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Irish politics criticizes the way the UK decided to sever ties with the European Union
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It’s been six months since the Irish Mairead McGuinnes (Ardee, 1959) made the leap from the European Parliament -where he held a seat for more than three legislatures- to the European Commission to replace his compatriot Phil Hogan, forced to resign after being accused of violating the sanitary rules of the covid-19, and taking charge of the portfolio of financial services and capital market union whose task is to guarantee financial stability and avoid a new banking crisis. Even so, Brexit and the application of the Ireland and Northern Ireland they are still very present in their day to day. “If one chooses, and the UK did, to leave the customs union and the single market and disconnect from all our plant and animal health rules, there are consequences. If the UK had chosen otherwise, we would not have these difficulties now. “, he maintains in an interview with EL PERIÓDICO and various European media.
The problem with the Protocol for Ireland and Northern Ireland persists.
Vice President (Maros) Sefcovic spent much of December trying to agree to an extension of the deadline when we realized that the companies were not ready and had said so. Had the Prime Minister (Boris Johnson) engaged in a clearer and more direct discussion with businesses in Northern Ireland and UK exporters to Northern Ireland, Brexit would have been better prepared. Industry and companies would have better understood the necessary paperwork. The necessary infrastructure and information exchange would have been put in place. I’m not sure what exactly happened but clearly there was not enough preparation for everyone to implement it in due time.
How about London’s unilateral decision to postpone customs controls until at least October?
The UK should have negotiated with the EU. We all know that solutions must be found and that they must be found collectively. When the UK says they need at least until October, this leaves things more open than would be helpful. Businesses must prepare for these changes and it must be now.
What we have are two visions of the protocol.
A majority in Northern Ireland voted to remain in the European Union. Certainly the unionist community in Northern Ireland has concerns because they want to be close to the rest of Britain and they don’t like the idea of borders or barriers. But they should have known what the consequences are and I don’t think they discussed the implications with full clarity. It took a lot of time and effort to agree on the protocol and it should be implemented, taking into account all sensitivities. We are fully aware of the difficulties and we want to help. We do not want to see more fragmentation in Northern Ireland. Divisions don’t help.
Even so, the European Commission has chosen to initiate legal action against the United Kingdom
We have responded in the way that we could. We had to respond. Now I hope that wisdom will prevail and that Lord (David) Frost will sit down with my colleague Sefcovic. If it is until October because this is the unilateral decision, with which we absolutely disagree, we would like to think that the UK will in good faith try to implement its end of the deal before October. We will be flexible but if you make a deal with someone you have to sit down and talk to them.
Did you think there would be problems?
Yes because Brexit has created a very unique set of circumstances in Northern Ireland, which did not exist when the UK was a full member of the EU. I remember borders, barriers, soldiers and checkpoints. The joy of not having them is simply incredible but it is difficult for people of a younger generation to realize that they existed. Brexit has brought this back to a place in the Irish Sea where we thought, and the UK agreed, that they could be accommodated (to avoid a physical border on the island).
In January Brussels invoked a clause in the protocol to restrict vaccine exports.
It was a mistake that was alive for an hour and then we apologized for days. The fact that it happened has increased our awareness to check and verify that there are no unintended consequences, particularly in Northern Ireland. I was really concerned at the time of the incident that Europe’s commitment to Northern Ireland and to peace was being called into question.
The regulation of financial services is pending. Brussels and London have been given until the end of March to close an agreement on the equivalence of financial rights that allows British companies to continue operating in Europe.
We do not have urgency nor should we rush. We don’t have enough information. We have to see what the EU’s interest is, particularly around financial stability. The main reason for Brexit was to diverge from EU rules. I hope there is not much divergence in the financial system, but we will also change our legislation. We hope to meet our deadline to agree on the Memorandum of Understanding and then we start working on some details.
What should the European Commission do so that all European financial centers are on an equal footing at the international level?
In the EU there have been some parts of the financial system that have relocated. We will not have a square but (several): Frankfurt, Amsterdam, Paris, Dublin. All as part of the EU financial system. We don’t have a strategy that says this has to happen and it has to happen here. The markets will decide which is the most appropriate place. What we want is financial stability. There are likely to be many changes around digitization, open banking, digital currencies… It is an area of rapid evolution in the coming years. Many of the problems we face are global. We have very strong regulatory cooperation with the United States and it works. It is what we need with the UK. As for financial services that have moved to the EU, they are welcome for the places that have benefited but it is a consequence of Brexit and the form of Brexit that the United Kingdom chose.
Do you see it possible to reach an agreement this year in the OECD on the fee for digital services? Are you expecting easier negotiations with Joe Biden?
In general I would say that relationships are easier globally with the Joe Biden Administration. The mood and atmosphere towards a deal is better. On the digital rate, the position of the EU is that we want things to work in the OECD but we are prepared to move forward on our part if there is no agreement. When one looks at the public’s mood towards big business and taxes there is much more sensitivity due to the crisis. Citizens want transparency and fairness in global taxation so I hope we can move forward at the OECD level. It would be really useful from a European perspective, but as the President herself said, we are ready and willing to work towards a European solution.
Are you worried about the increase in bad loans?
We are fully committed to supporting companies and workers. We also have the ECB that has contributed to supporting countries and their economies and has been vital during the pandemic, which is not over yet. According to their analysis, in a very adverse scenario, the potential is 1.4 trillion bad debts by the end of next year, but it is the worst possible scenario. If we look at the statistics, the level of bankruptcies has decreased during covid-19, which responds to support for companies. We will probably see an increase in bad loans. Hopefully it does not extend to the worst case scenario, but if it does, we need secondary markets that perform well. If these bad loans remain on the banks (balance sheets), they will stop giving loans to citizens and companies and we could have a credit crisis. We will avoid it by acting early and with a debate at national and European level. But having properly functioning secondary markets is absolutely crucial.
Can you exclude new banking crises?
Our job is to avoid a banking crisis. We are aware of what could happen in the worst case scenario and we are working to avoid it. We will have (a new round of) stress testing in July. I don’t think there will be a sudden jump in bankruptcies. I don’t see what will happen. I want banks to talk to companies that are viable in the long term so that there are restructurings where appropriate. Someone could be blamed for the past crisis, a reckless lender or a reckless borrower. This time, the truth is that the developed world was not prepared for a pandemic. We have learned and adapted very quickly. We take action quickly. We have had good results with vaccines. Despite all the difficulties that the covid-19 has thrown at us, the reaction has been adequate. We are well aware that something as invisible as a virus can stop the world. We must be prepared if something like this happens again.
It may interest you
They have recently proposed legislating on cryptocurrencies. In what state is this matter?
It is something that everyone talks about but there is no regulation. We want there to be sufficient regulation and consumer protection within that framework. As for large companies launching digital currencies, we have already said that they should not start until it is regulated and it is done in a negotiated way. Due to covid-19, digital is the new currency because since March we have used cards. I think there will be dramatic changes in this area. There are many innovations and we have to analyze the risks as well. In addition, we know that the number of fraud attempts during covid-19 has increased in the financial system because there are more people working digitally, so we have to ensure that the entire system, all the infrastructures, are sufficiently secure.
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