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A new European Commission: but don't expect radical policy changes

Date: 15th September 2014

In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses recent key developments, including the appointment of the new European Commission.

The main points are:
  • The Scottish referendum (18 September) has dominated UK markets over the past week with an already weakening pound falling further against the dollar.
  • Oil prices have declined recently as demand has fallen, reflecting Eurozone weakness and China's slowdown. Oil supplies remain plentiful despite turmoil in the Middle East.
  • European Commission President Jean-Claude Juncker's new Commission contains a significant innovation, a "new way of working". Six Vice-Presidents have been appointed in addition to the High Representative of the Union. They comprise the First Vice-President (Juncker's "right-hand man"), the V-P for the Budget & HR and four V-Ps who will lead "project teams", each "steering and coordinating" the work of seven or eight Commissioners.
  • France's Pierre Moscovici was appointed the Commissioner for "Economic & financial affairs, taxation & customs", but we do not expect his appointment to lead to a radical loosening of Eurozone fiscal policy. His work will be overseen by three Vice-Presidents.
  • The UK's (Lord) Jonathan Hill was appointed the Commissioner for "Financial Stability, financial services & Capital Markets Union", but we do not expect his appointment to lead to a radical change in the approach to financial regulation. His work will be overseen by two Vice-Presidents.
  • In response to the continued economic weakness in the Eurozone, ECB President Draghi announced another stimulus package with 10 basis points cuts in the key interest rates and the announcement an Asset-Backed Securities Purchase Programme (ABSPP) on 4 September.
  • Analysis of population data suggests that in the year to January 2014, net emigration contributed to falling unemployment rates in Spain (especially), Ireland and Portugal, and significantly reduced the increase in Greece's unemployment.
Ruth Lea said, "It is, of course, too early to say how exactly the new Commission will operate but inevitably the presence of coordinating Vice-Presidents will constrain the freedom of the individual Commissioners. We do not expect any major changes in economic policy despite the Eurozone's weakness. And we do not expect any major changes to financial regulation of the City, despite the appointment of Jonathan Hill as the financial services Commissioner."

For full story: http://www.arbuthnotgroup.com/economic_perspectives_group.html

Press enquiries:

Arbuthnot Banking Group PLC:

Ruth Lea, Economic Adviser
07800 608 674, 020 8346 3482, ruthlea@arbuthnot.co.uk
Follow Ruth on Twitter @RuthLeaEcon

David Marshall, Director of Communications
020 7012 2432, 07502 285 835, davidmarshall@arbuthnot.co.uk

Bell Pottinger:
Dan de Belder
020 7337 1548, ddebelder@bell-pottinger.co.uk

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