Matthew Lynn in an excellent article in 21 July’s Daily Telegraph points out that the ECB has been buying corporate bonds in, amongst others, “Glencore, a company which only last year came perilous close to imploding, Telecom Italia, with its massive exposure to the weakest major economy in the world and Lufthansa, a lumbering beast of an airline just waiting to be eaten alive by new and aggressive low-cost carriers”.
In other words the EU’s foremost financial public authority has been handing out State Aid subsidies to a whole load of grateful enterprises. State Aid is defined as “ any advantage granted by public authorities through state resources on a selective basis to any organisations that could potentially distort competition and trade in the European Union (EU).”
I would expect smart Alec ECB lawyers would point out that the close definition is national public authorities and not supra-national authorities but that is mere sophistry. It is 100 per cent clear the ECB is breaking the spirit of the Rule with impunity.
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The latest nonsense coming out of Brussels is that in order for VCTs and EIS qualifying companies not to infringe State Aid Rules, investment should only take place in less than seven year old companies (the limit is raised to ten for those heavily R&D orientated) and cannot be used to assist those companies to make acquisitions. So Lufthansa, Telecom Italia and Glencore absolutely fine but any UK domiciled company outside its infancy, forget it.
On the other hand what’s good enough for the ECB should be good enough for Her Majesty’s Treasury. It is worth pointing out that some of the statutory legislation implementing this Brussels interference has not reached parliament yet so now is the time for the our new chancellor to install some Thatcherite backbone into the Treasury and say “no, no, no”.
As Brexit becomes reality we must start to roll back counter-productive EU diktats. Let’s start with this destructive VCT/EIS legislation. If you agree then why not get your MP involved? Thank you ECB for showing us the way!
Elsewhere, Real Business examines the fallout from the EU referendum on businesses.
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