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News & Insights on Europe

News and Views on Europe – 28 Sep 2018

posted by eucentresg

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Transatlantic ties – Trump’s policies do not sit well with its European allies
At the European Parliament on Monday (24 September), European Central Bank president Mario Draghi warned that the EU should be prepared for the impact from US-China protectionist measures. According to Draghi, protectionism, emerging markets’ vulnerabilities and the financial market volatility are among the main risks that the EU will face. In fact, the positive growth that has been observed for over five years might now be threatened by protectionist measures in the global economy. On the other hand, the European Central Bank does not expect Brexit to take much of a toll on the Euro except in the central clearing of derivatives.

In an attempt to mitigate the effects of Trump’s protectionist measures, European Commissioner for Trade Cecilia Malmström has expressed that the EU and the US are exploring the possibility of a limited trade agreement. While real negotiations have yet to start, she mentioned that both sides are looking at facilitating the sale of US liquefied natural gas to Europe and reducing overall regulatory barriers to trade. A meeting will be held in November to discuss the agreement.

Beyond the economic realm, Europe’s big powers are also at odds with the US over its withdrawal from the Iran nuclear deal. All the other states that had been signatories to the deal (France, Germany, the UK, China and Russia) met in New York recently and expressed their commitment to the “full and effective implementation” of the Iranian accord. The EU in particular has adopted a blocking statute in an attempt to thwart US’s enforcement of sanctions. It is also planning to create a special financial company to continue facilitating Iran’s sale of oil to the EU. With the rest of the P5+1 members still in support of the deal, the US is left isolated. Trump’s National Security Adviser, John Bolton, known for his hawkish views, however, continued to “admonish” Iran and “mocked the European Union for its lack of details on the planned mechanism” for supporting the Iranian deal.

 

UK and EU prepare for no-deal Brexit
En route to the UN General Assembly in New York, British Prime Minister Theresa May said on Tuesday (25 Sep) that no-deal Brexit would be preferable to the EU proposals that would risk breaking up the UK. To back up the statement and convince Brussels that London is willing to walk away from the negotiations if necessary, the British government has been dispatching “technical notices” in recent months to illustrate what a no-deal Brexit would mean for citizens and business alike and advise on how they can prepare for such a scenario. As of Monday (24 Sep), a total of 77 such notices were published, covering a range of topics from aviation and car insurance to traveling with your pet dog. At the same time, the EU is also intensifying its preparation for a no-deal Brexit, or what a confidential EU document (‘Preparing for the United Kingdom’s withdrawal from the Union’) identified as “disorderly withdrawal”.

Discussions on the prospect of a no-deal Brexit picked up momentum recently in part because the EU had in the Salzburg Summit rejected Ms May’s Chequers plan which would see the UK having free trade only in goods, but not in services, something which is seen as “cherry picking” by the EU.

Twist and turns around the Chequers plan continued this week. On the one hand, Bruno Le Maire, French economy minister, reaffirmed the rejection and claimed that allowing the UK to leave the EU while holding onto the benefits associated with full membership through the Chequers proposal was “suicidal” for the EU. He urged the EU to pay more attention to the future of itself rather than the future of the UK. On the other hand, the UK’s home secretary Sajid Javid insisted that, as long as the EU does not issue a formal rejection, the Chequers plan is still valid in the on-going negotiations. Javid also discounted the possibility of a second Brexit referendum because, in his opinion, the British people had already made their choice clear in the June 2016 referendum. This position was being challenged this week by the opposition Labour. Labour delegates voted Tuesday (25 Sep) to approve a motion that would keep all options – including a fresh referendum – on the table if the Parliament is deadlocked over Brexit. Labour leader Jeremy Corbyn flew to Brussels on Thursday (27 Sep) to warn the EU of the danger of a no-deal Brexit, which could “be so damaging to jobs and living standards in both the UK and EU countries”. (Speculation went rife that Labour would force a snap election before Brexit day to implement its job-first Brexit vision but Ms May dismissed the idea saying it is not in Britain’s best interest.)

Despite the uncertainties on (the terms of) Brexit, the Tory government is said to be making a few policy plans for the post-Brexit era. Ms May on Wednesday (26 Sep) promised business leaders that the post-Brexit UK would be a “low tax and smart regulation” economy, charging the lowest business tax rate in G20. Earlier on, she and her ministers also agreed to focus post-Brexit migration system on high-skilled migrants and will not offer preference to EU worker. Both proposals are likely to frustrate the EU as Brussels opposes London’s bid to be an offshore tax-haven on its doorstep and implicitly expects the UK to offer preferential treatment to EU citizens post-Brexit.

Potential tensions arising out of the two proposals could add to the complexity of Brexit negotiations. In addition, closer economic relations with the US would be high on Ms May’s trade agenda as the UK exits the European Single Market. In a bilateral meeting on Wednesday (26 Sep), Ms May and US President Donald Trump talked about a potential “big and ambitious” UK-US FTA, though Washington indicated that this is only possible if the UK “preserves enough space on regulations” post-Brexit. Unfortunately, the pre-condition set by the US is in principle incompatible with the Chequers plan which expects the UK to align much of its regulation on merchandise trade with the existing EU rulebook for trade in goods.

 

Migration and Islamophobia – issues that vexed the European societies
At the Salzburg summit, the leaders of the EU remain divided over how to handle the migration crisis. Federica Mogherini delivered an encouraging reminder that the partnership with Africa has been successful in lowering new arrivals. However, there is still no consensus on whether to continue rescue mission Operation Sophia, which was previously halted by Italy urging other states to take in migrants after disembarkation.

At the informal summit afterwards, French President Emmanuel Macron pointed to migration hardliners like Italy’s Matteo Salvini, Hungary’s Viktor Orban, and the Visegrad Four whom he said were responsible for internal divisions. He said Europe is “no menu à la carte” and that failing to show solidarity might result in expulsion from the Schengen. The issue of reallocation of refugees and burden sharing has also been divisive as some countries reject the proposal while those countries with a large amount of immigrants like Greece, Italy, France, and Germany are pushing for it.

While the political leadership in the EU remain divided over taking in refugees, a Pew Research Centre Survey reports that a majority of people from several European countries show support for taking in refugees fleeing from violence and war. However, they do not approve of how the EU has dealt with the situation. In fact, the report shows that people are more disapproving of how the EU is handling the refugee crisis than with the economy. Unfortunately, the survey did not ask what elements of the EU’s actions on refugees they disapproved of. A previous Pew Research Center survey showed that majorities in most EU countries surveyed prefer that their national government, and not the EU, make decisions on migration issues.

Internally, in some European countries, rising concerns for Islam is swaying policies dealing with immigrants to the right. The introduction of these policies are motivated by concern for terrorism as well as the creation “parallel societies” within the respective nations. The Danish government has recently introduced a proposal to impose sanctions and incentives on the “ghettos”, where a majority of inhabitants are Muslim immigrants. The intention is to assimilate these communities into the larger Danish Society, and by force if necessary. The result is a policy called “Together for Denmark”, which will impose harsher standards for foreigners to adopt Danish society’s language and values, Immigrant parents who take their kids back to their countries of origin for extended periods could face prison of deportation. Mattias Tesfaye, point person for the plan, says these tough measures on immigration and integration are necessary to break down parallel societies” and to sustain the welfare state.

Meanwhile in France, a report by liberal think tank Institut Montaigne, submitted to President Macron warns of the influence of Islamists over French Muslims. Macron has promised lawmakers to bring Islam under a comprehensive set of “framework and rules” under the state, which the report attempts to accomplish. This is an attempt to stop the spreading of radical ideologies within ethnic enclaves within the country, and is reminiscent of Marie La Pen’s 2017 presidential campaign. However, the project of reforming Islam follows in the footsteps of previous failed attempts to establish an Islam of France, which Senator Bruno Retailleau warns will not only “not protect the French from radical Islam, but it risks fragilizing the republican pact”.

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