EU’s big 6 pitch a rival to Wall Street

BRUSSELS — The EU’s six largest economies have a vision for creating a U.S.-style financial market. Now they just need to sell it to everyone else.

The finance ministers of France, Germany, Italy, the Netherlands, Spain and Poland emerged victorious on Thursday from a mini summit in Berlin, green-lighting the contours of a deal that aims to turn the EU into an investment powerhouse that can rival Wall Street and the City of London.

The deal emerged from the splinter group after weeks of preparation away from the slow legislative deliberations in Brussels. Treasury officials from across the bloc have been negotiating an EU bill, dubbed MISP, which carries the same ambitions of integrating financial markets and introducing a single watchdog.

"We have striven to find a balanced compromise that reflects our stance and may serve
as a contribution for further discussions in the Council," finance ministers from the six countries, known as the E6, wrote in a joint statement published Friday.

But now comes the hard part.

The supergroup of six countries will now have to rally other governments to join their cause without making it look like they’re ignoring the views of contrarian countries.

After creating their own splinter group, they will have to go cap in hand to their remaining 21 peers in the EU. They need the support of at least nine other countries to secure the votes needed to push the market reforms through Council — to ensure they meet the requirement of support from 15 nations making up 65 percent of the EU’s population.

E6 finance ministers plan to present their agreement to the rest of their peers on June 12, when they all meet for next month’s meeting of EU finance ministers, known as Ecofin, in Luxembourg.

The overall goal is to create a “Savings and Investment Union” that makes it easier for insurers, fund managers and ordinary savers to pour trillions of euros into the EU’s economy, as an indebted continent struggles to meet the challenges of its time.

Back-to-back crises have limited the power of the public purse, so policymakers are hoping professional financiers and savers can do the heavy lifting by putting their money to work in the right places. EU citizens alone have €11 trillion of cash savings sitting in their bank accounts.

But vying interests from within the industry and national governments, such as Ireland and Luxembourg, threaten to derail negotiations. That’s convinced the E6 group to agree on the fundamentals among themselves to speed the process along, triggering fears of a two-speed Europe in which some countries are left behind.

“I don’t think a separate structure is feasible, because it would conflict with the prevailing perception in all member states today that fragmentation must stop,” Cyprus’ Finance Minister Makis Keravnos, who currently chairs Ecofin meetings, told POLITICO.

Devil in the detail

The broad strokes of the deal paper over internal divisions within the E6. While all six governments agree on upgrading the EU’s securities regulator into a supercop for the bloc, they disagree on how fast the process should happen.

The compromise among the six ministers is that the transfer of powers from national supervisors to the European Securities and Markets Authority (ESMA) is done in a phased approach, via a transition period that "should be appropriate and as short as possible."

That leaves the exact timeframe up for discussion, on a topic where there are plenty of competing interests.

Italy and the Netherlands had initially suggested a slow transition of up to eight years for ESMA to acquire new powers.

However, the Hague has since eased those demands, with Dutch Finance Minister Eelco Heinen advocating for a shorter transition period during Thursday's discussion, according to a Dutch official, which may bring countries closer together — if Italy is willing to compromise.

Another contentious issue is ESMA expanding its supervision to crypto firms, which are currently overseen at a national level.

In a key compromise, the E6 agreed that “significant” crypto firms should fall under ESMA’s remit, while smaller players remain under national supervision.