Prior to the assembly of European Union leaders this week, the recurrent theme in discussions around Brussels was “competitiveness”. The topic of how the EU can keep up with China and the US on various fronts was discussed at the European Council meeting. Buzzwords such as “unlocking” finances and “cutting red tape” were widely used with particular focus on unleashing finances like pension savings to be invested in EU businesses and startups.
The formation of a capital markets union was one of the primary propositions circulated on Thursday. This idea was not new and has been debated for several years now. This would suggest transitioning towards a unified EU market regulation how capital is circulated within the union. Advocates claim such reforms would simplify the process for individuals to invest their savings in low-risk sectors, rather than letting them idle in bank accounts.
However, the concept of consolidating different national capital markets has constantly been thwarted, given the contentious nature of the proposed reforms. This entails striving to align different national policies on issues such as insolvency, and possibly tax standardisation, a major concern for Ireland.
Past suggestions have been hampered by the worry that the changes would produce both winners and losers. France, where the existing European Securities and Markets Authority (ESMA) is based, would likely lobby for ESMA to assume a wider function in the capacity of a comprehensive regulator in any new capital union. Smaller countries like Ireland, Sweden, and Luxembourg resist this, fearing that a major EU financial regulatory centre in France may entice firms to shift offices to Paris. As a result, despite backing from France and Germany, there is considerable doubt about whether the proposal will advance any further than when it was first suggested in 2015.
Although Ireland expresses support for capital market union reforms, the preliminary drafting for an agreement at the summit was perceived as overly biased towards France. The earlier text considered more EU level supervision and synchronisation of national insolvency regimes.
Despite the lengthy negotiations between leaders, the conclusive statement was largely congruent with the initial proposals. A consensus was reached that the EU should aim to align the various aspects of national insolvency rules and enhance the coalescence of capital market supervision across the EU.
Taoiseach Simon Harris, speaking at Brussels, confirmed on Thursday that Ireland would not endorse any steps towards uniformity of corporate tax. The discussions that day were primarily the commencement of dialogue. The conference wasn’t anticipated to solve what majority regard as intricate policy debates and discrepancies.
A lot will also hinge on who comes out on top in the forthcoming European elections, including whether Ursula von der Leyen remains European Commission president for another term, and who takes up the crucial role of commissioner.
The potential re-election of Donald Trump as US President post-November was the looming concern during the summit. Trump’s presidency would likely derail the present positive relations between the EU and the US. The consequence could be a revival of something akin to a trade war between the two superpowers, diverting attention from discussions about internal EU amendments.