Tonight, the European Greens are organizing a big election party in Brussels entitled “Choose Courage“. The two lead candidates Terry Reintke and Bas Eickhout will present their vision for Europe in the next five years. But above all, the event is a “call to all member parties, partners, activists, civil society, volunteers and all supporters who want a sustainable, fair and democratic Europe”.
This sounds like an appeal to the Green Party troops in a political context in which the party has found itself on the defensive with its issues. Farmers’ protests, inflation, the effects of the war in Ukraine – the reasons are manifold. At the same time, the effects of global warming are becoming increasingly noticeable.
“In the last European elections in 2019, there were climate marches and it was politically costly to oppose the Green Deal. Today it is politically profitable”, says Philippe Lamberts, Co-Chair of the Greens in the European Parliament. The Greens would therefore have to deliver “the game of their lives” in the election.
Have a good start to the weekend!
At first glance, the matter seems clear: at their summit in mid-April, the heads of state and government agreed to “continue work without delay” in the Council and the Commission on all necessary measures to create truly integrated European capital markets. The first item on the list is the “harmonization of relevant aspects of national insolvency frameworks for companies”.
However, the resolute-sounding formulas of the conclusions conceal strong political resistance. Economists have been pushing for the legal framework for insolvencies to be harmonized in order to make it easier for investors to invest in other EU countries and thus free up more capital across borders, and not just since the current initiative by Chancellor Olaf Scholz and President Emmanuel Macron. But little has happened so far.
Harmonizing insolvency law would make it easier for investors to assess the risk of default when buying shares, bonds or funds in other EU countries, says Sebastian Mack, Senior Policy Fellow at the Jacques Delors Centre of the Berlin Hertie School. “However, the legal traditions in the member states differ considerably, and the ministries of justice find it very difficult to abandon their familiar systems.” In the USA, the conditions are much better, as the legal area there is largely uniform.
In Europe, insolvency law has so far been a national matter. The first attempts at convergence were made back in the early 1960s, but no real progress was made for a long time. Under the Juncker Commission, the member states then agreed on the EU Directive on restructuring and insolvency in 2019. This set common principles for the prevention of insolvency and made it easier for debtors to get rid of their debts through restructuring.
In December 2022, the EU Commission then followed up: it presented a proposal for a directive that is intended to address three of the most important aspects of insolvency law: The realization of assets from the insolvency estate, the efficiency of the proceedings and the fair consideration of creditors.
However, one and a half years after its submission, the proposal has made little progress, neither in the Council nor in the European Parliament. The Federal Ministry of Justice in Berlin supports the proposed directive as a measure to promote the convergence of national insolvency systems, says a spokeswoman for the BMJ. However: “The actual text submitted requires extensive revision.” This was also made clear by the reactions of the majority of member states and associations.
According to the BMJ spokesperson, the Council working group has so far only dealt with part of the proposal relating to insolvency avoidance law. “The unanimously supported vote here was to give the member states more flexibility in shaping the framework.“
The proposed directive has also made little progress in the European Parliament. The Belgian MEP Pascal Arimont (EPP), rapporteur of the lead Legal Affairs Committee, has postponed his report several times and now only intends to present it after the European elections in June. Only the Economic and Monetary Affairs Committee has so far issued an opinion, on the initiative of SPD MEP René Repasi.
Repasi sees “a very clear national reflex” in this directive. Each member state considers its own insolvency law to be the best, says the professor of European law. However, the 27 different insolvency law regimes “create problems that need to be addressed with a European solution”.
However, the EU Commission’s proposal has also been criticized by interest groups. In a detailed statement, the German Association of Insolvency Administrators and Trustees (Verband Insolvenzverwalter und Sachwalter Deutschlands – VID) says: “Even though a closer integration within the European Union and, more specifically, the further harmonization of insolvency law is to be welcomed, the reason for and form of the proposed directive must be questioned very critically.
So everyone can agree on the goal of the Capital Markets Union, but the implementation in concrete terms is running up against a lot of resistance. Yet there is definitely a need for action. This becomes particularly clear when you look at the average recovery rate in various EU countries. The recovery rate refers to the proportion of the loan amount that lenders are reimbursed in the event of a debtor defaulting.
According to a 2020 study by the European Banking Authority (EBA), lenders in Greece only received 5% of the capital lent back, compared to almost 75% in Luxembourg. There are also significant differences between the major countries. In Germany, lenders received an average of 49% back, in France only 34%, but in Spain 66%. The differences are due to the fact that each national insolvency law regulates the creditor hierarchy differently in the event of insolvency.
This is a problem for the Capital Markets Union. After all, the predictability of insolvency rules in a country is a key factor for investors. A recent study by the French National Bank argues that financial market investors usually have less insight into the solvency of their investment targets than banks. The differences between national legal systems therefore act as barriers to cross-border investment.
According to experts at the French National Bank, harmonizing insolvency rules would help to create a pan-European market for financial products. It would also reduce transaction costs and lower risk costs.
In view of the deadlock, former Italian Prime Minister Enrico Letta has put forward a new alternative: a “European company code”, which would also include harmonized stock exchange and insolvency law. Letta speaks of a “28th regime“, which would be placed alongside the 27 national legal systems. Those affected could then choose which one applies to them. “This could be a way out in many areas if states do not want to give up their centuries-old legal traditions and cultures”, he told the FAZ.
The proposal for a 28th EU regime deserves “closer examination“, according to the BMJ. However, it must be taken into account that “insolvency law consists of regulations that have an all-round effect and are mandatory”. This sets limits to the possibility of using a model based on choice of law, which must be explored in detail.
Macroeconomic management and the goal of decarbonization are in a tense relationship, as the inflation episode of the past two years has shown. A supply shock initially caused energy prices to skyrocket, which led to price increases for all other product groups in the following months.
To counteract inflation, the ECB raised interest rates. Inflation eased, but the price for this was a sharp rise in investment costs, including for decarbonization projects. The wind energy sector in particular suffered as a result, as it has high capital costs.
“Renewable energies generally have much higher upfront investment costs and are initially more capital-intensive than fossil fuels”, says Grégory Claeys. The Senior Fellow at the economic policy think tank Bruegel has published a new book with colleagues on the interplay between macroeconomics and decarbonization. According to the authors, the EU needs much more green investment and an industrial policy geared towards innovation.
But how is this to be financed? In view of the strained state coffers and the newly introduced EU debt rules, not much can be expected from the member states. In the medium term, there is no way around a European investment program, says Claeys. In his opinion, the income from the emissions trading system should be used for this, among other things. This would protect public finances.
But that is easier said than done. During the book presentation in Brussels, the Director of the EU Commission’s Directorate-General for Climate Action, Yvon Slingenberg, recalled that the Commission had already proposed a European Sovereignty Fund in the fall of 2022. Among other things, this was to be financed by revenue from emissions trading. However, this was not acceptable to member states.
“Finance ministers tend to be conservative – in their own way. I don’t know if heads of state are briefed by their finance ministers, or if they were previously finance ministers themselves”, she said, alluding to German Chancellor Olaf Scholz.
Bruegel founder Jean Pisani-Ferry warned against relying too heavily on the classic economist response of carbon pricing. Some economists have become advocates of this single instrument. But: “A one-instrument policy will not be enough. A mixed strategy is needed”, said the former Macron advisor. He also pointed out that CO2 prices would disproportionately affect poorer people.
Because political room for maneuver in fiscal policy seems limited on both the expenditure and revenue side, more and more voices are being raised that want to harness monetary policy for the decarbonization mission. Last week, French President Emmanuel Macron opened the door to this discussion. “We must [start] the theoretical and political debate on how we can include at least a growth target or even a decarbonization target in the objectives of the European Central Bank … … into the objectives of the European Central Bank. This is absolutely essential“, he said during his Sorbonne speech.
Progressive NGOs and think tanks have been trying to bring the issue to the public’s attention for some time. The demand can also be found in the “Green Industrial Deal” published yesterday by the European Greens.
Claeys distinguishes two ways in which the ECB could promote more climate investments. Firstly, in its role as the top bank supervisor, it could rate green loans more favorably than loans for fossil fuels. It could do this on the grounds that stranded assets pose a risk to financial stability. Secondly, it could promote green investments more strongly through differentiated interest rates in its monetary policy.
While Claeys is in favor of the first option, he warns against the second. “Favoring green investments in the central bank’s monetary policy is very dangerous in the current institutional framework”, he said. In order to shake up the current prioritization of price stability, the treaties would have to be adapted, and that would be politically highly challenging.
The ECB must consider how it should deal with supply shocks in the future, especially as these are likely to occur more frequently in the future due to climate change and geopolitical tensions. In the case of temporary shocks, such as the one two years ago, the ECB needs to think more carefully about how it reacts. But: “You can’t use cyclical instruments to solve a structural, long-term problem”, said Claeys.
Instead, the EU should focus more on public development banks. The European Investment Bank (EIB), but also national development banks such as KfW, are ideally positioned to boost investment in decarbonization. “They are there to deal with structural problems”, argues Claeys.
The public development banks can also offer loans with lower interest rates for transformation projects, i.e. what the proponents of a “green” central bank want to achieve. However, this goal is more efficient and politically easier to achieve via the development banks. “I don’t think people talk enough about the EIB”, says Claeys.
Less than six weeks before the European elections, Renaissance is shifting up a gear. The composition of the list, which is headed by the leader of the Renew Group, Valérie Hayer, is to be announced this Friday in Paris, as confirmed by sources in Brussels and Paris. French President Emmanuel Macron’s camp will then present the program the following Monday, one day before an important election event in Paris. The idea is to be in “battle order” by Europe Day on May 9, according to the sources.
The battle for the best places on the Renaissance list revolves in particular around the chairman of the influential Environment Committee in the European Parliament, Pascal Canfin. The former minister of Socialist President François Hollande has made defending the Green Deal, and in particular, the legislative proposal to restore nature, his political hobbyhorse.
This position presents Renaissance with a strategic problem: Should it appeal to voters from the center-left spectrum who are receptive to environmental and climate issues? Or more conservative voters, who tend to be put off by this discourse and are receptive to the anger of farmers?
In 2019, the nomination of Pascal Canfin was “la surprise du chef”. Emmanuel Macron had recruited him against the backdrop of the climate marches, much to everyone’s surprise. As President of WWF France, the former Green was number two on the list for the European elections. At the time, the aim was to counter the French Green Yannick Jadot. And that brings us back to the question: What to do with the green joker when the wind seems to be changing?
For this reason, the statements of the various interviewees differ. Some sources see Pascal Canfin in fourth place. He would be certain of re-election. Others see him at the bottom of the list, in 15th place, for example. The polls give the Renaissance Party between 15 and 20 seats.
It remains to be seen whether the decision on Pascal Canfin will give the Renaissance a boost in the polls. So far, the election campaign is not going well: although Valerie Hayer is in second place in the polls, she is still far behind Jordan Bardella, the candidate of the Rassemblement National. And the gap to the third candidate, Raphaël Glucksmann, is narrowing all the time. The socialist appeals to the very center-left electorate that Canfin was supposed to win over.
Tonight, the European Greens are organizing a big election party in Brussels entitled “Choose Courage“. The two lead candidates Terry Reintke and Bas Eickhout will present their vision for Europe in the next five years. But above all, the event is a “call to all member parties, partners, activists, civil society, volunteers and all supporters who want a sustainable, fair and democratic Europe”.
This sounds like an appeal to the Green Party troops in a political context in which the party has found itself on the defensive with its issues. Farmers’ protests, inflation, the effects of the war in Ukraine – the reasons are manifold. At the same time, the effects of global warming are becoming increasingly noticeable.
“In the last European elections in 2019, there were climate marches and it was politically costly to oppose the Green Deal. Today it is politically profitable”, says Philippe Lamberts, Co-Chair of the Greens in the European Parliament. The Greens would therefore have to deliver “the game of their lives” in the election.
Have a good start to the weekend!
At first glance, the matter seems clear: at their summit in mid-April, the heads of state and government agreed to “continue work without delay” in the Council and the Commission on all necessary measures to create truly integrated European capital markets. The first item on the list is the “harmonization of relevant aspects of national insolvency frameworks for companies”.
However, the resolute-sounding formulas of the conclusions conceal strong political resistance. Economists have been pushing for the legal framework for insolvencies to be harmonized in order to make it easier for investors to invest in other EU countries and thus free up more capital across borders, and not just since the current initiative by Chancellor Olaf Scholz and President Emmanuel Macron. But little has happened so far.
Harmonizing insolvency law would make it easier for investors to assess the risk of default when buying shares, bonds or funds in other EU countries, says Sebastian Mack, Senior Policy Fellow at the Jacques Delors Centre of the Berlin Hertie School. “However, the legal traditions in the member states differ considerably, and the ministries of justice find it very difficult to abandon their familiar systems.” In the USA, the conditions are much better, as the legal area there is largely uniform.
In Europe, insolvency law has so far been a national matter. The first attempts at convergence were made back in the early 1960s, but no real progress was made for a long time. Under the Juncker Commission, the member states then agreed on the EU Directive on restructuring and insolvency in 2019. This set common principles for the prevention of insolvency and made it easier for debtors to get rid of their debts through restructuring.
In December 2022, the EU Commission then followed up: it presented a proposal for a directive that is intended to address three of the most important aspects of insolvency law: The realization of assets from the insolvency estate, the efficiency of the proceedings and the fair consideration of creditors.
However, one and a half years after its submission, the proposal has made little progress, neither in the Council nor in the European Parliament. The Federal Ministry of Justice in Berlin supports the proposed directive as a measure to promote the convergence of national insolvency systems, says a spokeswoman for the BMJ. However: “The actual text submitted requires extensive revision.” This was also made clear by the reactions of the majority of member states and associations.
According to the BMJ spokesperson, the Council working group has so far only dealt with part of the proposal relating to insolvency avoidance law. “The unanimously supported vote here was to give the member states more flexibility in shaping the framework.“
The proposed directive has also made little progress in the European Parliament. The Belgian MEP Pascal Arimont (EPP), rapporteur of the lead Legal Affairs Committee, has postponed his report several times and now only intends to present it after the European elections in June. Only the Economic and Monetary Affairs Committee has so far issued an opinion, on the initiative of SPD MEP René Repasi.
Repasi sees “a very clear national reflex” in this directive. Each member state considers its own insolvency law to be the best, says the professor of European law. However, the 27 different insolvency law regimes “create problems that need to be addressed with a European solution”.
However, the EU Commission’s proposal has also been criticized by interest groups. In a detailed statement, the German Association of Insolvency Administrators and Trustees (Verband Insolvenzverwalter und Sachwalter Deutschlands – VID) says: “Even though a closer integration within the European Union and, more specifically, the further harmonization of insolvency law is to be welcomed, the reason for and form of the proposed directive must be questioned very critically.
So everyone can agree on the goal of the Capital Markets Union, but the implementation in concrete terms is running up against a lot of resistance. Yet there is definitely a need for action. This becomes particularly clear when you look at the average recovery rate in various EU countries. The recovery rate refers to the proportion of the loan amount that lenders are reimbursed in the event of a debtor defaulting.
According to a 2020 study by the European Banking Authority (EBA), lenders in Greece only received 5% of the capital lent back, compared to almost 75% in Luxembourg. There are also significant differences between the major countries. In Germany, lenders received an average of 49% back, in France only 34%, but in Spain 66%. The differences are due to the fact that each national insolvency law regulates the creditor hierarchy differently in the event of insolvency.
This is a problem for the Capital Markets Union. After all, the predictability of insolvency rules in a country is a key factor for investors. A recent study by the French National Bank argues that financial market investors usually have less insight into the solvency of their investment targets than banks. The differences between national legal systems therefore act as barriers to cross-border investment.
According to experts at the French National Bank, harmonizing insolvency rules would help to create a pan-European market for financial products. It would also reduce transaction costs and lower risk costs.
In view of the deadlock, former Italian Prime Minister Enrico Letta has put forward a new alternative: a “European company code”, which would also include harmonized stock exchange and insolvency law. Letta speaks of a “28th regime“, which would be placed alongside the 27 national legal systems. Those affected could then choose which one applies to them. “This could be a way out in many areas if states do not want to give up their centuries-old legal traditions and cultures”, he told the FAZ.
The proposal for a 28th EU regime deserves “closer examination“, according to the BMJ. However, it must be taken into account that “insolvency law consists of regulations that have an all-round effect and are mandatory”. This sets limits to the possibility of using a model based on choice of law, which must be explored in detail.
Macroeconomic management and the goal of decarbonization are in a tense relationship, as the inflation episode of the past two years has shown. A supply shock initially caused energy prices to skyrocket, which led to price increases for all other product groups in the following months.
To counteract inflation, the ECB raised interest rates. Inflation eased, but the price for this was a sharp rise in investment costs, including for decarbonization projects. The wind energy sector in particular suffered as a result, as it has high capital costs.
“Renewable energies generally have much higher upfront investment costs and are initially more capital-intensive than fossil fuels”, says Grégory Claeys. The Senior Fellow at the economic policy think tank Bruegel has published a new book with colleagues on the interplay between macroeconomics and decarbonization. According to the authors, the EU needs much more green investment and an industrial policy geared towards innovation.
But how is this to be financed? In view of the strained state coffers and the newly introduced EU debt rules, not much can be expected from the member states. In the medium term, there is no way around a European investment program, says Claeys. In his opinion, the income from the emissions trading system should be used for this, among other things. This would protect public finances.
But that is easier said than done. During the book presentation in Brussels, the Director of the EU Commission’s Directorate-General for Climate Action, Yvon Slingenberg, recalled that the Commission had already proposed a European Sovereignty Fund in the fall of 2022. Among other things, this was to be financed by revenue from emissions trading. However, this was not acceptable to member states.
“Finance ministers tend to be conservative – in their own way. I don’t know if heads of state are briefed by their finance ministers, or if they were previously finance ministers themselves”, she said, alluding to German Chancellor Olaf Scholz.
Bruegel founder Jean Pisani-Ferry warned against relying too heavily on the classic economist response of carbon pricing. Some economists have become advocates of this single instrument. But: “A one-instrument policy will not be enough. A mixed strategy is needed”, said the former Macron advisor. He also pointed out that CO2 prices would disproportionately affect poorer people.
Because political room for maneuver in fiscal policy seems limited on both the expenditure and revenue side, more and more voices are being raised that want to harness monetary policy for the decarbonization mission. Last week, French President Emmanuel Macron opened the door to this discussion. “We must [start] the theoretical and political debate on how we can include at least a growth target or even a decarbonization target in the objectives of the European Central Bank … … into the objectives of the European Central Bank. This is absolutely essential“, he said during his Sorbonne speech.
Progressive NGOs and think tanks have been trying to bring the issue to the public’s attention for some time. The demand can also be found in the “Green Industrial Deal” published yesterday by the European Greens.
Claeys distinguishes two ways in which the ECB could promote more climate investments. Firstly, in its role as the top bank supervisor, it could rate green loans more favorably than loans for fossil fuels. It could do this on the grounds that stranded assets pose a risk to financial stability. Secondly, it could promote green investments more strongly through differentiated interest rates in its monetary policy.
While Claeys is in favor of the first option, he warns against the second. “Favoring green investments in the central bank’s monetary policy is very dangerous in the current institutional framework”, he said. In order to shake up the current prioritization of price stability, the treaties would have to be adapted, and that would be politically highly challenging.
The ECB must consider how it should deal with supply shocks in the future, especially as these are likely to occur more frequently in the future due to climate change and geopolitical tensions. In the case of temporary shocks, such as the one two years ago, the ECB needs to think more carefully about how it reacts. But: “You can’t use cyclical instruments to solve a structural, long-term problem”, said Claeys.
Instead, the EU should focus more on public development banks. The European Investment Bank (EIB), but also national development banks such as KfW, are ideally positioned to boost investment in decarbonization. “They are there to deal with structural problems”, argues Claeys.
The public development banks can also offer loans with lower interest rates for transformation projects, i.e. what the proponents of a “green” central bank want to achieve. However, this goal is more efficient and politically easier to achieve via the development banks. “I don’t think people talk enough about the EIB”, says Claeys.
Less than six weeks before the European elections, Renaissance is shifting up a gear. The composition of the list, which is headed by the leader of the Renew Group, Valérie Hayer, is to be announced this Friday in Paris, as confirmed by sources in Brussels and Paris. French President Emmanuel Macron’s camp will then present the program the following Monday, one day before an important election event in Paris. The idea is to be in “battle order” by Europe Day on May 9, according to the sources.
The battle for the best places on the Renaissance list revolves in particular around the chairman of the influential Environment Committee in the European Parliament, Pascal Canfin. The former minister of Socialist President François Hollande has made defending the Green Deal, and in particular, the legislative proposal to restore nature, his political hobbyhorse.
This position presents Renaissance with a strategic problem: Should it appeal to voters from the center-left spectrum who are receptive to environmental and climate issues? Or more conservative voters, who tend to be put off by this discourse and are receptive to the anger of farmers?
In 2019, the nomination of Pascal Canfin was “la surprise du chef”. Emmanuel Macron had recruited him against the backdrop of the climate marches, much to everyone’s surprise. As President of WWF France, the former Green was number two on the list for the European elections. At the time, the aim was to counter the French Green Yannick Jadot. And that brings us back to the question: What to do with the green joker when the wind seems to be changing?
For this reason, the statements of the various interviewees differ. Some sources see Pascal Canfin in fourth place. He would be certain of re-election. Others see him at the bottom of the list, in 15th place, for example. The polls give the Renaissance Party between 15 and 20 seats.
It remains to be seen whether the decision on Pascal Canfin will give the Renaissance a boost in the polls. So far, the election campaign is not going well: although Valerie Hayer is in second place in the polls, she is still far behind Jordan Bardella, the candidate of the Rassemblement National. And the gap to the third candidate, Raphaël Glucksmann, is narrowing all the time. The socialist appeals to the very center-left electorate that Canfin was supposed to win over.
