Juncker: will we see some Junck Bonds?

JP Morgan’s Hugo Anaya comments on the six issues Mr Juncker wants to tackle:

1- FISCAL FLEXIBILITY: The Euro area has been evolving on the balance between fiscal consolidation and growth, and it is progressing towards a set of more “peripheral friendly” policies, allowing some fiscal flexibility to countries as long as they show their commitment to implement structural reforms.

 

2- EMU INTEGRATION: Mr Juncker has also shown a great interest in increasing the integration of the Euro area, focusing on the need for a “targeted tax capacity” for all of the EZ (of indefinite scope). To do so, he has pledged to introduce legislative measures that “enlarge” the EMU during his first year in office (until November 2015). It proposes replacing the troika with a different structure reporting to the European Parliament.

 

3- UK AND EUROPE: Although Jean-Claude Junker did not speak specifically of the United Kingdom, he made a series of small references (concessions) to British concerns, insisting that he rejects the notion of a ‘United States of Europe’ and believes that integration does not have to move at the same speed in all the countries of the region.

 

4- POLITICAL INTEGRATION: On this issue, Juncker intends to be an “activist” President, pledging to implement the “Community method” in the formulation of regional policy (where key decisions are made through the institutions of the EU rather than the Member States). The problem is that larger member states are sceptical and are not likely to support this new form of mandate, since they would lose influence when it comes to formulating and adopting new policies and reforms.

 

5- CAPITAL MARKETS, TAXATION, ENERGY AND INVESTMENT: Juncker wants to continue encouraging the implementation of the Banking Union (currently in process) through the creation of a “Capital markets Union”, which aims to balance the differentials in financing cost of different countries. Policies he plans to apply for the implementation of this Union are not clear yet. At the same time, Juncker intends to increase investment in infrastructures, introduce the “Financial Transactions Tax” (currently proposed in 11 Member States) at a European level, and to create a European energy union.

 

6- SEPARATISM, EU ENLARGEMENT AND IMMIGRATION: Mr Juncker completely ruled out the possibility of enlarging the EU during his tenure. In particular, he believes the expansion of the EU into Eastern Europe should end. In this sense, his comments have had various interpretations, since some in London believe that he refers to that if Scotland becomes independent of the United Kingdom in September, Juncker will not longer allow this country to be part of the Union (although JP Morgan not believe that Juncker would like to refer to that issue). It pledged to centralize the immigration policy at a European level, which could create an adverse reaction of some country members.