Nervous days for bankers and drugmakers awaiting vote on regulators' new home cities

17 November 2017 12:48pm

16 November 2017. By Simon Taylor.

For executives in Europe's drugmaking and banking sectors, this weekend will be a nail-biting time — waiting to find out where their respective EU regulator will move to after Brexit forces them out of London.

EU governments will vote on Monday on which cities are the winners. The latest soundings suggest Bratislava and Milan lead the field to house the European Medicines Agency, while Frankfurt is favorite to host the European Banking Authority.

The winners will emerge from a cascade of voting rounds aimed at whittling down the 19 hopefuls to home the EMA and eight for the EBA. While the system has been designed to minimize the lobbying and horsetrading that has typically dominated similar decisions in the past, backroom deals involving tradeoffs with important EU posts are expected to remain influential.

Ministers responsible for EU affairs will vote late on Monday afternoon, with decisions expected in the early evening. Voting on the medicines agency is first, with three rounds expected to be necessary, while the EBA could be settled in two. In each round, countries vote for a first, second and third choice, according them three points, two points and one point respectively.

EMA voting

Slovakian capital Bratislava and Milan are expected to sail through to a second round along with Copenhagen and Amsterdam, while Stockholm and Vienna have an outside chance of surviving the first round.

Bratislava has the backing of other central and eastern European states keen to see the agency go to a country that joined the EU in or after 2004. Milan has support from southern states after Barcelona’s bid faded due to Catalonia’s political turmoil. Copenhagen and Amsterdam, meanwhile, are seen as having the strongest bids on their merits but may split the votes so that only one makes it past the first round.

In the end, the decision should hinge on whether “business continuity” or “geographical distribution” is seen as more important. These terms are both EU diplomatic euphemisms.

Business continuity refers to how smoothly the EMA can continue its work with minimum interruption after its move. In reality, it is code for how many of the agency’s 1,000 staff will be hemorrhaged by refusing to move. Bratislava’s big challenge is that the staff cost of living allowance is 76 percent of the EU average, compared to the juicy 142 percent they get in London now. Moving would mean a huge cut in salaries and allowances.

Geographical distribution refers to allocating EU agencies so that they are spread among all countries. In this, Bratislava has high hopes, as Bulgaria, Romania and Slovakia don’t have EU agencies on their territory and the argument that one of the two bodies should go to a country in central or eastern Europe boosts its chances.

EBA voting

With the EMA’s new home settled, ministers will vote on the EBA. Close behind Frankfurt in the race are Dublin and Luxembourg, but the German government has run a massive lobbying campaign to talk up its financial capital, using the argument that it makes sense to have the EBA in the same place as the European Central Bank.

France supports Germany, although Paris is also a candidate. No country can host both agencies so the winning candidate for the EMA will see its bid for the other agency eliminated.

While the front-runners are clear, predicting the final winners is a fool’s errand thanks to the multiple voting rounds and lack of transparency around any backroom deals.

For example, Bratislava’s main pro and con are transparent: Slovakia is one of the countries due to host an EU agency, but large numbers of EMA staff may refuse to move there. Yet potentially just as influential in the final vote is the impending need to choose a president for the Eurogroup, the club of finance ministers for the 19 countries that use the euro. If Slovakia believes its finance minister, Peter Kažimír, could win that, they could be induced to give up their EMA bid more easily.

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