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News & Insights on Europe

News and Views on Europe – 2 Nov 2018

posted by eucentresg


Angela Merkel steps down from chairmanship of her party prompting an uncertain future for Germany and the EU
On Monday, 29 October, German Chancellor and the acknowledged “Queen of Europe”, Angela Merkel announced that she will step down from her chairmanship of her party, Christian Democratic Union (CDU), in the wake of state elections in Hesse. This has led to speculations on whether she will continue to be chancellor for the full term till 2021. In Hesse, the CDU came in the lead but with only 27.4% of the votes, down 10.5% from its 2013 result, followed by a tie between the Greens and SPD at 19.5% each. Reports say 73% of those who switched their votes from CDU to another party said they wanted to give “a wake up call” to the federal government. At the press conference, Merkel said this was “a clear signal” from the people, and she took the responsibility as the CDU leader, hence her decision to step down as party chairman.

Merkel’s announcement has sent shockwaves through Europe and Germany, heralding “the end of an era”. There are concerns that Merkel’s departure signals turmoil for the EU. According to policy analyst Leopold Traugott, despite “her fair share of mistakes” Merkel’s departure is not simply good news for Europe. She was committed to the European project, and there is no clear leader who could play that central role in the EU. Traugott added that French President Emmanuel Macron may not be able to hold onto the helm on his own without Germany.

Hence, EU leaders, even her strongest critics, have expressed that they would like to see Merkel continue her chancellorship until the end of her legislative period in 2021. Germany’s size and power in the EU ensures that the position of German chancellor is an important and influential role in the EU. However, Merkel herself is seen as integral to holding Europe together and her departure is likely to cause a vacuum no matter who takes on her mantle. One senior center-right prime minister commented, “there’s a different atmosphere in the room when she’s not there. Once she’s gone, Orban takes over”.

Meanwhile, the race to fill the now open position as CDU party chairman and chancellor has already begun. Merkel’s “protege”, CDU Secretary General Annegret Kramp-Karrenbauer (“AKK”), is first in the running for the party presidency. She has received high approval ratings in a special party convention after Merkel’s announcement. While her candidacy means continuing Merkel’s legacy, it does not please the conservative wing who wants to swing back right on issues such as the refugee and asylum policy.

Friedrich Merz, Merkel’s rival who was ousted by her from CDU party leadership in 2002, is seen as a viable conservative candidate. It is hard to predict his chances since he disappeared from Bundestag almost 10 years ago. Another candidate is Health Minister, Jens Spahn, who is an outspoken conservative critic of Merkel, especially with regards to refugee policy. He also supports burqa bans, opposes dual citizenship and tax increases. Some experts say that if Kramp-Karrenbauer replaces Merkel, it will be good for the EU. Schuman Foundation Director Jean-Dominique Giuliani remarked “She is close to France and is very European. She will be more active than Merkel, who always played in the background”.

A day after she announced the decision to step down as CDU chair, Chancellor Merkel pledged on Tuesday (30 Oct) a new development fund to tackle unemployment in Africa. She wants this compact with Africa to show the upside of her decision to open Germany’s borders to receive refugees in 2015. Even though the crisis was mostly driven that year by the civil war in Syria, Africa’s economic outlook will have an important impact on migration issue in the long term. The approach taken by Europe is to “talk with Africa” and not “talk about Africa”. The investment is seen as part of a “Marshall Plan” for Africa and the aim is to create jobs for Africans while easing poverty and curbing political and violence, which has encouraged large numbers to head for Europe.


Austria withdraws from UN migration pact, following in the footsteps of the US and Hungary
Austrian Chancellor Sebastian Kurz announced to the media on Wednesday, 31st October, that his country will be withdrawing from a non-binding United Nations pact on migration. Kurz cited concerns that countries’ sovereignty would be compromised, and claimed that the pact will blur the line between legal and illegal migration. Kurz is governing in coalition with the far-right Freedom Party. Under his nationalist leadership, Austria’s immigration policies have tightened. Freedom Party head Heinz-Christian Strache said Austria worried that the pact could lead one day to a recognition of migration as a human right.

The UN Global Compact for Safe, Orderly and Regular Migration lays out a common approach to international migration and objectives to better organise refugee flows and define their rights more precisely. Austria’s move follows in the footsteps of the United States and Hungary, who have also backed out of the pact, which was agreed upon last July. Poland, which has clashed with Brussels over national quotas for asylum seekers, has stated that it is considering withdrawal as well.

EU Commission spokesperson Natasha Bertraud has issued an official statement that the EU regrets the decision taken by the Austrian government, and that migration is a global challenge that can only be solved through responsibility-sharing at a global level.

In light of the populist sentiment that migrants are a threat to host countries, Hungarian sociologist Zsófia Nagy has shared an interesting perspective. According to her, anti-refugee sentiments do not arise automatically among the citizens of European host societies. They arise when, through a host of alternative facts and misinformation, right-wing populists associate refugees with trends of smuggling, crime or terrorism.

In fact, Nagy points out that terrorism is not a consequence but a cause of migration inflows confronting Europe recently. Terror acts committed in Europe comprise only 3% of all such incidents globally. According to the Global Terrorism Database, more than half of all terrorist acts in 2017 concentrated on four countries (Iraq, Afghanistan, India and Pakistan), while more than half of all victims of terrorist acts are from three countries (Iraq, Afghanistan and Syria). Essentially, Nagy argues that refugees are not potential perpetrators but potential victims of terrorism, which is why they are fleeing. She also pointed to research that has shown that risks of refugees arriving in Europe being radicalised are not any higher than other disenfranchised groups.


Italy clashes with the European Commission over 2019 budget proposal
Down South, Italy has expressed defiance against the European Commission’s rejection of its 2019 draft budget proposal. Despite the threat of harsh sanctions, the Italian Eurosceptic government coalition of Matteo Salvini’s Lega and Luigi Di Maio’s Five Star Movement plans to retain the same measures.

Under the budgetary plan for 2019, Italy plans for a deterioration in their structural balance that amounts to 0.8% of GDP, while the European Council had recommended a structural improvement of 0.6% of GDP. Italy has insisted on increasing its deficit to 2.4%, which effectively goes against EU fiscal rules designed to protect the Eurozone. Brussels demanded last week that Rome produce a revised version within three weeks, or it could face fines up to 3.4 billion euros. However, it is doubtful how effective the sanctions will be, as they will only serve to worsen a deteriorating fiscal situation in the country.

If Italy ignores Brussels and continues with their planned deficit of 2.4%, this deficit will amount to 44.88 billion euros, adding to Italy’s debt pressure. Italy’s public debt-to-GDP ratio was 131.2% in 2017, the second largest in the European Union and one of the largest in the world. Public debt was equivalent to 37,000 euros per inhabitant.

The row has sparked calls on the Italian government to leave the Eurozone before it inevitably collapses. Francesca Donato, director of anti-euro organisation Eurexit, claimed that a crash of the euro will result in the European Union forcing member states to abandon the euro sooner or later, urging Italy to withdraw before it is too late.

Personal attacks have also been fired at top EU officials, who happen to be Italians. Half of the EU’s top six jobs are held by Italians – European Parliament President Antonio Tajani, European Central Bank President Mario Draghi and the EU’s foreign policy chief, Federica Mogherini. Italian government officials have asserted that these EU officials were put in place by former prime ministers Matteo Renzi and Paolo Gentiloni, and are using their posts to act against Italy’s national interests.
The EU’s top Italians are sticking to a defence of the bloc’s opinion, saying that the EU’s position serves the interests of all Italians, as well as all Europeans.


UK announces final pre-Brexit budget as warnings about no-deal Brexit loom large
Amidst difficult Brexit negotiations with Brussels, the UK Chancellor Philip Hammond presented his budget in the House of Commons on Monday (29 Oct). Two things stood out in the final budget announcement before the country leaves the EU. First, Hammond asserted that the UK would have to choose between tax cut and a hard Brexit (whereas some hard-line Brexiteers advocate having both). To Hammond, the UK would (refrain from cutting tax in order to) boost short-term spending to stimulate the economy in the event of a hard Brexit. Alternatively, the UK could afford lowering tax rates if the exit from the EU is an orderly and smooth one safeguarded by a Brexit-deal. (On the prospective Brexit deal, Hammond had the backing from Brexit Secretary Dominic Raab who said a deal would be done by 21 November.)

The second aspect of the British chancellor’s announcement attracting much attention was the pledge to impose Tech Tax, colloquially known as “Google Tax”. By strengthening anti-avoidance provisions, London plans to extract more tax from the likes of Google and Facebook, even as the UK pushes aggressively to make itself as welcoming as possible to the tech industry post-Brexit.

Hammond’s assessment that the British economy would be in need of urgent fiscal intervention in a no-deal scenario was echoed by private sector “opinions”. In such an “opinion” blog post published on Wednesday (31 Oct), Standard & Poor’s, a global credit rating agency, warned that a disruptive Brexit would plunge the UK into recession with rising unemployment (and inflation) and tumbling wages. Part of the “pessimism” surrounding a no-deal Brexit has much to do with uncertainties about the right of British companies to retain their EU employees post-Brexit if no deal is reached between the UK and the EU. Caroline Nokes, the UK’s immigration minister, admitted on Tuesday (30 Oct) that as of now, it is “almost impossible” for companies to know which EU citizens they employ have a right to work in the country. Nokes urged the government to take a “pragmatic approach” to reduce uncertainties and allow EU citizens to prove their right of working in the UK efficiently.

Another dire consequence of the UK crashing out of the EU without a deal concerns the country’s territorial integrity. Argentina’s Foreign Minister Jorge Faurie said last Thursday (26 Oct) his country is following Brexit talks closely and would seek to “enhance” its claim to the Falkland Islands should the UK lose European support for its control of the islands. (The islands, known in Argentina as Las Malvinas, are currently recognisd as a British overseas territory under the EU’s Lisbon Treaty, which countries in the bloc are obligated to support. The situation could be drastically different post-Brexit especially in the context of a no-deal Brexit.) Faurie’s remarks received immediate rebuttal from the UK’s foreign office, which said: “There is no question of changing the status of the Falklands post Brexit. The UK government has been clear that our overseas territories, including the Falklands, will retain their current relationship with the UK after we leave the EU.”

Though Brexit may not be a cause for celebration, the UK wants to mark this event by releasing Brexit 50 pence coin in conformity with the Royal Mint’s “long-established tradition of producing coins in order to commemorate historic moments”. The coin, to be available Spring next year, would bear the queen’s head surrounded by the date of Brexit on one side, with the phrase “Peace, prosperity and friendship with all nations” on the other.

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