Week in Review (29 March)

PSOE manifesto adopts leftward positions but Sanchez attempt to retain coalition flexibility

In our 18 February report we suggested that Pedro Sanchez and the PSOE would approach the forthcoming Spanish election with two aims:

- To try and rise above the Catalan issue which has so exercised the Spanish right – even if by largely ignoring it – and instead present his party as the ‘moderate’ option

- To accent his policy platform with left leaning proposals on social and taxation policy

This approach, already evident in the housing legislation driven through by Sanchez’s government in the last weeks of the current parliament, was underlined in the 27 March launch of the PSOE electoral manifesto. The document makes no specific mention of the Catalan crisis, while also outlining a range of progressive taxation measures. It does not, though, include a proposal for a tax on banks.

The inclusion of a bank levy had been widely anticipated, to the extent that PSOE representatives had spoken about it in the days prior to the manifesto launch. It is a long-standing policy idea of Sanchez’s PSOE and it remains possible that it will be pursued should the party be returned to government as part of a left wing coalition.

The absence of the levy from the manifesto – as with the silence on the Catalan question – suggests that Sanchez is attempting to keep his coalition options open. If the Prime Minister cannot realistically pursue a left wing coalition, aided by regional parties, he may contemplate a shift to a centrist alliance with the anti-separatist, pro business, Ciudadanos.

Council approves position on secondary markets for bad loans

Ahead of the dissolution of parliament on 8 April, pressure is mounting on MEPs to agree the European Parliament’s negotiating position on legislation which aims to create

a secondary market for NPLs by removing impediments to credit servicing by third parties. The Council finalised a negotiating position on 27 March which includes safeguards that could restrict sales of debts less than 90 days past due, as well as transactions that trigger immediate repayment demands. MEPs are under pressure to agree their negotiating position in an attempt to ensure work on the file is completed by the time Parliament closes on 18 April. If no agreement is reached it will be up to the next European Parliament to agree an approach. MEPs have acknowledged that the second part of the file which deals with measures to streamline EU rules on the recovery of collateral will not be dealt with until the next legislature.

Swedbank dragged further into Danske money laundering scandal

Following 25 February allegations of some exposure to the Danske bank scandal, Swedbank’s situation became much graver in the last week following a Financial Times report that the New York State Department of Financial Services is investigating Swedbank over several money laundering allegations. It is now alleged that some €135 billion was moved through non-resident accounts in Swedbank’s Estonian branch between 2010 and 2016.

Faced with the new investigation and the allegations of substantial potential laundering activities Swedbank yesterday fired its CEO Birgitte Bonnesen.

Further Scandinavian banks may yet be drawn into laundering investigations. Activist investor Bill Browder, who helped set the Danske investigation in motion, has made allegations that Nordea bank was involved in laundering. As each new bank is drawn into the scandal the risk intensifies of reputational damage to the Scandinavian banking system as a whole.

European Parliament signs off on EU plastics directive

Yesterday, the European Parliament gave its final sign off on the EU plastics directive. The directive has proved popular with governments keen to be seen to be acting on plastic pollution and will see single-use plastic items such as straws, forks, knives, and cotton buds banned in the EU by 2021. A key element of the legislation is the producer responsibility scheme – which imposes clean-up costs on producers such as tobacco companies which will now be required to cover the costs for public collection of cigarette stubs.