Finance ministers unwind in Venice before tough talks in Brussels

Buongiorno and welcome to Europe Express.

Ah, to be a G20 finance minister or central banker today: Venice is the city welcoming you for the weekend.

While the meeting is mainly perfunctory, aimed at endorsing a global corporate tax rate that was agreed last week during OECD-led negotiations, eyes will soon turn to the less picturesque EU capital, where a few nations are still resisting the deal.

On Monday, US Treasury secretary Janet Yellen will continue her lobbying effort, in person this time, when she meets eurogroup finance ministers (including the European holdouts). Her chief concern is an EU digital tax proposal, which the US fears would undermine the OECD deal.

While the European Commission is in principle still planning to table its proposal on July 20, it faces intense internal pressure to delay the measure to avoid creating unnecessary friction with the US.

On the eastern front, Bulgaria and Moldova are holding parliamentary elections on Sunday. We will explore the stakes in each country and what to expect when the results are in — including the rise of a comedian/folk-rock singer on to the political stage in Bulgaria.

A meeting in Venice

When G20 finance ministers gather in Venice, they are widely expected to give the political seal of approval to a global tax deal backed by more than 130 countries at the OECD, write Emma Agyemang and Sam Fleming.

The agreement can genuinely be considered historic, as it would for the first time introduce a global minimum corporate tax rate and change a century’s worth of tax rules to ensure the largest multinationals pay more tax where they operate.

But that does not mean that it is perfect or even fully embraced by its 131 signatories (the latest country, Peru, signed this week). We are told that at least 15 developing countries felt pressured to join, and did so with reservations.

No doubt some countries signed up with the hope of influencing the outcome in their favour. Areas still up for negotiation include the final tax rate, which is carefully worded in last week’s agreement as “at least 15 per cent”.

One of the countries pushing for a higher rate is the US, which had originally sought a rate of 21 per cent, partly to support the Biden administration’s domestic tax reform agenda.

Other countries want to keep the rate as close to 15 per cent as possible. Still, some want more revenue from the part of the deal that reallocates taxing rights to jurisdictions where companies have their sales — especially if, as with Brazil, Italy, India, Indonesia, Turkey and the UK, they have to give up digital levies.

There are also the eight countries that did not sign up at all, including three EU member states: Estonia, Hungary and Ireland.

Further complicating the picture is the European Commission’s plan to propose a new digital levy this month, as mandated by EU leaders last summer.

The levy was expected as soon as next week, and is tipped to appear on July 20 — but some in the commission are pushing hard for it to be delayed yet again until well into the autumn to avoid roiling the global talks.

The tax is deeply unloved in Washington, where the Biden administration has been urging the EU to delay or ditch the idea for fear that a go-it-alone EU approach would threaten the global tax talks. Any levy that looks as if it is targeting tech companies also risks provoking a backlash on Capitol Hill, making the Biden administration’s job of getting the corporate tax overhaul through Congress even tougher.

Yellen is due to travel to Brussels to attend a meeting of the eurogroup on Monday. The discussion with the Treasury secretary is meant to focus on macroeconomic policy and banking, and the eurogroup is not supposed to handle EU tax matters.

Nevertheless, one EU official acknowledged: “I can’t exclude the possibility that some ministers will want to take this up.” Given the divisions over the digital levy, it would be pretty surprising if they did not.

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The Delta variant is driving up infections in Europe. How worried are you about the resurgence of Covid-19 cases? Click here to take the poll.

Bulgaria’s Beppe Grillo

Who is Slavi Trifonov? Many Bulgarians have an affection for the leather-clad TV presenter and celebrated folk-rock singer. His political views and intentions, however, remain a mystery, write Ben Hall and Marton Dunai in Sofia.

Trifonov’s party There Is Such A Nation could emerge as the biggest in Sunday’s parliamentary election, Bulgaria’s second in three months. The vote will almost certainly spell the end of Boyko Borisov’s 12-year rule. 

Borisov’s GERB party, spurned by its rivals, has no options for forming a majority. His demise will delight liberal Bulgarians furious at the spread of corruption and mismanagement of EU funds under his tenure, which they say has held the country back and turned many of their compatriots against democracy itself. 

But what happens next is unclear.

Trifonov himself is not standing for parliament. His party lacks a programme apart from electoral reform and direct elections for senior law enforcement positions. His MPs are an unknown quantity and the party’s funding is a source of speculation. He was also criticised for his conspiratorial views about Covid-19 and opposition to lockdown measures.

Analysts described him as a cross between Beppe Grillo, the caustic comedian who set up Italy’s anti-establishment Five Star Movement, and Volodymyr Zelensky, Ukraine’s comic actor turned president. Trifonov’s party is named after one of his albums, Zelensky’s after his TV show. Trifonov’s record label is said to be behind his campaign, just as Zelensky’s production company ran his. Trifonov’s scorn for representative democracy is pure Grillo.

To the consternation of Bulgaria’s political field, Trifonov has refused to talk to potential coalition partners in the other protest parties. In fact, during the campaign, Trifonov has tried to say as little as possible to anyone, eschewing events and avoiding interviews. He is the antithesis of Borisov, the dominant voice in Bulgarian politics for a decade.

Ivan Krastev, chair of the Centre for Liberal Strategies in Sofia, said that while Trifonov was trying hard to be Borisov’s opposite, the two had much in common beyond their tough-guy looks. They were self-made men of humble origin “born into a criminal environment”, like the rest of Bulgaria’s middle classes, when communism was collapsing and Yugoslavia disintegrated. “Following the rules was never required of them.”

Bulgarian liberals and progressives may rejoice at GERB’s defeat, but few have any confidence about what comes after.

Moldova crossroads

Moldova will hold parliamentary elections on Sunday with polls suggesting that the pro-western Action and Solidarity party founded by President Maia Sandu is on course for victory, writes central Europe correspondent James Shotter.

Sandu scored a landslide in presidential elections last November and has since been seeking to consolidate power in parliament to push through pledged reforms to root out the chronic corruption that bedevils one of Europe’s poorest countries. According to a recent report by Freedom House, a US-based watchdog group, “corruption remains entrenched in all levels of government, and existing anti-corruption laws are inadequately enforced”.

After a protracted struggle, Sandu succeeded in calling early elections. Polls forecast that PAS is on course to win the biggest share of the 101 seats in the new parliament, followed by the pro-Russian Electoral Bloc of Communists and Socialists, headed by Sandu’s great rival Igor Dodon and his fellow former president, Vladimir Voronin.

Four smaller parties, two pro-Russian and two pro-European, could also make it into parliament.

As in November, when its votes played a decisive role in Sandu’s victory, Moldova’s 1m-strong diaspora is likely to have a big say in the outcome of the election.

Last month, the Supreme Court ordered Moldova’s electoral commission to increase the number of polling stations abroad by one-third, after some locations were overwhelmed in November by the huge turnout.

“The end result of these elections is whether Moldova breaks the vicious cycles of prolonged resistance to structural reforms, or perpetuates stagnation,” writes Dionis Cenusa with Expert-Grup, a think-tank based in Chisinau.

What to watch

1. G20 finance ministers and central bank governors meet in Venice to rubber stamp the OECD tax deal

2. Bulgaria and Moldova hold parliamentary elections on Sunday

Smart reads

• The case against Hungary: Read the full report of the three scholars making a legal case on why the EU should suspend its payments to Hungary, which the FT previewed this week.

• The green shortfall: The think-tank Bruegel has taken a detailed look at the recovery plans of member states with an eye on the EU’s green goals. While it finds that in total €220bn has been spent in areas such as energy efficiency and renewables, it is still short of the €350bn of investments the commission has said are needed by 2030.

• No grandi navi: As tourism starts to return, some in Venice would rather cruise ships steered clear. A fractious debate is brewing in the city about the environmental damage of the big ships, and whether it would be better to swap cruise ship day-trippers for slower-paced tourism. (NYT)

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