Politico: Macron criticizes ‘ultra-liberal’ Europe

In his first appearance on a radio talk show since he was sworn in, the increasingly unpopular French president came out swinging against an EU he is better known for defending against opponents such as Matteo Salvini, Viktor Orbán and Vladimir Putin.

The EU is letting down its middle classes, ignoring their legitimate fears and exposing itself to a populist wave that could ultimately submerge the bloc, Macron told Europe 1 radio a few months before his centrist La République En Marche starts campaigning for the European Parliament election.[...]

His target was not the right-leaning populists who oppose him face-to-face. By railing against European “ultra-liberals,” Macron was pointing to all the factions that have resisted his plans, articulated during his presidential campaign and during a landmark speech at the Sorbonne in Paris, to make the EU a more “protective” bloc via tighter security cooperation, taxes on digital giants and tougher restrictions on state-aid takeovers. [...]

An example of “ultra-liberal” resistance was on display this week in Brussels, where Finance Minister Bruno Le Maire was pitching a French plan to impose a 3 percent revenue tax on companies like Google and Facebook. After more than a year of high-level diplomacy, the best Le Maire was able to extract was a vow from Germany to consider enforcing the tax from 2020, only if and when the Organisation for Economic Co-operation and Development was unable to come up with its own solution for taxing digital companies.

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Politico: Macron gives EU tech tax a political push

The French-led push fits into broader European efforts to rein in Silicon Valley companies, ranging from a $5 billion antitrust fine against Google to ongoing investigations into Facebook’s data practices. The large tech firms have so far responded by ramping up their lobbying efforts in the European capital, while U.S. Treasury Secretary Steven Mnuchin has warned the Europeans against jeopardizing tech investment — although so far Washington has stopped short of bringing the digital tax issue into its argument with Brussels over trade. [...]

While Paris claims to have the backing of 19 countries including the United Kingdom — whose chancellor, Philip Hammond, has pledged to “go it alone” on such a tax — it’s far from garnering the unanimous support needed for the measure to pass. A group of countries led by Ireland and including Estonia, Sweden and the Czech Republic remains strongly opposed.[...]

Tech firms’ opposition to the tax plan is due mainly to its long-term implications rather than any immediate financial impact. Under the current proposal, which was put forward by the European Commission for consideration by EU states by year-end, companies with substantial digital operations in the EU — those generating more than €750 million in annual revenue — would be subject to the new tax. The Commission has suggested a tax of 3 percent on revenues would raise some €5 billion a year. [...]

The problem for tech companies has more to do with the fact that France, and many EU allies, want to enshrine the idea of taxing value added from the collection and deployment of personal data for advertising — in other words, the engine at the core of Facebook, Google, Twitter and, increasingly, Amazon’s wildly successful business models. A European tax on data could prompt other countries to impose similar measures — just as Japan, South Korea, South Africa and a slew of other countries have imposed their own variations of Europe’s far-reaching data privacy rules.

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Vox: Europe is threatening to fight Trump on Iran sanctions

French Finance Minister Bruno Le Maire said on Friday that the European Union will look into reviving “blocking regulations” that were originally created in 1996 to protect European companies doing business with Libya and Cuba from US sanctions. They were an effective tactic at the time: They actually convinced Washington to back down from imposing sanctions. [...]

Le Maire also said Europe is also looking to achieve “financial independence” from the US in response to the sanctions. According to the Guardian, one proposition for executing that would be creating “a purely European finance house to oversee euro-denominated transactions with Iran.” The basic idea is that Europe could create financial institutions that are immune to US sanctions because they don’t deal in US dollars or link up with the US financial system. [...]

Ilan Goldenberg, a Middle East expert at the Center for a New American Security and former senior Pentagon official, told me he’s skeptical that European banks and businesses will want to risk being hit by US sanctions since the effectiveness of any future European blocking regulations is unclear.

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Politico: Reality blurs Macron’s eurozone vision

According to the Elysée, Macron will wait until the end of the month to make his detailed proposal public — just a few weeks before the next European Council meeting in mid-October. A preliminary discussion of deeper eurozone integration will take place at the informal meeting of EU finance ministers in Tallinn, Estonia, on Friday and Saturday. [...]

The old German position is that fiscal restraint and structural reforms in the eurozone countries would suffice to avoid a repeat crisis. But most economists, including German ones, note that external shocks to the European economy would hit different member countries in different ways and that some form of pooling of resources and fiscal transfers — that is, the strong helping the weak — would be necessary in times of crisis to avoid another financial panic. [...]

Contrast this with Merkel’s guarded endorsement of the idea at her summer press conference in Berlin a day before Macron’s interview was published. The common budget, she said, could be made up of “small contributions, not hundreds of billions of euros” from eurozone members and be devoted to rewarding countries that implement structural reforms. As for the eurozone finance minister, the person would merely help provide greater “coherence” in the economic policies of different countries.

That’s also the vision outlined by European Commission President Jean-Claude Juncker in his State of the Union speech on Wednesday — although he wants the joint economy and finance minister for the EU as a whole. [...]

Skeptics of Macron’s grandiose plans agree that more needs to be done to make the eurozone safer and more stable. But they say it would be enough to complete the major reforms that have already been launched — such as the EU’s banking union, arguably the most important reform of European institutions of the last 10 years.

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Politico: Emmanuel Macron’s choice: Merkel over fast reforms

Before implementing the tax overhauls Macron promised during his presidential campaign, the government led by Prime Minister Edouard Philippe will first make sure the French budget deficit is brought under the EU-imposed limit of 3 percent of GDP — for the first time in years.

The new president’s emphasis on tackling the deficit to the detriment of tax reform may help reassure the German government of Angela Merkel that it’s at last dealing with a fiscally serious French counterpart, as both countries want to restart the Paris-Berlin motor for Europe. France’s budget deficit has been above the 3 percent limit in 13 of the 18 years since the threshold was adopted, as economist Charles Wyplosz recently noted. [...]

“They had a choice: Forget about the 3 percent, blame Hollande for the miss and start right away on tax cuts; or play the credibility card. They chose the latter,” said a Treasury official, adding that he was happy with the decision.

“There was a debate in French government circles between economists favoring reforms and growth and the Treasury guys intent on the 3 percent limit, and the Treasury guys won,” noted Gilles Moëc, chief economist at Bank of America Merrill Lynch in London. [...]

Another reform — the exoneration of financial holdings from France’s infamous wealth tax — has also been delayed until 2019, even though Philippe promised it will be voted along with the 2018 budget, in October.

As for the labor reforms, they will continue unabated, the former Macron campaign economist noted. Macron chose the labor market overhaul as the international symbol of France’s ability to reform its economy. But according to most economists, it will have a limited impact on actual jobless numbers.

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