by Mish

However,  work rules make it much harder for companies to shed employees in Germany and France than in the UK.

A second problem is the likelihood of a financial transaction tax that Germany and France have desired for years. With the UK out of the way, will the EU plow ahead with a tax?

Targeting London

Please consider Frankfurt Vies for UK Banking Jobs Post-Brexit.

Germany is considering changing its labour laws to make Frankfurt a more attractive hub for banks looking to move staff out of London after Brexit, in the latest attempt by EU countries to woo financial institutions from Britain.
People briefed on the plan said Germany was looking at imposing an upper salary limit on employee protections of €100,000 or €150,000, which would make conditions such as redundancy terms less generous. “Labour law wasn’t designed for people like this,” one person with knowledge of the situation said.
However, the proposal comes as leading Wall Street banks indicated this weekend that they were more likely to relocate certain operations to New York than the eurozone if they shifted them from London. James Gorman, chief executive of Morgan Stanley, said that although the bank was looking at whether it needed a new headquarters in the eurozone, he thought “the big winner is going to be New York”.
One of Germany’s main drawbacks as an international financial centre, often cited by bank bosses, relates to labour laws that make lay-offs difficult and costly. Minimum statutory redundancy terms, for example, are twice as generous in Germany as in the UK. That is a particular issue for banks, which tend to hire and fire more readily than other sectors, in line with cyclical business fortunes.
Germany, like France, has other labour restrictions, including special protection for older workers and those with families. One employment lawyer said a senior banker earning $1.5m in total remuneration could typically be made redundant with a payout of $150,000 in London, but the cost could currently be 10 or 15 times that in Frankfurt.
If Germany presses ahead with the reform idea, it could confirm Frankfurt as the natural choice for City of London employers looking to shift jobs to another European location and safeguard access to the single market once Britain has left the EU.
Fresh data compiled by the Financial Times show that, London aside, Frankfurt is by far the dominant EU location for bank operations. Seven of the 10 global banks whose European operations were analysed by the FT had a subsidiary in the German financial hub, ahead of Luxembourg with five, and Paris and Dublin with four apiece.

Spotlight on Financial Transaction Taxes

Bloomberg reports EU Sagas of Greece, Transaction Tax Back in Focus.

Two European Union financial sagas return to the spotlight this week. One is Greece. The other is the financial transaction tax being pursued by 10 EU governments.
During much of last year, it would have been reasonable to bet that the FTT initiative had a better chance of succeeding than Europe’s efforts over half a decade to keep Greece in the euro area. Concerns about the health of Deutsche Bank AG and other European lenders add to the reasons why that’s no longer the case — and just how far the tables have turned will be on display when EU finance ministers gather in Luxembourg on Oct. 10-11.
Euro-area finance chiefs will decide on Monday whether Greece, in its third international rescue program since 2010, qualifies for another disbursement of aid. At stake is a 2.8 billion-euro ($3.1 billion) payout tied to Greek overhauls in areas in such as pensions, bank governance and the energy market.
The signal from numerous European officials including EU Economy Commissioner Pierre Moscovici is that the Greek government of Prime Minister Alexis Tsipras has done enough to win the transfer, which is what remains of a 10.3 billion-euro tranche that euro finance ministers approved in principle in late May.
The FTT saga is almost as old as the Greek crisis. Forged in the wake of the 2008 financial crisis, it took concrete form in 2011 with a commission plan for levies on stock, bond, derivative and other trading as a way to curb financial speculation and get the industry to make a “fair contribution” — projected at 57 billion euros a year — to state budgets.
The proposal failed the following year to garner the needed unanimous support of EU governments and was revived in late 2012 by a smaller group of national capitals under European “enhanced cooperation” rules that require the participation of at least nine member states.
Austrian Finance Minister Hans Joerg Schelling has pledged to step down as leader of the FTT group should no decision be reached this week.
Few EU initiatives ever really get killed; they simply get shelved until the political winds change. The FTT plan may be a rare exception.


Poisoned Atmosphere

The EU never gives up on nannycrat ideas and the Financial Transaction Tax (FTT) will be no exception.

Over time, the EU always seeks more tax hikes to fund pet projects. So even if they temporarily shelve the FTT idea, it will return.

As for Frankfurt supplanting London, I rather doubt it. Even if Germany does loosen its work rules, it may get as many howls from France as the UK.

The nannycrats want common work rules, a common currency, a common army (huge taxes will be needed to support that idea), common wages, etc. If Germany cuts taxes or changes work rules making Germany even more competitive than France, expect France to scream.

Finally, the UK has measures it can take to lure business, notably lower its corporate tax rate further.

Regardless of what happens, add this discussion to the already poisoned atmosphere heading into the Article 50 Brexit negotiations.

The odds of a very destructive trade war between the UK and the EU are high and rising.

Mike “Mish” Shedlock

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