Climate Change (Q 18)

• 30% reduction in carbon emissions (QQ 19–26)

• Eastern Partnership (QQ 27–28, 34, 37)

• Human rights (QQ 29–30)

• Russia (QQ 35–36)

• Ukraine (QQ 38–39)

• Energy security (Q 40)

PRIORITIES OF THE EUROPEAN UNION 7

APPENDIX: RECENT REPORTS FROM THE SELECT COMMITTEE

Session 2008–09

Enhanced scrutiny of EU Legislation with a United Kingdom opt-in (2nd Report, Session 2008–09, HL Paper 25)

Session 2007–08

Government and Commission responses Session 2006–07 (34th Report, Session 2007–08, HL Paper 199)

Annual Report 2008 (32nd Report, Session 2007–08, HL Paper191)

Correspondence with Ministers October 2006–April 2007 (30th Report, Session 2007–08, HL Paper184)

Priorities of the European Union: evidence from the Minister for Europe on the June European Council (28th Report, Session 2007–08, HL Paper 176)

Priorities of the European Union: evidence from the Ambassador of France and the Minister for Europe (24th Report, Session 2007–08, HL Paper 155)

The Commission’s Annual Policy Strategy for 2009 (23rd Report, Session 2007–08, HL Paper 151)

Priorities of the European Union: evidence from the Minister for Europe and the Ambassador of Slovenia (11th Report, Session 2007–08, HL Paper 73)

The Treaty of Lisbon: an impact assessment (10th Report, Session 2007–08, HL Paper 62)

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Minutes of EvidenceTaken before the Seclect Committee on the European Union

TUESDAY 11 NOVEMBER 2008

Present Cohen of Pimlico, B Roper, LDykes, L Sewel, LGrenfell, L (Chairman) Symons of Vernham Dean, BHarrison, L Wade of Chorlton, LHowarth of Breckland, B Wright of Richmond, LJopling, L

Examination of Witnesses

Witnesses: Rt Hon Caroline Flint, a Member of the House of Commons, Minister for Europe, andMr Andrew Dalgleish, Head Europe Strategy Group, examined.

Q1 Chairman: Minister, it is a pleasure to see youhere and I begin by saying to an old friend from yourHome OYce days, congratulations on theappointment, we are delighted to see you in this role.You are very welcome to this Committee. We haveone hour with you and I know you would like tomake an opening statement which suits us very well.One of the key members of our Committee, BaronessCohen, who chairs the sub-committee dealing witheconomic and financial aVairs and is therefore veryinterested in the financial crisis is delayed and will notbe here maybe for another 20 minutes or so. Would itbe alright with you—and I leave it entirely up toyou—if we were to begin with energy and climatechange and then put the financial crisis after that.Caroline Flint: That is fine.

Q2 Chairman: That is very kind of you. We will startwith your opening statement.Caroline Flint: Thank you very much and thank youfor your warm welcome. I do think we have had a lotof correspondence over the years and what is veryinteresting in my present job of course is that I amalso visiting some countries—Bulgaria for examplejust last week—which I happened to visit as a HomeOYce minister a few years ago and obviously some ofthe issues around justice and home aVairs are stillkeenly on the agenda, particularly in terms of theenlargement process. I am seeing some new faces butalso seeing some older faces as well both in theForeign and Commonwealth OYce and also UKRepand also on my travels around Europe. I am lookingforward to the celebration of your tenure on thisCommittee in the not too distant future and I hopesome of your colleagues will be able to attend andsupport that as well. If people do not know aboutthat I will make sure my colleagues behind me alert

you all to that. You have asked me to come along andtalk about the October European Council. It tookdecisions on a number of the most pressing issuesfacing the Union today. In many respects I feel I havecome into my present job at a time when theEuropean Union is really being seen to tackle some ofthe issues that are of most concern to people. I alwaysbelieve very strongly that the European Union is at itsbest when in the discussions it is has having and theactions it takes we really can see its added value interms of what national governments can provide.Nowhere is that clearer in terms of the internationalfinancial and economic crisis we are dealing with atthe moment. I think we have seen strong leadershipfrom the Presidency resulting in good conclusionswith all Member States signing up for a concreteaction to ensure a coherent European Unionresponse. Of course I am very proud that our primeminister has played such a leading role. Morerecently, on top of a UK paper that we provided onstrengthening the global financial system EU leadersreaYrmed the value of this coordinated response andthat was added to in terms of the informal councilthat took place last week on 7 November. This willhelp prepare an EU position ahead of the G20summit in Washington on 15 November. Climatechange was the other dominant issue and it remainsvital that the Council maintains its focus on reachinga deal on the 2020 package this year. We believe it isthe only way to get others to negotiate towards theright agreement at Copenhagen next December. It isespecially important, we believe, that we are able toshow the new US administration that Europe is reallyserious about its low carbon commitment and thatdoes mean agreeing an ambitious package by the endof the year. Delaying action will only increase thecosts of tackling climate change down the road. On

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2 priorities of the european union: evidence

11 November 2008 Rt Hon Caroline Flint and Mr Andrew Dalgleish

Russia it was clear at the October Council that wecannot return to business as usual while Russiacontinues to fail to meet commitments but at thesame time it is not in our interests to isolate Russia.We will continue to engage in a hard-headed andsystematic way on important issues like energy.Clearly matters have moved on since the Council.The Presidency statement following yesterday’sGeneral AVairs and External Relations Councilmade clear that resumption of PCA negotiations wasnot a return to business as usual. It set out a unifiedEU position. There was deep concern that Russia hasnot yet withdrawn to its pre-7 August position. Therewas concern that the OSCE as well as EU monitorshave still been prevented from entering South Ossetiaand continue to support Georgia’s territorialintegrity. On all these issues we once again saw theimportance under sometimes challenging anddiYcult circumstances for individual Member Statesthe importance of EU collective action and I lookforward to discussing many of these in more detailwith you.Chairman: Thank you very much indeed, Minister.That covers that very succinctly. Let us begin withLord Sewel and energy and climate change.

Q3 Lord Sewel: You mentioned the importance ofthe climate change issue in your statement, Minister,but in fact what comes out from the conclusions (it isone paragraph and it is fairly sparse whereas many ofus had been expecting that we would see a pretty clearstrategic signal and orientation coming from themeeting on the way forward) is an instruction for theCommission and the Presidency to do some intensivework between now and December. Are there doubtsentering the debate? Are there doubts that perhaps inthe context of the financial crisis that some of thecosts of the climate change and energy package maybe just too high for some Member States and someindustries within Member States to support? Is therea little bit of concern coming through? There is thiswonderful phrase in the conclusions that the packageshould be applied “in a cost-eVective manner to allsectors of the European economy and all MemberStates, having regard to each Member State’s specificsituation”. Having regard to each Member State’sspecific situation could be the biggest get-out clauseof all time. What is your interpretation of it?Caroline Flint: You are correct to allude to the factthat there are some challenging issues here about howwe can arrive at a united position at the DecemberCouncil whilst taking into account the very diVerentenergy needs of diVerent countries in the way inwhich they supply their energy already and certainlyin my visits that I have undertaken so far climatechange has been on my agenda in terms of bilateralsI have had with a number of countries. So there aresome challenging issues and that was highlighted at

the Council but I think really regardless of the pointyou make about the paragraph in the document weare pretty satisfied and content with the outcome. Ithink we should not take just a paragraph from thedocument as the only reference point in terms of thediscussion that has been continuing since the SpringCouncil of 2007. The 2020 package represents anambitious and far reaching set of proposals but Iwould think to yourselves and to other colleagues inthe European Union who at the present time areworried as we all are about the financial situation, thecost of not doing anything now and arriving at a clearposition in December is far outweighed by the cost ofnot doing these things down the road in the future. Ithink the Stern report has indicated that quite clearlyif we do not bite the bullet on this and take someserious decisions we are putting oV until tomorrowsomething we can ill aVord to do. When I did aclimate change lunch in Prague recently I was struckby one of the facts that I was provided with in mybriefing that of something like two and a quartermillion if you like climate jobs worldwide 600,000 ofthem are already in China. That sort of thing reallyalerts me to the need that if the EU wants to be in aleadership position in regards to our discussions withour American colleagues but also China, India andother countries as well, then we falter at this point atthe expense of families across the European Union. Ibelieve that there is a focus that we do need to meet apackage and I think the French are very clear ondoing that. Clearly there is no detail to be workedthrough in terms of individual Member States butthat was always going to be the case I feel. I think atthis point in a cycle this is where things do becomemuch more intense and of course Member States arediscussing with the Commission and the Presidencyabout how the package will aVect them, how diVerentissues around carbon leakage, that people areworried about understanding these and also theissues about the auctioning and so forth. Thenegotiations are firmly on track. The Council didreach the commitment to this agenda and the Councilalso endorsed the President’s call for more intensivework on this which I think was going to happenanyway but obviously we have the financial situationat the moment that maybe some feel that that is areason not to do anything. I think that the financialsituation at the moment gives us all the more reasonto look at this agenda because actually it is about jobsin the future, re-skilling people for a place, if you like,in terms of future jobs and industry where the EU canbe a world leader.

Q4 Lord Sewel: I think we would all agree with yourgeneral view that it is important to move now and itmakes sense to move now because delay has to cost.Do you have evidence that that view is shared by, say,the Poles, the Bulgarians and the Romanians?

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3priorities of the european union: evidence


Ultimately is the test going to be whether there is aneVective emissions trading scheme by the end of theyear?Caroline Flint: I do think that countries can beenergised and focused in terms of their presentsituation in terms of their energy sources and theimpact of these proposals but at the same time sign upto a principled agreement of the way forward. I thinkthat is where we are at the moment. I do think that thework was put in train by the Council in spring 2007;this is not a new topic of discussion. We are at thatpoint now where, if you like, the devil is in the detailof working through with counties about how thediVerent targets are going to aVect them, but theyalways knew about these targets and actually fromwhat I understand—of course my colleagues in otherdepartments lead on this in terms of policy—consideration has already been taken into account inthe targets of where diVerent Member States are andthat is also something that is taken into account interms of compensation too. Again this is not aboutassuming that everyone is in the same place. We arenot in the same place as our French colleagues and wehave very challenging targets to meet in relation tothis package. I believe that we will work to anagreement in December and clearly the negotiationsbetween now and then and beyond then willcontinue. I think, as I said, for us it is an opportunitywe just cannot aVord to miss.

Q5 Lord Roper: Minister, you have already saidsomething about the discussions which took placeboth in September and October and yesterday in theGeneral AVairs Council. I wonder whether youwould like to say a little more about the way in whichthose have developed and in particular whether thishas been reported in the press. The foreign secretaryand the Swedish foreign minister did make aparticular position yesterday particularly referring tothe hard headed nature of any further negotiations. Ialso wonder whether, if one goes back to thedocument which was published last week by theCommission, it appears reading that that theCommission considers that they have authority toreview the negotiations on the PCA without therebeing a further decision in the Council.Caroline Flint: Firstly I was with the ForeignSecretary, David Milliband, in Brussels yesterday. Ithink the joint statement between him and hisSwedish colleague was to very much promote thepoint that whilst we recognise that actually on manydiVerent fronts bilateral relations with Russia areimportant but also EU relationships are important—climate change and energy for example is key to thatand I think we have the energy review beingpublished in the next week—but at the same time thiscould not be business as usual. I think, given thecomplexities of the situation, the fact that after the

meeting yesterday a press statement was issuedsupported by all 27 members, that really did indicatethat the context of resuming PCA negotiations wasagainst wanting to see progress on the agreementsmade over the summer in relation to the packagearound Georgia, South Ossetia and Russia. That isgoing to continue and again, in terms of the PCA, myunderstanding is, looking at the last time this wentthrough, it took some years of negotiations tocontinue and of course during that time and presentlywe will continue to look at the progress mainly interms of Georgia and that will be there. My colleague,the foreign secretary, spoke to the president ofGeorgia last night. I met with the foreign minister ofGeorgia last time I was in Brussels as well and I thinkthey understood the position that the EU took and Iam glad that we can continue to go forward on thisparticular issue in a united way. On the commentabout the review, I think I would like to have anotherlook more closely at the wording on that because Iwould hope the Commission would not be toopresumptuous on that matter. I think what isinteresting, having looked at the review (which Ithink is available on the website) is that it does, if youlike, set out the very many diVerent ways in which theEU needs to engage with Russia, but I would sayimportantly it is a two-way street, the needs of Russiato engage with the EU too.

Q6 Lord Wright of Richmond: Minister, have theevents in Georgia had any eVect on Russianparticipation in the Middle East Quartet?Caroline Flint: I think I would have to ask mycolleague.Mr Dalgleish: I think we will have to come back toyou on that.

Q7 Lord Roper: As well as preparing for the PCAthere will be at the end of this week a meeting atsummit level with Russia, how far were the topicswhich ought to be on the agenda for that meetingdiscussed?Caroline Flint: Sorry, I did not hear the last part of thequestion.

Q8 Lord Roper: The EU-Russia summit which istaking place on Friday, how far was considerationgiven yesterday in the Council or informally as to thetopics which ought to be the high priority for thosediscussions and would you be able to say anythingabout that?Caroline Flint: I think I would have to get back to youon the detail of what they are going to discuss onFriday but the background of this was that we dohave to engage and in the same way as we would belooking to the resumption of the Geneva talksfollowing the first meeting, we will also be looking atthose talks as to progress on the conditions that were




set earlier in the summer. As part of my role I havebeen looking at some of the issues around energy andsecurity and I want to take a closer look at that inlight of the energy review that is coming forward aswell which again will impact on Russia too. I thinkagain whether it is climate change, the economy,energy supplies or a whole number of other issues interms of security too are outlined in the in the EU-Russia review. There are many, many issues that weneed to be talking about with Russia. The key to theissue here is that it is not the UK or the EU that areisolating Russia, it is Russia who isolate themselves ifthey are not willing to work in a rules basedframework with the EU and other organisations too.

Q9 Chairman: It seems to me that what prevents areturn to business as usual can in fact turn out to bea very long term problem. Who decides when we havegot to the point where it can be business as usualagain? We may have to live with the fact that Russiais doing things that the European Union does not likebut at some stage we have to declare that we can co-operate with them on a regular basis.Caroline Flint: I note the point you make. Part of allthis engagement is to demonstrate that there is asmuch in the interests of Russian families in terms ofcloser cooperation with the EU as for the EU itselfand many, many diVerent fronts. That is part andparcel of why we try to get these opportunities fordiscussion together so we clearly can see howimportant this is, in other areas as well in terms of, forexample, Nato; the Russian Council has beensuspended but actually there still needs to be on-going discussions with Russian representatives onsome of the issues of concern, for exampleAfghanistan and other matters too. So all the timethis is about how we keep the talking going whilsttrying to get some progress and movement. We canonly hope that there is enough there for people torealise how important this is to make some changesand to eVect some change but I do not think it is easyand I do not think it is easy to have a timetableagainst it per se.

Q10 Lord Dykes: Referring to previous commentson the Quartet meeting at the weekend, in a way itwas the other way round that Russia did seem to besomewhat more engaged than it had been on thisparticular issue; they tended to be standing back alittle bit from it and leaving the lead to be taken by theUS and other entities in the Quartet. They soundedmore enthusiastic this time about progress beingmade and a direct part of the negotiation did confirmboth the Palestinian President’s oYce and the PrimeMinister designate of Israel that their indirect talkshave been going pretty positively and pretty well inrecent times. Russia did extend the invitation to themin three months time for the next meeting of the

Quartet. Was there not some sense of impatienceamongst member governments, including the UK,about the slowness of this process? The originaltarget of President Bush was 2005 for a Palestinianstatement. Then we have been talking about the endof this year. Now it is going well into next year andeven if the direct parties in the talks are pleased withprogress, obviously significant concessions have to bemade including by the established government ofIsrael in terms of settlements and that kind of thing.Surely a much more accelerated sense of impatienceshould now be directed towards this process to get thePalestinian state that they deserve.Caroline Flint: I think we can just support andencourage the Quartet to work. I think as DavidMilliband was asked earlier today in ForeignCommonwealth OYce questions, President ElectBarack Obama’s focus in this area again hopefullymight give a new impetus. I am certainly happy towrite to the Committee on our thoughts arising outof the meeting at the weekend. On so many diVerentlevels we try to support progress on these issues butas you know probably better than I this is a task thatmany have set themselves and has been diYcult formany, many years, but there may be an opportunityfor fresh impetus as the President Elect BarackObama comes into oYce next year.

Q11 Chairman: Clearly we are going to have to waitto see the outcome of the Israeli general election tooand the colour of the government.Caroline Flint: It was not discussed at the EuropeanCouncil I have to say.

Q12 Baroness Symons of Vernham Dean: Minister,you have been very emphatic that the EU is not goingback to business as usual with Russia but at the sametime you are also very emphatic that there are stilldiscussions and engagements and in some ways whatcomes over is actually an even more concentratedfocus on Russia which, in more practical senses,could look like almost business as usual plus ratherthan business as usual minus. What I really wanted toask you about was the question of the support ofGeorgia’s territorial integrity. Of course we supportthat but what does it mean in a practical sense otherthan saying to the Russians, “We really do not likeany form of military engagement in Georgia and webelieve in the territorial integrity of Georgia. Howdoes this have real nature and substance as a policyas opposed to just re-stating a position?Caroline Flint: First of all I think what is clear by thestatement issued by the General AVairs Councilyesterday is that the pace and tone of negotiations aregoing to be dictated by the review that wasundertaken but also by the on-going Russian actionsin Georgia as well. I think it is important that thatwas made very clear in the press statement. I think it




is about us engaging with Russia but still being ableto express the severest concern about how they workwith us but also in relation to Georgia as well,whether or not some of the agreements that weremade over the summer both in August andSeptember led by President Sarkozy are going to bemet. As far as I am aware while some aspects of thatpackage of agreements have been met there are othersthat have not. Again we have monitors out in thefield. We are getting reports back from those. Thereare about 200 EU monitors. We will use that I thinkto guide our discussions, again all the time pressingthe case whether it is with the EU discussions andforums or within the Geneva talks to see someevidence of some progress being made. I agree, this isnot easy and we would also, alongside this, havesupported an independent investigation into actionstaken by both sides in relation to human rights tooand deaths and injuries that occurred as a result of theactivities in the summer. I think on all these diVerentpoints we have enough to look at to really test whatis happening, whether there is compliance. As far asI understand OSCE and EU monitors have not beenallowed into South Ossetia so that is one of the issuesthat is outstanding. We are obviously watching andhopefully encouraging these conditions to be met.That would be our barometer I suppose.

Q13 Lord Wade of Chorlton: You use the wordengagement, how does engagement between Europeand Russia take place from a practical point of view?It is one thing for the President to make statementsand to meet leaders, but clearly if there is going to beproper engagement there needs to be very regularmeetings between parties to discuss things. I agreeentirely with the point made by the Lord Chairmanthat good engagement with Russia for the future isimportant from everybody’s point of view. How dowe actually achieve that within the Europeancontext?Caroline Flint: I think it happens on many diVerentlayers. At this point I am not able to detail all of thembut clearly the Geneva talks are one forum in whichwe will be able to clearly see whether progress is beingmade given that that was in particular established forall parties in the conflict to meet and hopefullyresolve the situation. You can see from the auditreview how many diVerent subject areas the EU isengaged in and therefore there are many diVerentforums there. I think what will be interesting is how,having done the review and PCA discussionsreconvening, we take stock of how the individualsubject areas—whether it is the economy or climatechange—are moved forward but also the fact that thepace and tone of those discussions and those issueswill be influenced by progress on the Georgia-Russiasituation. I think what we will be looking for in termsof the UK Government is to not lose sight of that

whilst these other important discussions need to takeplace in many, many, diVerent forums. I think that issomething the Council has to come back to.

Q14 Lord Wade of Chorlton: Is the BritishGovernment satisfied that those engagements arecarried out in the way they describe? Are they carriedout in a satisfactory way? Are you satisfied that theright systems are in place to make it happen properly,that is what I am really asking you? Couldimprovements be made?Caroline Flint: Coming relatively new to this Isuppose to a certain extent for me it will be interestingto see how those discussions on all those other areasof interest with Russia from the EU perspective willsit alongside the situation in Georgia. I might have tocome back to you on that at a later date. Clearly thisis not a precise science and many, many diVerentoYcials in the EU will be involved on a—dare I sayit—more mundane level of discussion against thissort of international action that was taken over thesummer. We are very clear and I think the meeting ofthe GAERC yesterday was very clear that it is notbusiness as usual; the pace and tone of discussions interms of cooperation of Russia will be set againstwhat they agreed over the summer and progress onthe Georgian conflict situation. That is something wewill continue to make sure that we do not lose sightof. I think at this point that is probably the best Ican say.

Q15 Lord Roper: The paragraph in the conclusionsof the meeting of October which deals with Russiaalso deals with the question of relations withUkraine. I wonder if I could stray to that issue for amoment. I think we were interested in the speech ofthe foreign secretary in Kiev on 27 August where hestated the British Government position on the longterm goal of Ukraine was, “once Ukraine fulfils thecriteria, it should be accepted as a full member, andwe should help you get there . . . the goal is a goodone”. On the other hand there was not very muchother membership perspective shown in theagreement which was reached between the EuropeanUnion and Ukraine when they met a couple of weekslater in September. I wonder whether this gapbetween the collective EU position and the positionwhich the foreign secretary enunciated is one whichthe British Government hopes they will be able tonarrow in the near future.Caroline Flint: I am hoping to visit the Ukraine in thenot too distant future myself so I think that will giveme more of an insight of the situation there. Clearlyin terms of EU enlargement there is no one set blueprint because every country is in a somewhat diVerentsituation and the timeline varies enormously. I amheartened, I have to say, from the last few weekswhere I have been learning more about how we can




support the Eastern Partnership and make that muchmore of a practical way in which we can supportcountries like the Ukraine and others in terms of theirEuropean Union ambitions. I think if we can get thatinto such a place that it really can work but alsowithin the area, countries work together and learnfrom each other I think that would be a very positivestep forward. Certainly in terms of my role one of mypriorities is to spend some considerable time both inthe Caucuses and in the Western Balkans to see whatmore we can do practically to move people forward.However, as I say, there is not one set blue print Ithink on this and it is only when we really get downto some of the challenges that diVerent countries facecan we have a better understanding about just howmuch is necessary in terms of support to arrive attheir final destination. Again, I am a practical person;for me the words are one thing but until you actuallysee things and how they are working on the groundand therefore can input into it, it is a very diVerentmatter indeed but I think we should all be pleasedactually that countries like Ukraine are wanting toface westwards and see their future for Ukrainianfamilies as being very tied up with potentially amember down the road of a prosperous EU.

Q16 Chairman: What is the current state of theoriginal Polish-Swedish proposal for the EasternPartnership? They came up with this about fourmonths ago and said that they wanted to establish aparticular EU relationship with some of the Easternneighbouring states. I recall that Ukraine at the timewas rather hostile to the idea because they thoughtthat that was, as it were, shoving them to one side andit was a substitute for a roadmap towards EUmembership et cetera, et cetera. I was just wonderingwhether you have picked up anything about wherewe stand on this. It still seems to be on quite a lot ofcountries’ agendas and does not seem to becrystallised yet.Caroline Flint: The Council actually agreed that thereshould be initial examination of the proposals for thefuture Eastern Partnership of the European Unionwhich I understand the Commission intends tosubmit in November. I think, if you like, a practicaloutput of this aspiration, I suppose, is to see if thatsort of partnership can provide added value toindividual discussions with countries. As I saidbefore, it is not a one size fits all. I think we will belooking to see what the Commission come back with.I think actually looking at this both in terms ofindividual countries but a partnership within an areaor region is actually a good thing to do because itgives some focus but also a better look at how the EUaligns some of its projects and support in a particulararea, again not in the Caucuses per se but certainly inthe Balkans where I visited a few countries in the lastfew weeks. There clearly are some issues that overlap

between the borders– crime being one of them, I haveto say and tackling organised crime and so on—which demonstrate that partnership work looking atthat may not be a bad thing at all. At the end of theday if it works individual countries can only bewinners and if it helps to enhance their journey andmake some accelerated progress that can only help aswell. Of course we will continue to have individualarrangements, agreements and road maps forcountries as they develop and are able to meet therequirements that we have set, maybe more than wedid some years ago, much higher requirements andclearer requirements on those countries who want tobe part of the EU.

Q17 Chairman: You mentioned enlargement and theBalkans. There seems to be a bit of a divide—maybea growing divide now between what CommissionerRehn is saying and being very positive about Croatiawhile there are some Member States that are stillinsisting that there can be no enlargement until theTreaty of Lisbon is ratified, if it ever is, and thattherefore there seems to be a two speed approach tothis between the Commission and some importantmembers of the Council. Has the UK taken aposition on this and if so what is it?Caroline Flint: Our position is that whilst we areabsolutely delighted that we have ratified the LisbonTreaty and obviously want to work to a successfulconclusion on that, we do not believe that the LisbonTreaty in and of itself is necessary in terms ofenlargement. We feel that there are other legalarguments for accession treaties in other ways. Thatis our position and will continue to be our position. Ido know that there are other Member States whichtake a diVerent view, but I think what I am pleasedabout actually is that progress on enlargement,regardless of particular views of some of ourcolleagues, has continued and the fact that Olli Rehnproduced the reports last week I think is good. Ihappened to be in Zagreb last week and saw formyself how, by the fact that those reports arepublished, it had created an opportunity for moredebate about how they can now use the next 12months particularly given that Croatia was given anindicative, if you like, timeline for 2009 of what morethey could do. I think that is helpful. I also know,having met my Czech colleague and knowing fromour Swedish colleagues as well that there are plans foran enlargement summit I think in March/April of2009 under the Czech Presidency. So again I think weare making progress. I do think that we do sometimeshave to make sure we reassert why enlargement isimportant. I think it is important here in the UK butalso in the European Union as well because I think onso many diVerent fronts that I hope the Committeewould support we have gained so much fromenlargement already in so many diVerent ways. We




should never rest on our laurels that everyone outthere knows that and we need to be better at puttingthat across. I would feel that to have a situation wherewe slowed down in terms of our engagement withcountries and looking at how better we can supportthem whether through the Commission or throughthe sometimes specialist or technical support thatindividual members can give would be a wastedopportunity and given how long these things take—for many the journey will be many, many years downthe road—let us not lose these months we have overthe next year whilst we await the outcome of theLisbon ratification. I think that is something that iswidely supported within the membership of the EUwhilst I appreciate there are some individualcountries which have maybe not as strong a view asthe UK on this matter.

Q18 Chairman: I think we should turn now to thefinancial crisis and investigate a few of your thoughtson this. I do not know whether you have yet had achance to meet Commissioner Neelie Kroes, she isone tough lady and she is defending competitionpolicy with tooth and nail but obviously, given thecircumstances in which we are now, she is makingwhat I regard to be some very sensible noises abouthow you deal with state aid in a time of financialcrisis. I notice that she has made a very clearstatement that as far as aid to banks is concerned therules still apply to the extent that if a government is ashareholder in a financial institution she wants toensure that there are no assaults on competitivenessthrough state channelling. On the broader questionof state aid to industries clearly she has quite an openmind on that but again there has to be a very, verygood reason for doing it. What, in your view, shouldbe the degree to which one might be able to relax stateaid rules in certain circumstances?Caroline Flint: I think the banking measures whichboth the UK and other EU Member States havealready put in place have demonstrated that you cantake action but you can still be within the boundariesof the state aid and competition policy because Ithink, as you inferred, state aid rules do allow forexceptional measures particularly when it is trying toremedy a serious disturbance to the entire economyof a Member State. I think we are all pretty clear thatis what we have been facing and other countries in theEU have as well. That is very important. The state aidframework does continue to provide otherflexibilities in key areas such as small and mediumenterprises and rescue and restructuring aid. I thinkthe position of the UK Government is given thatthere is no fundamental need for a change to therules. I actually asked about some examples of whereaid can be given to domestic businesses and industrywhich is not in contravention of state aid rules andsome of the examples oYcials provided are, for

example, SMEs are covered by the SME frameworkwhich allows the government to provide up to 20% ofeligible costs for small enterprises and up to ten% ofeligible costs for medium sized enterprises; largerindustries are covered by a diVerent set of rules butwith a set of get out clauses which, for example, haveallowed the UK to write cash for its bank but also tohelp the Post OYce and provide emergency funds Iunderstand for MG Rover. Government support wastemporary and therefore allowed. As far as I can seethere is a certain amount of flexibility within thesystem but I think as the Prime Minister reiterated incomments he made yesterday we have to be reallycautious and mindful of falling back on some shortterm protectionist measures which in the medium andlong term will prove to be not as positive down theroad. That is why we believe that a pro-activecompetition framework is important and why at thisstage we think the measures under state aid rules interms of banking are right and in line with theframework. We would have to be very clear aboutneeding other discussions about the proposals fromother colleagues in the EU to change that. I think atthis present time quite rightly national governmentsand the EU are asking a lot of questions about howwe take action and the right and appropriate point tointervene. As I said, our view is that we think thesystem works rightly at the moment; any otherchanges would be subject to debate and you wouldprobably have to get someone from HMT here to talkto you about that.

Q19 Baroness Cohen: We do not seem to have acommon financial or economic policy within the EUand we have seen Member States acting unilaterallyto protect citizens and domestic banks. Is it your viewthat we should all try to work together from now on?Caroline Flint: I actually believe that in the last fewweeks, just over a month, the EU has actually done agood job. Coming into this position as Minister forEurope I think out of adversity has come a verypractical opportunity to demonstrate that whilstnational governments need to take action the role ofthe EU in terms of added value to, for example,prevent the situation where Member States went oVto do their own thing and that created huge problemsin the banking systems in other countries—I think atsome point a few weeks ago there was some concernabout that, quite serious concern—has proved that ifwe had not got the EU we might have had to inventit. That does not take away from what nationalgovernments need to do but I think the set ofprinciples that have been arrived at both in terms ofhow we operate within the EU but I think also inworking through what sort of role and what sort ofideas we should take forward in terms of discussionson a more global financial state has been very positivein the last few weeks. Clearly Member States are




always working closely together. At the OctoberEuropean Council everyone agreed to a commonapproach which is guaranteeing bank funding, re-capitalisation of banks if necessary. They also agreeda series of key actions, national guarantees, bankdeposits protecting tax payers’ investments as well. Ithink those principles and actions have shown the EUat its best, coordinated, focussed and clearlydelivering for individual businesses and familieswhich is something I hope I will be able tocommunicate here in the UK over the months ahead.So I think it has been actually pretty good and we willcontinue to engage with the EU heads ofgovernment. The Prime Minister has taken a hugelead in this role and I think it is good to see thishappening. It is sad that it has maybe taken this tohave something that so clearly shows the added valueof the EU but I think sometimes in a crisis that iswhen these things emerge and are very clear.

Q20 Chairman: I have one question on this and thatis to do with regulation. Many people have, probablyjustly, blamed what has happened on what they callthe 20 year frenzy of deregulation. There is a lot offinger-pointing going on about that at the moment. Inotice that the EU is going to the November 15summit with a set of proposals to improve regulationssuch as supervisory colleges for cross-borderfinancial companies, to strengthen risk controlmechanisms, codes of conduct on excessive risktaking, tighter rules for credit rating agencies,harmonised definitions of banks capital, et cetera, etcetera. That is a pretty ambitious set of proposals. Atthe end of the day the question to pose I suppose is:are we or are we not in favour of a Europe-wideregulator or are we going to settle on parameters forregulation for the whole of Europe and leave it to thenational regulators to do the job? At the weekend inParis I ran into Jacques de Larosiere, former head ofthe IMF, and he told me that President Barroso hadjust asked him to take on the job of trying to come upwith a Europe-wide set of proposals on this andclearly the European Union would appear to bemoving towards the idea of a Europe-wide regulator.You could write to us later about this if you do notwant to answer it now, but I am very interested toknow whether or not our position has changed. Itused to be, if I am right, that we were not in favour ofa Europe-wide regulator but under the changedcircumstances it seems to me that maybe theargument for one is beginning to gain some credencein the EU. Do you have any views on this?Caroline Flint: There are people raising this issue butof course again some of the financial challenges weare facing and when you start looking in terms ofregulation they are not just European they are globaland again part of getting a coherent EU voice on thisis also to assist us in some of those discussions that

need to happen on that level as well, something thatthe Prime Minister for some years has been arguingfor discussion on. I would be happy to write to theCommittee on this. I think again a lot of questions arebeing asked at the present time. I do not thinknecessarily that all the answers have been found, butI think the fact that the right questions are beingasked for us to debate these issues is important and Iam happy to write to the Committee on thatparticular issue.Chairman: That would be very helpful for ourcolleagues on our sub-committee dealing witheconomic and financial aVairs because they aregetting into this area right now.

Q21 Lord Harrison: Minister, a very warm welcometo one of the best jobs in government. I want to talkabout the Stability and Growth Pact which I alwaysthought should have been the Growth and StabilityPact because the Treaty quite clearly says that oncestability has been established then growth can becontemplated and should be contemplated. We nowlive in very diVerent times because of the financialcrisis and suddenly everybody is interested in gettingthe European economy going again, giving it a kickstart, so concentration comes on growth. What isyour view and the view of our government about theoverall debt criteria and the budget deficit criteria?Should these be ignored and overturned in the needto concentrate and focus on growth or should they bemaintained? Or should we turn a blind eye for aperiod whilst we try to kick start the economy?Caroline Flint: The Stability and Growth Pact hasand continues to have the full support of the UKGovernment. We continue to believe that it doesprovide a flexible and strong framework forcompetition policy. At both the October EuropeanCouncil and the 7 October ECOFIN meeting headsof government and finance ministers indicated thatthe pact should continue to be fully applied. Iunderstand that the Commission will bring forwardan EU economic recovery strategy in advance of theDecember European Council which will be based onthe Lisbon Strategy and the Stability and GrowthPact and will look at what that paper brings forwardin terms of any changes at that point. As I say, I thinkthere is a sort of consensual view that the Pact isappropriate today. The fact is that having the Pacthas not proved an obstacle to measures that havebeen taken in terms of recapitalisation or any otherforms of proportionate intervention, but obviouslywe will look at the Commission document withinterest when it is produced.

Q22 Lord Harrison: Say the current budget extendsbeyond three% or the overall longer debt ratioextends beyond 60% (these are the targets that havebeen observed over the years or attempted to be




observed) there may be a justification. People maysay that for a period you do need to do that if youtruly want to begin to develop opportunities.Caroline Flint: I think that the Council has indicatedthat there may be exceptional circumstances where atemporary deficit above should be provided for and Ithink that has been acknowledged in discussions andagain I think we are dealing with exceptional timesand people are engaging on these issues. However, Ithink again what might be required on a temporarybasis as opposed to changing the fundamentals of thePact is a diVerent discussion.Lord Harrison: I think if you have a close reading ofthe original Treaty they mention those exceptionaltimes so I think there is latitude there. I hope youradvisors do point you that way.Chairman: I think that is absolutely right. It isimplicit in the Pact under those circumstances. Thetest is whether a country is prepared to do anythingto try and correct it. If they just say, “Well we’ll floatalong now we’re above the ceiling, we’ll go along withit because these are unusual times” then the Pactcomes down with force but if they show that they aremaking every eVort to get back down under the limitthen that appears to be okay.

Q23 Lord Roper: The Prime Minister’s visit to Parisat the time of the meeting of the Eurogroup wasrather useful and helpful in moving towards acommon policy. Do you think that could be aprecedent for future meetings between Britishrepresentatives and the meetings with the Eurozone?Caroline Flint: I think that our Prime Minister beinginvited to attend that meeting was a positive one. Ithink it is also about demonstrating that the issues weare facing are not a Eurozone problem in and of itself.We will of course continue to cooperate totally withEurogroup representatives but I think it is also veryimportant that we are cooperating and working withall the EU Member States and that the EU as a blockgroup is coordinated and coherent in terms of itsapproach. I think that is something we wouldsupport. As I say, there is nothing to be gained interms of some sort of division within the group itself.From January again, in another forum, we will beassuming presidency of the G20 and again I havebeen talking to Czech colleagues about their place onthat in terms of the EU Presidency. I think it is aboutobviously where it is important and where it makessense. Of course the UK is going to take part inforums but let us not let those forums overshadow orget in the way of the collectivity that we need tocontinue to be supportive on this. I think there werea few concerns in the last couple of weeks thatsomehow some of the countries felt left out of someof these forums and we certainly want to make surethat everybody feels they are included in diVerentways. I think what has been interesting for me on this

is that I suppose in some of my visits over the lastcouple weeks I have become aware of some of ourcolleagues in the EU who do not necessarily face thesame banking problems as we in other states but whoare very concerned about what will happen in termsof the economy where, as a result of a credit crunch,tourism is aVected, exports of goods are aVectedbecause people are not spending the money. They arevery interested in what is happening too and want tofeel that they are being fully engaged and activelyencouraged to be part of any discussions on anythingto do with the financial crisis.

Q24 Lord Roper: I had not realised we were going toget the presidency of the G20 in the New Year. If thatis the case will we be attempting to make it a G21 sothat Spain will be able to attend?Caroline Flint: I think there are some arrangements atthe moment for Spain to actually attend the nextmeeting, but I will write to you on that. I am meetingmy Spanish counterpart later this afternoon so Imight glean something from that.

Q25 Chairman: We were going to ask you as a lastquestion whether the government has any plans torevisit the five economic tests for Eurozonemembership. We left it to last because you can give aone word reply and I know what it is going to be. SoI therefore see little need to ask that question.Caroline Flint: We have a schedule for later and I amhappy to get HMT to write to the Committee. Thefive tests still apply and we are still where we are interms of next year’s budget.Chairman: If I may be so bold as to give governmenta piece of advice which I am not at all used to doingas you well know, that is that they read the excellentarticle by Willem Buiter, the former member of theMonetary Policy Committee headed “There is noexcuse for Britain not to join the Euro”. It is a very,very well articulated piece, particularly in light of thecurrent crisis.

Q26 Baroness Howarth of Breckland: During yourevidence on several occasions you talked about beinga practical person, you talked about the eVect ofpolicy on ordinary families and you talked about howthe EU can add value to ordinary families. One of thethings that certainly vexes me is how we convey toordinary families exactly what that added value isbecause as far as they are concerned many of themsimply see it as an added cost and added bureaucracy.I just wondered how you see this communicationproblem that we have which we came across verymuch in Lisbon and in Ireland where the Irish did notunderstand the issues because of the way they wereportrayed. What else can we do to help ordinaryfamilies, as you put it, to really understand theserather complex issues?




Caroline Flint: If I set myself the task of the Britishpublic to love the EU I think I might be having a bitof a problem but if I can maybe make some progressin trying to be clearer and communicate better theadded value I will try to do that. I think one exampleis the financial situation at the moment. I think manyfamilies in the UK and probably across the whole ofthe EU have been on a huge learning curve abouthow these diVerent banking systems work and how itdoes have an impact on them and why it is importantto stabilise it. I think sometimes, whether it isEuropean politics or national politics, we cansometimes end up not seeing the wood for the trees.We also I think sometimes underestimate—oroverestimate maybe I should say—how much peopleknow given that they are running busy lives and arenot immersed in the detail of policy that many of usare in this place. I think it is looking for those thingsthat really make a diVerence and if, for example, overthe months ahead, through national actions and EUactions and global actions we can show there is acritical line for how that is helping people but also notin terms of the crisis but also as the economy recoversgetting out of it. We have some big debates next yearin terms of jobs and skills and the role the EU canplay. I will do my best to get that across. However Ithink there are other issues as well. As a former HomeOYce minister I know only too well that actually ourcooperation across the European Union has been keyin terms of thwarting some of the most seriouscriminals on our continent and again I am lookingforward over the months ahead to working withministers in our domestic departments to have a lookat just what has been the output of our engagement.There are thousands of things we can do and, as Isaid, I do not want to get lost in that, but I thinkactually there are some things like cheaper mobilephones, access to health treatment when you are inthe European Union, justice as well as, let us notforget, 10% of the workforce in the UK owe their jobto inward or export opportunities as a result of beingpart of the European Union. I know as aconstituency MP when I say to people, “Don’t you

Memorandum by the Rt Hon Caroline Flint MP, Minister for Europe

UPDATE ON DEVELOPMENTS CONCERNING THE LISBON TREATY

Following my appointment as Minister for Europe earlier this month, I wanted to take an early opportunityto update your Committee on developments around the Lisbon Treaty following the Irish referendum.

As you know, the Government ratified the Lisbon Treaty on 16 July following Parliamentary approval of andRoyal Assent to what is now the EU (Amendment) Act which implements the Lisbon Treaty in UK law. 24Member States have now completed their Parliamentary processes to ratify the Lisbon Treaty.

The Irish view on Lisbon was given in their referendum on 12 June. As the Foreign Secretary said in the Houseof Commons on 16 June, there is no question of “bullying” or “bulldozing” the Irish. Ireland has asked fortime and the Foreign Secretary has made clear the Government’s view that we should respect that.

know this?” and they say “Of course we know it,we’re bored of you telling us”, it is only when we getthat reaction on some of these very positive outputsof being a member of the EU will we feel a little bitmore comforted that our communication job is done.I do not claim to have all the answers but I will domy best.

Q27 Chairman: That is a very encouraging reply andmusic to the ears of this Committee. I do hope thatgovernment will take on board the fact that somehowwe have to revive interest in European Parliamentelections. It is a curious paradox and a very sad onethat as the European Parliament accumulates morepower, interest in the elections goes down andparticipation in the European Parliament electionshas been sliding down ever since they began which isvery distressing. Maybe the answer is that we have toget national parliamentarians more involved in thecampaign for the European Parliament because theyare closer to the people. People will ask their memberof Parliament about the European Union but they donot seem to ask their member of the EuropeanParliament, and do not even know who he or she is.That is a fault that must be corrected. Minister, Ithink I can speak on behalf of the whole Committeewhen I say that we are delighted to have spent thishour with you. It has been a steep learning curve foryou; you must have the best climbing boots inParliament because you have gone up it very, veryrapidly indeed and we have been very well informedby you and are very pleased with what you have tosay. On behalf of the Committee and on behalf of mysuccessor, John Roper, may I say that when he takesover I am sure he will benefit enormously from yourfuture visits to the Committee after EuropeanCouncils or on any other occasion when theCommittee feels it would like your views and youradvice. Thank you very much and thank you toAndrew as well. We all wish you very, very well in thisextremely challenging time in that job. We hope youenjoy it too.Caroline Flint: Thank you very much.



This issue was discussed at 19–20 June European Council and the Conclusions recorded that:

“The European Council agreed to Ireland’s suggestion to come back to this issue at its meeting of15 October 2008 in order to consider the way forward. It underlined the importance in the meantimeof continuing to deliver concrete results in the various policy areas of concern to the citizens.”

On 10 September the Irish government published an independent survey as to why Irish citizens voted as theydid in the referendum. The survey found that the main concern was lack of knowledge about the Treaty. Otherconcerns related to:

— the future composition of the Commission;

— corporate tax base;

— social and ethical matters, including Irish abortion law; and

— Irish neutrality.

The survey is publicly available on the website of the Irish Department for Foreign AVairs: www.dfa.ie.

An Irish Parliamentary Committee on Ireland’s future in the Union has also been established. This Committeewill examine the issues that arose during the Irish referendum campaign, including the concerns highlightedby the survey, and how they sit in the broader context of Ireland’s EU membership. It is due to report by theend of November.

At the European Council on 15–16 October, Taoiseach Brian Cowen set out the Irish government’s analysisof the survey; the European Council took note of the concerns raised. As the Conclusions record, EU Headsagreed with the Irish government’s proposal that it:

“will continue its consultations with a view to contributing to finding a way to resolve the situation.On that basis, the European Council agreed to return to this matter at its meeting in December 2008with a view to defining the elements of a solution and a common path to be followed.”

The Government believes that this is the right way to move forward. It is for the Irish to decide what they willdo next and, on that basis, for the EU as a whole to agree the way forward. We look forward to the Irishproposals in December and will keep the Committees informed of further progress. The full text of theTaoiseach’s statement at the October European Council has been placed in the Libraries of both Houses.

I can also confirm that the technical discussions on detailed Lisbon Treaty implementation issues continue tobe suspended. You will recall that under the Slovenian Presidency in the first half of 2008 a series of technicalissues were identified for implementation work—as has happened on every EU amending treaty to date. Wewill continue to keep the Committees updated if and when a Presidency proposes to restart any suchdiscussions.

On the implementation of the yellow and orange card system and enhanced scrutiny of the JHA opt-ins, weare currently studying the House of Commons European Scrutiny Committee’s recent report on “Subsidiarity,National Parliaments and the Lisbon Treaty” and will respond on these points in good time. It remains theGovernment’s position, as we set out during passage of the EU (Amendment) Bill that we will work with bothEU Scrutiny Committees and the authorities in both Houses, to ensure that processes are in place to ensurethat each House can implement these new powers before the Lisbon Treaty enters into force.

I look forward to working closely with you across the range of EU business and to continuing the open andproductive relationship between the Government and the Committee. I also look forward to appearing beforeyour committee on 11 November to discuss the October European Council.

30 October 2008

Supplementary memorandum by the Rt Hon Caroline Flint MP, Minister for Europe

EU-RUSSIA SUMMIT, NICE, 14 NOVEMBER

When I gave evidence to your Committee on Tuesday I promised to let you have details of the agenda for theEU-Russia Summit, which will take place in Nice on Friday 14 November. The EU, as host, has proposed thefollowing draft agenda for the summit:

1. EU-Russia relations: state of play and future.

2. Economic and financial crisis.

3. International and regional issues.

I hope that this is helpful.

13 November 2008



Further supplementary memorandum by the Rt Hon Caroline Flint MP, Minister for Europe

SPANISH PARTICIPATION AT THE G20 SUMMIT

When I gave evidence to your Committee on 11 November, I undertook to write to confirm the position onSpanish participation at the G20 Summit on 15 November.

A Spanish delegation will be attending the G20 summit in Washington this weekend. The Spanish Ministerfor Europe, Diego Lopez Garrido, confirmed this to me personally when we met just after my evidence sessionwith you. It is my understanding that Spain will be occupying the French national seat (France holds two seatsat this summit, one as a member of the G7 and other as the current holder of the rotating EU Presidency).

The UK has supported Spanish attendance at G20 and the Prime Minister has told his Spanish counterpartthat when the UK became Chairman of G20, we would ensure Spain attended.

Aside from this issue, we are very close to the Spanish in our approach to the downturn. Spain has been verypositive about the UK rescue package, and has acted swiftly to implement the actions agreed at the OctoberEuropean Council based on the UK plan. Like the UK, Spain wants the EU to work closely with the US tocome up with a global solution to the economic crisis.

13 November 2008

Further supplementary memorandum by the Rt Hon Caroline Flint MP, Minister for Europe

When I gave evidence before your Committee on 11 November, I undertook to write to you about the futuredirection of EU level financial supervision and regulation.

Recent events have highlighted some of the challenges facing the supervision of financial institutions andmarkets, and at the October European Council, EU Heads re-committed to urgent implementation of theautumn 2007 ECOFIN Roadmaps, including to improve cross-border cooperation. As part of this Ecofin hasendorsed the UK’s proposal for the creation of supervisory colleges to improve supervisory cooperation andcooperation, facilitate information sharing, and improve the cross-border supervision of international groups.

The UK does not favour a single European supervisor for financial services. While recent events show the needto improve supervisory cooperation internationally, they have also highlighted the role of nationalgovernment and crisis management arrangements, showing that national accountability remains a critical partof both ongoing and crisis supervision. The UK’s proposals allow for national accountability to remain, whilstencouraging greater cross-border cooperation and convergence.

As you noted, a high-level group has been set up under the leadership of Jacques de Laroisiere to look atsupervision, financial stability oversight cooperation, early warning mechanisms and crisis management, andhow supervisors in the EU should cooperate globally. The UK looks forward to discussing its conclusions atthe Spring European Council 2009.

The OEC conclusions also called for acceleration of work on the Capital Requirements Directive, a Europeansystem to register Credit Rating Agencies, and further rules on the protection of deposits, all of which the UKsupports.

November 2008

Further supplementary memorandum from Rt Hon Caroline Flint MP, Minister for Europe

When I gave evidence before your Committee on 11 November, I undertook to write to you regarding Russianparticipation in the Quartet, to let you know whether events in Georgia had impacted upon Russianparticipation in the Quartet, and what the outcomes of the recent Quartet meeting had been.

The Quartet is an important mechanism for coordinating the international community’s support for theongoing Israeli-Palestinian negotiations. It also plays a key role in galvanising support for the Annapolisprocess and the foundation of a viable Palestinian state. We continue to fully support its eVorts.

Russia remains fully engaged in the Middle East Quartet (alongside the UN, US, and EU). Russian ForeignMinister Sergei Lavrov attended the Quartet meeting in Sharm el-Sheikh on 9 November. The Quartet issueda statement outlining the key areas of discussions and reiterated their support for the negotiations between theIsraelis and the Palestinians and commitment to a two-state solution. Foreign Minister Lavrov oVeredMoscow as the venue for an international MEPP meeting, and the Quartet agreed in its statement that spring2009 could be an appropriate time for a Moscow meeting. I have attached a copy of the Quartet’s statement.



The Foreign Secretary discussed MEPP issues with Russian Foreign Minister Lavrov on 31 October andunderlined the importance of sustaining momentum on the MEPP into 2009. Lavrov agreed and highlightedthe need for a comprehensive approach to peace in the region—an approach that we strongly agree with. Heand the Foreign Secretary agreed to stay in close touch on the MEPP in the months ahead.

The MEPP remains a critical issue for wider Middle East stability, and a key priority for the whole of theinternational community, including for the UK and for Russia.

This should not be aVected by other concerns. We remain convinced that this is an area where we can workvery constructively with Russia, particularly given Russia’s key role in driving forward progress through theQuartet.

November 2008

Quartet Press StatementSharm el Sheikh, Egypt9 November 2008

The following statement was issued today by the Middle East Quartet (United Nations, European Union,Russian Federation, and the United States):

Representatives of the Quartet—U.N. Secretary General Ban Ki-Moon, Russian Foreign Minister SergeiLavrov, U.S. Secretary of State Condoleezza Rice, High Representative for Common Foreign and SecurityPolicy of the European Union Javier Solana, European Commissioner for External Relations Benita Ferrero-Waldner, and French Foreign Minister Bernard Kouchner—met today, and heard from Palestinian AuthorityPresident Mahmoud Abbas and Israeli Foreign Minister Tzipi Livni at their request. They were joined byQuartet Representative Tony Blair. President Abbas and Minister Livni briefed the Quartet on Palestinian-Israeli negotiating eVorts since the 27 November 2007 international conference in Annapolis, Maryland thatformally launched bilateral negotiations to bring an end to the conflict by achieving the goal of two states,Israel and Palestine, living side by side in peace and security. The Palestinian and Israeli representativesreaYrmed their commitment, as stated in the Annapolis “Joint Understanding”, to vigorous, ongoing andcontinuous negotiations in order to conclude a peace treaty resolving all outstanding issues, including all coreissues, without exception, as specified in previous agreements.

The parties’ representatives aYrmed that, over the last year, they have engaged in direct, sustained, andintensive bilateral negotiations, based on a joint work plan that included the establishment of more than tencommittees. They described how the parties have been actively engaged not only on core issues but on an arrayof other topics necessary to turn the two-state solution into a reality. Without minimizing the gaps andobstacles that remain, the representatives of the parties shared their assessment that the present negotiationsare substantial and promising and they have succeeded in putting in place a solid negotiating structure forcontinued progress in the future.

President Abbas and Foreign Minister Livni stated the parties had reached a number of mutualunderstandings on the principles governing their negotiating process. These include:

— The need for continuous, uninterrupted, direct, bilateral negotiations.

— The principle that nothing would be considered agreed until everything is agreed.

— The need to reach a comprehensive agreement addressing all issues, as agreed at Annapolis, ratherthan just announce agreement on selected items in isolation.

The parties’ representatives also confirmed that, as stated in the Annapolis Joint Understanding, the partiesremained committed to implementation of their respective obligations under the Performance-BasedRoadmap to a Permanent Two-State Solution to the Israeli-Palestinian Conflict and to the agreed mechanismfor monitoring and judging Roadmap implementation and that, unless otherwise agreed by the parties,implementation of the future peace treaty will be subject to implementation of the Roadmap, as judged by theUnited States.

In addition to describing the structure of the negotiations and indicating areas in which progress has beenachieved, President Abbas and Minister Livni expressed gratitude for international support provided duringthe last year and requested continued support from the Quartet and all members of the internationalcommunity. First, they asked that the international community support the parties’ sustained eVorts in theframework of the Annapolis process and that it respect the agreed principles for their negotiations as describedto the Quartet. Second, they asked that all States promote an environment conducive to peace, non-violence,and the two-state solution. In this regard, they urged political and economic assistance, especially in relationto institutional and security reform, capacity building, economic development and the fulfillment of pledges,to the legitimate Palestinian government which has accepted the Quartet principles and respects the PLO



commitments. They asked the international community to redouble eVorts to confront and deny support forextremism, incitement, terrorism, and intolerance. Finally, the representatives stressed that, absent the jointrequest of the parties, third parties should not intervene in the bilateral negotiations. At the same time, theyconfirmed that international support and assistance will be vital once an agreement is reached, and that theyintend to jointly consult members of the international community on this issue at the appropriate time.

The Quartet expressed its appreciation for the description by the parties of their joint eVorts, which confirmedthe seriousness of the Annapolis process and underscored the determination of the parties to reach acomprehensive agreement. The Quartet reiterated its commitment to supporting the parties’ eVorts,underlined its commitment to the irreversibility of the bilateral negotiations, pledged to respect the bilateraland confidential nature of the negotiations, and called on all states to adhere to these same commitments. TheQuartet endorsed the goals set out by the parties and called on all states to lend their diplomatic and politicalsupport to that end, including by encouraging and recognizing progress to date.

The Quartet renewed its call on relevant states and international organizations to assist in the development ofthe Palestinian economy, to maximize the resources available to the Palestinian Authority, and to contributeto the Palestinian institution-building program in preparation for statehood, as decided during the Paris,Bethlehem, and Berlin Conferences. The Quartet cited Jenin as an example of the success of reforms institutedby the Palestinian government and of cooperation between the two sides, made possible in the context of theAnnapolis process. The Quartet further welcomed the recent deployment of Palestinian security services in theHebron governorate as a sign of the progress that has resulted from increased security cooperation. TheQuartet emphasized its determination to continue to work with Israel and the Palestinian government tofacilitate access and movement and an improvement in conditions on the ground in order to address urgenthumanitarian needs, foster economic activity, and improve the atmosphere for the negotiations. The Quartetreiterated its call to the parties to fully implement their obligations under phase one of the Roadmap, includingin relation to freezing settlement activity and the dismantlement of the infrastructure of terrorism.

The Quartet emphasized the importance of continuity of the peace process. The Quartet agreed that the springof 2009 could be an appropriate time for an international meeting in Moscow.

The Quartet reaYrmed its previous statements, including the 26 September 2008 statement issued in NewYork. Further, welcoming the recent calls for a broader peace, the Quartet oVered its support for the expansionof ongoing diplomatic eVorts toward regional peace, noted the importance of the Arab Peace Initiative, andreaYrmed its commitment to a just, lasting, and comprehensive peace in the Middle East based on UnitedNations Security Council Resolutions 242, 338, 1397 and 1515.



TUESDAY 20 JANUARY 2009

Present Cohen of Pimlico, B Plumb, LDykes, L Powell of Bayswater, LKerr of Kinlochard, L Richard, LHannay of Chiswick, L Roper, L (Chairman)Howarth of Breckland, B Sewel, LJopling, L Teverson, LMance, L Trimble, LMaclennan of Rogart, L Wade of Chorlton, LPaul, L


Witnesses: His Excellency Mr Jan Winkler, Ambassador of the Czech Republic, and Mr Miroslav

Kolatek, Deputy Head of Mission, examined.

Q1 Chairman: Ambassador, a very warm welcometo this meeting of the Select Committee. We are verypleased to see with you Mr Kolatek who is theDeputy Head of Mission. We are also pleased to seethat a number of your colleagues from other MemberStates are here. I think I should perhaps begin bymaking an apology. I have been chided by various ofmy colleagues by saying the one thing a goodchairman should do is remember that there issomething that does happen once every four years on20 January at 5.00 pm and that one should notoverlook these things, and I apologise to you as well.This session is on the record and it will be webcast aswe go on. You will receive a transcript of what youhave said in the questions and you will have anopportunity to propose any corrections to thattranscript. I wonder whether you would like to makean opening statement?His Excellency Mr Winkler: My Lord Chairman, myLords, I would like to make a statement. Thank youvery much for giving me the opportunity to stand, orrather sit, among you today and to inform theesteemed EU Select Committee about the CzechPresidency of the European Union Council. As youhave mentioned, many other important events aretaking place today: the inauguration of the 44thAmerican President; also an ECOFIN meeting; andalso our Foreign Secretary addressed the ForeignAVairs Committee of the European Parliamenttoday. In addition, I was reminded by my colleaguesthat today is also payday at the Czech Embassy soanother pleasure!I would like to stress that the year 2009 is special forus Czechs in two ways. Firstly, we have been given theopportunity to represent the European Union and alsowe are going to commemorate an event of greatimportance in Czech and European history, the 20thanniversary of the fall of the Iron Curtain and thevictory of the Velvet Revolution in the former

Czechoslovakia. If I go back briefly in my memoryexactly 20 years, I remember the enthusiasm ofhearing about President Mitterrand having breakfastin Prague with Vaclav Havel and other dissidents andthen Human Rights Day on 20 December 1988 whichwas celebrated by the first official free gathering ofCzech citizens addressed by Havel. Our hopes flewhigh but then in January, when we spontaneouslycommemorated the 20th anniversary of student JanPalach’s death in Wenceslas Square, we were againbeaten by riot police using tear gas and water cannons.This happened repeatedly every day for more than aweek, and Havel and many others were arrested again.We were depressed and humiliated so you willprobably believe me when I say that I would neverhave imagined that my country would chair theEuropean Union 20 years later and that I would beinvited to introduce the Czech Presidency in theHouse of Lords.As you are well aware, the Czech Presidency waspreceded by a successful French one. France had anambitious programme which she managed toimplement very well. At the very beginning howeverthe French Presidency was confronted with suchevents as the crisis in Georgia and the global financialcrisis. France, and President Sarkozy himself, showedan admirable determination in solving those crisissituations. We are especially delighted that the FrenchPresidency succeeded in the facilitation of keydocuments that we can now build on. Since we tookover the Presidency we have found ourselves in asimilar position. We faced a crisis in Gaza and thecollapse of gas supplies into the EU Member States. Asfar as the latter is concerned, the Czech Presidencysucceeded in concluding an agreement on thedeployment of monitors in the Ukraine. I am also gladto announce that due to the enormous pressurecoming from European leaders and EU institutions anagreement and settlement of the gas dispute between



20 January 2009 His Excellency Mr Jan Winkler and Mr Miroslav Kolatek

Ukraine and Russia was reached and gas supplies toEurope via the Ukraine were resumed. A Slovakofficial has confirmed today that at noon the gasreached Slovak borders. We still remain on alertthough. The Czech Presidency was also working hardto facilitate a solution to the current conflict in Gaza.Arriving at a solution is a long-term process. Ourpriority at the moment is to strengthen the achievedceasefire as a pre-condition for alleviating thehumanitarian crisis. The two-state solution remainsthe best hope for a lasting peace. With regard to this,the EU will work with other international partners toresume peace talks. In this respect, it also underlinesthe need to see tangible progress in Palestinianreconciliation, supported by the efforts of Egypt andthe Arab League. The Czech Presidency is going tohost two separate meetings, tomorrow a dinner of 27foreign ministers with Tzipi Livni, and on the eve ofGAERC on Sunday there will be another dinner withrepresentatives of Egypt, Turkey, Palestine andJordan.These ad hoc activities are fully complementary to theoriginal Czech priorities, the three Es, which stand forEconomy, Energy/Climate and Europe in the world.The work programme of the Czech Presidency isbased on the continuity of EU policies and on co-operation with France and Sweden as stated in thejoint 18-month programme of the Council. Let me saya few words about the first E which stands forEconomy. The global economic crisis has once againproven that in the global market no-one is protectedfrom the consequences of mistakes. Undoubtedly theprimary task during the coming weeks is to prevent afurther deepening of the crisis. We believe that theEuropean Economic Recovery Plan approved by theCommission during the French Presidency is a goodframework for the co-ordinated effort of theEuropean Union and its Member States.Implementation of this plan should be effective,targeted and time-limited. Reflecting the specificconditions of the Member States, it should respect theprinciples of the Stability and Growth Pact as well asthe competition rules. It is necessary to preventexcessive regulation and to avoid protectionism aswell as the irresponsible infusion of financial fundsinto the economy. Just today ECOFIN is discussing itspreparation for the G20 Summit in London in order toco-ordinate a new contribution for a solution on theglobal level. Chairman, my Lords, the recentdevelopments fully justify the emphasis of the CzechPresidency on strengthening the competitiveness ofthe European Union by building a strong andtechnologically developed European economy. Thefocus has to remain on the goals of the LisbonStrategy. Our task will be to minimise theadministrative burden, which will be of most help tosmall and medium businesses, and also to make surethat EU agencies will be justly allocated in the

Member States. These premises are all expressed inthe motto of the Czech Presidency: “Europe withoutbarriers” but it should also be a Europe of rules at thesame time. This year also marks five years since thehistorically largest expansion of the European Unionin 2004. The Czech Presidency intends to host aninternational conference to commemorate this eventand at that conference a study prepared by theEuropean Commission will be released about thebenefits of this enlargement for European countries inthe years that have followed.The second E stands for Energy. As I have mentionedat the very beginning, the recent developmentsconnected with the disruption of supplies of Russiangas have proven again that energy is another Europe-wide and global topic. The recent ExtraordinaryEnergy Council organised by the Czech Presidencyopened a new discussion on energy security in order tomake efforts to diversify the energy mix, including therehabilitation of nuclear power and investments innew technologies, to reduce the dependence of theEuropean Union on Russian gas. The Nabucco naturalgas pipeline is an issue of the highest priority and so isthe support for the construction of new oil pipelines.In the area of energy security we would like to focuson three dimensions to the problem, firstly thecompletion of the second Strategic Energy Reviewwith an analysis of medium-term demand and supplyof energy in the European Union, and theidentification of appropriate infrastructure projects;secondly, the completion of the Directive on themaintenance of minimum stocks of crude oil and/orpetroleum products, because the implementation ofthis Directive, at least partly, saved some Europeancountries from the worst of the current crisis; thirdly,a review of trans-European energy networks to makethem more flexible and able to support countries inreaction to the development of supplies. At the end ofJanuary a Ministerial Conference on the prospects ofthe internal market for electricity is going to take placein Ostrava, a city in Moravia. The Czech Presidencylegislative priorities in this area intends to conclude athird package for the internal energy market, tocomplete the review of two Directives and twoRegulations for electricity and natural gas, and toimplement the Regulation establishing an agency forco-operation of energy regulators. As I havementioned, energy is directly connected to climatechange. Consensus on a worldwide scale should beachieved at the global UN Conference on ClimateChange to be held in Copenhagen in December thisyear. The Czech Presidency will take up the excellentjob done by the French Presidency and launch asystematic preparation for this conference. Of course,this will be a job for Sweden, but in these days theseminar on climate change is taking place in Prague inorder to pave the way from Poznan to Copenhagen.The third E is for Europe in the world. The positionof Europe as a global player depends above all on thequality of the trans-Atlantic partnership. The Czech




Presidency will put an emphasis on intensive dialoguewith representatives of the new US administration inthe key areas of the economy, climate and energy aswell as co-operation with third countries. We areready to work on setting up such relations with theUnited States during the first visit of AmericanPresident Barack Obama in Europe this April. Wewould also like to host on that occasion an EU/USASummit. The EU’s position in the world is going todepend on the stance the Member States are going totake during the talks regarding the new agreement onstrategic partnership with Russia. The events ofrecent years, and especially of recent months, haveraised a number of questions and have emphasised thenecessity of a common approach by the entire EU.The Czech Presidency is coming forward with aprogramme for the Eastern Partnership which isequally as important to us as the Union for theMediterranean was to the French. Its expeditedpreparation is needed because of the growingimportance of co-operation with the regions ofEastern Europe, especially with the Ukraine, as wellas the countries of the Caucasus and the Caspianregions. The Eastern Partnership Summit isscheduled for May and will be followed by aninternational conference on energy security, aSouthern Corridor Summit, bringing together boththose countries which produce gas and oil andcountries which are important for its transport toEurope. The last point on that area is that the historicunification and stabilisation of the European continentwould be left incomplete without the gradualintegration of the Western Balkans into the EuropeanUnion. Therefore, under our Presidency talks willalso continue on enlargement, covering the countriesof the Western Balkans and Turkey. The Presidencywill make efforts to maintain the dynamics of EUenlargement. We will do our best to achieve theprogress of the Western Balkan countries within theframework of the Stabilisation and AssociationProcess.Chairman, my Lords, the Czech Republic is leadingthe European Union in rather difficult times and, tomake things even worse, elections to the EuropeanParliament will take place in June 2009. Therefore, weare aware that the Parliament’s legislative activity willslow down and all negotiated agendas will be morepoliticised than usual. Following the Europeanelections, the Czech Presidency will have to start aprocess of appointing the new European Commission.We believe that the institutional framework of theUnion, particularly the Lisbon Treaty, will be anotherimportant issue. Recent talks with our Britishpartners have proved that our priorities are of equalimportance to them. In other words, the main Czechpriorities are also priorities for the United Kingdom.There are many other topics in the work programmeof the Czech Presidency that I could talk about but I

would like to give the floor to you and your questions.Thank you for your attention.Chairman: Thank you, Ambassador. I am going toturn to Baroness Cohen.

Q2 Baroness Cohen of Pimlico: Ambassador, youhave justly said that the Czech Presidency comes at adiYcult time, particularly in the teeth of a majorfinancial crisis. Will the legislation that was proposedduring the French Presidency remain a priority ordoes the Czech Republic intend to bring forwardfurther reform or diVerent reform and regulation ofthe banking sector?His Excellency Mr Winkler: We can divide ourlegislative eVorts into areas. The first one regardsfinancial markets, and there is a very importantreview of the Directive on the capital adequacy ofinvestment firms and credit institutions in theprogramme. There is also a Directive regulating theinsurance sector, regulation of credit rating agenciesand the E-Money Directive. This is for markets. Thesecond important area is taxation. Our key priority isregulation on tax fraud and tax evasion—and I donot believe it is only a Czech priority—and thenregulation on modernised and simplified systems oftax recovery and tax administration. We believe thatnew technologies can help a lot in decreasingadministration. Our next priority is to avoid or toreduce tax avoidance. There is a review of theDirective on taxation of income from savings. Wewant to close loopholes in the existing SavingsDirective. Then we would like to continue the workon the Code of Conduct and on business taxationrules. As I have said, we are working on documentswhich were prepared by the French Presidency andwe believe that in this particular area this is basicallywhat was decided even before the crisis came and hithard. The important thing we stress, and I mentionedit in my opening speech, is that we very much believethat after these short-term steps Europe shouldreturn back to balanced budgets to keep its finances,not in individual countries but in the EuropeanUnion as a whole, in good shape.

Q3 Lord Hannay of Chiswick: Ambassador, youreferred to the Middle East in your openingstatement and the problems in Gaza. I wonder if Icould ask you a question in two parts really. The firstis: what actions is the European Union now taking tomake this extremely fragile ceasefire more sustainableand durable? The second part: you may have seen oryou may not have seen that in this Committee’sreport on the Middle East peace process 18 monthsago we said that the EU’s objectives should be “toattempt to maintain a peace process that is asinclusive as possible, while firmly rejecting attemptsby outsiders and extremists to derail it.” I wonder ifthat is an objective which is shared by the Czech




Presidency and whether the Czech Presidency willtake the opportunity of the EU/US Summit that willfall at some stage during the first half of the year topress upon the United States the importance for thefuture of the region of its new administrationsustaining an active, balanced and consistent interestand engagement in the peace process.His Excellency Mr Winkler: My Lord, if I may startwith the final part of your question. We very muchhope that the first visit of President Obama to Europein April will cover all three of these very importantissues. We understand that President Obama willcome to London for the G20 Summit where the focuswill be on the economy. Then he will take part in theNATO Summit where Afghanistan will probably bethe key issue. We believe that also on that occasionPresident Obama will meet representatives of the 27EU countries to discuss the Middle East because it isobvious, that in April there will still be a lot to do andto discuss. In the short term of course we want toachieve well-functioning international control,especially in relation to smuggling weapons intoGaza, monitoring borders, and making use of theproposed naval operations by Britain, France andGermany. On Israel’s part we would like to reach anagreement on opening of border crossings and aremoval of the current blockade. We have already on9 January called on Israel to fully open the crossingsand express its readiness to re-deploy the EU BAmission in Rafah. Our immediate step is tostrengthen the achieved ceasefire and to make itrobust. As I have mentioned, we are now preparingthose two separate meetings, one with the IsraeliForeign Minister and then on Sunday with Egypt, thePalestinian Authority, Jordan and Turkey in order todiscuss how to proceed. The Czech Presidency cameup with a proposal for a humanitarian conference ora donors’ conference. We understand that this ideashould reflect the merits of Egypt on the outcome ofthe situation, and so we would support Egypt in theirintention to host a humanitarian conference. We arealso aware of a recent proposal coming from theFrench President to host a major peace conference.Of course it is clear that there is a lot to be discussed.We shall see if there is a space for this peaceconference but a humanitarian conference is veryimportant because coping with the humanitariancrisis in the Gaza Strip is a key priority.

Q4 Lord Teverson: Ambassador, you havementioned the conference that you wished to bringtogether and the parties that will be there. One of theparties that was missing from your list was what somepeople would describe as the elected Government ofPalestine at the elections, Hamas, and I wonderwhether you felt that the European Union and thePresidency should reconsider its decision not to talkdirectly to Hamas?

His Excellency Mr Winkler: We agree that Hamas wasthe winner of the elections in the Gaza Strip; on theother hand, we feel that reconciliation on thePalestinian side is of key importance. Hamas canbecome a partner in negotiations under twoconditions: if they renounce violence as a legitimatemethod of the political fight; and secondly, theyrecognise the right of Israel to exist. Under suchcircumstances then Hamas can probably change intoa political party. I have heard a lot of comparisonwith Northern Ireland on how important it is tonegotiate with Hamas, but we all remember that therewere conditions for Northern Ireland’s parties to beinvolved in those negotiations, so this is our position.

Q5 Lord Teverson: Ambassador, you gave sometime, I think quite rightly, to the gas dispute whichhas been one of the most recent challenges for theEU. We were going to ask you what the latestdevelopments are but obviously you have just told usand we have read it in the news, still I am sure wewould be interested to know whether you think thisis at last a solution and one which will last for sometime. I would be particularly interested in your viewson how we make this a more permanent solutiongiven that a similar thing happened a couple of yearsago, and I think one would say that the fact that thisproblem has happened again has meant that the EUresponse then was not very successful. How do wemake this a more permanent solution that works foreastern and central Europe and how do we make aframework by which this threat is removed? I wouldlike to understand particularly how the CzechPresidency will make this a better solution than wehad after the first crisis two years ago.His Excellency Mr Winkler: Lord Teverson, I amafraid that this is not something which can be solvedduring one Presidency. As we have heard, there werenew agreements signed between Russia and Ukrainefor ten years and they agreed on a price for gas for theUkraine and a price for transit. From the verybeginning the parties involved stressed that this is acommercial dispute. Yes, it is a commercial disputebut later it appeared to have political consequences,and for a certain moment we got the impression thatit is rather a technological disaster than anything else.As it is now, we see that there is some solutionbetween the Ukraine and Russia, but of course wehave to look for a long-term, legally bindingframework. That is one thing. The idea of upgradingthe level of agreement to government level is notpossible at this moment because the contracts at thecompany level last for about 30 years. However, whatwe can do, as I have mentioned already in the energysecurity part, is to diversify our supplies in bothgeographical and technological sense. We have todecrease our dependence and this will bring morecompetition. It is most unfortunate that there are, in




particular, eastern European countries which weretraditionally fully dependent on supplies fromRussia. Not all of these countries are lucky enough,like the Czech Republic to have easily built a newpipeline to Germany, and now we are able not only tobe supplied by gas from Norway but we can alsosupply Slovakia. Through the diversification and theimprovement of our infrastructure, the pipelines andthe networks, will be able to supply from south tonorth and north to south and east to west and theother way round according to the situation of themoment. When I mentioned this diversification, in atechnology sense, it is not only the issue of nuclearenergy but it is also the issue of liquid gas, and tobuild and invest in storage facilities which can reallysupply all parts of Europe from independent sources.As I have said at the beginning, I do not think this issomething that we can solve within six months, butdefinitely we would like to go this way and to createthe best possible conditions for that diversification.

Q6 Chairman: Ambassador, in your introductionyou talked about the importance which you gave tothe Eastern Partnership and the plans for a meetingto be held in May. We read the proposals which theCommission published in December on the EasternPartnership with the six Eastern European partnersof the European Union. I wonder whether you wouldlike to say a little bit more about how you intend totake forward these proposals and what are the mainaspects on which you feel further work needs to bedone by the Council?His Excellency Mr Winkler: We consider the proposalsof the Commission to be an excellent basis forredefining the framework relations with our easternpartners. Chairman, if you permit, I would like tostart by saying a little bit about what the EasternPartnership is not because there are some basic fearsand I would describe four basic fears. The first pointis that the Eastern Partnership is not anti-Russian. Itis a positive policy for 27 EU Member States and sixcountries of eastern Europe. It is not a negative policyfor anyone. Secondly, we do not attempt toredistribute existing financial resources. The EasternPartnership is not going to compete with the southernor other dimensions of the European NeighbourhoodPolicy. We do not want to compete with currentexisting regional policies and projects. Fourthly, thisis not an enlargement policy; this is not just analternative to the enlargement process that is wellestablished in EU practice. It is just a tailor-madeway towards ensuring stability and prosperity in ourneighbourhood and simply prosperity for all of us.We believe that this Eastern Partnership will be aflagship of our Presidency. That is why we arethinking about a summit. There is a date—and ofcourse all dates are not yet confirmed—in May. Also,as I say, a specific part, I would say a sub-part to the

Eastern Partnership is the Southern CorridorSummit which is supposed to bring together fivecountries of diVerent groupings which should alsoinclude Turkey as an important transit country. ThisSouthern Corridor Summit is planned for the eve ofthe Spring Summit. I believe that this EasternPartnership will be perceived as an importantcomplementary project to other dimensions. Whenspeaking about substance we believe that this willdeepen co-operation on energy, on economic matters,on trade and environment partnership but alsorespect for fundamental rights and freedoms, andsupport for the transformation process in thosecountries.Chairman: Thank you very much. Lord Wade?

Q7 Lord Wade of Chorlton: Ambassador, we havetaken a great deal of interest in the negotiation of theWorking Time Directive and a report on this matterfrom the Committee has supported the view of theBritish Government. Further to the EuropeanParliament’s rejection of the Council’s commonposition on the Directive, how does the CzechPresidency intend to handle this important matter asit heads towards conciliation between the Counciland the Parliament?His Excellency Mr Winkler: Thank you, Lord Wade. Ishould start by saying that the Czech Presidencydeeply regrets that the negative position of theEuropean Parliament remains unchanged. It was noteasy to reach a common position in the Council andfind a working solution for all 27 Member States andall economic sectors. The Council is aware of theEuropean Parliament’s unchanged position and isfully aware of the fact that a compromise between theCouncil and the European Parliament has to beachieved. We are prepared to launch newconsultations among the Member States on one sideand the European Parliament on the other. Webelieve that the appropriate opportunity for this willbe the informal Employment, Social Policy, Healthand Consumer AVairs Council which takes placelater this week on 22 to 24 January. In March theconciliation procedure will start with the EuropeanParliament, I think after the March EPSCO. Todaythe Czech Minister of Labour and Social AVairs andthe Chairman of the Council had a presentation ofthe work programme of the Czech Presidency in theCommittee on Employment and Social AVairs of theEuropean Parliament. Should the esteemedCommittee be interested then it will be a pleasure forthe Embassy to provide you with more informationon what arose out of the presentation, discussion anddebate in today’s meeting of the Minister in theCommittee.Chairman: Thank you.




Q8 Baroness Howarth of Breckland: Ambassador,thank you for a wonderful concert which Ithoroughly enjoyed and it showed me that you havea pretty marvellous cultural background in yourcountry. I notice from the document that you gave usthat you talked to us about a “Europe withoutbarriers”. I am concerned that the barriers amongstpeople are to do with culture and to do withdeprivation and discrimination. It has been reportedthat the Czech Presidency has no focus on socialpolicy as a key issue. That would give us some causefor concern, particularly with some of the Directivesthat at the moment are moving through, particularlywith some of the health issues. I wondered if youwould explain your approach to social policy.His Excellency Mr Winkler: Thank you for yourquestion. I am pleased to explain. Probably thisfeeling or this impression that the Czech Presidencydoes not pay much attention to social policy is basedon the importance that we attach to thecompetitiveness. We wanted to focus on makingEurope competitive (having the feeling that otherPresidencies focused on social matters more) becausewe believe that a strong and competitive Europe willgenerate new and better working places as well asadditional social benefits. I think I should mention atleast four priority subjects which I think refer well toyour comments. Firstly, we believe that the mostimportant thing is labour force mobility in the EUlabour market. It is one of the greatest achievementsof enlargement. We are very happy that countries likeBritain responded at the very beginning and sent animportant signal to employees and workers in ourpart of Europe. Then we pay a lot of attention toflexicurity principles. We believe that employmentand labour market flexibility should be increased.Another important priority is horizontal support forfamilies within EU policies, not just selective butreally horizontal support, and social services as a toolfor active, social inclusion of the most disadvantagedpersons and as an employment opportunity. I wouldnot agree that social policy will be neglected duringthe Czech Presidency. Rather, we are trying to focuson the areas which were not fully covered in theprevious periods.

Q9 Baroness Howarth of Breckland: Are you in factsaying that some of the social policies are embeddedand intrinsic to some of your other programmes?His Excellency Mr Winkler: Very much so, yes.

Q10 Lord Kerr of Kinlochard: Ambassador, in yourinitial presentation you explained the three prioritiesof the Presidency, one of which was energy/climatechange, and that you would be ensuring systematicpreparation for the Copenhagen Climate ChangeConference in December. Can you expand on that abit? How do you think the EU can best prepare itself

and how do you think it can best influence otherplayers at Copenhagen?His Excellency Mr Winkler: The internationalagreement on adopting commitments for thereduction of greenhouse gas emissions beyond 2012has become the ultimate priority for the CzechPresidency in the area of climate change. We aregoing to conduct the necessary preparatorynegotiations to achieve a worldwide agreement onsetting obligations in terms of the reduction ofgreenhouse gases after 2012. There is a series ofmeetings; some of them are traditional and they arecalled the Bonn talks. Two of those intercessionalmeetings will be held in Bonn in Germany in Marchand June this year, and those talks will undoubtedlyrepresent another positive move forward within thenegotiations conducted by the contracting parties tothe United Nations Convention on Climate Changeregarding how global agreement at the CopenhagenConference could be achieved. As I have mentionedbefore, this will be a job for the Swedish Presidency,but of course we will act in that period on behalf ofthe EU in these talks and at the same time thePresidency will also prepare an EU common positionfor the Copenhagen Conference in December. Justtoday there is a seminar/workshop on climate changewhich started on 18 January and at the end of theworkshop the European Commission presented acommunication on the direction of negotiations priorto the Copenhagen Conference. There are fivethematic areas being covered: financial aspectsrelating to the implementation of both reduction andadaptation measures; the legal form of futureagreement on climate change; the issue of measurableand verifiable criteria for activities in support ofclimate protection; EU international negotiationstrategy during 2009; and to minimise the adverseimpact of climate change on developing countries. Iwould like to stress one important point whichappeared quite recently. According to statisticspublished lately, foreign direct investment outsideEurope decreased by 41% and therefore we see thatsome countries will really suVer a lot in this globaleconomic crisis. We believe that climate changeshould not become a victim of this. We should reallywork hard to firstly make the EU able to set a goodexample for other important players like China,India, Brazil, and the United States of course, toaccept our position. We also see environmentallyfriendly technologies as one of the greatopportunities in how we cope with the economiccrisis.

Q11 Lord Sewel: Just to follow that up, I supposenothing would be worse than a weak and ineVectiveinternational agreement which would just amount toa bit of cynical window dressing really. After all theEU’s climate change and energy package is not put




together with total ease and concord. What do yousee as the main challenges that face the putting inplace of a robust package and specifically do you seeany role for enforcement?His Excellency Mr Winkler: First of all, we are verypleased that again we can build on the energy/climatepackage agreed during the French Presidency inDecember which agreed those 2020 goals. No, yourquestion on enforcement is very tempting but—

Q12 Lord Sewel: Go on, give way to temptation!His Excellency Mr Winkler: I cannot say I see anyspace for enforcement. I very much believe that thosecommitments should be driven firstly by a goodexample and secondly by market principles, so weshould try to come up with proposals which willmake it attractive to implement environmentallyfriendly technologies. Enforcement—can youimagine?

Q13 Lord Sewel: We know that the problem withKyoto was that there was no enforcement. We havegot Canada saying recently that it has just given upon reaching its targets and putting policies in placethat would make that possible. There is a greattemptation to sign up to an agreement that haswonderful sounding targets and then to bin it furtherdown the road, is there not?His Excellency Mr Winkler: I am also accredited to theInternational Maritime Organization and recently Ihad a discussion with the Secretary General. I arguedexactly about this issue because they have theirexperience with enforcement measures on shipping.As you know, there is a tendency to leave shippingand also air traYc out of the legally binding structure.It was the Secretary General who confirmed that theyreceive much better results through incentives tointroduce new technologies than throughenforcement. I agree that some legally bindingstructure has to be in place but this is something thatwill be widely discussed and might even have adiscouraging impact at the moment. I think asEurope in particular we should rather demonstratethat this is something which we do for us, notsomething we do in order to generate new advantagesfor us.

Q14 Lord Hannay of Chiswick: Just following thisup, perhaps the word ‘enforcement’ is grating on yourears a bit, but implementation of any package agreedat Copenhagen is surely going to be essential, and forthat you are going to need a structure in the UNwhich is much more robust than currently exists. Youwill not, I would have thought, and you might like tocomment, get the US on board in any package if theydo not believe that there is any likelihood that otherparties to it will actually be brought to fulfil andhonour the obligations they have entered into. That

is what Congress will be on about. I think that if theEuropeans take too relaxed a view aboutenforcement, the result will be that we will not get anagreement and so it would be better I would havethought if the Europeans could work up rathercarefully ideas in which the UN agency or bodywhich had a responsibility for implementation couldbe shaped up for part of the Copenhagen agreement.Burden-sharing between the developed anddeveloping countries is going to be at the heart of thisnegotiation, but nobody is going to accept it if theydo not think it is going to be honoured.His Excellency Mr Winkler: Thank you for thatcomment. If I may, Swedish colleagues are here so Iam sure they have listened carefully!Chairman: In that case, Lord Plumb?

Q15 Lord Plumb: Ambassador, I am almost temptedto ask whether you see any space for enforcement onthe Common Agricultural Policy as one that has beenwith us for a long time as you well know. ThisCommittee gave its opinion on the Health Check andit had views on the longer term eVects. The FrenchPresidency of course did try to take it further than theHealth Check but whilst there was not evenunanimous agreement on the Health Check it wasimpossible to take it further past 2013. We areencouraged to note that the Czech Presidency hasalready said that it is willing to try to take this further.I would like your opinion on that and I wouldparticularly like to hear your comments on the viewsthat some member countries have of the possibility ofswitching money from pillar one to pillar two. Theenvironmental area of course is one of great concernand great importance which can be applied in somany diVerent ways in diVerent countries, forobvious reasons. It is an important issue and wewould like your general comments on where we goafter 2013 in particular.His Excellency Mr Winkler: Lord Plumb, I think weare quite happy that on both the CAP and the budgetreview are still waiting for the key documents fromthe Commission—the Health Check and the WhitePaper on the budget review—because I am sure thatwe all agree that CAP reform is connected with theEU budget report as it is an important part. Theactivities of the Czech Presidency in this sphere of EUbudgets will depend on the publication date of theWhite Paper on the budget review by the EuropeanCommission. I am afraid that the present financialcrisis, and also uncertainty about the outcome of theLisbon Treaty ratification could have a significantimpact on the timing and discussion of the budgetreview. The outcomes of the budget reviewdiscussion, which will take place during the CzechPresidency if the White Paper is published, will besummarised in the Progress Report. The Presidencywill then submit that report at a meeting of the




General AVairs and External Relations Council, andthen after that the dimension of the CAP would bespecified and the discussion on CAP reform will start,but I am very sceptical that this will happen duringthe Czech Presidency. Good for us!

Q16 Lord Paul: Ambassador, you indicate in yourstatement and in answer to the first question that youare fully committed to achieving better regulationand that you will recommend that the betterregulation agenda should continue into the newCommission. In which areas are you particularlykeen to see more eVective initiatives for achievingbetter regulation, and how will you achieve this? Howimportant do you consider the proper use of impactassessments in ensuring better regulation, and atwhat stages in the legislative process would you likethem to be used more extensively, and how will youachieve this? Also will you see that better regulationis also simpler regulation? How are you going tomake sure that the older regulations are deletedbecause sometimes old regulation remains and newregulation is done for the same thing and it ends upconfusing the regulators as well as the regulated.His Excellency Mr Winkler: My Lord, betterregulation appeared as an important chapter in ourwork programme as a part of our competitivenesspriority. We believe that the improvement ofregulation, including the reduction of the regulatoryburden, is an important factor for improvingcompetitiveness and making it easier to engage inbusiness, in particular for small and medium-sizedenterprises, which as we all know generate asubstantial part of GDP. I was told that 99% ofbusinesses are small and medium-sized enterprises.The Presidency is interested in the fastest possibleimplementation of the initiatives submitted on thebasis of the outcome of the evaluation of theadministration burden on businesses and inapproving further steps in the action programme forreducing administrative burdens at the SpringEuropean Council. Furthermore, the Presidency willsupport the exchange of experience and best practiceexamples in the public administration systems of EUcountries, primarily in the area of the introduction ofelectronic devices into administrative processes andelectronic public administration, e-government, as atool for reducing the administrative burden. OurPresidency will insist on carrying out an impactassessment on newly submitted policies because oftenthe first step is to increase the administrative burden,so we believe that there should always be an impactassessment of any newly submitted policies,including assessment of alternative solutions and acomprehensive presentation of the main findings anddata obtained through consultations and impactassessment to the public. We will also focus on timelyand more intensive use of impact studies on the EU

decision-making process. We will lead thepreparation of the Council’s positions on the thirdstrategic review of the Better Regulation initiativeand we aim to recommend the continuation of itsagenda when the new Commission takes oYce.Furthermore, the Presidency will strive forconsolidation and support for the use of instrumentsimproving the implementation of EU legislation, so acombination of these three factors should deliver.

Q17 Baroness Howarth of Breckland: We all want tosee better and more streamlined regulation and we allwant to see less regulation very often, but I just wantto ask you that when you look at this in yourPresidency you will also bear in mind that sometimesfor some people that means looser regulation and notnecessarily the protection of the consumer. Iwondered how your Presidency would balance betterregulation, which means not just less but strongerlegislation in relation to protecting consumers,particularly as we are going to have a ConsumerCredit Directive coming forward?His Excellency Mr Winkler: I know that this is animportant issue which is always raised of how to keepthe balance because consumer protection needsregulation to set standards to protect the publichealth. I am not sure if in our work programme thereis any clear advice or any clear decision on how tokeep that balance. I promise, I will have a look to seeif we can answer this question on how to keep thisbalance. My answer right here would probably bebased on common sense.

Q18 Lord Sewel: Ambassador, one of the areas thathas caused recent concern, particularly to the UKagriculture industry, is the Pesticides Directive wherethe Commission basically refused to carry out animpact assessment. Do you think that can be avoidedin the future?His Excellency Mr Winkler: The issue of pesticides isof course an issue of the productivity of agricultureand in the end the price of food. So we share theconcern that the Pesticides Directive could lead to anincrease in the price of basic essential food. Becausethis is quite a new thing, again, this did not appear inour work programme but we will supply you with awritten statement if you wish.

Q19 Lord Sewel: I think, Ambassador, there are twothings. There is the substantive issue of whether it isa good or a bad thing to do what the EU did onpesticides but there is a worrying business on processwhich was the actual refusal by the Commissioner toproduce an impact assessment.His Excellency Mr Winkler: Thank you.

Q20 Lord Sewel: Could that be avoided, do youthink?




His Excellency Mr Winkler: Thank you.

Q21 Lord Jopling: Following that, there is a longtradition in the Commission of withholding evidencewhich would, if published, materially improve theopportunity for the Council—I am thinking of aparticular case—to carry out certain policies. There isa long tradition of this policy in the Commission oftrying to inhibit agricultural practices in order to suitpolitical ends. I am thinking of a very similar case toLord Sewel’s years ago when there was theintroduction of a proposed ban on growth-promoting hormones. The use of growth-promotinghormones led to cheaper food and the ban led tomore expensive costs in producing that food, and thiswas introduced at a time when the Commission failedto publish a scientific analysis of this. This is one ofthe really very bad records that the Commission hashad over the years in inhibiting methods of foodproduction by political devices. I would like to thinkthat the Czech Presidency would stamp on the

Commission very hard when it was attemptinganything of this sort.His Excellency Mr Winkler: Lord Jopling, thank youvery much for that comment and for reminding us all.If you say this is an old established practice in theCommission, we cannot confirm that as a relativelynew member, but we will definitely take this as aninspiration and recommendation to pay attention toit and we will work on it.Chairman: Ambassador, thank you very much indeedfor having given us such a wide range of answers toour questions this afternoon. It has been useful for usat the beginning of the Czech Presidency to have hadthis opportunity to meet you, to put the questions toyou, and to have had such very helpful answers. Canwe wish the Presidency well for the remaining five anda bit months and hope that it goes forward and thatyou have a very successful Presidency. Again, thankyou very much indeed for coming together with yourcolleague and we are very impressed by how many ofyour other colleagues have been here in solidaritywith you today. Thank you all very much indeed.



TUESDAY 3 FEBRUARY 2009

Present Cohen of Pimlico, B Plumb, LDykes, L Powell of Bayswater, LFreeman, L Richard, LHannay of Chiswick, L Roper, L (Chairman)Howarth of Breckland, B Sewel, LKerr of Kinlochard, L Teverson, LMance, L Trimble, LPaul, L


Witnesses: Rt Hon Caroline Flint, a Member of the House of Commons, Minister for Europe, and Mr

Ananda Guha, Deputy Head, Europe Strategy Group on the December European Council, examined.

Chairman: Minister, thank you very much indeed forcoming to see us again. I think you have with youtoday Ananda Guha who is the Deputy Head of theEurope Strategy Group. The session is of course onthe record and will be web cast. You will receive atranscript and will have the opportunity to proposecorrections. I understand that you do not want tomake an opening statement today so I am going toturn to Baroness Cohen to ask the first question.

Q1 Baroness Cohen of Pimlico: Minister, I wonder ifyou could tell us which Member States have so farannounced a budgetary stimulus along the lines ofthat outlines in the European Recovery Plan? Whendoes the Government expect that the target of 1.5%of EU GDP will be reached?Caroline Flint: What I understand, according to theCommission, is that most Member States haveadopted or announced fiscal stimulus. I think 19Member States have already taken action or havepackages in the pipeline with the largest fiscalstimuluses coming from Germany which is 3.4% ofGerman GDP over the next two years. Eleven othercountries, including the UK and Spain, haveimplemented measures of over 1% of their nationalGDPs

Q2 Lord Dykes: Can you indicate to us whatproportion of the European Investment Bank’s 30billion Euro loan package for small and mediumsized enterprises the Government expect UKbusinesses to receive?Caroline Flint: My understanding on that is that thereis something like £4 billion should be available and Ithink it is £1 billion EIB funds available in the UK bythe end of 2008. Clearly this is very helpful, I hope, inaddition to other measures the Government is takingand there has been work since the announcement

with four UK banks involved in helping to draw thismoney down and provide these loan guarantees.

Q3 Lord Plumb: Minister, what progress has beenmade, if any, towards the conclusion of the DohaDevelopment Round subsequent to the commitmentmade towards the end of the December Council? Ideclare an interest as one who has been involved in allof the rounds up to Doha leading a group of agri-business people and of course that, in relation todeveloping countries, has been extremely important.Caroline Flint: We still believe that it is important totry to secure a successful conclusion to the WTORound. It remains a priority for us. I think it is clearthat we were disappointed that the G20 was unable tofill the commitment made by leaders in Washingtonlast November. However, recent ministerialdiscussions seem to suggest that there is someappetite within the G20 and the WTO more broadlyto see how we might pursue this with more vigour in2009. Ministers recently discussed the WTO Roundat the World Economic Forum I understand inDavos and with their Chinese counterparts at theUK-China summit. EU trade ministers have alsoexpressed their continued commitment to the WTORound at their informal meeting in January. We aregoing to continue to support the director general,Pascal Lamy, in his eVorts to secure this deal. We willlook to continue working with our EU partners andthe European Commission to move negotiationforwards and clearly the G20 summit here in Londonwill be important to that end because of course thereare individual European countries represented roundthat table but of course the EU is represented in theform of the Czech Presidency at the table as well. Wewill continue to make the case that the issues we faceat the moment in terms of the international financialcrisis are obviously focussing everybody’s mind andattention but actually recognising what is in it for the



3 February 2009 Rt Hon Caroline Flint and Mr Ananda Guha

countries in the developing world but also what is init for us in terms of open trade agreements is still animportant priority both in the short term and thelong term.

Q4 Lord Kerr of Kinlochard: The press reportssuggest that the meeting in Davos was not a 100%successful. Are you worried, Minister, that recessionsnormally breed protectionism? This seems to be quitea sharp recession, and we seem to have a President ofthe United States who has not said a great deal on therecord about the virtues of free trade, has votedagainst the Central American Free Trade agreement,has been critical of NAFTA, has not said anythingabout bringing Doha to a successful conclusion,except that it would be necessary to attach labour andenvironmental conditions if it were to be concluded atall. How worried are you about that?Caroline Flint: I think it is fair to say that on one levelit is understandable that with diYculties individualcountries are facing they are very concerned aboutwhat is happening at home. I think the danger is tolose sight of the fact that open opportunities to tradeare very important in terms of recovery. I think Iheard a sound bite last week about not wanting toturn a recession into a depression and I think that iswhere the international context of this really counts.I think that is sometimes quite diYcult to explain tothe media and also to businesses and families who,understandably, in our home communities, feel thatdrawing in is a necessity. We have to get clearer andbetter at explaining why narrowing down our role interms of these international agreements but alsoprotectionism does not help. I think we can do thatbut I think we have to be clearer and do it in languagethat people understand. When I am out and about Ioften talk about the ten% of British jobs that aredirectly connected to our opportunities to trade andgain investment from the European Union. I oftensay to employers that it would be great if they couldexplain to the workers that they have managed totake on as a result of this why the European Union isimportant. Only the other week when I was inCornwall meeting some apprentices in the marineindustry they were delighted to have thisopportunity; it was partly EU funded but when Iasked these young men about whether they wereaware of that they were not and these should be ouradvocates and businesses should make it theirbusiness to let their workforce know. On the questionof America I think it is a little bit early to tell. Our aimahead of the London summit will be to impress uponPresident Obama the importance of reaching a dealand why it is in our interest, looking into this area, ithas been on-going for a number of years. Obviouslythe diYculties in trying to get unanimity across thepiece is important on this but it makes the job verydiYcult, but we will still carry on with that work. I

think the other aspect of this where there is an EUdimension also plays into our relationships withAmerica. We should also be demonstrating to ourAmerican friends what the EU can oVer. If the EUcan actually work out its approach to thisagreement—as in other areas on climate change—and show that we are willing to take a lead, maybethat will help influence not just America but othercounties as well—China and India—in terms ofhopefully nudging them towards a successfulconclusion.

Q5 Lord Trimble: One welcomes the Government’scommitment to a successful outcome of the DohaRound and notes the positive statements that werementioned. However, there was a ministerial meetingin Doha in the early summer which failed and Iwondered whether the obstacles that preventedagreement then have become less or have theybecome greater since last July?Caroline Flint: I think it is quite diYcult to pin thatdown in that way. As I said, I think the financialsituation that countries are facing themselves in hasfocussed people’s minds and attention and I think itwould be naıve not to acknowledge that. On the otherhand, I think in terms of the EU we have managed tomove forward in a positive spirit both in terms of theeconomy but I have to say before the DecemberCouncil on Climate Change people thought wewould not reach an agreement of that. In that spirit,working together, we feel we can make somemovement forward in terms of Doha. How thatimpacts, as I have said, on other countries that areimportant to this I do not think I am necessarily in aposition to say but, as I said before, if the EU canshow it can lead in this area I hope that will bringsome pressure to bear on getting people around thetable to agree. I do not know whether Ananda, whowas in the Department at the time of that meeting,might be able to oVer something more.Mr Guha: The Minister is right in suggesting that theeconomic climate has changed substantially since theministerial meeting last summer, but there have beensubsequent ministerial meetings where ministers havereaYrmed their commitment to reaching aconclusion to the Doha Round and the UK’sposition remains constant, which is that we want toseek fair and open markets at this diYcult time, as inthe point the prime minister made with Premier Wena day or so ago.

Q6 Lord Trimble: I was just thinking that there weresome specific problems that prevented agreement lastyear and I appreciate comments made by the overalleconomic climate but I am not aware of anything ofa positive nature that has happened with regard to thespecific problems that prevented agreement last year.




Caroline Flint: As far as I am aware at that time therewere some issues blocking agreement on agricultureand non-agricultural market areas. I think there arestill problems.

Q7 Lord Hannay of Chiswick: Was the lesson of theG20 in November that the leaders were much toospecific on the process and said that there was goingto be a ministerial meeting before Christmas whichthen did not take place, and were much too vague onthe commitment not to introduce protectionistmeasures which several people present in Washingtonthen went oV and did. As you say it is very importantthat they commit themselves to the success of Dohaand avoiding protectionism but also—since we are inthe chair perhaps we can have some say over this—that the meeting should be less starry eyed about thefuture meeting of ministers which may or may not beright and much, much more precise about the nottaking of protectionist measures by all thoserepresented there.Caroline Flint: That is exactly what the G20 inLondon oVers and obviously being in the chair I amsure that the prime minister will want to make surethat this has an opportunity to be aired and to informboth in terms of open markets and againstprotectionism but also to secure some public signalsand commitment particularly, I think, from PresidentObama. I think whilst it is too early to say at thisstage just how much detail will happen at thatsummit, certainly as we look towards June and Julyit should give the direction of travel and I think thatis what we want to see, a meaningful end point thatpeople think they are working towards.

Q8 Lord Powell of Bayswater: Minister, continuingdown that same broad path but trying to apply itmore specifically to a UK interest, protectionismtakes many forms, not just tariVs; it is an attempt toreserve jobs for specific nationalities; it as an attemptto limit purchases to a particular country as thereseems to be some risk the Americans will do with ironand steel under their stimulus programme. Of courseit does apply to state aid where Britain hastraditionally been a very strong proponent of strictregulation of state aid. Can we expect EU state aidsrules to be applied to the proposed expansion ofNorthern Rock’s mortgage portfolio?Caroline Flint: The Government is still consideringthe most appropriate way forward in relation toNorthern Rock and obviously there has been somediscussion in the public domain about the speed atwhich the support through the taxpayers provides toNorthern Rock coming back which might be sloweddown to enable their business to expand. I think whatI would say on this and in relation to all other matterspertaining to the state aid issue in Europe is that weare in constant discussion, particularly at the

Treasury, about the rules and how they apply. I thinkI remember when I was present for a committeeearlier last year some of the discussion about whatflexibilities there are within the rules. TheCommission has made clear that as long as activitiesare temporary targeted towards supportingeconomies then there is some flexibility within thesystem but we are very clear that we do not want torewrite the state aid rules and we want to keep withinthe framework of them but use the flexibility that isthere appropriately.

Q9 Lord Powell of Bayswater: Does that mean thatwe will or will not be seeking a waiver?Caroline Flint: I do not think that that is a matter thathas come up. I think we are working at the moment,as I say, in the public domain which was aboutlooking at how much we are asking back from themin terms of what money was lent to them becausethere was a concern that that was restricting theiractivity. At this stage we are just looking at optionsfor Northern Rock and the strategy for that as wemove ahead. The broader point is that we have justkept in constant contact with the Commission abouthow the state aid rules should apply and how we canuse them.

Q10 Baroness Cohen of Pimlico: The Northern Rockdeal was agreed as a deal with the Commissioninasmuch as it constitutes a state aid. If theGovernment makes changes that extend furthercredits to Northern Rock or do not ask for the moneyback at the same speed then that will presumablyrequire another waiver.Caroline Flint: I do not think we are at all looking fora generalised waiver of the state aid rules. What wehave always looked for is working with theCommission within the framework and also that theCommission can continue to be flexible andexpedient on state aid rules where it is appropriate. Ithink that is something all members of the EU arelooking at. I think it has been agreed that we arefacing exceptional circumstances and therefore theflexibilities in there should be used. That is what weare working within; we are not asking for any changeto the state aid rules. Anything the Governmentmight want to do where we felt we needed to seek thepermission of the Commission that is part of the deal,we would go back to them and make sure it wasappropriate in this temporary situation we findourselves in.

Q11 Lord Kerr of Kinlochard: If they chose tointerpret the state aid rules in a particular way theycould require us to repay what they could declare wasillegal aid. We were quite enthusiastic when theyapplied competition policy quite strictly to the Irishbanks at the start of the Irish banking crisis when




there was apparent intended discrimination bynationality of depositor. Presumably we have to havea view about what is a conflict between everybody’swish to see banks recapitalised and the rules of thegame of the single market as laid down incompetition and state aids policy; there is a balanceto be struck surely?Caroline Flint: I think that is why, not just in theUnited Kingdom but every other member of the EU,there is constant discussion between departmentshere and their oYcials with the Commission becauseobviously within the state aid rules, as I understandit, there are these flexibilities. The Commission hassaid that as long as it is timely, targeted andtemporary there is some scope. The banks was oneexample because of the impact of banks going underand the knock-on eVect throughout the economy butalso where there are other situations of diYculty too.I think there is a case by case situation being made byMember States on this issue as matters evolve. Whatis clear is that we do not believe that the situationrequires a new framework or a diVerent framework;we want to work within the existing framework butobviously we want to be clear about the rules aboutthe flexibility in all this. There was a lot of talk aboutvarious ideas coming up from diVerent MemberStates about how they might like the rules to applyand some of them were more quietly said than othersand then disappeared because people realised itwould not be appropriate. I think that is thesituation; it is, as I say, an on-going discussion that weare continuing to have with the Commission andtheir oYcials on this matter.

Q12 Lord Richard: Can I ask you about theCommission, are they being diYcult or are theybeing helpful?Caroline Flint: I think the Commission is being reallyhelpful actually. In terms of the economic recoverypackage they have been very helpful. I do think theyare looking for positive outcomes in these times andnot only politicians in the form of ministers but alsothe Commission were able to respond to the situationand be seen to be acting in the here and now and whatthey could do to use what instruments they have attheir disposal and how they could get help with amore coordinated response across Europe. That iswhen the European Union is at its best when it islooking outwards, it is focussed and actually can beseen to be tangibly delivering something. Of coursethe dominance at the Council in December was onthe fiscal package but down the road with the G20summit coming up there will be other issues aroundwhat transparency there needs to be in theinternational banking sector, what reforms might beneeded down the road as well as looking at the jobsand opportunities packages that the EU might focuson as an aid to recovery as and when that happens.

Q13 Lord Richard: To put it in a sentence, you arenot expecting trouble from the Commission on this.Caroline Flint: We have had no trouble so far so Ihope that will continue.

Q14 Baroness Cohen of Pimlico: Northern Rock wasa fairly early collapse, the canary, if you like, for therest of the sector and therefore the whole state aidpackage might have been more strictly interpretedthan now when the whole thing has blown up andtherefore there might be a little more flexibility onNorthern Rock than there would have been, say, ayear ago.Caroline Flint: Possibly. We also should remindourselves that apart from the recapitalisationpackages that the Government has oVered to variousbanks we have also initiated in more recent times anumber of other activities by Government to supportincreased lending, underwriting risk as well. We areconstantly looking at where there are matters wherewe need the support of the European Union and wework within their rules but also there are other areaswhere we are acting to ensure that we can stop thebanks going under but also support the bankslending again. The package that was announced inthe last few weeks, hopefully as we see that actuallyworking through the system, we might see somemovement which is what we all want because that initself is going to be the biggest driver, particularlyreaching out into the real economy and getting thingshappening again.

Q15 Lord Powell of Bayswater: Is flexibility simply apolite word for a waiver?Caroline Flint: I think it was part of the frameworkand I think a very wise part of the framework to allowfor exceptional circumstances to be dealt with and weare all pleased about that in terms of the presentsituation we find ourselves in. However, I think it isnot just a blank cheque to do what we want. It is veryclear that the flexibility is within tight controls: is ittargeted? Is it timely, ie it is needed at the presentmoment but also will it be temporary as well? Theidea is certainly not, given this flexibility, for that tobe the rule of thumb for any future opportunities. Ithink in this case we have a framework that hasactually been able to respond to this exceptionalsituation which is good because I do not think wewould all like to go back to a committee and have tonegotiate from scratch the sorts of things we mightneed at this present time.

Q16 Lord Richard: So we will be asking theCommission to show flexibility by giving us a waiver.Caroline Flint: No, we will continue to work with theCommission on a case by case basis in terms of thingswe are doing to make sure they are in line with theframework and meet their flexibilities in the




framework they have outlined about how thoseflexibilities should be applied.

Q17 Lord Freeman: Minister, my question is aboutclimate change. I declare an interest as Chairman ofthe Advisory Board of PricewaterhouseCoopers,consultants on the Severn Barrage. I have noinvolvement in that work except admiration for thecomplexity of work that has to be undertaken. Giventhe agreement in December within the EuropeanUnion on climate change, a successful agreement onemissions, renewables and the prospect of the UKGovernment reaching some kind of statement oragreement on reduction in use through eYciencymeasures of energy, what should the EU be doing andhow confident are you that the EU will influence theCopenhagen summit in December on climate changefor an equally satisfactory outcome?Caroline Flint: I am glad you welcome the decision. Ihave to say, in the months running up to the Councilthere was quite a lot of doom and gloom out thereabout whether a package would be agreed and it gotincredibly tense, I think, in the final stages. However,we have got an agreement; I think it is a positive one.It does demonstrate how we can lead on these issuesand use that in other international forums. I think thenext milestone for the European Union is going to bethe Spring European Council when heads will agreethe EU’s position ahead of Copenhagen so we reallyneed to see a very concrete and substantive outcomeof that Council because it is going to be crucial if theEU is to be taken seriously this year and to movenegotiations forward. Without an EU proposal onfinance in relation to supporting developingcountries we will leave ourselves rather bare really interms of moving forward. That is something we areworking to. An EU oVer, conditional on the rightnumber of ambitions from developing countries Ithink would also help encourage other developednations to step up to the plate and do their bit too. Sowe will be working through this. There is a ministers’meeting tomorrow to discuss our response to theCommission’s recent communication andparticularly to agree a position on climate financing.I am happy to keep this Committee and the House ofCommons’ counterpart informed about where that isgoing, and how our position is firming up proceedingtowards the Spring Council.

Q18 Lord Freeman: Will the Spring Council alsoconsider what I think many members of thisCommittee who are interested in climate changebelieve should be included and that is technologicalassistance? It is not just finance coming from thiscountry and from the European Union, but technicalassistance.

Caroline Flint: I agree, yes. Part of the debate withinthe EU has been around the technology that we needfor example in carbon capture and storage and toinvest there. Again I think that would certainly bepart of our discussions; financial support as well asthe means to make a diVerence as well as thetechnology that is associated with that.

Q19 Lord Teverson: Minister, I see in the Presidencyconclusions that the 30%—which is, I think, thepreferred target if certain circumstances are met—aredescribed as long as the—and it is a rather newterm—“advanced developing countries make acontribution commensurate with their respectiveresponsibilities”. I presume that means basically thatthe BRIC countries come in and actually make somecommitment to reductions as well. Is that not rathermoving back to the Bush regime philosophy andsurely is it not going to fail?Caroline Flint: We set the 20% target reduction for theEuropean Union by 2020 which, I have to say, was amajor step forward but I think we wanted to leave thedoor open to stretching beyond that and again I thinkit was one of those situations where, having goteveryone on the table and in the right mood, wewanted to open up the opportunity to agreesomething in advance so that we could act and havethat door open. Obviously in discussions that willtake place later this year there will be negotiationshappening and I think to give EU negotiators theability to go beyond what was set was important tothat. I do not really see it as going back; I think thisis all about moving forward and, again maybe this isthe language of councils but I think it is very positive.As I say, what we wanted to do with this formulationwas leave the door open to further stretch and nothamper the hands of EU negotiators thinking theywould have to come back to the table with all 27Member States and get permission to negotiateupwards. I think that is pretty good actually.Mr Guha: Just to say, the 20% figure is commensuratewith all the things that have been coming out of theStern Review on the economics of climate change, theGovernment’s commitment to the 80% reduction by2050. If we can front load that to 30% that is great,but the EU has definitely demonstrated leadershipeven with the 20% figure.

Q20 Lord Teverson: What I was suggesting was thatby tying 30% up now with a new condition that hasalways been refused by those countries, are you notshutting the door when you are appearing to open it?Caroline Flint: Even though it has been shut in thepast that does not mean it cannot be opened in thefuture. I think climate change has moved up theagenda. I think we have had some positive statementsfrom the new president in America and also, I thinkimportantly, it has been trying to get across the




economic impact and cost of not doing anything. Iam all for saving the planet—of course we all are—but actually the Stern reports clearly show that thecosts of not acting now will get bigger and biggerdown the road. That was very much part of ourdiscussions, certainly where I had bilaterals in thelead up to December with my counterparts in theEuropean Union. Within the European Union wehad to configure into that some countries withparticular problems and their energy supply andwhat have you, and I think we got a really good deal.I think it is a case of just keeping it alive along with,I have to say, more and more thinking about howtechnologies of the future can play into our jobs andopportunities and recovery: changing the wayindustry operates, changing the nature of jobs thatcurrently exist and the training behind them but alsothinking about the jobs that have not even beeninvented yet and what they might oVer. I think thereis a very plausible and real economic argumentbehind that and that is the sort of message we wantto get across as well as saving the planet.

Q21 Lord Trimble: Could you not simply say thatthe more ambitious target is not capable ofachievement unless the BRIC countries are in theretrying to achieve it too.Mr Guha: China is now the biggest emitter of carbon.If we want to have a viable carbon deal atCopenhagen we will need China to come on boardand that was part of the discussions the primeminister had with the Chinese premier earlier thisweek. By setting the agenda at 20% we have set abenchmark which we are challenging others to comeup with whether it be the US or the BRIC countriesand this will be a tough negotiation but it is anegotiation which I think we have all agreed is onethat will have to conclude and conclude soon.

Q22 Lord Trimble: I would interpret the Council’sconclusions in the same way as Lord Teverson in thatthe Council was saying that 30% is conditional onBRIC coming in.Mr Guha: It was a diYcult deal to get to 20%. Anumber of other Member States, particularly the newMember States, would not have signed up to a 30%deal without some sort of quid pro quo from othermajor emitters.

Q23 Lord Trimble: it is not just a matter of gettingthe other Member States on board; we need to getBRIC on board to have any hope achieving that 30%.Without BRIC you will never achieve 30%.Mr Guha: That is correct but essentially by giving the20% benchmark we set a challenge and it is importantthat the EU as a whole did that to demonstrate quitegood leadership.

Q24 Lord Hannay of Chiswick: On the same pointsthat have been covered in recent questions I welcomevery much that the March European Council is goingto make progress on these issues of technologytransfer to developing countries and finance forthem, but surely the heart of this negotiation inCopenhagen is actually going to be the articulation ofthe relative obligations being entered into by thedeveloped countries and the developing countries.They will not be the same—that is what Bali says—but if they are so diVerent as to be meaningless we willend up at Copenhagen with a deal which does notactually reverse climate change. Is it not time that theEuropean Union started to firm up a negotiatingposition for the diVerent obligations that ought to beentered into by the two groups of countries becausethat is going to be at the heart of the futurenegotiation? Certainly what the Chinese primeminister said to the Financial Times was notparticularly encouraging. The present intention forMarch seems to be to deal with part of the problemsof developing countries but not the key one which isthe relative obligations.Mr Guha: I think we have already had a similardebate within the European Union whereas newMember States were arguing that they could reducetheir carbon emissions massively from 1990. We haddiscussions on burden sharing and no doubt therewill be a repeat of that when it comes to the widerinternational negotiations. I think it is a perfectlyvalid point.

Q25 Lord Hannay of Chiswick: Yes, but I observedin the House last Thursday that we cannot aVordmany more victories like the one in December if wewant to reverse climate change.Mr Guha: I am not sure I understand—

Q26 Lord Hannay of Chiswick: December is claimedto have been a great success for the European Unionand I would go along with that, but it was a very closerun thing and quite a lot of water was poured into thewine in the process. If we have the same approach inthe run up to Copenhagen we risk having an outcomeat Copenhagen which looks good on paper but doesnot actually achieve the only thing we need to achievewhich is to slow down and eventually to reverseclimate change. That is the point I am making, whichis why at the heart of this negotiation will be this issueof the relative obligations of developed anddeveloping countries. It would help, Minister, also ifyou could assure us that you will not be going oVdown the road of threatening trade protectivemeasures against anyone who does not do what wewant in this negotiation which has been talked aboutfrom time to time and which is, I think, a verydangerous course.




Caroline Flint: As I said earlier, I think part ofaddressing some of the aspects around the financepackage is about being able to provide something todeveloping countries but also at the same time havesome expectation about what they should deliver aswell. I certainly noted what you said, Lord Hannay,and I will make sure that my colleagues in otherdepartments who lead on this are made aware of theCommittee’s views. As I said, there is a meeting ofministers tomorrow who are most involved in thissituation and they will be deciding the UK’s strategy.I will make them aware of the Committee’s views andyour views in particular.

Q27 Lord Kerr of Kinlochard: Thinking aboutEastern Europe, the European Council liked theconcept of the Eastern Partnership and I think thereis going to be a summit meeting in May. TheEuropean Council wants to look again at the conceptand has asked the Council to flesh it out. How is thatwork coming on? Can you describe the flesh that hasbeen put on the bones? I admit that I do not reallyunderstand how detailed this new framework is to be.Can you tell us which are the areas where the MemberStates are divided about how much flesh to put on thebones, and what kind of flesh?Caroline Flint: I think there is a pretty successfulconclusion to this. The discussions are developingand there have been a number of discussions atoYcial level that have had wide support. We are nowgoing through other working groups dealing withtrade, justice and home aVairs issues and thePresidency will meet eastern partners this month.There are some key issues outstanding, financingbeing one of them. How the eastern partnership willcomplement the Black Sea Synergy and alsoinvolvement of third countries as well. As I detail inmy notes to Lord Roper they have identified somemoney—I think something like 600 million euros—and what I understand will happen now is that duringthe course of this year and next year they will be usingthat budget line, if you like, as a way to incentivisebids and ideas to come forward and money can beprovided. I understand it can take up to two yearsfrom the ideas going, getting partners who can helpin these diVerent areas but also making sure that thereis the capacity there. There will be a launch summiton 7 May. That will actually also be followed on 8May with an energy summit with the easternpartnership invited to be part of that as well whichseems to me a good idea because obviously thesecountries are very important to the issues aroundenergy security and supply. Again I think the way theCzech Presidency has put that together is a welcomeinitiative.

Q28 Lord Kerr of Kinlochard: The six countries arequite a disparate group; is there any qualification orhurdle they have to pass to become members of thisclub?Caroline Flint: In diVerent ways, looking at the list ofcountries, yourself and others will be aware aboutdiVerent levels of engagement and work within theEuropean Union. Some countries in the group havegot some EU sanctions being applied to them indiVerent ways. It will be interesting to see,particularly in the next few months, for examplewhether Belarus are able to take some actions inorder to have a good report which I think is due inApril. There are diVerent levels of engagement andcooperation already in these countries, but I thinkwhat holds them together is their location and thegeographic position and those particular aspects.They are diVerent in diVerent ways and there is notnecessarily a one-size fits all in terms of EU’srelationship with them or, for that matter, theirrelationship with the EU. Some are clearly ambitiousabout a much closer relationship and even to be partof the EU family; others are looking westwards interms of potential opportunities for their country inthe future.

Q29 Baroness Howarth of Breckland: One of theissues that comes up quite often in this is the questionof human rights in these countries. I am veryinterested in the agenda setting for the March and theMay discussions because when we interviewed theCzech ambassador he was quite clear that the Czechswere not interested in the social issues that relate tothe EU and I think we are aware that some of thedirectives relating to women’s rights have beenquestioned in relation to their implementation insome of our EU partner countries, never mind thosein the eastern partnership. How are those kinds ofquestions going to be raised at a time wheneconomics and climate change crowd the agenda, andyet these are the issues that will aVect individuals onthe ground?Caroline Flint: I think they are ever present and oneaspect of rule of law and the way in which countriestackle corruption is very important in terms ofindividual human rights but they are also about thebackdrop to businesses wanting to work in thosecountries, particularly if they are going to have theirown staV placed there over a period of time. It is oneof the issues that many businesses say puts them oVinvesting because of lack of confidence in the courts,the way in which social society is organised and theimpact that can have particularly if there is a Britishcompany employing a local workforce as well. It isnot about trade versus human rights; we believe the




two absolutely have to go together. Governance,democracy and rule of law are absolutely key to thatas well as the transparency within which thesesystems operate. We think that is important. What webelieve is that the benefits that the closercollaboration with the EU can oVer can incentivise,we hope, these countries to make some changes andI think we have some evidence of that with countriesthat have joined the EU—I am not talking just aboutthe last round but going back even further—so that issomething we will continue to work on. It does meanthat it is something that the EU does but we also doin our bilateral relationships as well. Certainly inrelation to Belarus I was very clear about this when Imet them.

Q30 Baroness Howarth of Breckland: While you sayit is implicit, that is what the Czech ambassador wassaying and we were saying it needs to be madeexplicit. I assume our government will make theseissues explicit as well as implicit.Caroline Flint: I think we always do make it explicitand do not shirk the opportunity to do so.

Q31 Lord Sewell: Coming back to climate change, Ithink there is every likelihood that whatever comesout of Copenhagen will be declared as a greatagreement that has the potential to save the world. Ifit is going to save the world it needs to beimplemented quickly. Would you like to saysomething about the framework to ensureimplementation, that whatever comes out is actuallydelivered. Also would you say something aboutfinancial assistance to developing countries? Icertainly detect within the Commission a growingconcern that the developing countries themselveswould prefer to see that financial assistance in termsof general development aid rather than specificallyfocussed policy assistance to enable them to reduceemissions. Finally, if you look at the BRIC countriesin terms of human and physical assets at risk they aregoing to be the greatest beneficiaries of a successfulattempt to control climate change, but the rhetoric isnot particularly helpful. Certainly last year theIndian Government seemed to be somewhatdetached from reality. Do you detect any change inrhetoric from the BRIC countries?Caroline Flint: Dealing with the first point, as Imentioned earlier the Commission has published adocument in which it has outlined two mechanisms(without recommending one over the other) toprovide new sources of finance. As I said, the relevantministers here in the UK are meeting tomorrow whenthey will be looking at that document and thinkingabout what position we feel would be most useful tothis. You will forgive me if I do not pre-empt theirdiscussions tomorrow on that.

Q32 Lord Sewell: Would you agree thatimplementation is vital.Caroline Flint: I absolutely agree with you and that iswhy getting the right package around incentivisingthese countries to be part of a package is veryimportant. We are also looking at another aspect ofthe communication which recognises domestic capand trade systems and an eVective way for countriesto reduce their greenhouse gas emissions. Again theEU could assist developing countries over time inadopting systems similar to this. Ananda, did youwant to add something?Mr Guha: I was going to make a couple of pointsactually. Firstly, on the clean developmentmechanism those are very specifically projects thatwill benefit developing countries. China, where I wasposted for three years, is the principle beneficiary ofthe clean development mechanism. Even while I wasthere between 2005 and 2008 as to the question youasked about whether we have seen a change inrhetoric, I think the answer is very firmly that wehave. The Chinese have published their nationalclimate change plan, for instance, and I think theyrecognise it and reports like the Stern Review—commissioned by the Chancellor as was—have beenvery influential in changing their thinking on it andthat has to be a positive development ahead ofCopenhagen.

Q33 Lord Sewel: What about India?Mr Guha: In India there has been a very similardebate and I know the Stern team have been out thereand have had very productive discussions.

Q34 Lord Richard: Coming back to the easternpartnership concept because I share some of theconcerns that Lord Kerr has expressed. I suppose thetrick with these countries is how do we encouragebetter relations in the EU and this group of countrieswithout upsetting the Russians too much. If youalarm the bear no doubt he would retaliate. There isa balance to be struck there. It seems to me that thereis a danger that the EU is perhaps displaying toomuch enthusiasm for relations with easternpartnership countries and perhaps we should treat itmore circumspectly and take it slowly and calmly. Doyou share that view?Caroline Flint: I hope we are taking it calmly. As I saidbefore, the relationships with these countries—the sixin the eastern partnership—vary enormously I thinkin many respects in terms of the existing cooperationand agreements that we have with them. Some arevery keen to have a journey towards membership ofthe EU; others are not in that situation. What I dothink is important is where we have countries whowish to work more productively with the EuropeanUnion that is up to them to decide. I do not think thatshould be seen as a threat to historical culture and




other links with Russia. Many of these countries willcontinue, whatever their relationship with the EU, tohave constructive relationships with Russia as a nearneighbour and the interlinking of their existing tradewith that country is likely to continue for theforeseeable future. Likewise, Russia’s relationshipwith the EU is very important as well; Russia I thinkhas benefited much from that relationship and shouldcontinue to do so. I think this is about the 21st centuryand living in a modern world where countries want tolook at what is best for their citizens and part of thatis about looking westwards towards the EU and I donot think that is a bad thing. Of course concerns havebeen expressed but I think we just need to deal withsome of those concerns head on and say what this isabout. This is about opportunities for our system toprosper from association but also for these countriesas well. This is not about a threat to anyone. Somepeople might not read it like that but I think that isthe case and we have to keep making that case, whatit is about rather than what it is not about.

Q35 Lord Hannay of Chiswick: Is it not the case thatthe excess of zeal really lies in Moscow, in the RussianGovernment which has an excessive amount of zealfor re-incorporating these countries in what they calla sphere of influence, which is something whichwould be against our interests and certainly againstthe interests of these countries. Are we making anyprogress at all in getting into a situation where the EUreally does have a properly articulated and unifiedpolicy towards Russia or are we still living in a worldin which, whenever the Russians want to, they candivide and rule?Caroline Flint: In terms of your first remark I do notbelieve there is a post-Soviet space that Russia has theright to dominate. Secondly, I think that in relation tothe EU, as the Committee will be aware, it was agreedto re-start discussions with the Russians in terms of apartnership or cooperation agreement. That covers amultiple number of areas and what was very clearwhen the decision was made to re-start thosediscussions was that the tone and pace of them wouldbe determined by Russia’s engagement andinvolvement but also the outstanding issue ofGeorgia. We want to have, as they say, a rules basedengagement with Russia and one in which we canwork openly and productively and also one in whichwe have to set the pace of those against how Russiaacts in a constructive way as well. As you will all beaware the Ukraine/Russia gas dispute I thinkfocussed everybody’s mind and attention aboutenergy supply more than anything that had beenwritten on paper before. I was in Prague for the CzechPresidency foreign ministers informal meeting and itdominated our day of discussions. Parallel to ourdiscussions the Commissioner responsible for energyand the energy minister from the Czech Presidency

were having meetings with both Russianrepresentatives bilaterally and Ukrainianrepresentatives. I think it would be fair to say thataround the table people were very concerned aboutwhat had happened. Now I think equally people areconcerned about Ukraine’s involvement in this. Itreally drew into stark attention the need to look at theissue productively and speed up our approach toenergy security and supply. That is why I thinkdiscussions later this year about the package aroundinvestment in these areas and looking at all thepipeline issues and interconnection issues has beenvery important.

Q36 Lord Dykes: Sometimes it can be a question ofpersonalities and in view of the two or threeencouraging interviews you gave to the western TVmedia do you think there has been a significantpsychological change with President Medvedevinstead of President Putin?Caroline Flint: I would like to think that theinternational reactions to what happened in Georgiagave our Russian colleagues some pause for thought.I think the continuing relationship with the EU hasbeen caveated by wanting to see a more positiveengagement by Russia as well and we will continue towork with Russia. However, when we feel that Russiais not acting appropriately we will say so as well;whether it is the Georgia situation or the gas supplysituation the EU showed it was ready to do so eventhough we have 27 Member States round the tablewho obviously have diVerent types of relationshipswith Russia as well. I think it was a pretty good result.

Q37 Lord Teverson: The Commission has proposedbiennial summits of heads of state and government ofEU Member States and the six eastern partnercountries. How valuable do you think these summitswill be in comparison to bilateral summits betweenthe UK and individual countries? Is there going to beroom for these in the diplomatic heads of governmentmerry-go-round given the fact that we already have aMediterranean Partnership, a Nordic Council and nodoubt you could name many more than I could.Caroline Flint: I might come back on that answerafter we have seen how they are working in practice. Ithink they oVer value to individual bilateral summits.What is important about them is that where they takeplace they should be well prepared and the agendashould be something that has some outcome from it.To that end I think they are quite useful. They will bea demonstration of high level political support forthese countries and working with them but I think theproof will be in terms of when they take place whatactually happens and we will watch that with interest.I have some sympathy with your point of view aboutsummit-itis and how packed the diary is. I say that,sharing my angst with you about the calls on my time




to spend in various meetings. I do not mind meetingsas long as they are meetings with a purpose and weget some added value out of them. I think they arehelpful and if we can see how our bilateral summitsfeed into them and help complement them and createmomentum they will be great but we need to see themworking in practice and see if they are working wellor if they need to be thought through again.

Q38 Lord Richard: Can I come back again to theUkraine? How reliable a partner do you think theUkraine will make for the UK? Indeed, how reliablea partner would they make for the EU given the gasdispute troubles and the economic troubles? Howshould we approach them?Caroline Flint: I visited the Ukraine not so long ago;I went down to the Crimea and got a flavour for thediVerent parts of the country. It is clear to me fromthat visit that Ukraine really does want to be part ofthe European Union and among its public it is verypopular. They want to be a reliable partner; I thinkthey do want to become a normal European countrybut it is not easy. I think it is part of our role to seehow we can assist them to attain that goal. We areworking in diVerent ways with them. I think theenergy situation in one sense shows how much workneeds to happen in the Ukraine as well. As aconstructive friend of Ukraine it is important to saythat the actions that happened did cause a lot ofdisquiet amongst EU partners, equally so Russia aswell. Again I think they have to demonstrate this yearfollowing previous EU reports about the countryhow they are going to get down track and part of thatI think is about political unity in the country to dealwith some of the areas that it has to deal with to beshown to be making a diVerence. There is a lot ofsupport for Ukraine and I think within Ukraine thereis definitely the will. It is making that happen that Ithink is going to be key. As I said, I am glad the initialsituation was resolved. If it is resolved to an extent aswell in terms of the issues about the gas prices andwhat Ukraine pays and so on and it does not lead toa repeat of the situation next year then I think thatwill be good. One of many things that have come outof this dispute is trying to get a contract onto a betterbasis, the sort of commercial basis that needs to existfor a country like Ukraine to become part of the wayin which we do contracts and facilitate contracts asEU Member States.

Q39 Lord Teverson: Minister, did we really have allthe same machinations back in 2006 when thishappened then? It obviously has not been a completefailure as proven by the fact that we have the sameproblem this year.Caroline Flint: You are right, that is why I said thatI hope this time next year we actually do not have arecurrence of what has happened. The way this cycle

has developed has been very worrying but I thinkwhat has made a diVerence in terms of previousoccasions is how this crisis really galvanised the EUMember States and the Commission to think aboutwhat role we needed to play to deal with this. I thinkit is quite diYcult for the European Union becauseobviously it is a commercial contract and it is notreally the role of the European Union to act as anintermediary broker. We may want to play that rolein this situation but we do not want it to lead toprecedent to other situations. However, I think wherethe EU did show some leadership was to recognisethat there were political aspects to this that they couldact as a broker on but also that within limitations toget parties talking to each other and finding acommercial solution. The other side of it is the way inwhich it has galvanised EU Member States to thinkabout energy policy and step up their determinationto look at some of these issues around renewables butalso energy pipelines which again will develop moreduring the course of this year and energy ministersmeet and talk about getting some of the ideas andpilots under way and within that the relationshipswith countries that are going to be party to thosesorts of developments. I hope we are not going to bein the same situation of a repetition of this and I thinkthe actions the EU took this time were correct andpretty helpful to making sure it does not happenagain. I do not want to be complacent; we have towork hard at this.

Q40 Lord Hannay of Chiswick: Surely, Minister, theEuropean Union has committed itself to a stimuluspackage and is looking for ways of improvinginfrastructure in a way that is useful. It has had on thetable since the gas crisis of 2006 Commissionproposals relating to interconnectors to join up theexisting pipeline system, provide for gas storage andfor more LNG terminals. All these are things thatneed to be done, not just written on pieces of paper.Is there any hope that at the March EuropeanCouncil—where I think energy is going to be one ofthe principal subjects—they will actually take somedecisions instead of just sending the Commissionaway to re-write papers that have been re-written anynumber of times already?Caroline Flint: I think you would agree that we needto see the EU budget being used to support ourenergy strategic objectives and whether that is theinterconnection projects (because obviously one ofthe concerns in the recent crisis was that gas wasavailable in Europe but you could not get it fromplace to another quickly enough) or the issues aroundthe southern corridor and I think there is more workbeing done to look at that as well. We see that as partof the EU economic recovery package. What wewould like, as part of our agenda I suppose, in termsof the EU is to see the budget of the EU being used




for things that we really do think make a long termdiVerence to our prosperity and security. Certainlyenergy security and supply are key to that and I thinkthere will be some more development around this butcertainly those areas I have outlined have beenearmarked as part of the economic recovery package.

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Chairman: Minister, thank you very much indeed.This has been a very useful and helpful session. Youare certainly having a rather busy scrutiny weekbecause I understand you will be with our colleaguesin the Commons tomorrow. Thank you very muchagain.

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Priorities of the European Union: evidence from the Ambassador …€¦ · discussing the priorities of the Czech Presidency are: • Regulation of the banking sector (Q 2) 6 PRIORITIES