European Union

China has rejected the proposal from the World Health Organization to carry out the second phase of the investigation into the origins of the coronavirus, which would include inspections of laboratories and markets in the city of Wuhan, Reuters reported on Thursday. Theories include a possible laboratory leak, fuelled by the lack of raw data corresponding to the 2019 gene sequence from the Wuhan Institute of Virology.

The World Health Organization (WHO) said on Thursday that low-income countries could have added €32.2bn to their GDP forecast for 2021 if they had similar vaccination rates as high-income countries. It also warns that the unequal distribution of vaccines globally will have "a lasting and profound impact on socio-economic recovery" in low-income countries. "Vaccine inequity is the world's biggest obstacle to ending this pandemic," said WHO chief Tedros Adhanom Ghebreyesus.

A new report on Wednesday by the British branch of NGO WWF and UK supermarket giant Tesco, shows that 1.2bn tonnes (over 15 percent) of food produced globally is lost during harvest or slaughter procedures. The research states that 58 percent of farm-related food waste takes place in middle- and high-income regions. WWF is calling on Brussels to address food waste through EU policies.

Hungarian prime minister Viktor Orbán has announced a referendum on his country's controversial new anti-LGBTIQ law - in response to criticism from the European Union which called the new legislation discriminatory.

The US says a deal has been reached with Germany to prevent Russian gas from being used as political leverage by Moscow over Europe in the Nord Stream 2 pipeline project. The deal sees Ukraine get $50m (€42.3m) in green energy technology credits and a guarantee of repayment for gas transit fees it will lose by being bypassed by the pipeline through 2024, reports the Associated Press.

The EU deploys thousands of advisers to its missions abroad. Without addressing reform as a profoundly political struggle, however, the EU will remain successful only in operational advisory and trainings.

The UK is pressing to rewrite the Brexit protocol for Northern Ireland, describing it as a flawed concept. But the European Commission is not interested in re-opening talks. Maroš Šefčovič, the EU vice-president in charge of EU-UK relations said Brussels "will not agree to a renegotiation of the protocol," noting it had been ratified by the UK parliament.

The survey was carried out in seven member states that have not yet adopted the single currency: Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania and Sweden. Denmark has decided not to join, having negotiated an opt-out.

Slovenian foot-dragging on the appointment of prosecutors to a new EU anti-graft office may trigger a decision by the European Commission to take it to court. Slovenia's prime minister Janez Janša said they would be appointed by autumn.

In the world economy, the European Union (EU) is often portrayed as a ‘market power’, able to leverage the large size of its internal market and its considerable regulatory capacity to influence international trade negotiations and shape global market regulation. Moreover, the EU often favours stringent regulation for products and production processes. In finance, after the international financial crisis of 2008, the EU also favoured more stringent domestic and international rules on several financial services, with some exceptions in the banking sector. At the same time, the EU’s attempts to ‘trade up’ international financial regulation by acting as a ‘rule-maker’ rather than a ‘rule-taker’ has met with limited success.

 

The EU’s role in the post-crisis international governance of financial securitization does not sit well within the literature that considers the EU as a ‘paladin’ of stringent regulation as well as a rule-taker in finance. In fact, while the United States (US) promoted more stringent domestic and international rules on securitization in the aftermath of the crisis, comparatively, the EU, has tended to sponsor less stringent domestic and international rules. Securitisation is the process of creating marketable financial instruments by pooling various financial assets (e.g. mortgages, loans) and selling these repackaged assets to investors.

 

The regulation of securitisation is important because it is part of the shadow banking system and contributed to the 2008 international financial crisis. It also has implications for monetary policy and the provision of funding to the real economy. Furthermore, in the context of the covid-related economic crisis, securitisation can be a way to provide additional funding to struggling companies. Yet, it can also be a source of financial instability. This is because securitisation can be instrumental for the creation of complex and opaque financial products, with poor quality of credit underwriting and monitoring standards. The EU has a relatively large securitisation market, although smaller than the one in the US.

 

What accounts for the EU’s role as a pacesetter in ‘trading down’ the regulation of securitisation worldwide? An explanation that has been overlooked so far is the pivotal role that the United Kingdom (UK) has played in the international standard-setting process, where it forged a coalition first with the US and then with the EU. The UK, in addition to the EU and US, can be seen as a third power when considering the regulation of global finance. The UK’s power is derived from the fact that it has a very large financial sector, and the City of London is an important international financial centre, also for securitisation. Moreover, the UK has traditionally punched above its weight in international financial fora also because British regulators have advanced expertise on financial matters and well-established contacts within the global financial community. Thus, whether the UK sides with the US or the EU, has implications for strengthening or weakening the negotiating positions of either jurisdiction at the international level.

 

In the case of securitisation, prior to Brexit, UK and EU regulators had aligned preferences and coordinated their actions at the domestic and international levels. In particular, a powerful alliance was forged by the Bank of England and the European Central bank (ECB), with the support of the European Banking Authority (EBA) and the European Commission. The Bank of England and the ECB produced two influential policy documents on this matter in 2014, noting that securitization, if appropriately structured and regulated, could provide additional funding to the real economy. Furthermore, it could be a source of funding for banks, which could transfer credit risk to non-bank financial institutions. A particular focus was on the promotion of simple structures and transparent underlying asset pools (so-called ‘high-quality’ securitization), while preventing the resurgence of the complex and opaque structures that contributed to the 2008 financial crisis. The European Commission was also supportive of securitization, which was a key component of the Capital Markets Union project proposed by the Commission in 2015. In fact, high levels of securitization were regarded as instrumental to develop Capital Markets Union, which was supported by many EU member states, especially the UK. Capital Markets Union was designed to increase financial sector integration in the EU and enhance the EU’s position in global capital markets.

 

In international standard-setting fora as well as at the regional (European) level, the Bank of England, the ECB, the EBA and the European Commission, were on the same page and sang from the same script in the attempt to reform the securitisation framework. To revive securitisation markets, two sets of measures were necessary: rules to increase the transparency and standardisation of securitised products, so as to create a label for ‘safe’ securitisation, and less stringent capital rules for this type of securitisation. In response to the EU-UK proposal, the Basel Committee on Banking Supervision (BCBS) and the International Organisation of Securities Commission (IOSCO) published Criteria for Identifying Simple, Transparent and Comparable Securitization. At the same time, the BCBS agreed to reduce capital requirements for simple, transparent, and comparable securitization (2016). The same process was subsequently repeated for short-term securitisation (2018). Interestingly, the international discussions concerning the regulation of securitisation and the discussions on Capital Markets Union and the re-launch of securitization in the EU proceeded in parallel and the former were used to legitimise the latter.

 

Overall, the regulatory pendulum swung back and forth: initially, in the wake of the 2008 crisis, the international regulation of securitisation was traded up following the pace-setting of US regulators. Then, it was traded down as a consequence of the pace-setting of EU and UK regulators. Whereas the financial industry as a whole plauded this regulatory easing, critics (mainly some academics and finance watchers) worried about this development. The explanation – which is elaborated in my JCMS article mentioned below – hinges on the pivotal position of the UK, which first allied with the US and then with the EU on this matter. More generally, the article highlights the crucial role of the UK in making rules for global finance, in particular, whether the UK forges a coalition with the US or the EU. This explanation can ‘travel’ to other cases in finance and has become more important after Brexit because the question of whether the UK will side with the US or the EU in international standard-setting negotiations has come to the fore, especially whenever the EU and the US have strongly misaligned preferences. It takes two to tango in regulating global finance.

 

This blog post draws on my recent JCMS article: Quaglia, Lucia ‘It takes two to tango: the European Union and the international governance of securitisation in finance’

 

 

Short bio: Lucia Quaglia is a Professor of Political Science at the University of Bologna. She has published 10 books, 6 of which with Oxford University Press and over fifty peer-reviewed journal articles. She has also guest co-edited 4 special issues of highly ranked academic journals.

The post The European Union and the international governance of securitisation in finance: from foe to friend? appeared first on Ideas on Europe.

The publication on 21 July of the UK government’s Command Paper came just before the end of the Parliamentary session. Flagged for several weeks, it was presented as the culmination of a long push to secure changes to the Northern Ireland Protocol.

Undoubtedly, the Paper does cap the numerous public statements of Lord Frost, Brandon Lewis, Boris Johnson and others in government, not least in saying that a root-and-branch reformulation of the entire text is needed, rather than some tweaking at the edges.

But it is another aspect of culmination that is more striking: the lack of credibility behind the proposals advanced.

Put briefly, the UK’s position appears to be one of “we didn’t mean to sign the Protocol, so let’s change it”, an approach that has no grounds in either international law or basic political common sense.

The international law aspect is something I’ve covered already, but to recap the basics: if you freely sign a treaty, you’re bound to stick to it, unless there’s some very fundamental change of circumstances. And no, disliking it isn’t enough.

The political angle is one that’s not too complex to unpack either.

In any potential negotiation, you need to know what your best alternative to a negotiated agreement (or BATNA, for acronym fans) is. As long as you can get a better outcome by negotiating than by not negotiating, then you should negotiate and agree.

Note that this is purely relative: the negotiated outcome might be poor, but it just needs to be less poor than not agreeing. And so it is for Brexit.

The EU might not like the Protocol much, but it was better than any other option on the table, or walking away from the table altogether.

As such, the UK’s proposal to renegotiate the Protocol needs to be a clear improvement on the status quo.

And yet, the Command Paper barely deals with the EU’s needs (beyond Single Market integrity), which means the case has not been made to even start on this, so the Commission’s rejection of renegotiation is less than surprising.

Since the UK knows all this, the question has to be why bother pursuing a route that isn’t going to lead anywhere good? Playing with invocations of Article 16 (which isn’t what the UK government thinks it is, but that’s a different point) can only result in numerous legal and trade retaliations from the EU, and a big telling-off by the US, only to leave the UK with the original problem still in place, so it’s not really going to work.

As with so much of the Brexit process, this isn’t really about the external aspect, but the internal one. The deep allergy of Number 10 to signing up to anything that gives a formal role to the EU in UK affairs is driven by the pressures of backbenchers, regardless of the views of public opinion, businesses or anyone else.

Indeed, the most telling sentence in the entire Command Paper is from para 14:

Nevertheless, the revised Protocol delivered the fundamental requirement of enabling the UK as a whole to leave the EU in a genuine and meaningful way

British policy is thus about what mustn’t happen, rather than what must; a strategy that has failed repeatedly since 2016.

The hope is still, clearly, that someone will come up with a cunning wheeze to square the numerous circles, so all that’s needed – and fortunately all that’s possible – is to keep things from settling into any kind of regularity, so that no one gets too comfortable.

I’ve set out some further thoughts on the Command Paper in this thread, but the key is that this isn’t any kind of unblocking process, but rather a holding pattern:

Right, a first reading of Cmnd Paper on NI Protocol

tl;dr is tl;dr [sic]https://t.co/NqnUdWSqRP

1/

— Simon Usherwood (@Usherwood) July 21, 2021

As a bit of a side-note, I’ll also mention that the DUP made various positive noises about the proposals in the Command Paper, largely because they talk to the same people.

The DUP’s seven tests from last week did highlight the problems of the current Protocol, but also of all the other options out there. Those that do meet the DUP’s requirements don’t work for either the EU or Number 10.

This suggests that we are still a very long way from any kind of stable equilibrium on Northern Ireland.

PDF: https://bit.ly/UshGraphic88

The post tl;dr – The UK’s Command Paper on the Northern Ireland Protocol appeared first on Ideas on Europe.

The European Commission proposed on Tuesday rules that would see companies transferring cryptocurrencies, such as Bitcoin, collect details of senders and recipients, in order to help authorities detect money laundering or terrorism financing, Reuters reported. This will ensure "full traceability of crypto-asset transfers," the commission said. Anonymous crypto-asset wallets will be banned since anonymous bank accounts are already forbidden under EU anti-money laundering rules.

Moroccan intelligence agencies targeted French president Emmanuel Macron with the Israeli-made spyware software Pegasus, according to Le Monde newspaper. Although targeted, it remains unclear if his phone was compromised by the software. They also reportedly went after EU Council president Charles Michel, when he was prime minister of Belgium.

The UK will pay France €62.7m to prevent migrants from crossing the English Channel, in a deal hammered out on Tuesday. The plan includes doubling the number of French officers deployed along the coast. The deal comes a day after a record 430 people crossed the Channel on small boats.

Greece has launched an investigation into four NGOs, accusing them of facilitating illegal entry of foreigners and espionage. Among those targeted is Aegean Boat Report, which details pushbacks of migrants and refugees. Greek migration minister Notis Mitarachi last December accused it of helping migrant smugglers, a charge denied by the NGO.

The European Commission on Tuesday proposed a new set of anti-money laundering and countering terrorism-financing rules. The legislative package includes the creation of a new EU-level Anti-Money Laundering Authority, which will seek to coordinate with national authorities to ensure the rules are applied consistently throughout the private sector. The package has been described a major step forward by the Greens.

A recent study shows that gun homicide has increased in Sweden - as opposed to the rest of Europe, where it's been in decline for years.

The concern of Germany's Constitutional Court was that the European Court of Justice did not sufficiently check the action of other EU branches of power. The Polish situation is the exact reverse: the government is taking control of the courts.

The rule-of-law report comes in a crucial moment as Brussels is currently approving member states' recovery plans, conditional on having a robust justice system and anti-corruption framework.

OPINION on the proposal for a directive of the European Parliament and of the Council on measures for a high common level of cybersecurity across the Union, repealing Directive (EU) 2016/1148
Committee on Foreign Affairs
Markéta Gregorová

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