News
BackA number of new developments in Brussels concerning the subject of regulating the financial markets - not only AK EUROPA and the European Office of the Austrian Trade Union Federation ÖGB dealt at their event with hedge funds and private equity; the European Parliament, too discussed the new report presented by the French MEP Jean-Paul Gauzès. Also on the agenda of the European Parliament was an expert hearing on the financial transaction tax. The Economic and Finance Ministers of the EU-27 in Brussels were meeting at the same time and made one thing clear: the Member States do not want Europe to have too many powers!
European Parliament: Gauzès presents his report on hedge funds and private equity
In Brussels this week, Jean-Paul Gauzès, MEP and member of the European People's Party, presented his draft report on “Alternative Investment Fund Managers (AIFM)”, normally referred to as hedge funds and private equity, to the Committee on Economic and Monetary Affairs (ECON) of the European Parliament. The most important points are: the area of application of the Directive shall remain as recommended by the Commission: the vehement lobby attempts by various financial institutions to obtain exemptions, for example for real estate funds were ignored by Gauzès. Interesting is also the position with regard to the controversial threshold values. Here the Commission had suggested that the new regulations should only apply starting at an investment volume of EUR 100 million for hedge funds and EUR 500 million for private equity. Similar to the Austrian Federal Chamber of Labour, Gauzès sees here the danger of evasion structures and cancels the threshold values. Controversial is the proposal of the Frenchman regarding an upper debt limit (leverage). Gauzès proposes that the newly to be created European Systemic Risk Board (ESRB), which will be established at the ECB, should control excess indebtedness. Udo Bullmann criticised this approach on behalf of the Social Democrats and demanded concrete upper limits to be included in the Directive itself. Apart from that Bullmann demanded to prohibit short selling and concrete private equity regulations for funds. Thrilling negotiations will certainly take place, also because the position of the Member States in the Council differs on important points from the intentions of the Parliamentarians.
Those who caused the financial crisis should pay for it: Financial transaction tax
An expert hearing on the financial transaction tax (FTT) took also place in ECON. A representative of the Commission indicated that the Commission had currently no intention of submitting a proposal, that it would, however, follow international discussions. The FTT could not be compared to the Tobin Tax, which had been discussed previously. It could be the aim of the tax to achieve household revenues in times of austerity, to contribute to regulations and to ask the banking sector to foot the bill for the crisis it has caused. He also referred to the work of the Austrian Institute of Economic Research WIFO, which calculated that based on a tax rate of 0.01 % revenue of EUR 287 billion could be achieved globally and of EUR 130 billion in Europe (including Switzerland). The representative of the OECD mentioned that it would be worth to take a closer look at the FTT. Not so the boss of the London Stock Exchange. He pointed out that with her stamp duty, Great Britain already had a similar tax (0.5 %), which was a burden on business and would increase capital costs by up to 12 %. Sony Kapoor, Managing Director of the Think-Tank Re-Define took the opportunity of striking a blow for the FTT. If in spite of the stamp duty, which was significantly higher than the 0.01 % suggested by WIFO, London was nevertheless Europe’s largest financial centre, the concept could not be as wrong as depicted by the finance lobby. Tax revenue was important, but it could not be generated by increasing VAT or taxes on wages, said Kapoor. Jacob von Weizsäcker of the economic Think-Tank Bruegel in Brussels pointed out that the debate would often mix economic and political arguments. There might be better instruments economically; nevertheless it could be that the FTT might politically be easier achieved than other variants. The crisis had reversed the burden of proof. It was now the turn of the financial industry to prove that such a tax would not play an important role as an instrument to tackle the crisis.
Economic and Finance Ministers curtail the competences of the European Financial Regulators
The Council of the Economic and Finance Ministers showed clearly this week what kind of spirit prevails in the negotiations between the Member States. Although ministers agreed on the future structure of the European Financial Supervision, it clearly represents a challenge. Instead of creating more powers for the European supervisory authorities as recommended by the Commission, there will be fewer. As in the past, the national supervisory bodies are supposed to call the tune and to make sure that a European Regulator does interfere as little as possible, even when all experts demand the opposite. Some MEPs have already announced that they will oppose this course; it remains to be seen who will come out on top.
Furterh Information:
Report of Jean-Paul Gauzès on hedge funds and private equity
Official press release on the Council Meeting of the Economic and Finance Ministers
In Brussels this week, Jean-Paul Gauzès, MEP and member of the European People's Party, presented his draft report on “Alternative Investment Fund Managers (AIFM)”, normally referred to as hedge funds and private equity, to the Committee on Economic and Monetary Affairs (ECON) of the European Parliament. The most important points are: the area of application of the Directive shall remain as recommended by the Commission: the vehement lobby attempts by various financial institutions to obtain exemptions, for example for real estate funds were ignored by Gauzès. Interesting is also the position with regard to the controversial threshold values. Here the Commission had suggested that the new regulations should only apply starting at an investment volume of EUR 100 million for hedge funds and EUR 500 million for private equity. Similar to the Austrian Federal Chamber of Labour, Gauzès sees here the danger of evasion structures and cancels the threshold values. Controversial is the proposal of the Frenchman regarding an upper debt limit (leverage). Gauzès proposes that the newly to be created European Systemic Risk Board (ESRB), which will be established at the ECB, should control excess indebtedness. Udo Bullmann criticised this approach on behalf of the Social Democrats and demanded concrete upper limits to be included in the Directive itself. Apart from that Bullmann demanded to prohibit short selling and concrete private equity regulations for funds. Thrilling negotiations will certainly take place, also because the position of the Member States in the Council differs on important points from the intentions of the Parliamentarians.
Those who caused the financial crisis should pay for it: Financial transaction tax
An expert hearing on the financial transaction tax (FTT) took also place in ECON. A representative of the Commission indicated that the Commission had currently no intention of submitting a proposal, that it would, however, follow international discussions. The FTT could not be compared to the Tobin Tax, which had been discussed previously. It could be the aim of the tax to achieve household revenues in times of austerity, to contribute to regulations and to ask the banking sector to foot the bill for the crisis it has caused. He also referred to the work of the Austrian Institute of Economic Research WIFO, which calculated that based on a tax rate of 0.01 % revenue of EUR 287 billion could be achieved globally and of EUR 130 billion in Europe (including Switzerland). The representative of the OECD mentioned that it would be worth to take a closer look at the FTT. Not so the boss of the London Stock Exchange. He pointed out that with her stamp duty, Great Britain already had a similar tax (0.5 %), which was a burden on business and would increase capital costs by up to 12 %. Sony Kapoor, Managing Director of the Think-Tank Re-Define took the opportunity of striking a blow for the FTT. If in spite of the stamp duty, which was significantly higher than the 0.01 % suggested by WIFO, London was nevertheless Europe’s largest financial centre, the concept could not be as wrong as depicted by the finance lobby. Tax revenue was important, but it could not be generated by increasing VAT or taxes on wages, said Kapoor. Jacob von Weizsäcker of the economic Think-Tank Bruegel in Brussels pointed out that the debate would often mix economic and political arguments. There might be better instruments economically; nevertheless it could be that the FTT might politically be easier achieved than other variants. The crisis had reversed the burden of proof. It was now the turn of the financial industry to prove that such a tax would not play an important role as an instrument to tackle the crisis.
Economic and Finance Ministers curtail the competences of the European Financial Regulators
The Council of the Economic and Finance Ministers showed clearly this week what kind of spirit prevails in the negotiations between the Member States. Although ministers agreed on the future structure of the European Financial Supervision, it clearly represents a challenge. Instead of creating more powers for the European supervisory authorities as recommended by the Commission, there will be fewer. As in the past, the national supervisory bodies are supposed to call the tune and to make sure that a European Regulator does interfere as little as possible, even when all experts demand the opposite. Some MEPs have already announced that they will oppose this course; it remains to be seen who will come out on top.
Furterh Information:
Report of Jean-Paul Gauzès on hedge funds and private equity
Official press release on the Council Meeting of the Economic and Finance Ministers