Chicken is a kind of a duel in which two people drive straight at each other, careening down a path at high speeds. The person who jumps or steers out of the way first is the ‘chicken’. As neither one is assumed to be crazy enough to actually go through with a crash, the game of chicken is all about bravado. And that is where I believe the trilogue negotiations are. Each side is now pushing the other for final gains and to save face. But everybody knows a deal must be done by the end of the year.
The story so farAlthough the trilogue parties did not reach an agreement on 24 October, if you look at what has been said and what has not been said since, you could see where it is going. The debate is also moving on to those other areas that have been put on hold pending an agreement on Long-Term Guarantees (LTG). But first, some facts. The trilogue, which took place on 24 October, was shorter than originally planned. The Presidency (which acts on behalf of the Council in the negotiations) arrived with an agreed position to negotiate the LTG package on behalf of Member States, something that has not happened in the Omnibus II trilogues to date. At the meeting, the European Parliament suggested some changes to the calibration of the Council’s proposal, and introduced (verbally) a list of additional safeguard measures and requirements to the package. There are also outstanding issues both old and new. The old are equivalence and sovereign debt, the new are collectively known as institutional or ‘horizontal’ issues. Ever heard of correlation tables, explanatory documents or Commissions of Enquiry? Nor have I. Until last month I was blissfully unaware of their existence but they have now become part of the Omnibus II trilogue negotiations. Quite an important part.
At the trilogue on 24 OctoberA number of people present at the meeting said the Presidency genuinely believed its proposal would be accepted and was taken aback when that was not the case. This seems to reflect the fact that a number of people involved with the negotiations were highly optimistic an agreement would be reached on the 24th (Solvency II Wire 22/09/2013 & 25/9/2013). A summary document circulated to Member States by the Presidency the following day, and obtained by Solvency II Wire, states, “The EP [European Parliament] indicated that it was not entirely satisfied with Council’s figures.” It asked for the Volatility Adjustment application ratios to be reduced and the Matching Adjustment fundamental spreads to be increased. The Parliament indicated it was “happy” with 15 year transitionals.
A list of demandsThe Presidency document also states, “Then, the EP presented orally a large list of new measures that it wanted to introduce in the LTG package, relating to both reinforced transparency requirements and to additional prudential measures” (emphasis added). Most notable of these was the insistence to elevate the Credit Risk Adjustment into the Level 1 text.
Burkhard Balz MEP leaving an ECON session on 4 November 2013