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News & Insights on Europe

News and Views on Europe – 23 Feb 2018

posted by eucentresg


Transatlantic Drift on display at the Munich Security Conference 2018?
From 16 to 18 February, hundreds of international decision-makers met at the 54th Munich Security Conference (MSC). This year, transatlantic relations, Russia’s alleged meddling in US election, and traditional and non-traditional security threats facing Europe were at the centre of the oft-heated discussions.

US Vice-President Mike Pence on Sunday (18 Feb) led a chorus of reassurance for allies rattled by Donald Trump’s policy stance, saying that “The United States is and will always be your greatest ally. Be assured that President Trump and our people are truly devoted to our transatlantic union”. However, Trump’s criticism of NATO as “obsolete” and his praise for Britain’s decision to leave the EU had already unnerved Washington’s allies. Therefore, European leaders gave the pledges only a lukewarm welcome, and some, such as French Foreign Minister Jean-Marc Ayrault, felt offended that Pence “had not at any moment mentioned the EU.”

Adding to the aforementioned sources of tension between the US and the EU, there also appeared to differences over Russia. At the MSC, US National Security Adviser H.R. McMaster lashed out at Russia’s attempt to undermine Western democracy (and publicly taunted a Russian cyber expert in the audience). In contrast, Europe’s stance was starkly more conciliatory. For instance, German Foreign Minister Sigmar Gabriel met several times with his Russian counterpart, Sergey Lavrov, offering the prospect of easing economic sanctions imposed over Moscow’s role in eastern Ukraine and calling Russia an “indispensable” partner in global efforts to prevent proliferation of nuclear weapons. (Gabriel also echoed Commission President Juncker’s call for a more robust European security policy, for the reason that “as the only vegetarian in a world of meat-eaters we [the EU] will have a difficult time.”)

Another pressure point was that US officials expressed their fear that EU defence cooperation may distract from NATO. “We want to remain transatlantic while also becoming more European,” German Defense Minister Ursula von der Leyen said in her opening address of the MSC. Von der Leyen’s comments were welcomed by French Defense Minister Florence Parly, who called for EU’s “strategic autonomy” and “robust European defense.” Though US and NATO officials do not oppose such plans in principle, they worry that creating a duplicate military structure could sap NATO’s own resources. “No matter what you call it, it comes out of the same wallet,” US Senator Lindsey Graham said, adding “Duplication is a concern.”

But it is the policies of this and previous US administrations which give rise to the perception that the US is longer militarily committed to the defence of Europe that prompted European states to accelerate defence cooperation, if not integration, in the first place. Another major reason that European leaders felt compelled to strengthen defence cooperation among themselves is that, as the latest MSC annual report suggests, Europe faces heightened risk of inadvertent armed clash between Europe and Russia, in part due to the erosion of arms control agreements, deployment of additional weapons and tensions over military exercises. In addition to these traditional security concerns, Dutch defence minister Ank Bijleveld warned that the risk of bioweapon attack is growing, but governments still underestimate risks. (Indeed, research suggests that the risk of biological catastrophes is likely to increase further in the years to come because of increasing global travel, trade and urbanisation).


UK rolls out Brexit plans as a new anti-Brexit party launches
British Prime Minister Theresa May travelled to Berlin to attend the MSC 2018 (see above). She met first with German Chancellor Angela Merkel to discuss the Phase II Brexit negotiations about to start. Offering some comfort to May, Merkel suggested that the UK needs not face a rigid binary choice between a full single market membership or a limited CETA-style FTA in striking a balanced and closest possible deal with Europe. (Nevertheless, Merkel suggested that a potential midway for the UK is unlikely to cover financial services.)

On the second day at the MSC May set out the UK’s goals for the future security and law enforcement relationship with the EU. May made it clear that Britain, despite leaving the EU, remain committed to the defence of Europe. More significantly, she called for a new security treaty with the EU post-Brexit to safeguard existing anti-terror and police cooperation. She stressed that such an agreement was essential to protect citizens on both sides of the Channel. Her words, however, did not receive warm welcome by EU leadership. Commission President Jean-Claude Juncker noted that, while continued defence and security cooperation is in the interest of both sides, the issue could not be “mixed up” with the wider Brexit negotiations.

On Tuesday (20 Feb), the UK’s Brexit Secretary David Davis told an audience in Austria that the UK has no plans to recast itself as a regulation-light economy undercutting rivals on the continent. He denounced some European leaders’ fears on a regulatory race to the bottom to be “based on nothing, not history, not intention, nor interest”. Just as Davis attempted to dispel European concerns in some aspects, three anonymous senior British officials told Politico that Britain could refuse to pay its debts to the EU (i.e. Brexit Bill) if Brussels reneges on its commitment to a future free-trade deal. (The tricky part is that, under the EU law, Brussels cannot agree a trade deal with the UK until it has left the bloc. However, this leaves Britain in the uncomfortable position of signing divorce papers without a legal guarantee of what the new relationship will look like. British parliamentarians were reportedly wary of this insecure situation.)

For the business community, the absence of a guaranteed trade deal means that the cliff-edge hard Brexit scenario cannot be ruled out. (Outgoing) Bundesbank executive board member Andreas Dombret had already warned that Banks should “prepare for a hard Brexit” in an interview published on Monday (19 Feb). Comparing to the banking and financial industry, the manufacturers are no less concerned. Representatives of British manufacturing companies at an annual manufacturers’ conference on Tuesday (20 Feb) complained of the uncertainty about their future trade relationship with the EU with one delegate calling May’s Brexit strategy “an absolute shambles”. Europe, on their part, is making itself prepared for the possibility of Brexit without deals. For instance, the Netherlands plans to hire at least 750 new full-time customs agents in preparation for (hard) Brexit, the Dutch government said in a letter to parliament released last Saturday (17 Feb).

The uncertainties surrounding Brexit led to a major political development in the UK. An anti-Brexit party, Renew Britain, modelled on French President Emmanuel Macron’s En Marche movement was launched on Monday (19 Feb) by a group of pro-EU campaigners who hope to capitalise on the chaotic Brexit process to pressure politicians into stopping the withdrawal. (Renew Britain now claims to have more than 450 applications to stand as candidates for the 650-seat House of Commons. And the party said it had received informal advice about how to proceed from En Marche.)

On Thursday (22 Feb), the UK formally published a proposal for how it wants the transition period immediate after Brexit to work. It said the period should be as long as it takes to “prepare and implement the new processes and new systems”. (But the UK denies that it would be longer than the planned two years.) The document also confirms that the UKwill abide by new EU laws, but will not be able to sign trade deals with third countries without the EU’s permission. BBC suggests that the proposal would make “uncomfortable read” for Tory Brexiteers because it contains no “pushback” on EU demands for free movement of people to continue in the same form during the transition phase, no suggestion of a veto to block new EU laws and no power to implement new international trade deals without the EU’s permission. (At the time of writing, it is yet to know how May’s split cabinet would react to the proposal. And Jeremy Corbyn, the opposition leader is scheduled to make a speech next Monday to clarify Labour’s position on Brexit and the proposal.)


Germany’s changing political landscape
Two weeks ago when the two big political German parties, the Christian Democrats (CDU/CSU) and the Social Democrats (SPD), agreed on a coalition deal in order to form another so called grand coalition, there was hope that the political uncertainties following September’s general elections would come to an end. But it does not seem to get quieter. Many commentators pointed out that the “ way politics is done in Germany is undergoing a profound shift”, a development that is similar to other countries in Europe. In the Netherlands, for instance, four parties were necessary to assemble a governing coalition. Belgium went for 541 days without a government. And it has been challenging in Germany as well. Compounding the problem is the fact that both CSU/CDU and SPD have lost significant votes (Chancellor Angela Merkel’s conservative alliance lost almost 9% (33%), while the SPD lost 5% (20.5%) compared to 2012) and their former dominance seems to be eroding.

Following the coalition deal – which now needs approval by the 450,000 Social Democratic party members – the SPD is now wrestling with infighting and rebellion brewing in the grassroots. Only days after the coalition deal was announced, its former leader and former President of the European Parliament, Martin Schulz stepped down after flip-flopping on the grand coalition and trying to claim the post of foreign minister, leaving the party in turmoil. The public fight between him and incumbent foreign minister Sigmar Gabriel contributed to the party’s disunity. The newly designated chairwoman Andrea Nahles and acting party leader Olaf Schulz (who will take over the finance ministry) seem to be struggling to assert their authority, which in turn raised doubts over the party’s fitness to govern. Therefore, it was not surprising when support for the party dropped to a new historic low in polls published on Monday (19 Feb). At 15.5%, it has lower support than the far-right Alternative for Germany (AfD). The poll showed the AfD at 16% support (making it for the first time the second-strongest party in Germany).

Social democracy has been under increased pressure all across Europe. SPD is desperate to avoid the fate of its counterparts in the Netherlands (the Labor Party) and France (the Socialist Party), the latter also currently polling at historic lows (between 17 to 19% according to recent figures). Therefore some SPD members have turned to the British Labour Party for inspiration. Under Jeremy Corbyn’s leadership, British Labour party has made a sharp left turn, which in turn seemed to have led to increased support as reflected in last year’s June polls. However, a similar left turn in Germany would be problematic, since the political left is fragmented, with Die Linke (The Left), having controversial positions with regard to Russia and NATO.

Merkel’s CDU is also not immune against crisis, though it has thus far not been as intense as what is happening within the SPD. Chancellor Merkel faced criticisms from within her own party for giving away key ministries to the SPD. Also CDU members, particularly from the party’s youth and business wings, are calling on the party to prepare for Merkel’s succession. In order to ease those calls, Merkel appointed her close ally Annegret Kramp-Karrenbauer on Monday (19 Feb) as secretary-general of the CDU. Kramp-Karrenbauer, currently state premier of the tiny state of Saarland, is widely respected in the party for her serious, pragmatic approach to policymaking and is sometimes dubbed “mini-Merkel” by German media. She could use her new role to enhance her chances of one day succeeding Merkel as German Chancellor. Merkel herself was secretary-general before becoming Chancellor. The outgoing secretary-general, Peter Tauber, is giving up the post due to health issues. On 26 February the CDU will hold a party congress, where delegates will vote on the coalition deal and the secretary-general.

It is now down to the vote of the SPD’s members, whether Germany finally gets a new government. Party members started to vote on Tuesday (20 Feb) and have until 2nd March to submit their votes. The result is expected to be announced soon thereafter. Past referendums have been regarded as formalities, but this time the result is far from assured, although experts expect a positive outcome. Manuela Schwesig (SPD), state premier in Mecklenburg-Vorpommern, did not mince her words when she said: “The SPD needs to calm down and leave this chaos behind so we can concentrate on the membership vote.”

An op-ed by Josef Joffe in Politico titled “Angela’s Merkel government of losers”, criticised her for doing “anything to stay in power”. He added that September’s election results were a clear “vote of no-confidence”, for Merkel, “once touted as “empress of Europe,”. She, the once masterful politician, who has outmaneuvered every potential contender for 12 years, could only hang on to power by practically giving away the government to her weakened junior partner.”

A “political obituary” by Ulrike Guérot, founder and director of the think tank European Democracy Lab, and professor for European policy at Danube-University in Krems, Austria, was also published in Politico, with the title: “Martin Schulz, the man who could only disappoint”. In the article she criticised Schulz for neither fighting the European cause, nor trying to convince German voters of the advantages of the EU for Germany during the campaign. She concluded that “Europe, it turns out, is nothing to write home about in Germany. And that is very bad, both for Germany and for Europe.”


Should Europe Police the Digital World?
Champions of frontier-free digital movements will be dismayed to find out that politicians within the EU institutions are doubling down on their quest to “Tame the Titans” of technology. In an article titled “Europe’s tech ambition: To be the world’s digital policeman” the Politico report expressed some reservations on Europe’s regulatory zeal in trying to set the rules for the digital world. The EU have brought investigations and charges against digital giants suspected of abusing their positions as digital monopolists, like in the case of Google being found out to have positioned its products over its own rivals in searches. In more ambiguous incidences of anti-competitive behaviour, tech companies have gobbled up smaller firms, such as Facebook acquiring of Instagram and Google, of Waze, each for more than a billion.

In Europe, this sort of behaviour is seen as against consumers’ interests. First, frontier-free technology not previously circumvented by “offline laws”, operated with a degree of carte blanche. Since laws that exist in the interests of citizens did not apply to regulate social media platforms, such platforms have been accused to rob consumers of their basic rights to lodge complaints within the Member State of Residence. Secondly, anticompetitive behaviour reduces competition within the technology ecosystem, which results in a less than conducive business environment that would have brought about consumer benefits in terms of choice, quality and increased domestic consumption. Thirdly, when sponsored content is masked as an article, it arguably fundamentally misleads consumers into buying into disingenuous marketing, which creates public distrust in native advertisement. These anathemas are seen as breaches of European consumer laws.

With the European Commission’s attention on them, Facebook, Google+ and Twitter have tried to align their terms of services with EU consumer protection rules. The first two problems have somewhat been redressed to placate lawmakers. However, the truth is that technology is increasingly becoming more political. Who will emerge victorious in this strife between technology and politics is still unclear. Lest we forget, protector of the market place, Gary Reback, who represented companies against Google confirmed that companies he represented for in a case against Microsoft have “all but died out” anyway. Moreover, in a recent Politico article, it transpired that the main complainant in an antitrust inquiry against Google happened to be controlled by anti-Google rivals, Nasper and Oracle. This reveals vested interests between warring corporation, or “astroturfing” as is known, in which corporations purportedly pledge support for grassroots initiatives for self-interests.

Clearly this is no zero-sum game, there are several sides to the stories and no straightforward solution or “quick fixes”. Reining in the world’s largest tech platforms will not be easy but this task is overseen by Mrs. Margrethe Vestager the European Commissioner for Competition, who is said to be “the rich world’s most powerful trustbuster”.

Europe’s regulatory approach towards digital giants has surprisingly won praise by George Soros. In a commentary in Project Syndicate, Soros have taken to vilifying these companies, stating that the “rise and monopolistic behaviour of the giant American Internet platform companies is contributing mightily to the US government’s impotence”. He added that these internet monopolies have become “public menace” whilst conveniently omitting that the Soros fund has in the past, traded heavily in Facebook, Twitter and Google’s stocks.

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