KEY EVENTS THIS WEEK:
EU lays down rules for regulatory agencies relocation
The battle to lure the departing UK-based European regulatory agencies is on as Brussels has issued the criteria which will guide how it will decide their future post-Brexit locations. In a proposal published earlier this week, the President of the European Council Donald Tusk laid down the ground rules and called on member states to have bids submitted by July 31st.
The London-based European Medicines Agency (EMA) and European Banking Authority (EBA) both employ over 1,000 staff and are highly sought after. Although the British government has not given up hope of retaining the agencies and believes that their future will be determined by the exit negotiations, everyone else sees this as wishful thinking.
A number of elements are set down in the proposal, the first ‘’objective criteria’’ stresses the need for ‘’business continuity’’ in locations that can ‘’maintain and attract highly qualified staff’’, implying that the agencies must be relocated and running smoothly by the time of Brexit. The second element address the ‘’desirability of geographical spread of the agencies’ seats’’ which relates to past EU promises to base agencies in newer member states further to the East.
However, the proposal also maintains that ‘’this procedure concerns relocation rather than setting up new agencies’’ meaning that the original agreement to base agencies in newer states relates only to new agencies rather than the relocation of older ones. The document highlights that applications must be able to provide a home for the EMA’s off-site archive of 34,000 boxes, have adequate education and staff facilities, as well as being able to host an additional 30,000 hotel nights a year for the EMA and 9,000 for the EBA. With the remaining EU27 seeking to benefit in any way possible from Brexit, this paper kick-starts the five-month battle between members vying for two of the bloc’s regulatory jewels.
Member state infighting stalls ECB plans to move euro-clearing out of London
Efforts by the ECB to shift euro-clearing from London after Brexit is facing obstacles after it emerged that there were deep rifts between the Eurozone’s three biggest members over who should supervise it. Although Germany, Italy, France and the ECB all agree that euro clearing needs to be relocated once the UK leaves the bloc, it seems that the question remains over ‘’who would supervise, the ECB or the national central banks’’?.
The ECB currently has ‘supervisory colleges’ that oversee the London-based clearing houses through rules set down by EU regulations and agreements reached with the Bank of England. However, the central bank is fearful that it may lose power over these firms which account for more than 90% of euro clearing.
A proposal has been drafted up by the Executive Board of the ECB that sets euro clearing under the direct supervision of the Eurosystem, which is comprised of the ECB and the 19 national central banks of the Eurozone. The proposal, however, does not specify or include a preference for any particular location. This disagreement threatens to delay the EU’s timetable to make a June legislative proposal on euro clearing post-Brexit and could force the Commission to step in and make a proposal without consultation from the ECB.
Commission eyes future Eurozone reform with ‘’reflection paper’’
A leaked read-out of a highly confidential meeting seen by German newspaper FAZ shows that the EU Commission is planning significant changes to the Eurozone. The Commissioners responsible for the euro, Valdis Dombrovskis and Pierre Moscovici, recently met a select few MEPs to inform them in advance about the content of the ‘’reflection paper’’ that outlines the future of the monetary union and is expected to be presented in several days’ time.
The wide-reaching paper calls for a number of proposals, including the establishment of a euro finance minister subject to scrutiny from the European Parliament and greater access to finance for the euro area. Various sources of increased finance are explored, such as a fund for the protection of public investment during times of recession or the creation of a Eurozone budget.
Highlighting the necessity for a community financing instrument, the Economic and Financial Affairs Commissioner Pierre Moscovici admitted that many Eurozone countries cannot invest enough in times of downturn due to the rules set down by the EU Stability Pact. An additional inclusion in the paper is a highly ambitious target to have all EU27 joining the single currency by 2025.
For years, the Eurozone has required further reform and closer integration to make it work. The proposals set out in the Commission’s latest proposal certainly are far-reaching and would bring about substantial changes. However, it is unlikely that all the proposals would be passed and implemented in their current state, given that many Eurozone states are against further integration and any signs of federalisation.
Franco-German initiative push for speedier Eurozone reforms
The two largest Eurozone economies have begun to draft up plans aimed at substantially increasing co-operation between their largest companies as part of an effort to enhance bilateral relations and boost the struggling Eurozone economy. The election of Emmanuel Macron has revived the Franco-German engine and both sides are keen to commence greater economic policy co-ordination in order to bring about quicker changes to the Eurozone.
The German Finance minister Wolfgang Schäuble met his French counterpart Bruno Le Marie at the start of this week to discuss a wide range of possible proposals. In a show of unity at the conclusion of their meeting, they jointly announced that ‘’deeper co-ordination and integration of economic policy is needed in order to achieve real economic convergence’’, adding that future European policies could be developed through ‘’common bilateral initiatives’’.
Such initiatives will be detailed further when a working group reports to a joint Franco-German cabinet meeting in July but there is speculation that it could feature co-operation in the digital economy and energy. This follows on from media reports that energy companies RWE and Engie are looking at a possible share swap that would create a €50bn Franco-German group. Although the Macron Presidency is still very much in its infancy, it is already evident that a close French and German partnership will a key pillar of its tenure.
EU states back bill for tougher oversight on social networks
Coming only days after the horrific terrorist attack in Manchester that killed 22 people, EU ministers have approved legislation that seeks to curb hate speech on social media platforms such as Facebook, Twitter, and Youtube. Although the bill still needs to passed by the European Parliament, it is fresh evidence that member states hold serious concerns over online radicalisation and the incitement to join terrorist organisations.
For social media platforms where video content is an ‘’essential part’’ of their services, new measures will be put in place to block videos that include hate speech or content that justifies terrorism. This could result in the establishment of mechanisms that allows users to flag such content. However, these proposals will not extend to live streaming such as Facebook live, but only videos stored on the platform.
The bill also includes a provision to ensure that video streaming platforms such as Netflix and Amazon Prime Video have a 30% quota of European films and TV shows, an increase from the original 20% proposed by the European Commission. The new rule is only a directive, meaning that individual EU countries will have to transpose it themselves into national law. This will give each nation greater scope to determine the level of responsibility big platforms should take on. Germany, for example, have recently proposed a bill that threatens social networks with fines of up to €50 million if they fail to remove hateful content or fake news within 24 hours.
May 29th – June 4th
Wed 31st May & Thurs 1st June: European Parliament Plenary Session
8th June: Governing Council monetary policy meeting of the ECB
8th June: UK general election
11th June: First round of French parliamentary election
13th – 14th June: US Federal Reserve Open Market Committee meeting
14th – 15th June: Meeting of the Basel Committee on Banking Supervision
15th June: Eurogroup meeting
15th June: Bank of England Monetary Policy Committee meeting
16th June: ECOFIN meeting
18th June: Second round of French parliamentary election
22nd – 23rd June: European Council Summit