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News & Insights on Europe

News and Views on Europe – 19 May 2017

posted by eucentresg

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EU-Singapore trade deal cannot be concluded by EU alone
In a closely watched decision announced by the Court of Justice, the highest court in the EU, on Tuesday (16 May), the EU-Singapore Free Trade Agreement (EUSFTA) was ruled to require ratification by all member states’ national and regional parliaments. The Luxembourg-based court on the one hand acknowledged that a large part of the agreement does fall under exclusive EU competence, as provided by the Common Commercial Policy (CCP), and on the other highlighted that portfolio (i.e. non-direct) investment and commercial arbitration will require unanimous backing by member states (Click here for EUC Commentary).

Singapore expressed hope that the deal could be implemented provisionally for companies to take advantage of the deal at the earliest possible date. Provisional application means trade agreement could enter into force once the European Parliament gives the green light and before national and regional parliaments finalise their consent.

Although the ruling clarified the European Commission’s exclusive competence (and narrowed the range of topics which will be subject to national ratification as compared to an earlier opinion issued by Advocate General of the EU), the Commission, as Euractiv suggests, will soon have to decide whether to seek the ratification of the EUSFTA as concluded against the risk of getting bogged down in regional parliaments, or to split the agreement into two halves, one of which would contain all the aspects over which Brussels has exclusive competence, while the other would need to be approved at national and regional level.

The ruling’s implications on Brexit is also far reaching. The clarification that investment does not fall under exclusive EU competence could foretell that investment provisions be left out of a future EU-UK trade deal to avoid delays and political pitfalls. But the exclusion of investment provisions will certainly make it fall short of the sort of “bold and ambitious deal” Theresa May wants.

 

French newly minted president – Meeting with Merkel and shuffling the cards of traditional French politics
On Sunday (14 May), Emmanuel Macron was inaugurated as the French President. Wasting no time, the new president made his most important personnel decision to date and appointed Edouard Philippe as his Prime Minister. Philippe is a conservative lawmaker from the Républicains and the mayor of Le Havre. The appointment of a conservative was seen as a strategic move by Macron and a verification of his pledge to govern outside of the traditional French left-right divide. It has been a further blow to the Républicains: even before Philippe was appointed, leaders of the Républicains criticised Macron for trying to “poach” people from their party. Macron’s “seduction” of politicians from rival parties have stirred up the traditional mainstream parties.

The full slate of Macron’s cabinet was announced on Wednesday (17 May) after he had all candidates checked over their finances and potential conflicts of interest. The new cabinet is made up of 11 women and 11 men and includes representatives from all political parties, except from the far-right National Front. Again, his government appointments reflect his promise to bridge the left-right divide, but is also seen as a move to broaden Macron’s support, since he has no established party, ahead of the legislative elections in June. However, polls are predicting that his party will gain a majority in the elections.

Macron also wasted no time in trying to “chart the future of Europe” by making his first official trip to Berlin to meet German Chancellor Angela Merkel. The meeting between them was widely described as “warm”. Macron talked about possible areas of cooperation such as external defence, joint asylum proposals, foreign policy, fiscal and economic policy. However, he did not focus on the sensitive topic of his proposed eurozone reforms. Macron has other priorities at the moment, first and foremost to reform the French labour market to tackle mass unemployment. It is perhaps also understood that discussions on reform and treaty changes of the EU have to wait until the results of the general elections in Germany in September.

However, Merkel responded positively to and showed herself supportive of changes to EU treaties and insisted that the EU would be “vulnerable” if it refused to amend the existing rules. Merkel further stated at a joint press conference that there “is a common understanding that we can’t just focus on Britain leaving the EU but that, first and foremost, we have to think about how we can deepen and crisis-proof the European Union, especially the eurozone.”

Both leaders pledged to relaunch their country’s partnership in order to “reconstruct” the EU and have planned for a Franco-German ministerial meeting in July, in order to liaise on proposals to reform the EU. The meeting was widely celebrated in the media, Euractiv, for instance, called Merkel and Macron the “new power couple” aka “Mercon”. The German media was also extremely positive about the “historical” meeting and described their cooperation mainly as a fight and counterweight against populism.

 

Poland and Hungary in the spotlight for concerns over the rule of law
On Wednesday (17 May) the European Parliament called for the EU to start so-called Article 7 proceedings against Hungary due to a “serious deterioration of the rule of law, democracy and fundamental rights” [See the text of the resolution]. This could theoretically lead to EU sanctions against Hungary, such as the suspension of voting rights. Article 7 says that the EU can impose sanctions if a member state is found to be in “serious and persistent breach” of core values such as “respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights.”

Since Orbán came into power in 2011, the EU Parliament has passed several resolutions aimed at Hungary’s controversial policies and reforms, e.g. of the judiciary, media, NGOs, asylum law and academic freedom. However, most of those sanctions have proved to be “toothless”. Fidesz, Orbán’s party, which is a member of of the EPP (European People’s Party), has enjoyed backing of this European political family, but it seems that the tide might have changed.

The resolution won a broad backing, including from traditional allies of Hungarian Prime Minister Orbán – sending a strong signal that EU is tackling the “slide” towards “illiberal democracy”. Nevertheless, sanctions seem to be unlikely at this point, since there is a need for a unanimous decision and Poland has said that it would veto such a vote. Poland also finds itself under EU scrutiny over concerns related to alleged breaches of the rule of law. After a meeting of European and foreign affairs chiefs of the 28 EU member states in Brussels on Tuesday (16 May), European Commission Vice President Frans Timmermans said that the majority of EU countries want the EU Commission to rekindle dialogue with Warsaw. Talks between the two sides came to an impasse after the Polish government insisted there was no threat to democratic principles in the country, despite the EU’s recommendations.

In addition to the Article 7 proceedings, the Commission launched another infringement procedure against Hungary concerning Hungary’s asylum law, in particular the blanket detention of migrants. The Commission believes that Hungarian legislation does not comply with EU law. The next steps include a referral to the Court of Justice of the European Union (CJEU), if the response by the Hungarian government is considered unsatisfactory.

At a time when it seems that populism has peaked, following the results of the Dutch and French elections, where the far-right parties were kept out of government, and with the EU toughening up against populism in Hungary and Poland, another front has opened up. Austria announced snap elections for October after the current ruling coalition fell apart. Polls are predicting that the right-wing Freedom party (FPÖ) has a real chance to be in the government. The dilemma of the two mainstream parties seems to reflect a European problem: “Is cooperation with far-right parties, under strict conditions, the least bad option?”

 

Turning point for the Greek economy?
Despite a major nationwide strike to protest austerity measures to be voted in Greek parliament on Thursday (18 May), a new sense of optimism seems to be emerging among policymakers and businessmen.The vote comes ahead of the Eurogroup meeting next week (22 May) in Brussels where issues around the country’s €86 billion bailout programme will be discussed. The Greeks hope that their vote on the latest set of reforms will clear the way for an agreement on debt relief and more fiscal leeway. It is expected that around €7 billion will be signed off in order for Greece to meet debt obligations due in July. Despite Greece meeting all targets so far, there is a large disagreement between the creditors regarding a debt relief, in particular between Germany (the biggest creditor to Greece) and the International Monetary Fond (IMF). Germany has opposed such a debt relief, while the IMF has insisted it on it.

Greece has been under supervision of international creditors since 2010, and since then has imposed austerity measures after austerity measures. The fiscal discipline has improved the country’s finances but it has led to one in four Greeks being unemployed and cut household incomes by a third.

 

Vietnam, EU complete negotiations on logging, timber trade
The EU and Vietnam reached a Voluntary Partnership Agreement (VPA), to combat illegal logging and promote trade in legal timber on Tuesday (16 May) after almost six years of negotiations. As part of the VPA, Vietnam will develop a timber legality assurance system to ensure that its exports of timber and timber products come from legal sources, including systems to verify that imported timber has been legally harvested and traded in accordance with the relevant legislation in the country of harvest.

Apart from boosting exports of Vietnamese timber products to the EU, the VPA is expected to improve forest management and deter illegal logging as it comes just days after Environmental Investigation Agency (EIA), an UK-based NGO, issued a report entitled “Repeat Offender: Vietnam’s persistent trade in illegal timber” asserting that 300,000 cubic metres of wood were harvested on an “unprecedented scale” from two national parks and one wildlife sanctuary in Cambodia between November to March before being smuggled to Vietnam.

Vietnam is among 15 countries negotiating or implementing the VPA with the EU. Other Southeast Asian countries negotiating with the EU include Malaysia, Laos and Thailand; preparatory work is also on-going in Myanmar. Indonesia was the first Asian country to initiate a VPA, with Forest Law Enforcement, Governance and Trade licencing beginning on November 15, 2016.

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