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Oncoming policy clashes with cloud economic forecasts

Good morning. Welcome to Europe Express. Spring did arrive in Brussels, unleashing the newly granted outdoor victories and enthusiasm for dining.It is also on the agenda of the Commission, which is Season Economic forecast today. Outlook: A little sunny.

In Luxembourg, the EU general court today has a national tax system Amazon And Engie Constructed illegal state aid. Consider the implications for the EU’s efforts to enforce fair distribution of multinational corporations.

And Berlin will contact you. Liberal FDP We will hold a pre-election meeting on the weekends.

By the way, Europe Express will be off tomorrow and Friday for holidays in multiple European countries. But don’t worry, we’ll be back on Monday.

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Mixed prediction

In February, the European Commission wrote that it tentatively spy on the signs of “light at the end of the tunnel” after the pandemic crash. Sam Fleming In Brussels.

Today, Brussels should be in a more confident position as it updates its previous forecast of 3.8% growth in the euro area in 2021 and 2022.

There is increasing evidence that the economy is recovering from this year’s recession. Manufacturing index Germany’s retail sales are accelerating, breaking records in April, and EU business and household sentiment is well above the level just before the pandemic.

Immunization campaigns are also increasing, and blockades have been eased in parts of the continent. EU should start this year Get an early boost From 800 billion euros Next generation EU Reboot scheme — and the spillover effect of the huge US economic stimulus.

But strong growth does not mean that policy debates between EU Treasury will suddenly ease.Brussels is focused on Very complex task Approve 27 national reconstruction and resilience plans by summer before obtaining approval from Member States.

Completion of that bureaucratic mission raises the question of what will come next — a possible topic for the EU’s June Summit.Already the president of France Emmanuel Macron As Paris plans to review its existing € 100 billion program, it is instigating new European initiatives to step up investment and help the continent compete with China.

Macron has not pinpointed exactly what he is thinking. Also, among the 27 member states, there is no willingness to retrial the size of the existing recovery fund. However, Macron is aiming for reelection next year and will want to think big about the EU’s joint initiative.

The more dangerous issue facing Treasury is when and how to start navigating the path back to a smaller deficit. Paolo GentiloniThe EU economic commissioner, announcing today’s forecast, has urged Member States not to retreat too quickly and short-circuit the recovery.

But emergency relief plans and corporate liquidity packages cannot remain unchanged forever. HSBC economist Fabio Barboni said France, Spain and Italy will face a structural deficit of 5% next year, making it difficult to restore fiscal sustainability. Many member states have postponed fiscal consolidation until 2023 or 2024.

Closely related to this debate is the question of what the EU’s fiscal framework will look like.Brussels Stability and Growth Pact It is early in the pandemic and we do not plan to reimburse it until 2023. Questions about how to reconstruct it could wait until after the German elections in September. But there is no doubt that economists need to “rethink” the rules, as UniCredit’s Erik Nielsen said.

Gentiloni Observed This year, the integration has fallen sharply into public investment in the wake of the last crisis. This is because the block can’t afford to do it this time. The EU needs to allow “special treatment for growth-promoting spending” in its fiscal system. Debt rules may also need to be adapted to reflect the massive explosions imposed by the crisis.

However, it is not easy to reach an agreement between Member States on this most sensitive economic topic.

Creative proceedings

No matter how the general court’s rulings on Amazon and Engie go on today, the Commission wrote that they are most likely to use them as an example of why regulations are needed to achieve tax fairness. Masu Valentina pop In Brussels.

And the mood at the international level is certainly changing in favor of the Commission, Biden management Recently proposed Plan in this direction.

European Commission Executive Vice President Marguerite Vestager has launched several state aid proceedings in the area of ​​taxation © Reuters

But will the loss in one or both cases undermine Marguerite Vestager’s reputation as a fierce competition law enforcer?

necessarily.So I wrote last year When the same court ruled Vestager Apple The tax arrangement with Ireland is illegal and the Commission has been given a green light to conduct a cozy tax transaction under the State Assistance Act. This has been done by pursuing Apple and Ireland in the EU Supreme Court and advancing against other proceedings, especially IKEA and Nike.

It’s not the first time the Commission has used competition law to force regulatory changes, even in the event of another loss. in this case, A very controversial area Of taxation. In fact, antitrust enthusiasts can trace a long history of such movements dating back to the 1970s. “It’s an old practice to try to make progress when the law is at a standstill,” says Alec Burnside, a partner at Decchert LLP.

One of the first examples was in the early 1970s when a committee tried to bring a company to court on suspicion of abuse of control in a merger lawsuit and at the same time persuade governments to approve the merger notification system. .. The Commission lost the proceedings on the facts, but in principle won it, which helped the merger rules to be approved. Burnside recalled that similar tactics were used in the 1990s and early 2000s to pass a deadlocked law opening up Block’s telecommunications and energy sectors.

Fair taxation Campaign participants also hope that the proceedings will trigger regulatory efforts. Tove Maria Ryding, tax judicial coordinator of the European Debt Development Network, said the general court ruling “is an important debate on how rules should be redesigned to ensure that multinationals pay their tax burden. We will add more fuel. ” “.

The big picture aside, here are some simple facts about the incident:

  • Bestaga in Luxembourg in 2017 Clawback 250 million euros from Amazon. A major US online retailer counterattacked and challenged the court decision.

  • In 2018, Vestager ordered Luxembourg to recover € 300 million From Engie, A French utility formerly known as GDF Suez. If supported, the authorities of the Grand Duchy will be forced to make changes to their tax system.

Chart du jour: Chance to become prime minister

A graph showing the votes of various German political parties since the last election in 2017. Currently, Greens is 26%, CDU / CSU is 24% and SPD is 14%.

Almost all of Germany’s candidates for the Chancellor are lined up, so here’s a visualization of where each party stands in a recent poll. The rise of the Greens has confused the old parties, but the liberals are doing better than expected. (((Click here for details).

Blockade prevention party

Germany’s opposition Liberal Democratic Party was once ridiculed as a wealthy and ruthless Liberal Democratic Party. They transformed as the Covid-19 struck, the Berlin bureau chief wrote. Guy Chazan..

The· FDPThe National Party Conference on Friday opened a niche as a tribute to those who were frank defenders of civil liberties during the blockade and curfew era.

It seems to be working. In a recent poll by INSA four months before the Bundestag election, the party fell 3 points behind the Social Democratic Party to 12% after just 7% poll in January.

Germany’s coronavirus regulation has gained widespread parliamentary support with the support of Angela Merkel’s centre-right CDU / CSU and SPD, as well as the opposition. Greens.. However, the FDP has consistently been critical of what is considered an executive overkill. It made it a natural and dependable party for Merkel’s pandemic policy skeptics.

The FDP has also campaigned against the blockade, which is in stark contrast to the far-right German option, which is flooded with corona denier, conspiracy theorists and anti-vacers. Unlike AfD, Free Democrats have never downplayed the dangers of Covid-19. It just has a problem with how the government tried to defeat it.

For decades, the FDP has been one of Germany’s political fixtures. It supported the Social Democratic Party Helmut Schmidt and the Christian Democratic Party Helmut Kohl’s government, saying that its opponents would do anything to maintain power.

After the 2017 federal elections, the leader Christian Lindner He withdrew from negotiations with the CDU / CSU and the Greens over a “Jamaica” coalition, saying “it is better not to rule than to rule by mistake.” The Liberal Party said it prioritized principles over power. Critics have accused them of neglecting responsibility for the country.

Then there was Thuringian blunder, Eastern state, where FDP politicians were elected prime minister by AfD vote in February 2020. Subsequent scandals almost sacrificed Lindner’s work.

Liberal Democrats claim to put off all these failures and focus on the future. They are likely to enter the government in a coalition of Greens and SPDs after the September elections, but they are deeply disgusted by the tax increases planned by these parties.

The delegation of the party convention on Friday may re-election Lindner as a leader and support the FDP’s election manifesto. This is a clear call for modernization and renewal. “Everything can be better,” it reads. According to polls, Germans have been accepting liberal messages for years.

Three things to watch today

  1. Economic Commissioner Paolo Gentiloni Announces Spring Economic Forecast

  2. EU General Court Rules on Tax Transactions Between Amazon and Engie’s Luxembourg

  3. Finnish Parliament votes on EU’s own resource decisions needed to fuel the recovery fund

.. .. ..And later this week

  1. Germany’s Liberal FDP Party will hold its meeting from Friday to Sunday

  2. Greece will be open to travelers this weekend

  3. Polish government announces New Deal on Saturday

Notable, quoteable

  • German regulators Pause Facebook From processing data from WhatsApp users, claiming that the new controversial terms of use for messaging apps are illegal under European privacy law.

  • The Romanian president begged Joe Biden to send more NATO troops into Eastern Europe. So he says the alliance needs to “keep alert” to Russia. (((AP).

  • Spain lifted most of its coronavirus blockades earlier in the week, but many have complained that legal measures to curb the spread of the infection are inadequate. Click here for details.. (El País)

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Oncoming policy clashes with cloud economic forecasts

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