The race for the EBA: Intrigue, alliances and a spoilt vote
Who voted for Dublin? Who spoiled their vote in the final round? Loss of the European Banking Authority contains valuable lessons
For Ireland, the vote on the European Banking Authority’s new home points the way to the kind of complex alliance building necessary in a post-Brexit EU of 27 states. Photograph: Andrew Hall/Riser/Getty Images
Ireland’s loss in the competition to host the European Banking Authority (EBA) on the dip of an Estonian hand into a large fishbowl will have been galling for the Government and the officials involved.
The EBA is no European Central Bank, but its location here might have helped swing a few decisions our way in the fight to win post-Brexit investment from the financial sector. So it goes, but having surprised the competition by getting to the final two, the lucky dip was a tough way to lose out.
It would also have been something of an irony, of course, for the country that had a spectacular banking bust a decade ago to house the institution which, in the words of its own website, “works to ensure effective and consistent prudential regulation and supervision across the European banking sector”.
That Ireland succeeded in getting into the final round was unexpected, not least to France and Germany, who had thought they were in a three-way race with Vienna. But perhaps what transpired points a way for us to fight off the plans now threatening us from Brussels, not least on corporation tax. And the strategy is to build alliances with the other smaller and medium-sized players which, like us, seem prepared – certainly on the basis of the EBA vote – to resist the pressure to give in to the Franco-German axis at every turn.
First round of voting
We don’t know who supported us in the EBA vote, but we can speculate with a reasonable hope of accuracy. The first round of voting involved each country giving a first, second and third preference and Ireland seemed to have benefited from wining a significant number of lower preferences.
Then it got interesting, with Frankfurt eliminated in round two and Ireland edging ahead, only to lose out after a final tie with Paris.
As far as we can gather, Ireland’s 13 final round votes came from two or three of the Nordic countries, some of the Baltics and the central European grouping of Hungary, the Czech Republic, Slovakia and Poland. The others may have been Bulgaria, Malta and perhaps Austria and even Italy. As it was a secret ballot, you can be sure a bit of the conventional local tactic of telling everyone “sure I’ll look after you” will have gone on.
Intriguingly, one country spoilt its ballot in the final round. Could Germany not bear to vote for either France or the Irish pixie heads? Who knows, as the secret nature of the ballot means nobody knows who cast the crucial spoilt vote.
For Ireland, it does point the way to the kind of complex alliance building now necessary in a post-Brexit European Union of 27 states. Until now, Ireland could generally count on UK support. Without the UK – a traditional opponent of tax harmonisation – we will have to seek new allies in future, with the Government already targeting the Nordic and Baltic states, for example.
Many of the newer EU members in central and eastern Europe were annoyed at the decision to locate the two agencies moving from London – the European Medicines Agency (EMA) was the second – to western Europe. Slovakia, which had been expected to be in the shake up for the EMA, refused to vote in the latter rounds after it did not make the final three. It said geographical balance was “not respected”.
There may be a mood here which Ireland can draw on, along with a reticence among many smaller states for moves to centralise power.
Ireland will desperately hope its alliance building can succeed. On tax harmonisation, the big member states and the commission are now pushing a dual agenda – special tax measures aimed at the digital players and a move to a common corporate tax base. Both present big dangers for Ireland, threatening our corporate tax base and possibly our attraction for foreign direct investment.
Since 2011, corporate tax harmonisation proposals have withered on a few occasions. But this time feels different, fuelled by anger at the tiny amounts of tax paid by the big US players on their earnings in Europe.
With our veto already in play over the Brexit Border issue, we won’t particularly want to be waving it around again here. And we do face the danger of concessions elsewhere – including on tax – being sought in return for Brexit support.
Corporate tax is a particularly tricky one for us and sees us clinging to a process led by the OECD in favour of EU moves. Ironically, it appears that we are now getting extra tax revenue as the big multinationals accept that they must move assets out of tax havens – and pay a bit more tax. This may only infuriate the big EU countries even more. We need friends in Europe – and Brexit is only the start of it.