Key Events This Week:
Brexit – May delays meaningful vote and Corbyn backs second referendum amendment
Prime Minister Theresa May announced a significant shift in her Brexit trajectory, committing to three days of indicative votes which will steer the course of her government’s policy approach. The PM had to delay her meaningful vote to March 12th because no legal concessions on the backstop have been achieved. Should her deal be defeated again, MPs will be asked to vote on endorsing a No Deal Brexit. Furthermore, the Prime Minister finally bowed to pressure from ‘remainer’ cabinet ministers and announced that the House of Commons would vote on whether or not to extend Article 50 on March 14th, at the latest.
Any request by the UK for an extension would require the unanimous support of the other EU 27 leaders. While welcoming any such request from the British, President Macron and Chancellor Merkel noted that the EU could only endorse an extension if there was a clear plan or purpose expressed by the UK. Spain’s Prime Minister Pedro Sánchez added that an extension of Article 50 would come with conditions.
The Labour Party also moved the pendulum on its Brexit strategy with Jeremy Corbyn formally announcing his party’s support for a second referendum. With Labour’s amendments on its Brexit plan defeated in the House of Commons on Wednesday, the decision to endorse a second public vote is likely to cause an additional obstacle in forming a consensus view on the eventual construct of a Withdrawal Agreement.
France pushes Ireland to support digital taxation for tech companies
During his visit to Dublin this week, French Finance Minister Bruno Le Maire urged his counterpart Paschal Donohoe and Taoiseach Leo Varadkar to support a proposal by the EU Commission to tax tech companies.
The proposal which was brought forward in March of last year, would tax tech companies on three different sources of income; the exploitation of data, advertising revenue and sales on digital platforms. The proposal encountered heavy resistance from Germany which only agreed on taxes for advertising revenue. Denmark, Sweden, Finland and Ireland opposed the proposal entirely.
France is set to adopt the proposal in a national law this year. President Macron is also planning on making the issue a priority during its upcoming presidency at the G7.
In a speech at the Institute of International and European Affairs Le Maire stated that “friends can say difficult things” to one another and that Ireland’s low taxes for tech companies allowed for Ireland profiting monetarily from the data of 65 million French consumers.
Irish Finance Minister Paschal Donohoe addressed the digital tax issue by mentioning the potential to find possible future solutions through technical talks at the OECD level. This was presented by the French Minster as a new position, but in reality has been a long held position of the Irish Government.
The Electrification of the German Car Industry
Germany will most likely miss the target of having 1 million electric vehicles on the road by 2020. It is expected that there will be a delay of two years to this ambitious policy. “Considering the current market dynamics, the 1 million target will likely shift to 2022.” Germany has been facing the same problems most EU countries face when making the decision to move to the electric car world. The cost, limited driving range and the lack of charging points are all areas of massive concern for consumers. This is why the German government, which is reportedly considering extending its €4,000 subsidy for buyers of electric cars, is urging manufacturers to step up their efforts.
Start-ups in Germany have in the last number of years grown rapidly due to the sluggish transition by the larger car manufacturers. Seeing the gap in the market, the traditional car companies have decided to step into the world of electric vehicles. Volkswagen says it will invest €44 billion to develop electric cars; it aims to be making 3 million electric vehicles a year across all its brands by 2025. BMW recently announced it would invest €200 million to expand a Munich electric car factory, while also spending €4 billion on batteries. Daimler is spending €1 billion globally on battery production.
“We certainly had a delayed start (to the electric vehicle sector), but now we are catching up,” Germany’s Transport Minister Andreas Scheuer said. For Europe to take control of the electric vehicle market, battery cells are a key battleground. Economy Minister Peter Altmaier said that “ in a few years, Europe will have a competitive battery cell sector that can survive without state aid.” Germany is asking carmakers to group together to set up production of solid state battery cells in the country to compete with Asian rivals.
Policy discussion on financial services post Brexit
The European Parliament and the European Council have reached a deal concerning the access rules for investment firms wanting to operate in the EU post Brexit. The European institutions will ensure that the UK financial services industry will have to abide by the standards of the European Union in exchange for market access.
The European Commission will be required to assess if non-EU financial centres have the equivalent standards of regulation. Furthermore, Brussels will be keeping an eye on supervisory issues and they will carry out continuous assessments for as long as access to the EU market is authorised.
This move has ‘strengthened and clarified’ the existing equivalence system according to the European Commission. The updated market-access rules will apply to all non-EU countries, and will be relevant for the UK once it leaves the Bloc. The measures are another step in a push by EU policymakers to conclude remaining issues before the European Parliament goes into recess this May.
Representatives of the financial services have warned against making the market-access conditions too strict. The deal will need to be legally adopted by the EU parliament and Council for the new rules to take effect. EU officials expect that they will apply from 2020, depending on when exactly the agreement is finalised.
Compliments of Vulcan Consulting, a member of the EACCNY