New Rules

Americans take a lot of criticism for their supposed ignorance about what their government is really up to but Europeans aren't much better.  "All politics is local," said Tip O'Neill, what people really care about is what is of direct concern to them and the communities in which they live.  Their level of concern and interest wanes with distance which can be geographical or psychological.  This is just as true of the inhabitants of Limoges, France as it is of the people in Port Angeles, USA.

And that's fine.  There are only so many hours in the day and aren't things like family, friends, work and the garden much more important than following the goings-on of distant bureaucrats and lawmakers?  It does make me smile, however, to hear a Frenchman talking about "those damn bureaucrats in Brussels" which reminds me of my childhood and the grumbling against "those damn bureaucrats in Washington."

I do try to pay attention to what's going on where I live both at the member state level (France) and at the superstate level (the EU).  Some of that stems from genuine interest (my undergraduate degree is in Political Science) but surely the fact that I am an immigrant has a lot to do with it.  There is a certain insecurity that comes with that status - a residency card does not make one the equal of a citizen - and it seems prudent to pay attention.

And, oh my, is there a lot to watch here in Europe.  The EU is and isn't a "United States of Europe."  All of the member states are sovereign states and most have existed for centuries.  For much of that time, they have been at odds with each other.  Borders have shifted back and forth, as well as the balance of power, depending on what era you're talking about.  Nothing quite like that ever happened in the U.S. which was founded relatively recently as a settler colony (or colonies) with people from those warring European states.  Some U.S. states (provinces) were independent early on in American history.  Texas, for example, and even today Texans like to point this out often and at great length.  As someone who comes from one of the other 49 states, can I say how boring this gets after awhile?  And do they understand how many of us, when they threaten to secede, are cheering them on?  Oh, please do.  Please turn yourself into an autonomous buffer state between the rest of us and part of that southern border.

Back to the EU.  So here you have 27 sovereign nations that have decided to come together and somehow they have to come up with common rules everyone can live with.  And that's precisely what they have been doing slowly but surely.  So slowly that many EU citizens seem completely unaware of what they've cooked up.  Just for fun, here are some examples that I follow regularly but when I try to talk about them with my friends and family here in France, they have no idea that these things were ever on the table, much less that EU laws and directives have actually been passed that are binding on them and that their national legislation (local laws) is being adjusted accordingly.

EU Blue Card:  This is an EU-wide immigration scheme very similar to a U.S. Green Card designed to draw highly qualified migrants to the EU.  It was proposed back in 2007 and was implemented in the member states in 2011/2012.  It offers very generous terms for work and residency in the EU and allows for mobility between member states.  A migrant can get a Blue Card in France and then move on to work in Austria, for example.

If you are a non-EU citizen interested in living and working in Europe, the EU has an immigration portal meant to help third-country nationals who wish to migrate here and have skills of interest to EU companies.

Cross-border Inheritance:  This one is pretty radical.  It offers nothing less than the right to choose the law under which you wish to have your assets distributed after your demise.  If you are French and you live in Germany, for example, you can choose either French law (nationality) or German law (domicile).  It even goes so far as to cover third-country nationals like myself.  I can, in theory, choose American succession law over French law even though I live in France and am married to a Frenchman.

Cross-border marriage:  Another fairly radical one concerning matrimonial property regimes is being negotiated. Divorce and custody were already the object of new regulations called Brussels II bis.   The Rome III Regulation allows cross-border couples to choose the law under which they wish to divorce.  Now the EU is looking at the issue of marital property regimes of cross-border (international) couples.  The Commission proposal is here.

I strongly urge all cross-border couples and their families in the EU to look into this legislation.  These rules were designed with you in mind and they impact you directly.

Social Security:  This goes back to a directive that was issued in 1992 (92/49/EEC) on insurance.  It allows EU citizens to opt out of public social insurance regimes and to purchase private insurance instead either in that EU member state or another.  Is it really possible to "quitter la sécu"?  Yes, but it's not easy and very few try.  To say that it is strongly discouraged would be an understatement but under EU law one does have the right to do this.

Automatic Information Exchange (The EU version of FATCA):  Talk of this has been around for a long time.  What the U.S. did with FATCA is something that politicians at the EU level have been dreaming of for a long time but there just wasn't enough support to launch something at that level.  FATCA changed the landscape and now the European Parliament thinks the time is right to push a similar system for EU citizens.  This proposed directive to amend "Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation"  was published right after the EP public hearing on FATCA and gives a framework for an EU version that builds on what has already been done, the European Savings Directive, for example, and the "DAC" which will require the automatic exchange of information between member states "on five categories of income and capital: employment, directors' fees, life insurance products not covered by other Directives, pensions and ownership of and income from immovable property.."  If passed, this new directive will expand the scope of the information to be collected to include "dividends, capital gains, other financial income and account balances."

My reading of this directive (and please feel free to correct me as I am not a tax expert or a lawyer) is that what FATCA does to U.S. Persons around the world, the  EU Automatic Information Exchange will do to EU citizens living in another member state.  So a Frenchman, for example, who lives in London or Berlin may have his financial information (income, account balances and so on) automatically sent to the French "fisc".  And if he's a U.S. Person as well?  He will have several states with seriously domestic budget problems looking through his personal finances and one does have to wonder what that will lead to.

This is going to be interesting for European banks and other financial entities.  Not only will they obliged to find U.S. Persons on their client list, they will also have to find and track those pesky German/French/British/Spanish Persons as well.  27 member states plus the U.S. - that's a lot of reporting.  It would not surprise me if some local banks in EU member states tried to wash their hands of ALL those damned foreigners (non-native EU citizens and third country nationals alike).

I respectfully suggest to my EU citizen friends that perhaps they might want to expand their definition of "local" and widen their circle of interest to include what's going on at the EU level.  Not all of the above apply to all but surely one or two have a direct impact on the lives of the EU citizens reading this post.  Grumbling about it after the fact is understandable (and a lot of fun, too) but that's not going to save any of us from the consequences, right?