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News & Insights on Europe

News and Views on Europe – 03 March 2017

posted by eucentresg

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Post-Brexit scenarios and developments on an EU- and UK-level

On Wednesday (1 March) the European Commission presented a White Paper on the future of the European Union (EU). The five scenarios are entitled “carrying on,” “nothing but the single market,” “those who want more do more,” “doing less more efficiently,” and “doing much more together.” The White Paper comes ahead of the special summit in Italy to mark the 60th anniversary of the Treaty of Rome (on 25 March) where the bloc’s 27 leaders are expected to give a declaration on the future of the EU after Brexit. While the tone of the White Paper is generally neutral, the Commission at times makes its preferred scenario clear. For instance, the Commission shows itself in favour of the most federal option (option 5) by stating that it will issue a reflection paper on eurozone governance. This would mean that the EU would speak for all of Europe on issues such as trade and foreign policy. Another scenario which seems to be favoured is the option of a multi-speed Europe with some member states integrating further and others maintaining their status quo. Jean-Claude Juncker, the President of the European Commission, called for EU leaders to narrow the gap “between promises and delivery”. He further noted: “The future of Europe should not become hostage to elections, party politics or short term domestic views of success. However painful and regrettable Brexit may be it will not stop the EU as it moves to the future. We need to move forward, we need to continue.”

While important for the EU to think of its future, the White Paper was not welcomed by everyone. Gianni Pittella, the leader of the socialist group in the European Parliament commented that the White Paper is a “clear political mistake”.

As Brexit talks loom, issues around financial settlements and citizens’ rights are expected to dominate the initial talks. A major point of tension for the UK will be around existing commitments, e.g. contributions to the 2014-2020 budget of the EU. Also the European Commissioner Günther Oettinger and Germany have voiced their concerns regarding the financial implications of Brexit: Germany and other net contributors to the EU budget will have to pay more, since Britain’s net contribution of €9bn could not be fully offset through future budget cuts. Therefore German officials have demanded that the EU budget must shrink.

Another major issue is that around the status of EU citizens in the UK and vice versa. On Wednesday (1 March) the British government suffered a setback on its Brexit plan when the House of Lords overwhelmingly voted (by 358 to 256) in favour of securing the right to stay for EU nationals after Brexit. The vote forces the government to amend the Brexit bill and is expected to delay its passage into law until 14 March.

 

Four EU states’ parliaments call for creation of Federal Union of States

The leaders of the lower chambers of parliament of Germany, Italy, France, and Luxembourg called for a European “Federal Union of States” in an open letter published in Italian newspaper La Stampa on 26 February. (For an excerpt of the letter, click here.)

“It is high time to move toward closer political integration — the Federal Union of States with broad powers. We know that such an initiative triggers a strong resistance, but someone’s inactivity cannot become a paralysis for everyone. Those who believe in European ideals, should be able to give them a new life instead of helplessly observing its slow sunset,” the letter read.

The letter – jointly signed by Bundestag President Norbert Lammert, President of the French National Assembly Claude Bartolone, President of Italy’s Chamber of Deputies Laura Boldrini and speaker of Luxembourg Chamber of Deputies Mars di Bartolomeo – was written in the run-up to a meeting of parliamentary leaders in Rome on 17 March to mark the 60th anniversary of the Treaty of Rome, which established the European Economic Community (EEC). The treaty’s signing by six countries– Belgium, France, Italy, Luxembourg, West Germany and the Netherlands – in 1957 eventually paved the way for the signing of the Maastricht Treaty in 1991 and the creation of the European Union.

This is not the first time the four parliamentary leaders call for a closer EU. In September 2015, Lammert, Bartolone, Boldrini and di Bartolomeo also signed a similar declaration calling for deeper and faster European integration. However, greater European integration is being increasingly challenged by a number of Eurosceptic parties around the continent, including the Alternative for Germany (AfD), the National Front (FN) in France, and the Party for Freedom (PVV) in the Netherlands.

Shortly after the release of the open letter, China’s Global Times interviewed two Chinese scholars asking them what this open letter means for European integration. Cui Hongjian with China Institute of International Studies said the letter “represents the pragmatic attitudes of some major European countries” and suggests that the idea of a “multi-speed Europe”, a concept once considered politically incorrect, could be revived. Shi Zhiqin, professor of international relations at Tsinghua University, felt that the letter could boost European federalism. He pointed out that debates over “federalism” and “Democratic Confederalism” have been held for centuries in Europe. But with the UK – “an advocate of the traditional liberalism and a prominent representative of Democratic Confederalism” – choosing to leave the EU, “the call for enhanced European integration came just in the nick of time.”

 

Will 2017 be the turning point for the EU? Asks Xinhua

On Monday (28 Feb), China’s state-owned Xinhua news agency published an editorial asking if 2017 will be the turning point for the EU. The editorial firstly noted that the European integration project, started six decades ago, is under unprecedented stress in the shadow of widespread discontent against the organisation and the rise of far-right, populist parties across the continent, leading to Brexit and ascendancy of such parties as the Front National (FN) in France.

The two trends, in addition to some other complex issues including immigration and euro crisis, have posed an existential threat to the EU. All these challenges are exacerbated by an increasingly less favourable geopolitical environment. In this regard, the editorial quoted British Conservative Party parliamentarian Charles Tannock as saying: “after six decades of US support for European integration, we have now a US president who supports Brexit, asks which country will leave the EU next and is advised by a man [former UKIP leader Nigel Farage] who wants to implode the entire EU.”

As “nationalism, populism, conflicting strategic interests, low economic growth and high unemployment have driven EU members apart”, Xinhua urged the EU institutions as well as the North Atlantic Treaty Organisation (NATO) to rise up to the challenges as soon as possible as “the longer they wait, the worse the situation will become”.

 

London Stock Exchange and Deutsche Börse merger on the brink of failure

The planned €29 billion union of the London Stock Exchange (LSE) and Deutsche Börse (DB), is on the brink after a last-minute demand from the European Commission. On 16 February, the Brussels’ watchdog asked the LSE to sell its majority stake in MTS (an Italian platform for trading bonds) because of antitrust concerns. However, on Sunday (26 Feb) LSE announced that they would not want to take such a step, and warned that the Commission was “unlikely to provide clearance for the merger”.

The planned tie-up has been highly controversial since it was announced a year ago – months ahead of Brexit. The pairing would have redefined Europe’s financial landscape, and create a European stock exchange big enough to compete with US rivals.

Experts say that Brexit is the main reason for the likely collapse of the deal. Bill Cash, a Euroskeptic Conservative who led the UK parliamentary hearing on the merger last week, stated: “It is inconceivable, in the U.K. national interest, that the London Stock Exchange should be regulated in and operated out of Germany as we leave, and having left, the European Union.”

The deal is not formally dead until the Commission’s comment after 3 April – the deadline for delivering its formal verdict. But it is believed that a failure of the merger will open the door to offers from US exchanges.

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