2 ★ FINANCIAL TIMES Thursday10 October 2019

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S

pain’s Pedro Sánchez is at risk of joining the

ranks of European prime ministers who pushed

their luck too far.

David Cameron of the UK and Matteo Renzi of

Italy lost office because of referendums of their

own devising. Now polls ahead of Spain’s November 10

general election, which Mr Sánchez could have avoided

but chose to face, show problems in store for the Socialist

leader and suggest that Spain’s recent experience of politi-

cal impasse and weak governments will continue.

One of Europe’s few leftwing leaders,Mr Sánchez as bigh

ambitions to increase Spain’s influence in an EU shorn of

the UK and champion social democracy.He has often

beaten the odds, coming back to lead his party in 2017 after

being ejected the previous year, and manoeuvring his way

to the premiership last year via a confidence vote despite

holding only a quarter of the seats in parliament.

When Mr Sánchez faced his first election as premier, five

months ago, his Socialists came first but fell far short of an

overall majority. Now he has rejected a coalition with the

radical left Podemos party and is instead returning to the

ballot boxes for a few more seats. It is a gamble that has a

limited upside but considerable risk.

An average of polls in the El País newspaper puts the

Socialists at 27.8 per cent, a percentage point below their

April result. The centre-right People’s party appears to be

rebounding from the worst result in its history, up more

than four points at 20.9 per cent.

People blame Mr Sánchez for the inconvenience of the

fourth election in as many years; the economy has cooled;

a new party, Más País,

threatens to steal votes

from both the Socialists

and Podemos; and the PP

is striking a far more

moderate note than in

the last campaign.

M r S á n c h e z h a s

another challenge. Sen-

tences are to be delivered

soon in the trial of 12 Catalan separatists over their role in

the region’s failed independence bid two years ago. Separa-

tist parties in Catalonia are preparing massive protests if

the 12 are not acquitted. In an era of polarised politics,

there are considerable risks for the prime minister of a

backlash in favour of the right elsewhere in the country.

But if Mr Sánchez is guilty of hubris he is far from alone.

The great unexplored option of the past few months was a

coalition between the Socialists and he centrists of thet

Ciudadanos party, a pro-market grouping that broke into

national politics this decade. As recently as 2016 the two

parties agreed a joint platform for government. They also

had enough seats for an absolute majority in the current

shortlived parliament.

But such a deal was off the agenda. In April’s election

Albert Rivera, Ciudadanos’ leader, came within 220,

votes — less than a percentage point — of unseating the PP

as the second-biggest party. He was also furious at Mr

Sánchez for taking power with the parliamentary votes of

Catalan separatists. So he tacked to the right, ruling out a

coalition with the Socialists, despite the preference of

many of his voters for just such a deal.

“Rivera has made the biggest mistake,” said Astrid Bar-

rio, a political scientist at the University of Valencia, who is

setting up a party opposing Catalan separatism, La Lliga

Democràtica. “He gave up the opportunity of entering the

government for the vague ambition of leading the opposi-

tion, a prospect that no poll gives him.”

Ciudadanos now risks being the big loser in November’s

vote, with the El País poll of polls suggesting its support

could drop almost five points to 11.2 per cent.

Mr Rivera changed tack at the weekend, suggesting he

could back a bid by Mr Sánchez to form a government if

the Socialists emerge as the biggest party again.

But if the polls are right, that will no longer be enough to

assure that the Socialists stay in office. In that case,

November’s unnecessary election will at least have taught

Spain’s political leaders the perils of always wanting more.

[email protected]

GLOBAL INSIGHT

SPAIN

Daniel

Dombey

Sánchez gamble on

election risks turning

into act of hubris

People blame

Sánchez for the

inconvenience of

the fourth election

in as many years

I N T E R N AT I O N A L

GUY CHAZAN— BERLIN

Two people were shot dead in the east-
ern German city of Halle esterday aftery
gunmen reportedly tried to attack a
synagogue during Yom Kippur, the holi-
est day in the Jewish calendar.
Police in Saxony-Anhalt said several
shots had been fired, two people had
been killed and the attackers had fled by
car. They later tweeted that a sus-
pect had been arrested. The suspects
were not identified.
Max Privorozki, head of Halle’s Jewish
community, was quoted in Der Spiegel
magazine as saying the suspects were
stopped from entering the synagogue by

a security unit. Jewish institutions in

Germany are often guarded round the

clock by police, whose numbers are

boosted during religious festivals.

Mr Privorozki said between 70 and 80

worshippers were in the synagogue ta

the time of the shootings.

A man and a woman were being

treated for gunshot wounds in Halle

University hospital, said a spokesman.

Shots were also fired in the small town

of Landsberg, 15km east of Halle, police

confirmed.

“This is terrible news from Halle,”

said Steffen Seibert, spokesman for

Angela Merkel, the chancellor. “I hope

the police catch the culprit or culprits as

soon as possible and that no one else is in

danger.”

The attack during Yom Kippur, the

Jewish day of atonement, which is

marked by a day-long fast and prayers,

comes at a time of rising concern about

rightwing violence.

The upsurge captured the headlines

in June when Walter Lübcke, a promi-

nent figure in Ms Merkel’s CDU, became

the first politician assassinated by a

rightwing radical in postwar Germany.

According to interior ministry figures,

24,100 rightwing extremists were iden-

tified in Germany last year, a slight

increase on 2017, and more than half of

them were prepared to use violence to

further their aims.

The ministry said the number of vio-

lent crimes committed by such radicals

rose 3.2 per cent in 2018 on the previous

year, and anti-Semitic acts of violence

increased 71.4 per cent.

A photograph of one of the alleged

Halle shooters, published by Mittel-

deutsche Zeitung, a local newspaper,

showed a man in battle gear and helmet

carrying a rifle. A video, published on

the website of the mass-circulation Bild

newspaper, showed a man in battle gear

getting out of a car in the city centre and

firing on police with a shotgun.

Police returned fire and the suspect

fell to the ground before getting back

behind the wheel and driving off.

The newspaper quoted a witness who

saw a “masked man with a helmet...

and in military uniform” approach a

kebab shop where he had been having

lunch and “raise his weapon and fire

into the shop”.

The witness said that he locked him-

self in a toilet amid shouting and a loud

bang. “It was total confusion.”

Bild also reported that a hand grenade

was thrown into Halle’s Jewish ceme-

tery. Police did not confirm the report.

Additional reporting by Olaf Storbeck in

Frankfurt

Shooting

Two killed in German synagogue raid

Worshippers targeted by

attackers on Yom Kippur

day of atonement

JIM BRUNSDEN, SAM FLEMING AND
ALAN BEATTIE— BRUSSELS

The EU must do more to stand up for its
businesses in the face of an aggressive
China and a protectionist US, the bloc’s
trade chief has said, warning that it
needs “serious thinking” about how to
project its foreign and security goals.
Cecilia Malmstrom said five years as
Brussels’ trade negotiator had con-
vinced herthe EU was still ill-equipped
to be a strong global power. It needed to
be tougher, with a more centralised for-
eign policy and stronger rules toensure
European companies could compete on
fair terms with overseas rivals.
“The European Union, for all its suc-
cesses, is not really equipped to deal
with a changing world, with a world
order where we have this aggressive
China, [where] we have the United
States, which is not the traditional
strong transatlantic partner,” Ms Malm-
strom said.
She pointed to slow progress of nego-
tiations with Beijing on a treaty to open
Chinese markets to European invest-
ment as evidence that the EU was not
harnessing its political strength in sup-
port of its economic goals.
The comments from the outgoing
trade commissioner, who describes her-
self as a “proud liberal”, are a sign of the
shifting mood in Brussels.
Ursula von der Leyen, who takes over
at the end of the month as president of
the European Commission, has vowed
to turn the EU into a stronger “geopoliti-
cal” actor capable of asserting its com-
mon interests. Her preparations have
included handing greater powers to
Margrethe Vestager, the EU’s top com-
petition enforcer, to regulate the activi-
ties of US technology companies.
In a policy agenda aligned closely with
Ms von der Leyen’s goals, Ms Malm-
strom said the EU’s member states
should abandon their national vetoes
over EU foreign policy. She embraced,
too, plans to make it more difficult for
foreign companies to compete for public
sector contracts in the EU if European

companies were not offered similar

opportunities outside the bloc.

She also urged extensive use of a new

EU system to review foreign takeovers

— a move sparked by governments’ con-

cerns about Chinese acquisitions of

promising European tech groups.

But the comments also reflect the

challenge facing an EU in which national

capitals regularly struggle to hold a

common line against foreign powers.

There are “differences that exist

within the European Union on how to

position yourself with China”, she said.

“Some are softer, some are harder, some

are very dependent.”

Ms Malmstrom is weeks from the end

of a mandate that has included some of

the biggest crises and successes in EU

trade policy,which Brussels conducts

on behalf of member states.

She said theWorld Trade Organiza-

tion, which polices global trade, was in a

“crisis” that went far beyond the threat

posed bythe US’s protectionist policies.

“The WTO’s crisis is bigger than [Don-

ald] Trump,” she said. “It’s been hard to

make decisions for a long time and some

of the criticism the Trump administra-

tion is voicing I can fully share.”

As an example of the institution’s

problems, she said “two-thirds of the

member states self-define themselves

as developing countries and thereby

exclude themselves from the obliga-

tions that the rest of us have”.

Ms Malmstrom’s first two years as EU

trade commissioner were dominated by

a popular backlash against trade negoti-

ations with the US and Canada, with

Brussels spearheading efforts to make

talks more transparent and address

fears that multinationalgroups could

ride roughshod over local regulations.

As she was trying to keep EU trade

policy afloat, a storm came from across

the Atlantic with the 2016 election of Mr

Trump and his conviction that “trade

wars are good and easy to win”.

In response, Brussels redoubled

efforts to strike deals with countries Ms

Malmstromcalls “like-minded friends”,

in a bid to reinforce theglobal trading

system. The EU signed the world’s larg-

est bilateral trade deal with Japan and

concluded 20 years of talks with the

South American Mercosur bloc.

Opinion age 9p

Interview. ecilia MalmstromC

EU told to take tougher role on global stage

Outgoing trade chief calls for

stronger and more united

approach to China and US

CHRIS GILES— LONDON

Businesses and tax experts yesterday

broadly welcomed OECD proposals to

allocate a share of big multinationals’

global profits to be taxed on the basis of

sales in different countries.

If most countries implemented such a

system, it would make corporate tax

more predictable and end the recent

trend of countries seeking unilateral

fixes to domestic tax problems.

The representatives of business at the

OECD welcomed the “attempts to bal-

ance levels of accuracy and simplicity

for both taxpayers and tax administra-

tions”.

Saying there still needed to be rapid

further work on the technical details,

Will Morris, chair of business at OECD’s

Committee on Taxation and Fiscal Pol-

icy, said: “We remain committed to con-

structively engaging in the OECD/G

process as the only forum for reaching a

practical and sustainable global out-

come”.

The OECD’s proposal would give

countries two new taxing rights.

First, for consumer-facing companies

and digital businesses, they would allow

countries to tax a proportion of the glo-

bal profits of large multinationals, end-

ing the ability to shift profits to escape

taxation.

The OECD is consulting on what

would count as a “residual profit” which

would be open to this form of taxation,

but the tax base would be the sales of the

global group in any country. This would

be particularly valuable for emerging

economies, where multinationals sell

but have no presence.

The second element proposes that for

countries that hosted multinationals

with a physical presence, there should

be a formula to generate a fixed rate of

return on local activity in the country

because many disputes arose in the area

of distribution.

There could be a top-up if these two

elements produced revenues that were

less than a country would have received

under existing rules.

Countries and the affected large mul-

tinationals should have access to

“legally binding and effective dispute

prevention and resolution mecha-

nisms”, the OECD proposed.

Amazon alled the proposals “anc

important step forward”. It said a broad

international consensus was crucial “to

limit the risk of double taxation and uni-

lateral distortive measures, while creat-

ing an environment conducive to the

growth of world trade”.

The OECD envisaged there would still

big international fights to come on the

exact parameters of the new rules,

which would have thresholds for size

and profitability before companies

would face these new rules, but officials

in Paris said there was an emerging con-

sensus in favour of the approach.

A French finance ministry official said

the OECD’s proposal “is a promising

basis for further work. The principles

and the unified approach follow the

approach we decided upon with the G

ministers last July in Chantilly.”

The official added: “We will have a

discussion on this basis next week at the

G20 in Washington DC. I would like this

discussion to give the needed political

steer in order to achieve an agreement

on international taxation in 2020.”

Ross Robertson, tax partner at BDO,

said here was still much work to bet

done.

“There are many definitions and tech-

nical mechanisms to be agreed: for

example, the threshold at which the

new rule would apply and the fixed

profit element for local activity,” he said.

“And there will be many practical

administrative problems to be resolved,

not least as the OECD recommends the

new rules take effect globally from one

agreed date.”

Additional reporting by Harriet Agnew in

Paris

Editorial Comment age 8p

Global profits

OECD plan to reform company tax receives broad welcome

Oct 2016: Ceta

After seven years of talks, a trade deal

with Canada was nearly scuppered by

the threat of a veto from Belgium’s

Walloons. Ms Malmstrom scrambled to

provide reassurances. Ceta was saved,

and its signing proved to be a landmark

in the EU’s push to strike other deals.

July 2017:trade deal with Japan

Having been humbled by the difficulties

over Ceta, the EU recovered by

brokeringthe biggest bilateral trade

deal of all timewith Japan.

Jun 2018: steel spat

Donald Trump, US president, angry at

the EU’s refusal to put voluntary limits

on steel exports, imposed tariffs. Ms

Malmstrom ruledout talks and pledged

retaliation. In the end, the EU softened

its position, with Jean-Claude Juncker,

European Commission president,

brokering a fragile truce.

June 2019: Mercosur breakthrough

After 20 years of trying, the EU

succeeded in brokering an agreement

with the South American Mercosur bloc.

In terms of tariff reduction, it was the

largest deal the EU has struck.

Deals and

spats all

part of

the job

Shifting mood: Cecilia Malmstrom says the US can no longer be regarded as the ‘traditional strong transatlantic partner’ —Virginia Mayo/AP

Race to the bottom

Corporate income tax rates ()















    

France Germany

Sweden UK US

Range of rates for all OECD countries

Source: OECD

A synagogue

visitor talks to

police after the

shooting in

Halle yesterday

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FEBRUARY 4^2
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THE RISE OF ECO-GLAM
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