MNI: Ireland, Luxembourg Resist Joint EU Supervision Proposal

Differences over the European Union's Capital Markets Union project look set to divide leaders at a summit starting in Brussels on Wednesday, officials told MNI, as countries with significant stock markets push to accelerate progress while others including Luxembourg and Ireland resist any moves towards joint rules on supervision and corporate taxation.

Draft conclusions of the summit calls for "harmonising relevant aspects of national corporate insolvency frameworks and of corporate tax law to foster equity investments" and for EU-level supervision of at least the "most systemic relevant cross-border capital and financial market actors."

But, so-called “host' countries”, such as Luxembourg, and Cyrprus, whose financial hubs have attracted offshore wealth, as well as Ireland, where a low corporate tax rate has made it the European headquarters for many large tech firms, are allying with states with less-developed financial industries in Eastern Europe and the Baltics to resist proposals such as an expansion of supervision, officials said.

While France, Germany, Italy and Holland want faster progress towards CMU, one official noted that even some of these governments are internally divided on the matter. While Germany’s Chancellor Olaf Scholz is in favour, his Finance Minister Christian Lindner opposes centralized supervision, while in Belgium the France finance minister is in favour while the prime minister is against, the official said. (See MNI: France Backs Proposal For Joint EU Retail Bonds-Officials)

“And there is a fair element of self-interest in France's demand for more powers for ESMA when it is based in Paris,” the official said.

DRAGHI, LETTA REPORTS

The release on Wednesday of a 150-page report into European competitiveness by former Italian Prime Minister Enrico Letta, who calls for a Savings and Investment Union to help finance the green and digital transitions with private sector money, has added impetus to the CMU talks. Another report into competitiveness, by another former Italian PM, Mario Draghi, is due in July, and the former ECB chief said on Tuesday that it might be more effective for a "subset" of willing states to go ahead with CMU, raising the prospect of two-speed financial market integration in Europe.

This week’s talks are set to be "frank", with the idea of an avant garde of the willing and able states possibly a topic of discussion, another official said.

But the final wording of the draft could be less ambitious, as leaders try to bring smaller countries on board at meetings over dinner tonight and tomorrow, sources said.