There will always be a healthy tug of war between European Union policymakers and the governments of the 27 national capitals.
Finance ministers can be particularly territorial and any mention of possible tax changes by Brussels officials is sure to raise hackles, something Ireland knows well from the years-long fight over its corporate tax rate.
Portuguese politician Maria Luís Albuquerque has sat on both sides of the table, as finance minister in the years after the financial crash, and since late last year as European commissioner for financial services.
[ EU takes another crack at capital markets reformOpens in new window ]
Ms Albuquerque took over the role from Ireland’s former commissioner, Mairead McGuinness.
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Commission president Ursula von der Leyen has asked her to come up with reforms to make it easier for money and investment capital to flow between EU states.
That would mean rewriting things like national insolvency laws and certain aspects of taxation to align EU members closer together. Governments and their finance ministers agree on the big picture in principle, but nobody wants to budge in practice.
“I know that people will say this is a power grab. It is not a power grab. It is about doing something that makes it work, because let’s face it, capital markets in Europe don’t work,” Ms Albuquerque said.
Current barriers to start-up companies expanding beyond their own national borders in the EU, and sourcing investment capital, are pushing nascent firms to the US where it is easier to raise money, the commissioner said. Online payments firm Stripe founded by the Collison brothers is the classic Irish example.
“When we talk about financial markets in particular, either we succeed by scaling this up to European size, or we don’t really stand a chance to be competitive. We will see our money flow out, we will see our talent go,” Ms Albuquerque said.
Speaking to The Irish Times in her office in the commission’s Berlaymont headquarters, she made the case for the stalled reforms.
At present, growing a company across EU national borders meant understanding different tax and legal regimes, she said.
“Everything is different, so why would I move to the country next door? If I’m going to go through all this trouble, I might as well go straight to where the market is big. I go to the US,” Ms Albuquerque said.
This is a problem for big member states, such as Germany and France, as well as smaller ones, such as Ireland. “Either we succeed together or fail isolated,” the commissioner said.
“We will see our companies not being able to innovate and grow,” the Portuguese economist said.
What was needed was a bigger, joined up European capital market, funded in part by ordinary people being encouraged to invest money that was sitting in deposit accounts.
Companies would then be able to borrow investment capital to finance their expansion from a wider and deeper EU pool of money.
The European Commission, the union’s executive arm that proposes laws, wants to harmonise, or align, some national finance rules to create that single EU market for capital.
“Insolvency is an example. Tax is an obvious other example. So we need to start harmonising that,” Ms Albuquerque said. Opposition from national governments has stalled the reforms, which were first put on the table a decade ago.
“We should all agree on what the shareholder is right? What the rights are of a shareholder? Well we don’t, we still don’t have a single definition,” Ms Albuquerque said.
The suggestion of giving more supervisory powers to a European markets regulator is also controversial. Smaller states with big financial services hubs, such as Ireland and Luxembourg, fear Germany and France will be the big winners of those changes.
Minister for Finance Paschal Donohoe has been steering a debate on all of this among his euro zone counterparts, in his role as Eurogroup president, but progress remains slow.
Ms Albuquerque, who is travelling to Ireland on an official visit this week, will discuss the proposed reforms with Mr Donohoe on Friday.
A cultural shift was needed as well, the Portuguese commissioner said. Europe could be hard on those who fail, while at the same time turning its nose up at successful business figures.
“We are too harsh on failure, rather than valuing the fact that there was a true attempt which could have succeeded, we focus on the fact that it failed,” she said.
“We don’t show that much sympathy for people who are extraordinarily successful, become rich and create big companies. We don’t treat them particularly well, that sends the wrong message,” she said.
Billionaires and successful entrepreneurs were not lionised in the way they were on the other side of the Atlantic. “The average American would probably say, ‘I would like to be like that guy who became a billionaire’. Here we actually tend to look at those people less favourably,” she said.
Ms Albuquerque, who secured the commission job former Irish finance minister Michael McGrath had his eye on, has called for changes to make it easier for ordinary people invest their savings.
Earlier this week the commission asked national governments to consider rolling out “saving and investment accounts”, that would allow people to earn a return on their money, rather than leaving it sitting in a bank deposit account.
Governments should introduce tax breaks to “nudge” people towards investing their money, Ms Albuquerque said. People should be allowed to open such investment accounts with as little as €10, she said.
The commission said getting Europeans to invest more of their savings could, in an optimistic scenario, unlock €1.2 trillion over the next ten years, which would flow into an EU capital market.
As the finance minister who oversaw Portugal’s exit from its economic bailout, and the painful post-crash austerity, she accepts some people could be risk averse with their money. “There might be some still scars from the last crisis, so people may be suspicious, that is possibly a factor,” she said.
Though many were already putting funds into less secure products, such as cryptocurrency, which indicated an opening for safer investment options, she said.
Money just sitting in bank deposit accounts was losing value. “Leaving the money in deposits with inflation, they’re actually losing purchasing power ... It’s just a waste,” the commissioner said.
Ms von der Leyen has promised to cut back on Brussels red tape and simplify EU regulations, following pressure from her centre-right political allies and business groups.
Ms Albuquerque’s own ties to industry have been criticised, having left politics for a period in recent years and worked for US financial giant Morgan Stanley and UK fund manager Arrow Global Group, before being nominated as Portugal’s EU commissioner pick.
She believes the EU should be careful not to think that simplifying rules and regulations would solve all of its economic problems.
“I wish it was that simple, it’s not so. There are other issues to pay attention to in Europe, other issues that actually have led to our loss of relative competitiveness, of productivity,” she said.
To put all the focus on easing EU regulations would be “dangerously short-sighted,” she said.
