IUF logo; clicking here returns you to the home page.
Uniting Food, Farm and Hotel Workers World-Wide

Eurosocialists Push for Comprehensive Regulation of Private Equity, Hedge Funds

Posted to the IUF website 18-Sep-2008

Share this article.

The European Parliament is set to vote on a report on Tuesday, September 23, calling on the European Commission to introduce legislative proposals for comprehensive financial market reform before the end of the year. The report, spearheaded by former Danish Prime Minister Poul Nyrup Rasmussen, who also heads the Party of European Socialists (the EU-wide grouping of Social Democratic and Labour parties), sets out clear guidelines for closer regulation of private equity, hedge funds and financial markets as a whole in the European Union. The proposals for legislation address a number of key labour movement concerns, including: limitations on debt levels in leveraged buyouts; measures to contain asset stripping of portfolio companies by private equity owners; greater transparency and disclosure rules for private equity with far greater scope than the voluntary "Codes of Conduct" which have been promoted as alternatives to regulation; greater capital adequacy requirements for financial instruments and institutions (including private equity and hedge funds), limitations on the easy securitization of leveraged loans ("originate and distribute") which have fuelled both the buyout boom and the financial crisis generally; and ensuring that employees in private equity-owned companies exercise the same rights to information as other EU private-sector employees. Other initiatives in the report call for action and reforms on executive pay, credit rating agencies and conflicts of interest.

The report, first submitted in May, is the outcome of tough negotiations between the Eurosocialists and the conservative and liberal groups who form a majority in the Parliament. The IUF has been deeply involved in this initiative from its inception. Despite being a heavily amended compromise, legislative action along the specific guidelines set out in the report would represent a big step forward for workers. The European Commission is obliged to respond to the call for legislation and has always come forward with proposals in the past when requested to do so in this way by the Parliament.

The significance of this initiative extends beyond the EU, particularly at a time of acute financial crisis worldwide, because adoption of the report would signal the existence of a parliamentary consensus across party lines on the need for comprehensive regulatory action and financial market reform.

To highlight the need for action in the face of global financial meltdown, and to support the initiative, the online campaigning organization Avaaz has launched an electronic petition. Signatures will be presented by Rasmussen to Euro MPs and to the European Commission on Tuesday in connection with the report. You can sign the online petition here.