Britain's Hill charms but fails to sway EU lawmakers

By Alastair Macdonald BRUSSELS (Reuters) - The installation of a new executive team for the European Union hit a first major obstacle on Wednesday when EU lawmakers ordered Britain's Jonathan Hill to return next week to try again to convince them he could be trusted to oversee financial services in the bloc. After a three-hour interrogation in which Prime Minister David Cameron's choice had appeared to disarm a potentially hostile economic affairs committee with wit and assurances of his European commitment, parties failed to agree on his approval and said he should return to face questions, probably on Monday. “We are asking him to do a resit,” Sven Giegold, finance spokesman for the Greens, who led the charge against allowing a former business lobbyist to control EU policy over a sector where the City of London has interests at odds with Brussels. A leading member of the committee from Hill's Conservative party tweeted: "Additional exchange of views next week for Hill. Not easy to learn 5 years of financial regulation in 10 days." Greens and others on the left, as well as some German conservatives wary of letting a country outside the euro zone have an appointment with powers affecting the single currency, had highlighted what they called a lack of substance in many of Hill's otherwise fluent answers. Some were especially concerned by his seemingly limited knowledge on proposals for Eurobonds - a sharing of public debt liabilities across the euro area - that is a hot-button issue in Germany but virtually unheard of in British politics. “He could not explain his position on euro bonds, which is rather embarrassing,” Giegold told Reuters. After a first two days of relatively untroubled hearings for some of the 27 nominees to the European Commission, Hill may not be alone in facing further obstacles that could delay incoming Commission President Jean-Jacques Juncker's efforts to have his full team approved by parliament before taking office on Nov. 1. The Spanish nominee to a newly merged energy and climate change office also faced hostile questioning late on Wednesday over family investments in the oil industry. And the Hungarian nominated to oversee education and culture had to defend his record in a government many in the EU say is anti-democratic. JUNCKER TEAM Juncker, with broad backing from his own center-right and other mainstream parties in the increasingly assertive EU legislature, has promised a line-up to revive the economy and regain the trust of voters who returned a new phalanx of anti-EU members to parliament in elections in May. But many lawmakers are also keen to demonstrate their independence from the Commission, and from the 28 governments of the Union, which each nominate one member to the executive. Earlier in the day, before a buzzing audience of hundreds in an amphitheatre at the modernist European Parliament buildings in Brussels, Hill appeared to disarm doubting EU lawmakers with a combination of personal charm, a broad grasp of financial regulation and commitment to European integration. Hill assured them he was "not here as a representative of the City of London", promised to act in the common EU interest, praised his French predecessor and flattered the legislature. He drew laughter and a ripple of applause when he rebuffed a questioner from the UK Independence Party, which wants to pull Britain out of the EU, by saying he did not think Queen Elizabeth would see any conflict between his oath of loyalty to her and his oath of office as a European Commissioner. Philippe Lamberts, Belgian president of the European Green party, said before the hearing that Hill was the most ill-assigned of "Juncker's pack of jokers" but he acknowledged after the session that the Briton was likely to be approved. Spain's Miguel Arias Canete, a conservative former agriculture minister, ran into a barrage of criticism from left-wing and Green lawmakers over past links with the oil industry and last-minute changes in his statement of financial interests. He said he had sold his shares in two oil storage companies as soon as he was nominated as energy commissioner and his son had resigned from their boards. He repeatedly dodged questions about his brother-in-law's interest in energy firms. Canete also apologized for having made what he called an inappropriate sexist comment during this year's European Parliament election campaign. After a debate against a female candidate, he had said debating a woman was hard because a man who used his "intellectual superiority" might appear chauvinist. He insisted there was no conflict of interest between his previous business interests and his portfolio. He was applauded by center-right allies but criticized by several other groups. In another hearing, Hungarian nominee Tibor Navracsics had to rebuff questions on his role in a Budapest government that has clashed with the EU over its treatment of minorities and laws that Brussels says restricted the media and free speech. Seeking the education, culture and citizenship portfolio, he highlighted his role in negotiating Hungary's modification of new laws under EU pressure and his embrace, having grown up under communist dictatorship, of European values of democracy. Asked sarcastically by an independent German lawmaker if he would make Hitler's "Mein Kampf" a set text in schools, he won applause by expressing support for Hungary's Jewish community. CONSENSUS BUILDER Hill tried to defuse criticism of his nationality and background, depicting himself as a consensus builder and bridge between countries inside and outside the common currency area. "We are all agreed there can be no going back to pre-crisis days," he told lawmakers. "No going back to the wild risk- taking with its terrible toll on the jobs and living standards of so many of our citizens. No going back to our banks having to be rescued on the back of taxpayers." But he also said the bulk of Europe's post-crisis financial regulation was now in place and his task was mostly to fine-tune it and strike a balance to ensure that too much regulation did not deny the EU economy "the lifeblood of investment". Echoing a broad goal of Juncker to regain the trust of voters who elected large numbers of Eurosceptics to the parliament in May, Hill said he wanted to promote investment and ease barriers that could benefit ordinary consumers. He floundered when asked for his views on euro zone bonds, high frequency trading and how he would defuse risks from "too big to fail" financial giants, prompting German liberal Michael Theurer to say: "You have shown impressive rhetorical brilliance but a fundamental lack of substance." Seeking to appease Eurosceptics in his own party and beyond, Cameron has promised to renegotiate Britain's relationship with the EU and hold an in/out referendum on membership in 2017 if he is re-elected next year. Cameron said this week it would not break his heart if Britons voted to leave, although he believed it was in the UK's interest to stay in a reformed union. Hill sidestepped questions on whether he would be involved in negotiations Cameron wants to reform the EU - his "day job", he said, would be EU finance. Former French Finance Minister Pierre Moscovici is sure to face a grilling on Thursday after his country announced it would need another two years until 2017 to get its deficit down to the EU limit of 3 percent of national output. Parliamentary sources said all 10 nominees questioned on Monday and Tuesday, including trade nominee Cecilia Malmstrom, had been given a green light by the parliamentary committees. (Additional reporting by Huw Jones in London and Jan Strupczewski in Brussels; Writing by Paul Taylor; Editing by David Stamp and Peter Graff)