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IPE Views: The CMU, the Wind and the Sun

Jonathan Hill may be turning to the fables of Aesop to sell the Capital Markets Union, says Jeremy Woolfe

If there’s anything harder in the world than getting the EU’s 28 member state governments to agree on anything, apart from endless chat, it would be good to know what it is. Clearly, today’s challenge has to be to rein back hard on nations cherry-picking their pet interests at EU meetings. 

Finance commissioner Jonathan Hill must be well aware he is facing an uphill struggle with his flagship project, to set up an effective Capital Markets Union (CMU) in the EU. For a start, there are the bank interests.

However, the CMU could spark off economic resurgence and create jobs. It is a top target for the Juncker Commission, whose priority is to save the reputation of the EU before its mandate ends in 2019.

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Therefore, must it not be easy to find support for the CMU? Difficult for anyone to oppose it? Aah, but look at the history of other crucial sectors. Sadly, examples of vested interests, leading to let-down, are legion.

For instance, talk of a pan-EU patent system, a vital prop to EU technology, goes back to the 1970s. But it got stuck in the mud. Only now is it staggering into effect.

As for having the EU states approving rules to get railways to run decent services across the EU, forget it. What you get is talk, talk – and more talk. Good for some jobs in Brussels, may be.

Against this, what should Hill do? Bang heads? Perhaps … ? At a recent address to a gathering of the Brussels financial elite, he said: “I think confronting people and, in effect, banging their heads against the wall is one way to go.” Hill then half-apologised for referring to Aesop, of ancient Greek fable fame.

The commissioner related a story about a dispute between “The Wind and the Sun”. Which was the stronger? There was a traveller on the road below. “I see a way to decide our dispute,” said the Sun. “Whichever of us can cause that traveller to take off his cloak shall be regarded as the stronger. You start.”

Hill continued, that, as the Wind blew and blew and blew, the traveller just wrapped his cloak round himself more tightly. At last, the Wind despaired. Next came the Sun, shining his glory upon the traveller, who soon found it too hot to walk with his cloak on.

Critically, the finance maestro followed that, if the sunshine technique for the CMU fails to work, “there are other methods available”. 

Aesop used “humble incidents” to teach great truths. So, is the new philosophy of the European Commission to apply sunshine as the same kind of “truth”? 

And could the Sun principle be working already? Perhaps. Only days after Hill’s address, the Commission warmly welcomed an EU agreement on measures to bring in the automatic exchange of information on cross-border corporate tax matters.

The EU national economic and finance ministers had been unanimous in taking steps to effectively target companies trying to escape paying fair taxes. The new measures will result in the automatic exchange of information among EU member states.

Agreement came only seven months after the presentation of the Commission’s ambitious proposal. Also, it is against as background that attempts to reform corporate taxation in Europe going back to the 1960s.

Finally, from Hill, was this statement on the CMU: “Free movement of capital was one of the EU’s founding principles”.

Sounds serious. Let’s hope.

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