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News & Insights on Europe

News and Views on Europe – 28 Jul 2017

posted by eucentresg

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Fallout from the first full-round of Brexit negotiations
The first full-round of Brexit negotiations ended in Brussels last week. The UK was criticised for its apparent lack of preparedness and for its “blank canvas approach” when it came to financial settlement. Coming back, the British government experienced significant business push-back, forcing Theresa May to be more receptive to the idea of having a transitional deal after Brexit. This means that single market access and freedom of movement would continue after 2019 for a specified period of time. (The European Parliament has recently passed a resolution suggesting a maximum of 3 years, delaying “cliff edge” to 2022.)

To alleviate uncertainties associated with Brexit negotiations, the UK seeks to intensify its connection with the US. At the launch of discussions on Monday (24 July) on post-Brexit planning, UK trade secretary, Liam Fox, said Britain wants to ensure business relations with the US are not disrupted and will seek negotiations on an “ambitious” trade agreement with the US. The discussion, jointly chaired by the US Trade Representative Robert Lighthizer, came after Donald Trump told Theresa May in the margins of the G20 Summit earlier this month that a US-UK trade deal can be done “very very quickly”.

Beyond trade there are other issues that have surfaced. The EU Budget & Human Resources Commissioner Günther Oettinger said on Tuesday (25 July) that while British can continue to work in the Commission after March 2019, British citizens can longer work for the EU’s trade department and be EU ambassadors to avoid conflict of interest.

Britain leaving the EU will have commercial implications not only for the UK itself, but also for its closet trading partner, Ireland. For long, Ireland relies on its neighbour as a stepping stone to the vast European market. For example, some 80 per cent of the Irish road freight that reaches mainland Europe passes through the UK. As Brexit burns Ireland’s British bridge to EU markets, Irish exporters may have to accept longer transport times and higher costs. (For a map prepared by Politico showing alternative, more expensive routes to deliver Irish beef to Italian restaurants, click here).

Ireland is not the only EU member states that are sucked into the Brexit saga. As the latest addition to the European integration project, Croatia is still subject to temporary restrictions of free movement of labour in the UK. Under the EU treaties, restrictions on the freedom of movement of citizens of new EU states are permitted for up to seven years if a country anticipates a “serious disturbance” in its labor market. As Croatia joined only in 2013, the restriction is extendable to 2020. Croatia’s position is that an extension of the restrictions to a date after Brexit would effectively turn the temporary measure into a lifetime ban. As such, Zagreb has pushed Barnier to address the issue during his negotiations with the UK.

Ironically, some believe that it was Tony Blair’s government’s lack of restriction on workers after Poland and other Central European states joined the EU that was responsible for the huge influx of EU workers into the UK. To set up an immigration system “that works in the best interests of the country”, May and Home Secretary Amber Rudd have commissioned independent experts to advise on the UK’s post-Brexit border policy and the economic impact of immigration from the EU.

 

EU-US spat over additional sanctions towards Russia
The US House of Representative on Tuesday (25 July) passed a bill that would place new sanctions on Russia (alongside Iran and North Korea) by a 419-3 vote. (While the bill aims to limit Donald Trump’s ability to deal, or improve relations, with Russia, the President can still veto it.)

Several European nations, including Germany, were angry because the draft law could trigger sanctions for European companies contributing to the development, maintenance, modernisation or repair of Russian energy export pipelines. Euractiv understands that there are at least eight projects involving European companies that could be affected by US sanctions such as Baltic Liquiefied Natural Gas (Schell and Gazprom) and Blue Stream (Eni and Gazprom).

After discussion on Wednesday (26 July), the European Commission said it “will act swiftly” if America’s legislative move harms the bloc’s energy security. “The US bill could have unintended unilateral effects that impact the EU’s energy security interests,” Commission President Jean-Claude Juncker said. “If our concerns are not taken into account sufficiently, we stand ready to act appropriately within a matter of days. America first cannot mean that Europe’s interests come last.”

The American international news outlet CNBC believed that, despite the rhetoric, Juncker actually has few tools available to counter the US bill. On paper, the Commission could demand a formal US promise to exclude EU energy companies; use EU laws to block US measures against European entities; or impose outright bans on doing business with certain US companies. But some other punitive sanctions such as limiting the access of US companies to EU banks require unanimity from the 28 EU member states. Ex-Soviet states such as Poland and the Baltic states are unlikely to vote for retaliation because it risk increasing EU dependence on Russian gas.

That said, more broadly, the EU-US spat over the sanctions is reflective of the fact that the two powers, after initially coordinating responses to Russia’s military intervention in Ukraine and its 2014 annexation of Crimea, now have divergent views on their respective relationship with Moscow. While the EU remains focused on the Ukraine issue, Congress is now using sanctions to address Russia’s attempt to influence US elections.

 

EU-Turkey ties under stress over political developments in Turkey
On Tuesday (25 July) EU foreign policy chief Federica Mogherini and Johannes Hahn, Commissioner for European Neighbourhood Policy and Enlargement Negotiations met in Brussels with Turkey’s Foreign Minister Mevlüt Çavuşoğlu and EU Affairs Minister Ömer Çelik. At the joint press conference, following the high-level political dialogue during which future relations were discussed, Mogherini said that the EU wants to see Turkey take “concrete steps on the field of rule of law, human rights, democracy, media freedom, protection of human rights defenders, opposition leaders.”

Last year’s failed coup, and the crackdown on critics and opponents which followed, gave the EU cause for serious concern over the rule of law in Turkey. Also April’s referendum to strengthen Turkish President Recep Tayyip Erdoğan’s power “raised concerns about the direction and the structure of some of constitutional amendments” according to Hahn. Erdoğan’s recent call to reintroduce capital punishment led to some MEPs (Members of European Parliament) calling for a complete suspension of membership talks. Relations are particularly bad with Germany. Some leading political figures in Germany accuse Erdoğan of taking “political hostages” – 22 Germans, some of them of Turkish origin, have been arrested since the coup – in order to force Germany to hand over two high-ranking Turkish generals involved in last year’s failed coup who have applied for asylum. However, a spokesperson of the German foreign office ruled out the possibility of a swap deal.

The tense relationship between the EU and Turkey makes it difficult to continue negotiations on Turkish bid to become a EU member state, However, this does not change the fact that Turkey will remain a candidate country and strategic partner. Concerns over the upkeep of the migrant deal with Turkey were brushed aside by German MEP Manfred Weber (leader of the European People’s Party – EPP) and Hahn. Weber stated in an interview with Euractiv: “The refugee agreement has advantages for both the EU and Turkey. For example, schooling of Syrian refugee children in Turkey is currently financed by EU money. This is an important investment in the future, not least because it is also an important preventive measure that counters Islamic radicalisation of young people.”

Indeed many western countries are dependent on Turkey when it comes to security cooperation, particularly regarding the return of jihadist foreign fighters from Syria. Many do not want to risk jeopardising this priority.

 

Issues around migration continue to divide EU member states
On Wednesday (26 July) the European Court of Justice (ECJ) ruled that the relocation plan, decided in September 2015, was legal. Hungary and Slovakia had filed a case against the scheme, which they thought went beyond the authority of the Council. The two-year relocation plan will end in two months, but has fallen short of the relocation target of 160,000 people from Italy and Greece. Coincidentally, the European Commission published the latest numbers in a press release on Wednesday – as of 24 July, the total number of relocations stands at 24,676. The refusal of the Czech Republic, Hungary and Poland to participate in the relocation scheme is why the European Commission is now getting tough on them and has now taken the next step in the infringement procedure which was opened last month. On Wednesday, the second stage of the procedure began. The Commission asked the countries to apply EU rules, to which they have one month to respond.

Also on Wednesday the ECJ ruled that Austria and Slovenia were entitled to deport migrants back to the state -Croatia in this case – where they first arrived. The case confirms that the EU Dublin Regulation is legal and that Croatia was responsible for examining applications for those who crossed into its border during the massive influx of migrants in 2015-2016. The ruling dismissed the notion that the migratory influx during 2015-2016 was an “exceptional circumstance”, although the EU struggled to manage the extreme numbers. The landmark ruling was also anticipated by Germany, which played a crucial role during the refugee crisis in 2015. German Chancellor Angela Merkel faced lots of criticisms – also by her own party – over opening the borders and not applying the Dublin Regulation. However, the ruling also made it clear, that there was no legal obligation to send people back to the country of first entry. Nevertheless, Martin Schulz, the Social Democrat challenger in Germany’s parliamentary election in September, had decided to make refugee issues part of the election campaign. He noted that Merkel’s “open-door” policy in 2015 was done “without agreement of our partners in Europe. If we don’t act now, this situation threatens to repeat itself.” But commentators were quick to note that his party (a coalition partner of Merkel) supported Merkel’s course in 2015. There are concerns amongst the Social Democrats that Schulz’s move is a “risky gamble” since it could strengthen the far-right Alternative for Germany (AfD), instead of harming Merkel.

Without doubt, the ECJ ruling possibly will create more problems for Italy, which has seen a large increase of arrivals from North Africa this year. 81,000 migrants have arrived in 2017, 14,000 more than the same period in 2016. The ruling allows countries to return migrants to Italy if they seek to apply for asylum anywhere else, despite the fact that Italy has demanded to share the burden of hosting and resettling migrants.

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