In chaos theory the butterfly effect describes how one small event in one place can have major unforeseeable consequences somewhere far away. The example goes that the beating of a butterfly wing in Japan could cause several weeks later a tornado in the US. Last week we got another illustration. In COVID-19 times the ill-conceived attendance to a golf dinner in Ireland by a trade commissioner has unexpectedly landed the financial sector with a new commissioner in Brussels. Indeed, on September 8 the European Commission President Ursula von der Leyen announced that the European Commission Executive Vice President Valdis Dombrovskis would be the EU’s new trade commissioner and Mairead McGuinness the new Irish commissioner with responsibility in financial services, financial stability and the capital markets union.
This limited reshuffle reflects von der Leyen’s intention to maintain stability in the College. In fact, beyond benefitting from the support of her fellows MEPs – McGuinness was elected EP vice president with 618 votes – she also has “significant political experience on EU issues” which would be “crucial in pursuing EU’s financial sector policy agenda and the Commission’s key priorities in green and digital transition”, as von der Leyen stressed in her statement. In other words, with 16 years at the European Parliament getting as close as you get to the top, she is a seasoned political operator.
Nevertheless, McGuinness seems to have limited experience with EU financial services policy having worked mainly on EU agricultural and environmental issues in the European Parliament. Some have already described her as a “blank slate” and expect her to be more dependent on the services of her directorate general. Others stress that she comes from a medium sized Member State with a strong financial center and that she will quickly learn on the go.
Ms McGuinness is not Commissioner yet. She will need to go through the approval process in the European Parliament and the appointment by the Council. During the hearing, MEPs and in particular members of ECON Committee will as is the custom put pressure on the candidate to make concessions on issues dear to their heart and interests in exchange for her confirmation. Spokespersons for the socialist and the greens have already hinted at critical questions that will be raised in particular regarding Irish practices in the field of financial services and tax. In the end McGuinness is nevertheless not expected to be given too hard a ride as she still is an MEP herself and on top of that very much liked as a person by her colleagues. Well prepared and in the absence of any major faux pas, she can expect to sail through the exercise.
A related hot topic in the Brussels financial services policy bubble is whether McGuiness can keep the director general of her services (DG FISMA), a fellow Irishman. There is no legal case for changing the director general and the Commission spokesman Eric Mamer has already said that a change is not to be expected in the short term. At the time of writing, this seems to hold true.
What can we expect from this Irish team at the helm of the EU’s financial services policy? No blatant pro-Irish policies and a strong European rational would be a reasonable guess. They will also push through the upcoming CMU 2.0 action plan, the recovery from the COVID-19 economic consequences as well as planned Basel III finalisation. All these projects are well underway. Finally, one can expect more understanding towards legitimate business models of international financial centres. This in itself would already be welcome in a post-Brexit world.
By Antoine Kremer