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International Internet Magazine. Baltic States news & analytics Monday, 18.11.2019, 04:19

Economy and finances combined: Valdis Dombrovskis’ approval in European Parliament

Eugene Eteris, BC International Editor, Copenhagen, 10.10.2019.Print version
Valdis Dombrovskis has easily gone through the European Parliament’s screening: the MEPs approved his nomination to the post of the EU’s top economics and financial commissioner. During about three hours MEPs “grilled” the Latvian nominee who will deal with an area of “an economy that works for people” during his next five years in the Commission as an executive vice president.

The former Latvian prime minister is expected to take over an expanded portfolio with the tasks and plans of promoting the EU’s economic interests globally, boosting “green finances” and add a social dimension to the Union’s common financial efforts. Besides, he promised to legislate on the Libra virtual currency backed by Facebook, acknowledged the Politico, which has illustrated five main items in Mr. Dombrobskis’s (VD) perspective activities.


Source: Hannah Brenton H. and Smith-Meyer B. in:

https://www.politico.eu/article/5-takeaways-from-valdis-dombrovskis-hearing

 


On money laundering

Tackling money laundering is going to be a priority in the next EU’s long-term agenda. The Commission ranked the issue high following a series of scandals in the Eastern part of Europe during 2018-19. Thus, this July, the Latvian government took some steps towards harmonizing anti-money laundering rules and introducing a single watchdog as the best course of action to tackle “dirty money” issues. These measures were the result of the Commission study*), which found that many banks had in recent years prioritized profits over customer checks and national supervisors were too inactive: no doubt, the EU and the states need a better financial supervision.

Presently, about one percent of the EU’s aggregate revenues (about € 160 billion) is involved in “suspect financial activity”.


*) More in: https://www.politico.eu/pro/europe-money-laundering-failures-signal-policy-headaches-for-new-commission/ 25 July, 2019. 

 

However, during the Parliament’s hearing, VD was more careful: he merely spoke of the “merits” of setting up a single watchdog. Such a cautious approach, according to experts, might stem from the fact that the EU states’ finance ministers (being generally quite skeptic to the idea of the EU’s “controlling role”) are going to discuss next steps to tackle laundering soon. Making any firm commitments to MEPs before the meeting might be a mistake if there are no unanimous intentions from the EU’s governments to active legislation.

 


On banking union

In analysing future VD’s work, the EU’s two flagship policies (called “unions”) in financial services, i.e. capital markets union and a banking union have been of a slight attention. For the perspective, the EU economy-financial sector’s boss has shown no great ambition to introduce the US-style capital market in which both companies and consumers can raise money.


However, there was an idea of creating the EU-s public-private fund to assist SMEs and medium-sized enterprises go public on capital markets, though without any reflections on its size and composition.


As to the banking union, with the focal issues of a centralized supervision and protecting banks from domestic debt crises, the future Commissioner stick to the existing EU’s supervision structures and backed the vital banking union’s structure, the European Deposit Insurance Scheme and the EU’s efforts to reduce nonperforming loans while creating a backstop to the eurozone's resolution fund.  


On “green financing”

As soon as the general EU perspective priorities for the next five years are supposed to be around sustainability issues, VD made clear that this trend will be supported by the so-called “green finances”. He stressed the importance of the EU’s plan for a Sustainable Europe Investment Plan with about €1 trillion of green investments (!) during the next decade. And it is about new financial sources rather than moving around with the existing funds.


The green financing will come from a triangle: the EU budget, the European Investment Bank (EIB) lending to combat climate change, and the “Invest EU program” to attract private money.


Without providing an exact amount of green financing, VD mentioned the EIB’s increasing and leading role in supporting numerous “green projects” and generating “many tens of billions of euros.”


Among most prioritized projects, VD mentioned green-bond standards, an EU’s Ecolabel program and “taxonomy” in defining most climate-friendly products.


More in: Supporting sustainability: EU’s financial innovation. In:

http://www.baltic-course.com/eng/modern_eu/?doc=147597&ins_print.


On crypto currency

In his remarks on crypto currencies and other fin-tech products, Mr. Dombrovskis announced the Commission’s plan for a legislative draft concerning such novelties as Libra during the next five-year term. It is known that Facebook plans to launch Libra in 2020, together with tens of other companies, including MasterCard and Visa.


More on Libra in: Libra- a new global digital currency. In:

http://www.baltic-course.com/eng/modern_eu/?doc=150171&ins_print

 

“Europe needs a common approach on crypto assets, such as Libra; I intend to propose new legislation on this. We'll need to regulate Libra to supervise it on EU level both from the point of financial stability and the protection of investors as well”, he said, also highlighting its risks to competition and cybersecurity.


He suggested this could be done with a new “regulatory framework” for Libra's intended type of virtual money, so-called “stable-coins”, linked to conventional currencies, rather than just updating existing rules.

 


Social agenda

The EU’s social agenda includes policies to create a highly competitive “social market economy” in the member states. Existing EU-2020 Strategy aims at providing more and better jobs, promote skills and entrepreneurship, improve the functioning of the labour markets, confronting poverty and social exclusion, modernising social protection systems including pensions, health and long-term care, facilitate the free movement of workers, etc.


More in: https://ec.europa.eu/info/sites/info/files/mission_statement_2.pdf


Protecting workers in the member states in a changing global economy and during the transition to circular and sustainable patterns were the priority issue in the VD’s “social agenda”.


Latvia’s Commissioner pledged to introduce a minimum wage at EU-level as one of his legislative priorities with a reinsurance program for cash-strapped countries to fund jobless benefits. Such “reinsurance proposal” is supposed to protect workers in tough times and secure stable workforce as a shock absorber for countries that experience sudden economic problems.


However, MEPs from the Parliament’s socialists and democrats’ block requested more active and goal-oriented social policies, including measures in social housing, collective bargaining and combating income inequality.


Several proposals were voiced for a more ambitious EU’s social agenda, as well as delivering on already approved EU-2020 strategy suggestions.

 

 






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