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Free movement of people: five actions to benefit citizens, growth and employment in the EU

The joint responsibility of Member States and the EU institutions to uphold EU citizens' rights to live and work in another EU country is underlined in a policy paper just adopted by the European Commission. To support Member States' efforts to do so, the Commission's paper outlines five concrete actions to strengthen the right to free movement, while helping Member States to reap the positive benefits it brings. The policy paper clarifies EU citizens' rights to free movement and access to social benefits, and addresses the concerns raised by some Member States in relation to the challenges that migration flows can represent for local authorities.

"The right to free movement is a fundamental right and it goes to the heart of EU citizenship. More than two thirds of Europeans say that free movement is beneficial for their country. We have to strengthen and safeguard it," said Vice-President Viviane Reding, the EU's Justice Commissioner. “I am aware of the concerns of some Member States regarding potential abuses related to mobility flows. Abuse weakens free movement. The European Commission is there to lend a helping hand to Member States to deal with such challenges. That's why today the Commission put forward five actions that will help Member States tackle potential abuse cases and use EU money for social inclusion more effectively. Let's work together on safeguarding the right to free movement. European citizens count on this."

László Andor, Commissioner for Employment, Social Affairs and Inclusion, said: "The Commission is committed to ensuring that EU citizens are in practice able to exercise their rights to work and live in any EU country. Member States and the EU must work together to ensure that free movement rules continue to maximise benefits for our citizens and for our economies. The Commission recognises that there can be local problems created by a large, sudden influx of people from other EU countries into a particular geographical area. For example, they can put a strain on education, housing and infrastructure. It therefore stands ready to engage with Member States and to help municipal authorities and others use the European Social Fund to its full extent."

With over 14 million EU citizens resident in another Member State, free movement – or the ability to live, work and study anywhere in the Union – is the EU right most cherished by Europeans. EU workers have been benefitting from this right since the dawn of the European Union, with the principle enshrined in the first European Treaty of Rome in 1957.

Free movement of citizens is also an integral component of the Single Market and a central element of its success: it stimulates economic growth by enabling people to travel, shop and work across borders and by allowing companies to recruit from a larger talent pool. Labour mobility between Member States contributes to addressing skills and jobs mismatches against a background of significant imbalances in EU labour markets and an ageing population.

Finally, EU free movement rules contain a series of safeguards that allow Member States to prevent abuses.

Today's Communication analyses the impact of mobile EU citizens on the welfare systems of host Member States. The factual evidence overwhelmingly suggests that most EU citizens moving to another Member State do so to work. They are more likely to be economically active than nationals and less likely to claim social benefits. In fact, the percentage of mobile EU citizens who receive benefits is relatively low, compared to Member States' own nationals and non-EU nationals (Annex 3). In most Member States mobile EU citizens are net contributors to the host country's welfare system.

The Communication sets out the rights and obligations which EU citizens have under EU law. It clarifies the conditions citizens need to meet to be entitled to free movement, to benefit from social assistance and to social security benefits. Taking into account challenges which have arisen in some Member States, it also explains the safeguards to counter abuse, fraud and error. It also outlines social inclusion instruments available to Member States and local communities facing particular pressures relating to the inflow of mobile EU citizens.

To address concerns in some EU Member States about the implementation of free movement rules on the ground, the Commission sets out five actions to help national and local authorities to:

Fight marriages of convenience: The Commission will help national authorities implement EU rules which allow them to fight potential abuses of the right to free movement by preparing a Handbook on addressing marriages of convenience.
Apply EU social security coordination rules: The Commission is working closely with the Member States to clarify the 'habitual residence test' used in the EU rules on social security coordination (Regulation 883/2004/EC) in a practical guide that will be produced by the end of 2013. The strict criteria of this test ensure that citizens who are not working may only have access to social security in another Member State once they have genuinely moved their centre of interest to that State (for example their family is there).
Address social inclusion challenges: Help Member States further use the European Social Fund to tackle social inclusion: From 1 January 2014, at least 20% of ESF funds should be spent on promoting social inclusion and combating poverty in each Member State.
Promote the exchange of best practices amongst local authorities: The Commission will help local authorities to share knowledge developed across Europe to better address social inclusion challenges. The Commission will produce by the end of 2013 a study evaluating the impact of free movement in six major cities. It will invite mayors in February 2014 to discuss challenges and exchange best practices.
Ensure the application of EU free movement rules on the ground: the Commission will also set up by the end of 2014, in cooperation with Member States, an online training module to help staff in local authorities fully understand and apply free movement rights of EU citizens. Today 47% of EU citizens say that the problems they encounter when they go to live in another EU country are due to the fact that officials in local administrations are not sufficiently familiar with EU citizens’ free movement rights.

Tackling Tax Avoidance: Commission tightens key EU corporate tax rules

Today the Commission proposed amendments to key EU corporate tax legislation, in order to significantly reduce tax avoidance in Europe. The proposal will close loopholes in the Parent-Subsidiary Directive, which some companies have been using to escape taxation. In particular, companies will no longer be able to exploit differences in the way intra-group payments are taxed across the EU to avoid paying any tax at all. The result will be that the Parent-Subsidiary Directive can continue to ensure a level-playing field for honest businesses in the Single Market without opening opportunities for aggressive tax planning. Today's proposal was foreseen in the Commission's Action Plan against tax evasion last year (IP/12/1325) and will be an important contribution to the on-going battle against corporate tax avoidance at both EU and global level.

Algirdas Šemeta, Commissioner for Taxation said: "EU tax policy is heavily focussed on creating a better environment for businesses in the EU. This means breaking down tax barriers and tackling cross-border problems such as double taxation. But when our rules are abused to avoid paying any tax at all, then we need to adjust them. Today's proposal will ensure that the spirit, as well as the letter, of our law is respected. As such, it will ensure greater revenues for national budgets and fairer competition for our businesses."

The Parent-Subsidiary Directive was originally conceived to prevent same-group companies, based in different Member States, from being taxed twice on the same income (double taxation). However, certain companies have exploited provisions in the Directive and mismatches between national tax rules to avoid being taxed in any Member State at all (double non-taxation). Today's proposal aims to close these loopholes.

First, it updates the anti-abuse provision in the Parent Subsidiary Directive i.e. the safeguard against abusive tax practices. In line with the Commission's Recommendation on Aggressive Tax Planning (IP/12/1325), the proposal obliges Member States to adopt a common anti-abuse rule. This will allow them to ignore artificial arrangements used for tax avoidance purposes and ensure taxation takes place on the basis of real economic substance.

Second, it will ensure that the Directive is tightened up so that specific tax planning arrangements (hybrid loan arrangements) cannot benefit from tax exemptions. Currently, the Parent Subsidiary Directive obliges Member States to give parent companies a tax exemption for the dividends they receive from subsidiaries in other Member States. However, in some cases, the Member States where the subsidiaries are based classify these payments as tax deductible "debt" repayments. The result is that the payments from the subsidiary to the parent company is not taxed anywhere. Exploiting such mismatches is the basis for a specific type of tax planning arrangement (hybrid loan arrangements) which today's proposal will clamp down on. Under the proposal, if a hybrid loan payment is tax deductible in the subsidiary's Member State, then it must be taxed by the Member State where the parent company is established. This will stop cross-border companies from planning their intra-group payments to enjoy double non-taxation.

Member States are expected to implement the amended Directive by 31 December 2014.

The issue of corporate tax avoidance is very high in the political agenda of many EU and non-EU countries, and the need for action to combat was highlighted at recent G20 and G8 meetings.

On 6 December 2012 the Commission presented an Action Plan for a more effective EU response to tax evasion and avoidance. This action set out a comprehensive set of measures, to help Member States protect their tax bases and recapture billions of euros legitimately due. The revision of the Parent Subsidiary Directive is one of the measures announced in the action plan.

Blackberry Abandons Plan to Sell Company

VOA, BlackBerry Ltd is abandoning a plan to sell itself and instead will replace its chief executive officer and raise about $1 billion from institutional investors, including its largest shareholder, the smartphone maker said on Monday.

Shares of BlackBerry dropped 16.3 percent to $6.50 in premarket trading. The company said it would raise the money with a private placement of convertible debentures.

John Chen will be appointed executive chairman and will be interim CEO while the company looks for a new leader. He is the former CEO of Sybase, a database software company that SAP AG acquired in 2010.

Chen joined private equity group Silver Lake as senior adviser last year.

BlackBerry grew from a small technology startup into a multibillion-dollar company by pioneering on-the-go email, but it has lost much of its market share to Apple Inc's iPhone and devices that run Google Inc's Android software.

BlackBerry's largest shareholder, Fairfax Financial Holdings Ltd, will buy $250 million of the debentures. BlackBerry said the subordinated debentures would be convertible into common shares at $10 and have a seven-year term.

Fairfax announced a tentative $9-a-share offer for Waterloo, Ontario-based BlackBerry in late September. But Reuters said on Friday that Fairfax was struggling to finance the $4.7 billion bid.

House GOP Holds Firm as Shutdown Looms

VOA News, The U.S. Congress is mired in a bitter political showdown that now appears likely to shut down major parts of the U.S. government Tuesday for the first time in 17 years. In the latest move, House Republicans passed another measure to derail U.S. President Barack Obama's health-care program. But the president and his Democratic Party allies in the Senate have made clear the measure is going nowhere.

In a high drama Saturday session, the Republican-controlled House passed a measure late in the evening that would fund the government until December 15th. But it also passed two amendments, one that would delay implementation of the heath care program for one year, which Democrats say is an absolute deal breaker.

House Republicans emerged from closed door meetings appearing energized, saying they are united in blocking the health care law because they believe it is the right thing to do.

Republican Congressman Pete Sessions urged support for the delay: "The House amendments would make important steps to ensure that Obamacare, the Affordable Care Act that President Obama and every Democrat voted for, does not have the opportunity to hurt American jobs and drag down our economy."

But Democratic Representative David Scott, an African American, accused some Republicans of doing everything they can to undermine President Obama, saying they can't separate Mr. Obama from Obamacare.

Scott told House Republicans "your hate for this president is coming before the love of this country, because if you loved this country, you would not be closing it down."

The Senate had passed a budget bill Friday that removed a House measure to defund the health care law, sending a clean funding bill back to the House for a vote. On Saturday, Senate Majority leader Harry Reid issued a statement calling the renewed House effort to block health care "pointless", and he made clear that the Democratically-controlled Senate would reject it.

The White House also reacted to the House measure, saying in a statement that "any member of the Republican Party who votes for this bill is voting for a shutdown."

Democratic Representative Debbie Wasserman Schulz made an appeal for Republicans to fight the health care battle elsewhere: "It doesn't have to be this way. We do have the ability to stop the brinksmanship and come together, and separate two completely unrelated issues."

Democrats point out that the health care law has been in place for more than three years and that President Obama was re-elected last year, despite his rival's plan to overturn the health-care plan. Republicans argue that the health care law is a massive and costly federal intrusion into American's private lives.

As it stands now, the Senate is not set to be back in session until Monday afternoon, leaving only a few hours until the midnight deadline when government funding runs out. There is no clear path to a way to end the standoff.

The House also passed a measure to make sure the military gets paid in the event of a shutdown.

If there is no budget deal by midnight Monday, most government agencies will shut down some, or all, of their activities. For instance, national parks will be closed and many administrative services, such as paying retirees, may be affected. An estimated 800,000 federal employees will be furloughed.

For those duties that are considered essential, employees will be required to work, but will not be paid until a budget bill is passed. VOA will continue to broadcast. Overseas, many people may find visa applications are delayed.


Detroit’s Financial Slide Linked to Exodus of Auto Industry

Economists say Detroit’s population most likely will never reach its former peak. And if the city is to come back, it will need to redefine itself post-bankruptcy as something different than “Motor City.”

Kane Farabaugh

DETROIT — Its nickname is the Motor City, but many of the automobile factories that gave Detroit that moniker are now hard to find inside the city limits. Detroit’s financial crisis is linked to the exodus of its auto industry, as it failed to achieve the economic diversity that helped other cities avoid bankruptcy.

At the height of Detroit’s boom in the mid 20th century, this plant manufactured Packard automobiles, employing about 40,000 people.

The promise of good pay and plenty of work at similar plants around the city attracted people like Tennessee native George McGregor in the 1960s. Today, he's president of the United Auto Workers Local 22 in Detroit.

“When I first came here, in the automobile factory, they were begging people to come. The hour rate was something like $3.25 an hour,” he recalled.

But the auto industry stopped begging when demand for American cars slowed and interest in foreign automobiles increased.

The Packard brand became extinct, and the hum of its once mighty factory is silent.

Crumbling buildings are part of one of the largest vacant industrial complexes in the world. They symbolize Detroit’s boom-to-bust story.

“There were about a dozen auto factories, and you know very large employers, and over time those have been shut down to now there’s only one left,” Scorsone said.

Economist Eric Scorsone, at Michigan State University, said although General Motors boasts the most prominent set of buildings in downtown Detroit, the auto industry plays a much smaller role in the city's economy.

“In fact, health care is the biggest employer now in the city,” he said.

There were about 300,000 auto factory jobs in Detroit in the 1950s, when the population was around 1.8 million.

Today, there are fewer than 27,000 jobs in plants operated by Chrysler and GM, and the overall population is just above 700,000.

“We got three casinos and two auto factories," McGregor explained. "We went from manufacturing to gaming for jobs.”

McGregor's UAW Local 22 Detroit represents workers at the GM Hamtramck plant still in operation here. He said many of those who work there don’t live in the city. “In my facility I’m going to say its about fifty. Fifty stay in the city of Detroit and the other 50 percent stay in the surrounding neighborhoods,” he stated.

McGregor said he had the opportunity to leave when others fled Detroit, but decided to stay. He doesn't regret it even in the wake of news that the city is bankrupt.

"I made a living in this city, and I plan on staying in this city, and hopefully it will come back,” he added.

Economists say Detroit’s population most likely will never reach its former peak. And if the city is to come back, it will need to redefine itself post-bankruptcy as something different than “Motor City.”


Europe Agrees on How to Deal With Failed Banks


Selah Hennessy

LONDON — The European Union (EU) has moved one step closer to forming a long-heralded banking union after finance ministers agreed on a new deal for bank bailouts. Tthe deal came as European leaders meet in Brussels to hammer out Europe-wide policies.

European Union finance ministers tried and failed to tackle the banking issue in negotiations last week but they finally struck an agreement in the early hours of Thursday morning.

According to the deal, in the future, taxpayers will not take the first hit when struggling banks need a helping hand.

Instead, the bank’s creditors and shareholders will take the first hit, followed by those with savings of over $130,000 in the bank.

A taxpayer funded bailout of failed banks will now only be a last resort.

Eurogroup President Jeroen Dijsselbloem said, "That's a major shift from the public means from the taxpayer, if you will, back to the financial sector itself, which will now become for a very large extent, responsible for dealing with its own problems."

Europe’s banking sector has been hit hard by the world financial crisis and sovereign debt crises across a number of European Union countries.

Countries like Ireland, Britain and Germany have had to pump billions of dollars of fresh money into struggling banks to keep them from collapsing.

Wolfgang Schaeuble, the Finance Minister for Germany, Europe’s largest economy, said it’s clear that in principle when banks get into difficulties in the future, the taxpayer should not be the first in line to pay.

Instead, a so-called banking union for Europe will be eventually established which would be aimed at creating financial stability across Europe.

European Union governments will still have to negotiate the legislation with the European Parliament - but the rules could come into effect by 2018.

Financial analysts said Thursday that the decision will be good for the markets because it creates some certainty that individual states will not have to prop up failing banks in future.

But Joe Rundle, head of trading at Britain’s ETX Capital, said it’s yet to be seen how the policy will play out.

"I think the big fear is when it comes to a bank in trouble, is, are the countries going to stick to the rules or are there going to be exceptional circumstances which require a different set of rules for that bank," he said.

Also on Thursday the heads of the European Parliament and European Commission agreed on a new European Union budget for the next seven years that is worth $1.3 trillion and will finance EU projects through the year 2020.


Millions of US Students Face Higher Costs Unless Congress Acts


Jim Randle

Seven million low-income U.S. college students face higher costs unless President Barack Obama and both Democrats and Republicans in Congress reach an agreement by July.

Many experts doubt the bickering politicians will act in time to prevent a doubling of the interest charged on education loans for students who need the financial help the most. This dispute comes as a college education is more important than ever to get good jobs, and college costs are soaring.

About one-third of college students in the United States rely on low-cost loans that are subsidized by the government.

Right now, the interest rate is 3.4 percent a year, but it will double to 6.8 percent if Congress doesn't act.

That could add up to thousands of dollars in additional repayments if low-income college students borrow $20,000 or more for the four years of undergraduate studies.

Spencer Hughes, student government president at Iowa State University, says the higher costs will hurt the students who can least afford it.

"For many of them this assistance is necessary for them to be able to afford a college education. So there are going to be some serious considerations if it is worth it for me to consider pursuing a degree with this increased burden," said Hughes.

Hughes says students are fed up with politicians who spend their time blaming each other for the impasse. He says it is time for Congress to do its job and reach an agreement so students know what their costs will be as they pursue higher education.

The evolving debate includes some who want to extend current rates, while others say it is too costly for taxpayers. Some want to tie interest rates to market conditions, while others say to do so would be okay if there were an upper limit on rates and a way to set the rate for a term in college.

Terry Hartle of the American Council on Education says he hopes the various factions can work out a deal. He says the issue is important to students and the national economy.

"Countries with a high percentage of educated and skilled workforce will do better than countries that do not have a highly educated and well-trained workforce," said Hartle.

Hartle says if Congress misses the deadline, members could work out a deal later and set interest rates retroactively.


Stock Markets Watch Bernanke


VOA News

Top officials of the U.S. central bank are discussing how much and how soon to reduce their efforts to speed up economic growth.

The chairman of the Federal Reserve will report their decisions Wednesday afternoon at 2:30 p.m. Ben Bernanke has previously said the bank will cut stimulus efforts if the unemployment situation improves further or inflation rises strongly.

Stock markets have been very volatile as nervous investors try to guess what the Fed will do.

Back in 2008, the Federal Reserve cut short-term interest rates to a record low level in a bid to boost economic growth. When that produced disappointing results, the Fed added a complex program to cut long-term interest rates involving $85 billion a month in asset purchases.

Stimulus efforts focus on low interest rates, because they make it cheaper for businesses to finance new equipment, expand factories, and hire new people. But if a stimulus program goes on too long, it can overshoot and spark inflation.


US Financial Concerns Recede as Economy Improves


VOA News

Just weeks ago, the political focus in Washington was on reaching a "grand bargain" on taxes and spending to cut the country's burgeoning debt, but now a string of events seems to have pushed the issue into the background.

The U.S. government's debt is nearing $17 trillion, as its annual budget deficit topped $1 trillion each of the last four years. That prompted U.S. President Barack Obama and his key congressional opponents to start talks about curbing the deficit, reforming spending plans for popular government pension and health care plans for older Americans and altering the country's complex tax laws.

But such talks have been halted, and part of the reason is that the U.S. economy seems to be on the upswing, and as a result government tax collections are increasing. A key congressional budget agency says the government budget deficit will shrink to $642 billion this year, the smallest in five years, and continue to fall in the next two years.

The senior economist at one the country's biggest banks, James Glassman at JPMorgan Chase, told VOA that actions by Congress contributed to the country's revived outlook.

“They allowed the social security payroll taxes to go back up a couple percentage points," said Glassman. "You’ve got sequestration, which is kind of holding government spending, not cutting government spending, but holding it down. And meanwhile the economy is recovering, and so the deficit has been coming down.”

Patrick Socci, dean of the Hofstra University business school in New York, told VOA that while the country's economic fortunes improved, Congress diverted its attention from spending and debt concerns to investigate how the country's tax agency, the Internal Revenue Service, targeted conservative groups for extra scrutiny as they sought tax-exempt status.

“The bandwidth [attention span] of the American public, I think, is relatively limited. And now you have the IRS scandal. And that I think occupied everybody’s bandwidth," said Socci. "And so they’re concentrating on that and it impinges on the discussion of a balanced budget or attempting to move in the direction of closing the deficit because here you have the arm of the government that collects taxes being significantly compromised by these alleged scandals that have taken place.”

Some Washington leaders originally thought Congress would have to increase the country's borrowing limit in the next few weeks. But Socci said that with the improving economic fortunes, that has been pushed off for months.

“I think the debt ceiling they thought originally would have to been resolved sometime around now, and now they don’t think that they have to touch the debt ceiling for at least another six months, which in political terms is an eternity," said Socci.

But Glassman sees trouble ahead for the government if it fails to rein in rapidly increasing spending for a popular program covering health care expenses for older Americans.

“The problem is when you look out over the horizon, the longer-term picture is not so great," said Glassman. "Federal spending for health is growing steadily, has been for a long time, and the Congressional Budget Office tells us eventually, if we don’t do anything, today’s cyclical deficit may go away, but that then we’ll start to see the deficit growing again. And that’s really the issue that should have been addressed.”

But he said that as the government deficit retreats, "everybody is sort of losing interest" in acting now. Glassman said Washington's leaders "tend not to deal with issues unless they are staring us in the face."


Europe Hands 6 Nations a Deficit Reprieve


VOA, Europe is giving six of its financially struggling countries, including the major economies in France and Spain, more time to control the deficit spending of their governments.

Austerity - calling for cuts in spending and increased taxes - has been the dominant prescription in the last two years for European countries looking to rein in budget shortfalls. But with unemployment surging and the continent mired in an 18-month recession, the European Union on Wednesday softened its demands.

The EU granted the Netherlands and Portugal an extra year to cut their deficits below the mandated level of 3 percent of their economic output. France, Spain, Poland and Slovenia were given an additional two years to meet the same standard.

Meanwhile, the Organization for Economic Cooperation and Development [OECD] said the economic weakness in the 17-nation euro currency union "could evolve into stagnation with negative implications for the global economy."

The Paris-based OECD, which promotes global economic well-being, said eurozone growth will shrink six-tenths of a percent this year, on top of a half-percentage point drop last year. Six months ago, the group predicted a smaller contraction, and a year ago said the eurozone economy would advance in 2013.

The OECD predicted 3.1 percent global growth this year, increasing to 4 percent next year.

But the OECD's secretary general, Angel Gurria, said unemployment across the world remains a major problem.

"The failure of the global economy to recover more strongly has posed a heavy burden on people. Unemployment remains far too high, In some countries it's already at record levels, and still rising in the case of the euro area," said Gurria. "It's still rising, it went through the 12 percent mark and moving up. The jobless, particularly youth and [the] less skilled, risk losing contact with the labor market and dropping out of the labor force all together. Even when activity eventually picks up, they will have been out of the market for so long that it will not be easy for them to hook up again."

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