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News & Insights on Europe

News and Views on Europe – 11 Jan 2019

posted by eucentresg

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Alliances of populism brewing in light of the European Parliament elections; many see need to steer the EU in the right direction
Ahead of the European elections in May, more than 1000 of Germany’s politicians and public figures were affected by a massive leak of data including some highly private information acquired by a lone actor hacking into personal accounts. The party responsible was a 20 year-old student acting alone and apparently without a political motive. Although no government facility was hacked, the size of the data breach has alarmed Germany, amidst fears of third party meddling in the upcoming elections, and calls to tighten cyber security are gaining momentum in Berlin.

Interior Minister Horst Seehofer announced efforts will be made to increase cybersecurity awareness amongst public figures and the general population as well as plans to develop “early warning system” to alert authorities about such exposé in the future. He will also add 350 full time staff to Germany’s Federal Office (BSI) for Information Security and expand BSI’s duties in keeping with more security measures. An update to 2015 security law will also be made in the next few months.

New and old political alliances are taking shape for campaigns in anticipation of the European elections. Manfred Weber, “Spitzendkandidat,” of the political group, the European People’s Party (EPP) was in Austria trying to “provide direction for the election campaign”, targeting in particular the populist, nationalist parties. However, the Freedom Party of Austria (FPO) a coalition partner of Austrian Chancellor Sebastian Kurz’s party, the Austrian People’s Party (ÖVP), is not quite on the same page, having supported Harald Vilimsky as its preferred “Spitzenkandidat” for the European elections

Italian and Polish leaders of populist parties met on Wednesday (9 Jan) to discuss their election axis. The League’s star,Matteo Salvini is joined by Jarosław Kaczyński, leader of the governing Law and Justice (PiS) party. Their commonalities include rejecting migration, Euroscepticism, and a liking of Donald Trump’s policies; they are nevertheless separated by Poland’s wariness of Russia. Both want to cooperate in the European Parliament and a poll by Politico shows they stand to do well. PiS could increase the number of MEPs from 18 to 24 while the League could get to 27 from the current 6 MEPs.

This alliance of populism that is forming worries one commentator, Alexander Clarkson, who believes that despite their anti-European rhetoric which have given them support from their public base, they are adept at changing the script when the need calls for it to achieve their agenda. One example used by the author is Salvini’s wrestling with EU Commission over Italy’s budget while also cutting a deal with them to deliver on his policy promise. Clarkson worries that the main agenda of populist and nationalist parties is not to bring EU down but to “promote a darker vision for Europe” using their ideological flexibility.

A different commentator has the opinion that in order to battle the rise of populism in the EU, the youth need to be mobilized and engaged. Giorgos Koulouris sees the young people as the most vulnerable group to populism, especially those from southern Mediterranean countries significantly affected by austerity measures, unemployment and low wages. According to research, 28% of young people in Europe between 15-29 in age – around 21.8 million – are at risk of falling into poverty. This has produced mistrust in political systems and politicians, which can feed populist sentiments. Koulouris believes that the solution to populism lies in investing in young people and creating economic growth.

In addition, citizens need to take back control. The CIVICO Europa movement has released a call for mobilization which urges citizens from all walks of life, to participate in a Congress of Europeans which will take place 22nd March 2019. This bi-partisan call states that this transnational forum is the only way to forward a “democratic revival of the European project”. Those who wish to participate may do so at WeEuropeans.eu.

In the meantime, besides Manfred Weber, also from the EPP group is EU’s Brexit negotiator, Michel Barnier. He is reportedly also setting sights on a top position in the Commission by hinting at his plans for Europe through tweets and publishing articles. A centrist on migration who wants to balance humanitarian impulses with “national debates and identities”, he has spoken out about not giving up on the European project, instead encouraging a responsive and collective Union. He also envisions a “Green Europe” and believes that “Europe can no longer outsource its security”.

 

Migration still a deeply divisive issue yet with no way out of deadlock
One commentator, Solon Ardittis, said that migration is looking to be a crucial yet divisive topic in the forthcoming European elections as well. The outcome of the elections and whether populist parties will gain ground depends on the integrity and accuracy of the debates on managing migration. For Ardittis, if the turmoil following the UN migration pact is evidence of anything, it is that far-right and populist parties are not afraid to use migration to promote their agendas while the mainstream political parties and public opinion still struggle with key migration facts. In addition, it seems that detailed efforts to make clear the benefits and impacts of migration are rarely described in a convincing or comprehensive manner. Ardittis believes there is “a pressing need for systematic analysis and dissemination” of how migration will truly effect EU’s national economies and societies.

According to a UNHCR report, the number of fatalities of migrants crossing the Mediterranean fell by more than a quarter in 2018 compared to 2,262 in the previous year. The report also states that the number of arrivals has dropped by roughly the same proportion last year to 113,482 after 172,301 in 2017. The numbers are drastically down from the peak of the migration crisis in 2015 although the continent is still reeling from the effects of the influx.

EU countries have been in a deadlock on negotiations for a common asylum policy since Italy has taken a hard-line stance against taking in anymore migrants. 49 people, including women and children–the youngest of whom is a one year old–are stranded off the Maltese coast on two NGO boats. Malta and Italy have both failed to take them. Malta had recently rescued another boat with 249 people, “which makes the calculation bigger”, and the Maltese Prime Minister has cited fears of setting a precedent. There is a split in Italy’s coalition government as Luigi Di Maio, leader of the 5 star movement, has suggested to take in women and children but The League’s Matteo Salvini insisted that Italy’s border will stay closed.

Salvini has remained firm on this stance despite the Pope’s plea on Sunday (6 January) for EU leaders to show “concrete solidarity” with the 49 migrants, who are now living in deteriorating conditions on board the boats. The Commision has also urged member states to admit them earlier in the week but the stand-off highlights the need for a better-coordinated EU response. Paraskevi Michou, who leads the commission’s migration department stated that the lack of coordination on EU asylum action has cost taxpayer some €49bn a year.

Germany and the Netherlands have offered to take in some of the migrants if other member states do the same. However, the split in the EU on taking in migrants seem to be present within countries as much as amongst them. Despite Salvini’s hard-line stance, some Italian mayors have been more willing to help. Luigi de Magistris of Naples said that he was ready to open the city’s ports to one of the boats, Sea-Watch, and “put into the field a rescue action” according to Italy’s Ansa news wire.

On the other side of the continent, there has been an increase in the number of illegal migrant vessels attempting to reach the UK via the Channel due to mild weather conditions and tighter security at the ferry and Eurotunnel terminals. France and the UK have decided to increase coordination to stem illegal migrant crossing in the Channel. The British government has sent a navy ship, HMS Mersey, to reinforce the coast guard already there. The French side has said that the crossing is not only illegal but also extremely dangerous and there is a need to combat “people smuggling”. It is known that there are multiple crossing points between these two ports, Calais and Grande-Synthe, near Dunkirk, and more than 1000 people are still waiting to cross. The action plan for common management of the shared French-British border will be finalized in the coming weeks.

 

The UK prepares for no-deal Brexit
The UK House of Commons have voted in favour of an amendment to legislation that would limit the government’s actions in the case of a no-deal Brexit. The amendment to the budget means that the government will not be able to use certain taxation powers to implement a no-deal scenario, unless the parliament votes on it first, or Article 50 is extended. As Labour MP Yvette Cooper stated, the vote “gives a way to rule out the worst way forward” for Brexit. While this amendment does not remove the possibility of no-deal altogether, the government’s room for action will be restricted in a no-deal scenario.

To prevent a no-deal scenario, MPs voted another amendment tabled by former minister Dominic Grieve to give the Prime Minister and her cabinet a 72-hour deadline to offer an alternative Brexit plan if MPs vote down the Brexit deal on 15th January.

While some lawmakers are putting pressure on the May government to ensure that a no-deal Brexit scenario is avoided, the UK has begun preparing for a no-deal scenario with rehearsals that started on Monday, 7th January. These rehearsals test road networks on disruption management at the most important trading gateway to continental Europe.

The government has already forewarned of possible disruptions of a no-deal Brexit across many areas, including pet tourism, import of crucial medicines and global supply chains within and beyond Europe. The British economy has slowed, with the housing market stagnating and service companies reporting pessimistic outlooks. Pro-Europeans are also concerned that Brexit will undermine Europe’s ability to navigate a volatile United States and assertiveness from Russia and China. Europe will lose one of its only two nuclear powers, and its economy will take a blow.

There are concerns from other stakeholders as well, such as British university leaders who declared that a no-deal Brexit would be “one of the biggest threats our universities have ever faced”. On Friday, 4th January, leaders from Universities UK, the Russell Group, Guild HE, Million Plus and University Alliance, penned an open letter to lawmakers to express their concern over a no-deal Brexit. They fear that the academic, cultural and scientific setback would take decades to recover from, and the mobility of students between UK and mainland Europe will be affected as well. For instance, student exchange programmes like Erasmus+ may come to an end if EU funding is removed. The leaders were also concerned that research links will be compromised.

Adding to the chorus of concern over a no-deal Brexit, Japanese Prime Minister Shinso Abe urged the British parliament to avoid a no-deal Brexit. He added that “the world is watching” and claimed that the whole world wants the UK not to leave the EU without an agreement.

The Irish agriculture minister also announced on Thursday, 3rd January, that Ireland will seek hundreds of millions of euros in aid from Brussels if a no-deal scenario occurs. This emergency aid would be required for beef, dairy and fishing sectors, sectors that are most exposed to customs and regulatory changes. The Irish cabinet is set to discuss no-deal contingency plans, which include schemes for port overhauls, a fund for Brexit-specific tax staff and talks to preserve the island’s integrated electricity network. In the case of a no-deal scenario, Ireland will have to enact up to 45 pieces of emergency legislation.

Nonetheless, Brexit supporters are optimistic that despite short-term disruptions, the UK will thrive in the long-term. They view the European project as increasingly undemocratic, excessively bureaucratic, and overall simply dominated by Germany.

The EU itself has repeated on Monday that there will not be any renegotiations or changes to the existing deal. The European Commission’s chief spokesman Margaritis Schinas told reporters that “the deal that is on the table is the best and the only deal possible”. However, the EU has been considering ways to help May convince the British parliament to back the negotiated deal.

The UK House of Commons is set to vote on the deal on 15th January. If the deal is rejected, May’s government could introduce other measures such as national elections or a second referendum to prevent a no-deal scenario. UK junior Brexit Minister Martin Callahan said that one thing is certain – the UK’s departure will not be pushed back, and that the UK will leave the EU on the 29th of March.

 

20th anniversary of the euro
The euro was introduced to the world economy on January 1st, 1999. This year, it is celebrating its 20th anniversary. The euro is largely seen to be a success, with membership growing from 11 to 19 countries and the euro-area economy swelling by 72% to 11.2 trillion euros.

To take stock of the euro project thus far, Bloomberg Economics ran tests on member states to see which ones reaped the purported benefits of the euro such as greater stability and economic integration, and the capacity to remain competitive and stable during crises. Member states were evaluated along indicators such as favourable financial conditions, ability to borrow, greater integration, competitiveness, productivity growth etc. The results revealed a wide disparity among member states.

Germany emerged as one of the top few beneficiaries of the euro, which was unsurprising given that it is Europe’s largest economy and the euro devalued its exports, propelling trade and increasing competitiveness. Slovakia and Slovenia also performed well on the Bloomberg tests, largely because the euro reduced exchange-rate risks and enabled them to deepen trade relations within the Eurozone.

On the other hand, three of Europe’s five largest economies performed the worst: France, Italy and Spain. They were unable to devalue in times of crises and their competitiveness deteriorated. Even in pre-crisis years, the three nations also did not deepen trade relations.

As a monetary instrument, the euro has helped to maintain price stability and prevent inflation from burdening household purchasing power. In fact, the European Central Bank revealed that the EU’s GDP per capita would likely be as much as one-fifth lower today if no integration had taken place.

The Eurozone also ranks second among the world’s economies in terms of GDP per capita. However, the disparities in GDP per capita have widened between countries, particularly between Germany and France or Italy. Antonio Tajani, the Italian President of the European Parliament, expressed that efforts are still required for Europeans to fully benefit from the “jobs, growth and solidarity that the single currency should bring”. Tajani asserted that the euro should be supported by establishing a genuine financial, fiscal and political union.

The euro is not only a monetary tool, but is part of a broader political project to ensure peaceful integration across Europe, forging ties between people and countries following two world wars. It has undergone its fair share of trials, including the sovereign debt crisis, the rise of populism and Brexit. Nonetheless, citizens of Eurozone countries largely remain supporters of the euro, with sentiments improving in 13 member states and Austria, Finland, Germany and Portugal even experiencing double-digit increases.

Eurostat revealed on Friday, 4th January, that Eurozone inflation slowed to an annual rate of 1.6% in December 2018. This is mainly due to energy items. With the central bank set for uncertainty ahead, it remains to be seen if the euro can continue to defy economic and political odds to further the integration project.

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