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News & Insights on Europe

News and Views on Europe – 7 Sep 2018

posted by eucentresg

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EU faces internal rifts and external pressures over budget, immigration, continued rise of the far right and trade with the US
On Monday, High Representative Federica Mogherini delivered her opening address at the annual EU Ambassadors conference. She discussed engaging EU countries for a political solution that “respects the freedom and dignity” of Syrians – focusing on reconciliation, reconstruction and the return of refugees. She urged Europeans to remain firm in the values that guide them. In external relations, she reminded the EU ambassadors that the priority of their work this year will be “to strengthen a global network of partnerships for multilateralism”. They have to send a clear message to partners all around the world that the EU is not withdrawing from world stage and stand ready to be a major global player.

While trying to remain optimistic, Mogherini also acknowledged that the Union is going through a difficult moment. At the same time, she reiterated that European unity is essential for the EU to advance its interests and values in an increasingly difficult world.

Mogherini’s speech was timely given the advent of several divisive issues facing Europe this week on both external and internal fronts. Budget Commissioner Günther Oettinger described the EU as facing “mortal danger”, in the face of risks of trade wars and aggression from autocratic countries such as Russia, Turkey and China. Oettinger also commented that his own country, Germany, is currently lacking enthusiasm for the EU, especially when it concerns budget-related issues.

One such issue is Italy’s conflict with the European Commission and investors because of its intention to increase spending for the year ahead. Salvini and Di Maio – heads of the League and 5-Star Movement respectively, both plan to reduce taxes and boost welfare spending. Salvini intends to increase spending while remaining within the EU’s deficit limit of 3% of Gross Domestic Product (GDP). Di Maio is following through with his election promise of introducing a universal income for the poor. With Italy’s public debt currently standing at 132% of output, Brussels and investors are unlikely to take kindly to such plans, expecting Italy to reduce its structural deficit instead.

Migration continues to be the touchstone for fissures in the EU. Italy’s warning to veto the Multi-annual Financial Framework (MFF) stems from a failed request for help from the EU in taking in some migrants. Di Maio has been consistent in saying Rome will not pay its due to the EU “if the migration situation does not change soon”. However Oettinger has been defensive of the EU budget framework and says it is in the best interests of all if it were passed before the 2019 European Parliament Elections. He also reported there is a 50-50 chance of a deal being passed with 100 percent chance of good arguments for why it should be done. Nevertheless, between the rise of Sweden’s anti-immigrant far right and recent protests-turned-riots in Germany, migration is “here to stay” and will continue to cause rifts within the EU and its member states.

The EU continues to see the rise of the far right in its upcoming elections. For one, the Swedes are heading to the polls next weekend with support for the far right Sweden Democrats rising. On 2nd September, Sweden’s former conservative prime minister, Carl Bildt, had an aggressive television debate with the far right Sweden Democrats leader, Jimmy Akesson, over EU policy. The Sweden Democrats have already called for an in/out EU referendum and is polling to win one-fifth of the votes. Bildt warned that the EU would “collapse” if far-right parties like the Sweden Democrats came into power across Europe. Akesson retorted that such rhetoric disrespects voters, and said Bildt was implying that the EU can only function properly under the guidance of certain politicians who are deemed “right” for the job. Akesson is advocating “a different kind of cooperation in Europe”, one that protects the nation state.

In Germany, the Bavarians will be voting in a state election next month. This election will challenge the Christian Social Democrats (CSU) as the ruling party, and test the increasing popularity of the right-wing Alternative for Germany (AfD), which is currently the third largest party nationally. The CSU has been criticised for being isolationist and distancing itself from Germany’s national government. They have employed a “more liberal interpretation” of German asylum laws so as to achieve “more humane and orderly” treatment of asylum-seekers. This approach has caused division within the ruling government, and alienated voters, prompting tens of thousands of Germans to protest against the CSU’s pro-immigrant stance in the state capital of Munich. The CSU has dominated Bavarian politics since the end of World War II, but looks set to lose its absolute majority in the upcoming elections, which means it will have to form an alliance with another party.

The EU is also trying to address its external disputes, particularly with the United States. On Monday, the EU proposed the beginning of formal talks with the US to address their long-standing concerns over beef imports. This dispute dates back to 2009 when the EU agreed to allow US to export 45,000 tonnes per year of hormone beef, but made the same quota available to other beef-exporting countries as well, such as Australia and Uruguay. As a result, American farmers complained that they were not getting their due share of Europe’s beef market.

The US Commerce Department also released a report on Wednesday detailing its burgeoning shortfalls with major trading partners, notably China and the EU. The US reached a historic trade deficit with the EU at $17.6 billion. This data is likely to aggravate President Trump, who looked at trade deficit simply as a result of “unfair trade policies”

 

Theresa May’s Chequers plan under siege as economic and political risks of no-deal Brexit brew
Ever since the introduction of the Chequers Plan by the British government in early July, Prime Minister Theresa May has been under siege from all fronts. While she vowed “no compromise” over her “precise and pragmatic” plan, the EU’s chief negotiator Michel Barnier insisted on Sunday (2 Sep) that he was “strongly opposed” to it for the reason that any plans for a “common rulebook” for goods but not services were not in the EU’s interests. Barnier’s categorical rejection of the Chequers deal had found support among leading Brexiteers, including Jacob-Rees Mogg and ex-foreign secretary Boris Johnson, but for different reasons. Mog, who is known for preferring a more distant relationship with the EU, said May’s plan won’t fly whereas Johnson hit out at the plan more harshly, saying the ‘disastrous’ Chequers deal would lead to a total victory for Brussels. Former Bank of England governor Mervyn King, another Brexit supporter, likewise blasted May’s preparation for the departure from the EU as “incompetent”.

Given all the criticisms and the perceived low acceptance of May’s long-drawn-out Brexit plan, the risk of a no-deal Brexit is rising by the day. This possibility was reaffirmed by German Chancellor Angela Merkel this week who took note of the fact that there has been no result of the negotiations yet. The UK in a Changing Europe, a British think tank, published a latest analysis of the costs of the UK crashing out of the EU without a deal on Monday (3 Sep). The paper concludes that a no deal Brexit would cost the UK four times more than the EU-27 and result in a “chaotic and severe” hit to its economy. In addition to economic risk, an added uncertainty concerns the integrity of the union of the United Kingdom itself. An opinion poll of 1,022 Scottish voters showed on Sunday (2 Sep) that if Britain leaves the EU as planned, 47% of Scots would vote for independence at another referendum on Scotland’s future. That compared to 43% who would vote against independence and 10% who said they did not know how they would vote.

Aware of the potentially catastrophic outcome of a no-deal Brexit, the British government is making a pitch for the Chequers plan in bilateral settings with individual EU member states. To counter the alleged British attempt to sideline Brussels, the European Commission last Friday (31 Aug) warned member countries against allowing their officials to attend bilateral seminars on Brexit in London. At the same time, the EU has shown early sign of compromise on the Irish border issue. The EU had earlier proposed a “backstop” plan which is to keep Northern Ireland in the bloc’s economic space post-Brexit and hold border checks in Irish Sea ports. But May said that would amount to pulling Northern Ireland away from the rest of the country. Danuta Hübner, who chairs the European Parliament’s constitutional affairs committee, said on Tuesday (4 Sep) that the EU could tweak Irish border backstop to win Britain’s approval.

To which extent Hübner’s statement would be translated into action is unknown as Barnier refrained from commenting on it. Surprisingly, Brexit was not mentioned as a topic of discussion as Commissioners gathered input for Commission President Jean-Claude Juncker’s last state of the union speech on 12 September. Among the issues raised, top EU officials mentioned “subsidiarity” (the distribution of competences between Brussels and member states), trade, migration, nationalism, energy and climate change.

 

MEP Weber Declares interest on Commission Presidency while Exit Polls for next year’s European elections Predict “Messy Outcome”
On 5 Sep, Member of European Parliament and leader of the European People’s Party (EPP) group, Manfred Weber declared his intention to “run” for European Commission presidency as his party’s ‘lead candidate’ next year. While no other EPP politician has expressed a similar intention to succeed Jean-Claude Juncker, frequently mentioned potential nomination rivals include former Finnish Prime Minister Alexander Stubb and EU’s Brexit negotiator Michel Barnier.

German Chancellor Angela Merkel has since backed Weber, but her officials clarified that her statements were not an endorsement of Weber for Commission presidency. Hungarian Prime Minister Viktor Orban has also declared his support for Weber.

Current exit polls for the European elections to be held in May 2019 show that no political party polls over 30%, thus foreshadowing a “messy outcome” as no two parties were expected to secure a simple majority to obtain sufficient mandate to govern. As such, Weber’s nomination for the top job in the Commission may rely less on the outcome of the European parliamentary election and more of an American ‘brokered convention’ outcome that requires coalition-building that takes into consideration the preferences of powerful EU leaders.

Under the Spitzenkandidat system, pan-European parties select a ‘lead candidate’, and the candidate of the political group that won the most seats would then most likely be chosen by the European Council of EU leaders as the European Commission President. However, leaders of EU governments have mentioned that they are not legally bound to the Spitzenkandidat system. On 5 Sep, French President Emmanuel Macron’s La République En Marche expressed their opposition to the Spitzenkandidat system, arguing that it is a “real democratic anomaly” as such automatic mechanisms remove their democratic power to select Europe’s top officials.

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