Welcome to Better Europe’s weekly update on EU Affairs.
EU DELIVERS SAVINGS AND INVESTMENT UNION, FOR BANKS (AND INSURERS)
STS is back, baby. Say again? Simple, transparent and standardised securitisation. When Member States wrapped up their position at the end of last year, the industry called it a Christmas present — you never really know what is inside. Or what is going to happen to the world once you open it. Well, this week in Strasbourg, Parliament and Council unwrapped the box. The surprise inside? A new “resilient” label to sit next to the simple/transparent/standardised one, reduced paperwork for investors, higher limits so retail funds can buy more STS, lower capital charges for banks (but only for low-risk deals!). Insurers can join the party too. The agreement is the first major deliverable of the Savings and Investment Union, says Commissioner Albuquerque, and of course, financial stability remains non-negotiable. According to the Council, “the updated framework will enable banks to free up more capital than is currently the case and channel increased lending to households, SMEs and infrastructure projects”. Ehm, wait a minute, wasn’t the Savings and Investment Union about moving retail savings away from banks and into direct financial market investment? Surely, making intermediation cheaper and easier will only entrench financing by banks? And yes, insurers can join the party too. But only if it’s synthetic STS.
RIOTS AGAINST MEMBER STATE DECISIONS SPREAD ACROSS EUROPE
Europe is burning, or so foreign leaders like Trump want to make us believe. It’s the extreme-left and the extreme-right fuelling the anger, to distract from their own lack of alternatives. But in reality, protests in France are about lack of school funding and the cost of living, Belgian protests and store looting started with increased tuition fees, Spanish and Portuguese citizens march for affordable housing, and Italian truckers block highways over diesel prices. Oh, and Albanians rally against a Trump family resort. Totally unrelated, even if chants in Milan are in French and chants in Lyon are in Italian. Protest experts call this a contagion effect — you see protests on TV and head out to the street yourself. We’ve seen that movie before, in the days of TTIP and with Fridays for Future. None of this is about the EU, but some people want to see a pan-European youth movement: to close the borders, reduce rents, or simply to make schools and Gucci shirts free. Professor Alberto Alemanno is right: this is not a criticism of an ungovernable Europe. It is, in his words, “a gift to anyone who wants to exploit the unrest”. Never waste a good protest!
CASH OR CARD, AS LONG AS IT’S EUROPEAN
This week, the Commission publicly admitted they are finally considering to activate the famous Blocking Statute, the set of rules from 1996 that would encourage European banks to continue to provide services to staff at the International Criminal Court. It is becoming urgent: Airbnb bookings for the next summer holidays are now in danger, as the U.S. has decided to label their employer a threat to American national security. And life in The Hague is already hard enough without access to Amazon and Google accounts. With the blocking statute in place, European financial providers who might otherwise cut services once Uncle Donald’s grace period expires in April would actually be blocked from complying with American law. In theory, every bank in Europe could be cut off from U.S. markets — which breaks the prisoner’s dilemma of certain banks complying and others not. In practice, some banks will probably find other opportunistic reasons to end services anyway. But the real solution, as Positive Money argues, is to disconnect from American payments in the first place. And what tool would be better placed to help us to do so than the digital euro? A public, EU-owned alternative to Visa and Mastercard, which process two-thirds of all euro-area card payments. If all goes well, the digital coins arrive in 2029. Until then, ICC staff best look for a hotel that takes cash.