July, besides being unseasonably warm across Europe has also been busy so please excuse the somewhat longer round-up. 

The European Parliamentary elections, the largest democratic exercise after India, was met with enthusiasm because of the increased voter participation and a clear shift towards parties favoring climate-centric policies. While there were no clear winners amongst the political groupings, save for the Greens and Renew Europe (formerly ALDE) which increased their representation compared to the two main groupings on the right (the EPP) and the left (the S&D) as well as the new entrants, the Brexit Party (which turned their backs on the opening of the 2019-2024 parliamentary session) there were a handful of losers at national and also at the EU-level. This vote seems to matter more and more in the world’s largest single market. It matters also for the new class of Commissioners and key jobholders coming in to replace the seasoned crisis fighters of the past five years.  

The race for top jobs and presidencies involved multiple late night marathon sessions before finally  the stalemate was broken in the early morning hours of July 2, the very day new members of the European Parliament had their inaugural session. So who has won what and who is leaving in what was a surprise finish?

• At the European Parliament (EP) the outgoing president, Antonio Tajani, was replaced on July 3 by another Italian, Social & Democrat grouping member David Sassoli, who will be in charge for the next two and a half years.  He is the seventh Italian to hold the office and besides his domestic career as a TV journalist, he is a former vice-president of the parliament. He won the plenary by calling for the EP to “respond with more courage to the requests of European citizens” and “to reinforce procedures to make the parliament a protagonist of a true European democracy”. 
• At the “other” legislative chamber, the Council of the European Union a.k.a. the Consilium, outgoing President Donald Tusk will from December 1, 2019, be replaced by Belgian Prime Minister Charles Michel. Michel, a lawyer by background, is Belgium’s interim (as well as since 1845 youngest) premier. He is part of the Renew Europe grouping – which is chaired by Michel’s Belgian colleague, ex-premier Guy Verhofstadt − and is the second Belgian to hold the permanent presidency of the Consilium. 
• At the European Commission, the executive of the EU, there was a dramatic dispute over the EPP Spitzenkandidat Manfred Weber, who subsequently bowed out from the race to replace the outgoing President Jean-Claude Juncker. This came despite the EPP parliamentary grouping being the strongest once again in the 2019 EP elections and Germany’s CDU having supported Weber up to the very last minute.  Eventually there was a Macron-Merkel deal to nominate the German Defense Minister, committed European federalist and trained doctor Ursula von der Leyen as the first female Commission president, despite winning by the narrowest of margins. Von der Leyen, who has been the only minister to remain with Merkel since the start of her chancellorship, will be at home in Brussels, having been born there, and being fluent in English and French. She may well even be more at home, having had a rough time because of procurement disputes when she was managing the 180,000 plus Bundeswehr soldiers, and she might feel more at ease marshalling her commissioners and the 33,000 European Commission civil servants. She will become the second German and third in a row EPP fraction member to hold the post. S&D EP Spitzenkandidat Frans Timmermans may well be set to continue his appointment as first-vice president during the von der Leyen Cabinet.    
• Josep Borrell − an accomplished politician and currently the Spanish minister of foreign affairs, and formerly EP president during 2004 and 2007 − will become the EU’s high representative for foreign affairs, taking over the role from Italian Federica Mogherini.  Borrell, however, runs the risk of his Spanish background botching things in the Balkans and particularly in the EU’s mediation in the Serbia-Kosovo talks, given that Spain does not recognize Kosovo because of domestic concerns over Catalonia. 

Over in Frankfurt the ECB’s own hunt for a successor to “Super Mario” from October 31 has ended with the victory of “the rock star of finance”, Christine Lagarde, who, building upon her legacy as a former French minister of finance, employment lawyer and incumbent chair of the International Monetary Fund, will become the first female President of the ECB and also the first non-career central banker to head the bank. Perhaps Lagarde’s political nous is the je ne sais quoi to do whatever it takes? 

Lagarde might concentrate on resolving the politics of getting a Eurozone budget further agreed, moving forward on institutional reform and possibly completing EDIS, as Pillar III of the Banking Union or agreeing more unified representation for the Eurozone within the IMF. With some commentators already calling for more of a rocket scientist rather than a rock star approach in getting growth going, especially given that Draghi has, at the July 25 2019 Governing Council Press Conference, left the door open on further monetary policy action and stimulus for Autumn 2019, all eyes may be on the ECB’s new director general for market operations on implementation. The DG-M is responsible for (designing technical aspects) and implementing monetary policy and the management of the ECB’s foreign reserves and investment (incl. QE) portfolios.  The accomplished former DG-M Ulrich Bindseil will from 1 November 2019 take over the Directorate General of Market Infrastructure and Payments from the outgoing Marc Bayle, who with others in his team spearheaded TARGET2, T2S and much of the market infrastructure systems the EU, EEA and the UK rely on.   

While admittedly these “top job” appointments mean gender balance is upheld, as is the EU political family route to office approach, the criticism of certain nominees,  particularly because of the complete lack of Western-European balance, along with a perceived democratic deficit because of the ignoring of the  Spitzenkandidat system, will likely continue if not grow. The team may be stronger than before but some of the choices may be a missed opportunity to really heal some deep rooted political and geographical divisions, in particular given that the European Commission as well as the Consilium’s 2019-2024 strategic agendas emphasize the priorities of unity, along with a fair and social union. Specifically, those agendas highlight that the Juncker Commission made 471 new legislative proposals, carried over 44 additional proposals and adopted or agreed 348 proposals, with, by its own admission  a “remarkable” 90% of them by consensus. 

The outgoing Commission is calling for “unfinished business” to be rolled over, and the European Parliament is making its own calls for this ninth parliamentary term to advance the unfinished files from the seventh and eighth terms. This includes the priorities in financial services, which are expected to be announced publicly by the new DG-FISMA Commissioner (unless Valdis Dombrovskis continues) over the next couple of weeks. 

And lastly, but not least, the race to replace Prime Minister May culminated on July 23rd in a somewhat smaller election of 66% or 92,153 members of the Conservative Party voting in favor of the Rt. Hon. Boris Johnson MP to become the Leader of the UK’s Conservative Party and thus May’s successor as Prime Minister as well as the Commonwealth Chair-in-Office – whether that will translate into post-Brexit trade deals remains to be seen.   

All in all, the outlook is busy, with multiple financial reform packages coming up and markets slowing. Moreover, when summer gives way to September, the EU will still be wrestling with the varying impacts of the ongoing EU-Italian budget battle – despite the EC having held off on disciplinary action for now, − as well as the Swiss-EU standoff, which also shines a spotlight on the continuing issues ahead of a Halloween Brexit, which in itself may become more vocal as views differ across the debate.   

We hope you enjoy this month’s edition and wish you the very best for the August break, we will return at the start of September. Please stay tuned to our Eurozone Hub for further periodic updates, including thematic deep dives on developments from European and national authorities that are likely to have considerable “change the business” but also “change the compliance” impacts.