On 20 November we will see a less flamboyant version of the Eurovision song contest, when the voting process is held at the General Affairs Council to determine which countries will host the European Banking Authority (EBA) and the European Medicines Agency (EMA) post-Brexit when these agencies leave their headquarters in Canary Wharf in London, writes Dmitry Leus.
The eight candidates bidding for the EBA are Brussels, Dublin, Frankfurt, Paris, Prague, Luxembourg City, Vienna and Warsaw.
Is winning the status of host city a prize worth having? It is difficult to know exactly how much real economic benefit hosting an EU agency will bring. In terms of immediate, direct jobs, the EBA is made up of approximately just 160 senior staff. However, given that it is one of the EU’s three supervisory authorities, it is safe to say that the presence of this agency in a city will attract banking and law firms, as well as increased tax revenues. Host status also brings prestige and it is perhaps this more than anything that the cities are competing for, with a view to taking London’s crown as Europe’s financial centre.
What criteria will the General Affairs Council base their votes on?
Contenders need to show that they can complete the new office space by the time Brexit happens. They need to be in an accessible location and have international schools as well as job opportunities for spouses and family members of the agency’s staff. They also need to demonstrate that they can provide ‘business continuity’. The other element is “geographical spread”, meaning that EU agencies should not be too heavily concentrated in any particular EU country or region; this is to ensure greater cohesion across the EU in support of the Juncker strategy for a united and strong Europe. The geographical criterion should strongly favour the Eastern European candidates of Warsaw and Prague; but neither Poland nor the Czech Republic are members of the Euro zone, and the ruling government parties in both countries are eurosceptic in their outlook, which may be an obstacle to their bids.
How will the voting take place? On 20 November, we will see a voting system that will have us yearning for the relative simplicity of a Eurovision song contest final. When the vote takes place at the General Affairs Council, countries are allowed to abstain, and they are also permitted to vote for themselves. In the first round, each country has six points. They must give three points to their favourite bid, two to their second choice and one to their third. If no single country secures 14 first preference ballots (a majority of the 27 EU member countries), the vote moves to a second round. In the second round, countries vote for one of the three or more bids with the highest votes from round one. Each country has one vote, which they must cast for their preferred bid. If no single offer receives 14 or more votes it moves to round three, where countries vote for one of the two remaining cities with the highest votes. The bid with the most votes wins. If there is a tie, the presidency will draw lots.
How will Member States decide on their votes? It seems this decision making essentially takes place on two levels. At the ‘surface level’: each bid will be formally measured against the set criteria; but behind the scenes there is a lot of horse-trading and deal making. Vienna, Prague, Dublin and Warsaw can all make the case that a vote for them would be in support of the “geographical spread”, as they only have one EU agency in their countries. Germany has two EU agencies, Luxembourg has three and Paris has four, including the European Securities and Markets Authority. On this particular element of the criteria, Brussels is of course disadvantaged, because that city is at the very heart of the EU, housing the three pillar institutions of the EU, as well as 15 EU agencies. But the Brussels bid is technically a good one, and often in competitions of this type, Belgium emerges as the choice of compromise. Each of the cities have been showcasing their wares in terms of the other criteria, whether it be the office space they can create, their transport links or other elements of the relocation package.
In terms of the lobbying behind the scenes, European banks are not willing to openly state any preference for where the agency should be located. But Frankfurt is very keen to host the EBA, and the city has already become a major target for banks fleeing the U.K. as a result of Brexit. Paris is not really seen as a serious option simply because they already host a major financial regulator, the European Securities and Markets Authority. France is also campaigning for Lille to win the European Medicines Agency (EMA). So the chatter for some time was of a Franco-German pact, resulting in the EBA going to Frankfurt and the EMA to Lille. But then rumours have been swirling around that France would rather back the Brussels bid than hand a prestigious agency to Germany. An interesting backdrop to the Frankfurt bid (and the mixed feelings between France and Germany) is that an EU review of supervisory bodies proposed that the EBA could be merged with the European Insurance and Occupational Pensions Authority, which is located in Frankfurt. The French opposed the merger and further concentration of influence in Germany, and the merger has subsequently been ruled out.
One bid that has fallen out of favour and then back in again seems to be Dublin. It is easy to see the appeal of an smooth linguistic and cultural transfer from London across the Irish Sea to neighbouring Ireland. Dublin has the advantage of being a Euro member with a developed financial services sector and good transport links. Ireland has been praised for their economic recovery and willingness to stick to austerity measures. It would also fit with the current mood to allow a smaller country host, rather than a heavyweight member state such as France or Germany.
But does Ireland have the allies to help swing the vote? Ireland’s closest ally was the UK, which is of little practical use; as the exiting party from the EU, the UK will have no vote on this issue in the Council. There is concern that Ireland does not have other natural, geographical allies, but perhaps they could swing the Visegrad vote (Poland, Hungary, Czech Republic and Slovakia) through diplomacy if they were to support the favoured Visegrad candidate for the European Medicines Agency, namely Bratislava.
Another contender is Luxembourg, which offers proximity to the European Investment Bank and the European Stability Mechanism, already located in the city. They also argue that their communications links would be an advantage, being within two hours travel of the European Central Bank and bodies in the financial sector in Frankfurt, Paris, and Brussels.
Whatever the outcome of the contest, we can expect to see frenetic lobbying in the final run up to the vote in just under two weeks’ time. The decision to relocate the agencies will bring home to the United Kingdom the real cost in terms of lost international prestige, and the loss of more than 1 000 highly paid professional jobs in London, as Britain’s total bill for “Brexit” starts to accelerate.