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News & Insights on Europe

News and Views on Europe – 8 Jun 2018

posted by eucentresg

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New populist government in Italy inaugurated – implications for the future of the EU
After months of political turmoil and unsuccessful negotiations, Italy’s new government was officially sworn in on Friday last week (1 June). The coalition government comprises of ministers from both the anti-establishment Five State Movement and far right League party respectively, marking an obvious shift away from the country’s outgoing centre-left Democratic party. The leader of the new populist cabinet, political novice Giuseppe Conte, addressed the Senate on Tuesday evening (5 June), comfortably winning the approval of the country’s lawmakers as he outlined his government agenda. The eurosceptic leadership will now seek to gain its second confidence vote in the lower house of Parliament, where it is most likely to win since it has a majority.

The Italian premier’s maiden policy speech reaffirmed the ruling coalition’s key objectives, which includes an anti-immigration agenda and increased welfare spending. In his address, Conte advocated for an overhaul of the controversial Dublin Regulation, calling for the “fair distribution of responsibilities” regarding the distribution of asylum seekers. He also promoted a review of the EU’s sanctions system, in particular with those imposed against Russia over the Ukraine crisis. On the other hand, Conte did not specifically address the issue of euro; a contentious topic that ultimately led to Italian President Sergio Mattarella’s rejection of the coalition’s first attempt at forming its government. However, Conte did speak about his goal of reducing the growth gap between Rome and the rest of Europe, confirming his desire to work towards reducing the country’s public debt.

While political heat in Italy has cooled, heightened fears regarding the future of the EU have not. The future of the bloc seems to be at stake in light of conflicting positions adopted by Member States towards issues such as the sustainability of the eurozone. The recent emergence of populist and Eurosceptic governments in both Italy and Spain threaten the Union’s traditional focus on austerity in the eurozone. Although Italy has not laid out explicit plans regarding the euro, its desire to increase welfare spending and cut taxes goes against the EU’s traditional fiscal rules. Moreover, even though French President Emmanuel Macron has persistently called for the EU to assist its debt-ridden Member States and offer investment benefits, his proposal has since made little headway in provoking effective change. Despite German Chancellor Angela Merkel’s (Macron’s presumed closest ally) recent concessions on Macron’s proposal, her ideas do not align neatly to his, outlining a minimalist EU reform at best. As reform efforts stalled over differences made more stark with more populist and anti-mainstream parties coming into the political scene, the future of the bloc continue to generate concerns.

 

Russian state visit to Austria amidst tense EU-Russia relations
Russian President Vladimir Putin’s recent state-visit to Vienna on 5 June (Tue) reaffirmed warm relations between Russia and Austria. Both countries emphasised their desire to strengthen cooperation and deepen bilateral relations, particularly in aspects of business and investment. The one-day trip included the signing of various bilateral agreements such as an extension of Austrian oil company OMV’s gas deal with Gazprom, as well as ceremonial visits to places such as the Red Army memorial in Central Vienna and an art history museum.

While such trips were generally routine, the Russian leader’s visit to Austria came at a challenging period of tense relations between Russia and the EU. Such cold ties can be attributed to issues such as the recent poisoning of a former Russian spy in the UK, resulting in the expulsion of more than 100 Russian diplomats. Incidentally, Austria did not join UK and several other EU member states in expelling Russian diplomats. The Union is also at odd with Moscow for its support for the Assad regime in Syria.

Since 2014, the EU has imposed economic sanctions on Russia because of the conflict in Ukraine and Moscow’s annexation of Crimea, sanctions which the Russia president eagerly hopes to be lifted. During his time in Vienna, Mr. Putin took the opportunity in a joint news conference with Austrian Chancellor Sebastian Kurz to reiterate his desire for the Union to call off such sanctions, referring to the sanctions as being “harmful for everyone”. While Mr. Kurz did maintain prospects for the sanctions to be relaxed “step by step”, he stopped short of making any concrete promises, advocating for an improved situation in eastern Ukraine.

Russia’s state-visit to Austria has sparked some concerns of its purported attempts in sowing disunity within the EU. Austria’s willingness to improve ties with Moscow, combined with the observable presence of pro-Russia Freedom Party in Kurz’s government, has led Member States to fear increasing euroscepticism within the EU, particularly since Austria will be assuming the EU’s rotating presidency in July. In response, Mr. Putin has denied such allegations, conveying his wish for a “united and prosperous EU”. Likewise, Mr. Kurz’s remarks are also aligned to the Russian president’s comment, expressing his desire for Austria to establish itself as a “bridge” between Eastern and Western Europe. While Austria’s engagement with Russia seem to be long in the making, only time will tell of how such relations will affect the future outlook and direction of EU dynamics with Russia today.

 

A third way Brexit customs arrangement examined this week
The Brexit negotiations have been stalled for some two months as the British government appears unable to agree to a position on their preferred post-Brexit customs relationship with the EU given the complexities of the Northern Irish border issue.

In the shadow of the internal split within Prime Minister Theresa May’s cabinet, the UK has floated two possible options. One is the “maximum facilitation” or “max fac” customs model favoured by hard Brexiteers. Max fac aims to use technology to avoid border checks on the Northern Ireland land border. The other model, the so-called “customs partnership”, is favoured by soft Brexiteers. Under this model, the UK and the EU would remain in the same customs union.

The two models have proved divisive and are incompatible with the EU’s position of full regulatory alignment between Northern Ireland and the EU post-Brexit. To bridge the gaps, the UK is reportedly examining a “third way” customs plan which would involve EU border checks being carried out selectively between Northern Ireland and mainland Britain. This model has been termed as “the channels model,” because it proposes creating two different channels at ports and airports for goods moving to and from Northern Ireland. A “green channel” would be established for goods moving between Northern Ireland and Great Britain. Goods passing through it would not be delayed with checks. However, goods coming from the mainland or the rest of the world would go through a “red channel” at Northern Irish ports and airports to check whether they comply with single market regulations. Whether this latest solution would be backed by all stakeholders is not known. For instance, the Democratic Unionist Party – whose MPs prop up Theresa May’s government in Westminster – warned that they could reject the proposal if they regard it as creating a special status for Northern Ireland.

It is clear that the new third way proposal is an attempt to answer the problems inherent in the max fac model. The model has been rejected by Brussels, which insists there is no technological solution which removes the need for border checks. Instead, the EU’s chief Brexit negotiator, Michel Barnier, says frictionless trade between the EU and UK is only possible through the “Norway plus” model, where Britain would be able to stay in the single market, but would have to accept free movement of people, EU laws and jurisdiction of the European Court of Justice — all red lines for the British government. Speaking to Politico on Tuesday, Norwegian Prime Minister Erna Solberg indeed asked “why … should you leave the EU if you’re accepting that?”

With less than nine months to go until Britain drops out the bloc, pressure is building on the UK to make progress or risk leaving without a deal. A backstop plan drafted by Ms May’s government, due to be presented to Brussels this week, was greeted with fierce opposition and criticism. The proposal envisages the whole of the UK remaining subject to the EU’s common external tariffs and remaining aligned to single market rules for goods until a new customs relationship is in place. To hard Brexiteers such as the UK’s Brexit Secretary David Davis, without the ability for the UK to unilaterally determine when it considers the backstop has served its purpose, the plan would keep the UK in a customs union with the EU in perpetuity.

Davis’ furious remarks came when he was commenting on the security relations between the EU and the UK post-Brexit. The UK released a 39-page slide deck last month laying out its vision for future security cooperation. The UK said it was willing to make “appropriate contributions” to the costs of running programs such as the European Arrest Warrant, and would “respect the remit of the European Court of Justice” so long as the UK’s “unique status with our own sovereign legal order” was also recognised. To the dismay of Davis, this “unconditional offer” made to the EU had been met with a legalistic response from the EU. Davis accused the EU of putting “the protection of legal precedents” above the operational capability in its approach to security arrangements post-Brexit.

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