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October 03, 2019

Goulard - after the grilling in the EP what next?

Emmanuel Macron's candidate for the European Commission is in trouble. Sylvie Goulard did not convince the MEPs yesterday at her hearing, she will have to continue answering questions. If this is not satisfying there could be a second hearing. 

She comes with her own controversial past: an open investigation by the EU's anti-fraud institution Olaf over fake employment of Modem assistants and a €10,000 salary from an American think tank while she was MEP herself. All this did not go down well with parliamentarians. Only Renew MEPs backed her nomination, far from the two-thirds majority she needs.

There is a much broader political context to this revolt. Rejecting her is a way for MEPs to take revenge on Macron for his coup to kill the Spitzenkandidaten process. And after MEPs rejected candidates from the conservative EPP and the centre-left S&D on Monday over conflicts of interest, the liberal Renew party could not easily emerge unscathed from of this hearing process. All this was to be anticipated, but Goulard probably was not prepared for the intensity of those violent and relentless exchanges.

This hearing was hardly about her future plans as commissioner. Of the 25 questions that she had to answer during the three-hour hearing, 11 were about the fake employment of Modem assistants and her contract with a US think tank. She apologised for the latter but did not give in over the former. 

Her competences and credibility were not questioned during the hearing. She has a long pro-European career behind her. But she also did not manage to take back the initiative in this exchange. 

Goulard resigned as Macron's first defence minister in order not to compromise the new government and the military over the EP assistant affair.  European institutions work differently. But as long as the investigations go on, will she really be in the position to lead a super-portfolio at the European Commission with three directorate generals to cover industrial, defence, space and digital policy? The German EPP MEP Christian Ehler delivered the killer argument saying that the portfolio is already too big for one commissioner, let alone one that could be compromised by legal difficulties. 

Even if she gets confirmed, it is unlikely that she comes out with the whole portfolio. As a concession MEPs might want to take away from her some parts of it like defence or digital. Maybe that was part of Macron's strategic plan so that she could offer something in return for her confirmation.

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October 03, 2019

A market mini-crash to take seriously

Another quarter, another stock market mini-crash. But this time we think we should be paying attention. The reason is that the analyst commentary attributes yesterday's sell-off to concerns about the confluence of poor economic data in several regions, concerns over global trade, geopolitical risk, and the looming Brexit deadline. All of these are real risks. But they were already known, having been flagged as downside risks in official forecasts for many quarters. What is new may be that stock markets are finally beginning to price in all of these risks, since the chance that any of them will go away keeps getting smaller as time passes. Eventually the balance of perceived probabilities will shift enough to tip the market over, and that is what may be happening right now.

Weak economic data is not limited to the ongoing deterioration of German manufacturing. US jobs data for September came in below expectations, and the August figure was revised down, stoking fears that there may be a dip in consumer spending. This could be the start of a slowdown in the US economy like the one we've seen in the eurozone since the start of last year. But it's not only that, there is an expectation that third-quarter earnings reported by firms in the Euro Stoxx 600 index will be the worst since 2008, at the start of the great recession. Global trade news are not good either. Tensions between the US and China shows no sign of letting up, and now we have the US imposing tariffs on European goods with the WTO's blessing (see our parallel story on the Airbus case). 

Uncertainty over Brexit, and the proximity of the October 31 deadline, may explain why it is the FTSE 100 that has been hardest-hit yesterday, but the factors behind the sell-off are real and not limited to the UK.

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