Britain's post-Brexit security arrangements in question after failure to disclose criminal records to EU is revealed
Relations between Britain and the EU were strained on two fronts earlier this week following accusations from the EU that Britain had illegally copied and misused the records of tens of millions of Europeans from the Schengen Information System. Britain's alleged misuse of the system has been flagged for several years, but the Renew Europe group is now pushing for further investigation of its actions, saying that Britain is, "Not a partner we can work with in these conditions".
Later in the week reports emerged that Britain failed to notify member states of some 75,000 EU nationals who received criminal records while living in the UK. To compound the problem, it has also emerged that the UK initially concealed the error from the EU for fear of reputational damage. The error may have allowed some of the 75,000 criminals to return to their home countries without authorities in those member states being aware of their presence. The errors were initially ascribed to a software issue by UK police, and later blamed on a failure to provide adequate police resources over a prolonged period of time. The spats threaten to undermine trust before substantive talks on the future relationship between the parties get underway.
Varadkar calls election for 8th February
Following a request from an Taoiseach Leo Varadkar, Irish President Michael D. Higgins dissolved the 32nd Dáil on 14 January. A short election campaign will follow with the general election to be held on Saturday 8 February 2020, just shy of four years after the last general election which took place on 26 February 2016.
In spite of the strong performance of the Irish economy, opinion polls suggest that support for Varadkar’s centre-right Fine Gael party has only marginally increased, hovering at around 28%, up marginally from the 25.5% support it secured in 2016. By contrast the centre-right Fianna Fáil (FF), the traditional party of government in Ireland who suffered enormous losses in the aftermath of the financial crisis, have been on a steady upward curve, at times eclipsing Fine Gael in opinion poll support since 2016. Current figures suggest the party is polling around 26%, behind Fine Gael but within the margin of error.
Given that the parties are running neck and neck within the margin of error there is little point in trying to predict a winner. If present polling numbers are replicated on election day while Fine Gael will remain the largest party, both parties will fall well short of the minimum 80 seats required for a majority, and a return to confidence and supply or a formal coalition will be likely outcomes.
The robust nature of the economic recovery in Ireland means that the general election there does not pose the same economic risks as in 2011 or even 2016. However, a protracted period of post-election negotiations, as occurred in 2016, or the threat of a second election later this year, are unlikely to be positive for investor sentiment.
Banks increasing capital ratio and decreasing exposure to NPLs
The ECB announced on Wednesday that banks under its supervision improved their financial positions in the final quarter of 2019. Total capital ratio for all banks increased to 18.05% from 18% in Q3, while at the same time the CET1 ratio was at 14.37%. Average CET1 capital ratios at country level ranged from 11.92% in Spain to 27.50% in Estonia.
Non-Performing loans dropped to an average of 3.41% in the same timeframe. Levels are now at their lowest since data were first published in 2015. Luxembourg had the lowest average ratio, at 0.91%, while Greece had the highest, at 37.40%.
The continued reduction in exposures to NPLs will be welcome news for the European Commission, which unofficially aims to have Europe’s NPL overhang dealt with by end 2021.