Highlights from the “Brussels for Breakfast” meeting

The extraordinary turns of events at the European Council’s `jobs summit” took up most of the discussion – but there were also a number of key items for EU finance.

• Attention focussed on the Council’s decision to appoint German Defence Minister von der Leyen as Commission President. She was not the EPP’s nominated Spitzenkandidat and her record at the Defence Ministry is widely criticised. So it is not yet certain that she will be able to gain the support of an absolute majority of Parliament.
• The appointment of Christine Lagarde to the ECB Presidency also came as a surprise – especially as both the President and Vice President would not have long experience in central banking. Does that matter in such a highly politicised role?
• Charles Michel as Council President is the second Belgian to hold the post… but perhaps multi-lingual, multi-party coalitions are a good training ground for consensus-building.
• As the meeting ended, S&D Sassoli from Italy was elected President of the Parliament – giving the Socialists one “job”. The mandatory timing of this election actually forced the hand of the European Council if they were to avoid the Parliament unilaterally making an appointment that would reduce their room for manoeuvre.

We felt the Commission’s decision to lapse the “equivalence” of Swiss equity trading with that in the EU may have been intended to send a message to Brexit Britain. The European Council mid-June meeting rammed home the message that the Withdrawal Agreement was not open for re-negotiation but the Political Declaration on future relations certainly can be discussed.

The same Summit also laid out a strategic agenda for the incoming Commission: setting four priorities – including “building a climate-neutral, green fair and social Europe”. The green theme came across in several other items: a Commission guideline to improve how firms report climate-related information; ICMA commented on the Technical Expert Group’s green deliverables; the Bundesbank supported the Central Banks and Supervisors Network on Greening the Financial System (NGFS) and the EBA consulted on draft guidelines about loan origination that include environmental issues. The next five-year political cycles in the EU will surely be a Green one!

That was not the only pressure on banks – the EBA reported that an immediate phasing-in of all Basel III requirements would produce a €135 billion capital shortfall – concentrated among the major banks. However, if all profits were retained, the shortfall would halve… but participants were quick to point out that would make banks un-investible….