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News & Insights on Europe

News and Views on Europe – 24 Nov 2017

posted by eucentresg

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Uncertainty over next German government – growing concern in the EU
The collapse of Germany’s coalition talks on Sunday (19 Nov) is the latest shock to hit Europe and has raised concerns that the European Union’s (EU) biggest country – and strongest economy – will send the bloc into paralysis. After four weeks of “exploratory talks” between Chancellor Merkel’s conservative Christian Democrats (CDU/CSU), the liberal Free Democrats (FDP) and the Greens, Christian Lindner of the FDP, announced its withdrawal on Sunday.

The uncertainty in Germany has left a vacuum in European leadership, worrying some observers about what this would mean for the EU. There were high hopes of “relaunching” the EU through reforms after Brexit last year, with a new Franco-German engine. And although the EU insisted on Monday that the collapse of the coalition talks in Berlin will not have an impact on EU matters, there is a fear amongst policy-makers of a potential policy pile-up without a stable German government. For instance, French President Emmanuel Macron’s plans to reform the EU and the eurozone, have to be put on hold for now. Without a stable German government in place, no major decisions are likely to be taken during the December eurozone summit.

There were also speculations on how the Brexit negotiations might be affected by the failed coalition talks. It has been reported that some Brexiteers urged British Prime Minister Theresa May to try to take advantage of Merkel’s weakness to gain an upper hand in the Brexit talks, while others believe the political situation in Berlin will have little impact on the negotiations.

All eyes are on Germany now, with three options for how to proceed: snap elections, a minority government (both untested waters) or yet another grand coalition between Merkel’s CDU and the Social Democrats (SPD). It is not clear yet which path Germany will choose.

The collapse of the coalition talks understandably dominated the German media the last few days. An op-ed by Andreas Kluth in the Handelsblatt Gobal struck a critical tone over the collapse of the coalitions talk adding that “Europe and the world cannot afford such a hiatus in the center of the continent.” The German daily Süddeutsche saw the crisis in a wider perspective noting that “The crisis in Berlin is a crisis for the continent. And if we add the unpredictability of the United States under Trump, it becomes a crisis for the West.”

Developments in Germany have not gone unnoticed in China. Sun Keqin, a research fellow of the China Institutes of Contemporary International Relations, wrote in Global Times that German political system, which used to be renowned for its stability and readiness to reach compromise solutions, has entered a new phase of instability with political parties unwilling to suspend dispute in collaborating for the greater good. Sun argues that for those who see German elections as “a weather vane” of European stability would be disappointed as even German politics has seen a “black swan event” like this.

For a more detailed commentary on this please click here

 

Spectre of Brexit bill, EU agencies relocation and German impasse
The EU’s chief Brexit negotiator Michel Barnier shared a 14-page document with the European Parliament Brexit steering group last week, laying out a “tentative timeline” for Brexit negotiations. The file suggested that if the EU leaders decide in December that “sufficient progress” has been reached in the current Brexit talks, “preliminary and preparatory discussions” on Britain’s future relationship with the bloc could start in February 2018 and end with a deal in October 2018. Barnier seems to be pushing for a “stand still” transition, in which the UK remains in the single market and customs union and under the jurisdiction of the European Court of Justice. (But Britain would have “no institutional rights” during that period, meaning that it would have no political presence in the European institutions and no voting rights in the Council.)

Knowing that its financial commitment would be the key to move the negotiations to the next phase, the UK is reportedly offering an enhanced offer of €40 billion, which is a significant increase on Theresa May’s earlier offer (roughly €20 billion) in her Florence speech in September. Since the EU is looking for a commitment from the UK not just to maintain its payments into the current EU budget up to 2020 — the offer made by May in Florence — but to cover its share of ongoing EU programmes such as regional and overseas aid, plus pension obligations accrued during Britain’s four decades as an EU member, €40 billion may not be enough to satisfy Brussels.

Whether or not the UK leaves the EU with a deal, the UK is on its way out of the bloc and some EU institutions will be relocated out of the country as a result. After contentious votes on Monday (20 Nov), Amsterdam will be the new home of the European Medicines Agency (EMA) and Paris will host the European Banking Authority (EBA), dealing a blow to Central and Eastern European countries which hitherto have not hosted key EU agencies. While the vote exposed lingering tensions and East-West divide among the EU27, the clearest loser was the UK. There seems to be no going back on Brexit now that its prize agencies have been promised elsewhere.

The on-going German political crisis, which arguably costs Frankfort the opportunity to host EBA, does not bode well for London, for two reasons (although Brexiteers are urging Ms May to exploit the German chancellor’s weakness at home to gain advantage in the Brexit talks. ) First, Germany and its voters have not shown much interest in the Brexit situation, and few in Berlin seemed particularly inclined to lend May a helping hand. In addition, the collapse of the coalition talks means that German politicians are likely to be focused intensely on their domestic situation for the next several months, relying on existing (hard-line) EU policies on Brexit.

Amidst uncertainties of Brexit, Philip Hammond, Chancellor of the Exchequer, delivered a speech on Autumn budget 2017 on Wednesday (22 Nov), pledging to set aside £3 billion over the next two years for “no deal” Brexit preparations. The chancellor – who has been accused of being too pessimistic about life outside the EU – did so in part because of pressure from Eurosceptics. They urged Hammond to show the EU27 that the UK is serious about walking away from talks if the offer from Brussels is unacceptable. In addition to unveiling spending plans, Hammond gave a sobering assessment of the economy, saying it is expected to grow more slowly than previously thought. (The Office for Budget Responsibility slashed its growth forecasts Wednesday, and now predicts the British economy will be £65 billion smaller in 2020 than it had anticipated in its assessment in March 2016.)

Nevertheless, a silver lining for the UK is that Chinese investments are not deterred by mounting political pressure and gloomy economic forecasts in the UK. According to the Global Investment Decision Makers Survey released on Monday (20 Nov), more than half (58%) of the 81 Chinese companies interviewed indicated that they are more likely to invest in the UK over the next five years. (The figure is even higher than for the rest of the EU, where 47% of Chinese respondents said they intended to invest.) Chinese firms’ attitude toward Brexit contrasts with a growing anxiety among the largest European companies about the possibility of a messy break-up. Benoît Potier, chairman of the European Round Table of Industrialists (ERT), said “Almost all of our members are expecting that Brexit will have an [negative] impact on their companies”.

 

Crisis in Rakhine State and plight of the Rohingyas dominated the news during the 13th ASEM Foreign Ministers Meeting
The 13th Asia-Europe Meeting (ASEM) Foreign Ministers Meeting (FMM) took place in Nay Pyi Taw, Myanmar on 20-21 November 2017. Much of the media reports on the ASEM foreign ministers meeting were on the crisis in the Rakhine state in Myanmar which led to an exodus of hundreds of thousands of refugees into neighbouring Bangladesh.

Before the Foreign Ministers Meeting, the EU High Representative for the Union’s Foreign Affairs and Security Policy, Ms Federica Mogherini, and her counterparts from Germany – Mr Sigmar Gabriel, Sweden – Margot Wallstrom and Japan’s Taro Kono, visited one of the refugees’ camp in Cox Bazaar to try and understand the scale of the problem. The issue was further discussed just before the formal ministerial meeting when Myanmar State Counsellor, Ms Aung Sun Suu Kyi met with a selected group of ministers. Parallel to the efforts and the EU pledge of support to Myanmar and Bangladesh, the Chinese Foreign Minister Wang Yi also visited Bangladesh and Myanmar to offer Chinese support and call on both countries to resolve the issue bilaterally with the support of the international community.

At the first plenary session of the ASEM foreign ministers meeting, Wang Yi called for the building of “a new type of Asia-Europe partnership” to safeguard regional peace and stability. He added that “disputes should be resolved through dialogue and differences addressed through consultations” and also urged Asian and European countries to uphold the multilateral trading system and oppose protectionism in all forms. Also speaking at the first plenary session was the Vietnamese Deputy Prime Minister and Foreign Minister Pham Binh Minh. In this speech, he said it is time to build a vision for a “responsible and responsive ASEM as a champion of multilateral cooperation”.

Kyodo news agency carried a report that highlighted the fact that the chair’s statement from the ASEM foreign ministers meeting would not be making any direct reference to the humanitarian crisis unfolding in the Rakhine state, but instead stick to reaffirming the “commitment to combat terrorism and violent extremism”. Japan News highlighted Japan’s plan to extend an additional ¥2 billion in emergency humanitarian assistance to Bangladesh to help cope with the massive influx of Rohingya refugees. The report also noted that Japan has already provided ¥600 million to help Bangladesh manage the crisis, and extended another ¥1.2 billion emergency humanitarian aid to Myanmar to support Rohingya that remain in the country.

As expected, the ASEM Chair’s statement for the 13th ASEM FMM did not directly refer to the plight of the Rohingyas focusing instead on “Strengthening Partnership for Peace and Sustainable Development”. However, the EU High Representative did make a declaration expressing concern over the situation in the Rakhine state and calling on Myanmar to finalise a bilateral agreement with Bangladesh government on the return of the refugees, and to ensure accountability for those responsible for committing atrocities.

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