France’s EU Council presidency will focus on ‘easy wins’, industry says
As Emmanuel Macron prepares to run for president for the second time, the French government will seek to push through as many regulations as possible throughout its presidency of the European Council to maximize impact, sources said. .
Started on January 1 and due to end on June 30, the French presidency of the EC will face the double challenge of supporting a presidential campaign and taking place in a context of rising geopolitical tensions in Ukraine and a persistent climate crisis.
“The French presidency takes over at a time of protracted health crisis and uncertain economic recovery,” said Bozena Gulija, a financial regulation consultant and former attaché at the European Court of Auditors. “Some indicators have been on the rise for two or three quarters, but it is still too early to say that we have emerged from the V-shaped recession. France’s program is called Recovery, strength and sense of belonging – such an ambitious program may in fact be necessary at this particular time.
In a speech to the European Parliament presenting the priorities of the presidency for the next six months, Macron presented the “three challenges of the century” facing the EU: climate change, the digital revolution and security (cyber and geopolitics ). “A presidency is short, and it must be concrete,” French Secretary of State for European Affairs Clément Beaune told a Bloomberg event. “It is also a means of selecting and accelerating the problems considered to be priorities. If we achieve results in these three areas, we will have had a useful semester of the French presidency.
The Presidency program also sets out three main ambitions for the EU during this mandate: to establish a more sovereign Europe by strengthening the Schengen area, protecting borders, controlling migration and improving asylum policy; create a new European growth model to make Europe a land of production, job creation, innovation and technological excellence; and fostering a more humane Europe, which upholds the rule of law and upholds its values, which is proud of its culture, trusts science and knowledge, and is committed to fighting discrimination and securing a future to the next generation.
At first sight, only the second objective has obvious links with the financial sector. “Many of the issues this presidency wants to prioritize are not directly related to the financial services portfolio,” said Nicolas Véron, senior fellow at the Peterson Institute for International Economics and co-founder of thinktank Bruegel. “These include carbon border adjustment, taxation and the OECD agreement, and everything related to NextGenerationEU. These are important issues which are also relevant for finance but which do not fall outside the competence of DG FISMA [Directorate-General for
Financial Stability] scope.”
See also: Sanctions against Russia could affect wider markets
Although adopting a pro-European position was clearly a strategic decision by Macron in the context of the presidential campaign, it did not appear to be linked to any particular policy measure or initiative – especially not a new one, argued Veron.
“There are not many references in the program to legislative initiatives relevant to the financial sector – financial regulation is only mentioned sporadically,” Gulija acknowledged. “In the end, we don’t know to what extent the presidency will be really active in terms of legislative initiatives. They arguably deal with more pressing issues related to the Covid-19 crisis, geopolitical tensions and the need to restructure Europe into a more sovereign region to deal with climate change and security.
Although the economy is an important part of the agenda, other sources have lamented the lack of more meaningful proposals in this area.
“Lots of headlines, few concrete steps – Macron’s so-called ‘programme’ is a disappointment,” said Markus Ferber, MEP. “Where the French president has gotten into the weeds, the proposals result in excessive regulation, bureaucracy and more debt. Europe following the “French way” would be bad news for its citizens, its businesses and its economy.
Ferber also criticized France’s all-encompassing approach. “[French Finance Minister] Bruno Le Maire talks about a new economic model and means more regulation, more debt and more state intervention: the French economic model under the Macron government is not a good model for Europe”, did he declare.
While France will likely want to close as many financial regulation files as possible during her tenure, she is unlikely to initiate anything new, multiple sources agreed.
“The French presidency will focus on advancing existing proposals for EU financial and banking regulation as much as possible, rather than proposing new topics,” said Emilie Rogey, partner at White & Case in Paris. “The objective is to conclude projects which are already the subject of proposals from the European Commission or which are under discussion in the European Parliament.”
A potential explanation for this, according to Rogey, is that EU financial regulation has now reached a stage where most areas are uniform and harmonized across member states, and do not need a fundamental overhaul.
See also: European open banking regulations are just the tip of the iceberg
“Areas where this may not be the case are usually those that include new products and services, such as crypto-assets,” she added. “Financial and banking regulations take time to pass and there are impact studies before any proposal is launched, so putting everything forward would take time. Aside from the sensitive issue of the UK’s post-Brexit equivalence status, financial and banking regulation is also not as critical and political in the public debate as Member States’ tax regime or debt.
Another explanation, however, is that Macron’s upcoming campaign for a second term could mean he prefers to tread a cautious path.
“If you want to get results and deliver, you have to focus on easy wins, like the things that were prepared by previous presidencies,” said Benoit Le Bret, partner at Gide Loyrette Nouel. “These typically include proposals to tackle distorting third-country subsidies and the Carbon Border Adjustment Mechanism, which will be a priority for candidate Macron. In financial services, he will try to tick boxes and agree on files that are ready, while taking a holistic approach to others.
For Macron, being president of the Council of the EU just as he enters the French presidential campaign is perfect timing, argued Le Bret.
“Macron is also thinking about his next job: for the next two and a half months, he will be the [EU Council] chair, then it will become the [presidential] candidate,” he said. “The candidate will clearly not focus on financial services as a priority – rather they will focus on climate change and all the EU protection proposals. The objective at the end of the mandate is to be able to say that the EU is better protected and greener, and that this was delivered by the French presidency.
Overall, summarizes Le Bret, the momentum of the French presidency will be “short but good”, with the first half of the mandate being largely political, and the second – marked by a more distant leadership from Macron due to the elections – more technical.
Double edged sword
If the looming electoral campaign can give wind to the French presidency of the Council of the EU, it could also eclipse it.
“It goes both ways,” Véron said. “The French presidential campaign will energize the presidency of the Council during the first weeks, when it is not running at full speed and the ministers and the president himself can still be active on the European scene. But it will also interfere negatively, as it will likely distract much of their attention from March. »
Minister of State Beaune, however, denied the possibility of such negative impacts, saying France’s work over the coming months would be a continuation of what previous presidencies have achieved.
See also: Increased scrutiny of greenwashing will alter ESG markets
“It’s not three months, in fact, because the presidency is a time when we try to speed up priorities and texts that we have been working on for years,” he said. “The idea of regulating digital platforms, for example, is an idea that France and a few other countries have pushed hard since 2017. Even during the presidential campaign, our negotiators and diplomats will continue, and there will also be another two months after the elections.
Although the EU Council presidency is usually an opportunity for political leaders to shine on the European stage and try to articulate an agenda, their impact remains limited, Véron argued.
“The extent to which the host country – and in particular the political leaders of the host country – shakes the agenda alone, must be put into perspective,” he said. “The reality is that some files are inherited from the previous presidency, and some are handed over to the next one. In this sense, the president cannot fully set his own agenda. What he can do, however, is choose where he wants to invest more effort and make progress.
Overall, Véron explained, the presidency of the EU Council is a well-oiled machine that largely escapes the hands of the host country, but which can be managed with more or less skill.
“Despite the challenges introduced by the very specific context of this presidency, its delivery potential should not be underestimated,” said Le Bret. “Three months is not that short, and if France does not manage to agree on all the points, it can at least propose general guidelines and move the debate forward. My advice would be: don’t expect too much, but don’t underestimate the final delivery.
© 2021 Euromoney Institutional Investor PLC. For help, please see our FAQ.