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News & Insights on Europe

News and Views on Europe – 1 Feb 2019

posted by eucentresg


As UK and EU clash over Irish backstop and window for negotiations narrow, businesses’ worries for post-brexit future rise
On Tuesday, (29 Jan), British Parliament voted on two amendments. The first call for the rejection of a no-deal outcome and the second asked the Prime Minister to seek alternative arrangements to the controversial Irish backstop. The second amendment, put forth by senior MP Graham Brady with the backing of May’s government aimed to send a very clear message to the EU. May hopes that with the voting result from the Parliament, she can re-open negotiations with the EU. However, Brady’s proposal does not spell out what the UK wants in terms of changes to the Irish backstop in the current withdrawal agreement.

The EU’s reaction to the votes by the British parliament was rife with frustration. Both Commission President Jean Claude Juncker and Council President Donald Tusk refused the possibility of re-opening negotiations when there is no clear consensus on the UK side and reaffirmed that the best deal was the current withdrawal agreement on the table. Other EU officials have come forward to collectively assert that nothing has changed as a result of the votes in the parliament with Juncker warning that the vote only “further increased the risk of a disorderly exit” of the UK. He added that the EU would have to prepare for all possible scenarios, “including the worst”. As such, the EU has accelerated preparations for a no-deal Brexit, including implementing safety nets to ensure the protection of rights of students in Erasmus program as well as EU citizens living in the UK. The EU will also ensure UK honor its financial commitments for 2019.

On the Irish backstop, Brussels has maintained its support for Ireland on the border issue and has rejected both a unilateral exit mechanism for Britain and a time-limit on the backstop at UK’s request. Irish PM Leo Varadkar has said Brexit is an act that has not been thought through by Britain. Of the proposal by Brexiteers to dissolve the hard border by means of technology, Varadkar states that he cannot exchange “a legally binding framework” for a mere promise.

Besides these two amendments, the House of Commons voted down other amendments, most notably one put forth by Labor MP Yvette Cooper and Tory’s Nick Boles, that aims to give more time to get a Brexit deal by extending Article 50 if May cannot get a deal by February 26. Cooper and Boles pledged to return with another amendment if the prime minister fails in the renegotiations. The PM will return from Brussels with supposedly a revised deal that will once again pass through Parliament on Feb 13.

While the political drama over Brexit intensifies, business companies in Britain and worldwide are getting more worried and uncertain about the final outcome. A no-deal could disrupt ports, supply chains, and send shockwaves through financial markets, and business leaders are urging lawmakers to seal a deal quickly. UK retailers have also warned of rising food prices and empty shelves in case of a hard Brexit. In a letter that came ahead of Tuesday’s Parliamentary vote, The British Retail Consortium, cited significant risks to UK’s food security and impact on consumers should they revert to WTO rules without a deal with the EU. As more businesses adapt to a post-Brexit future, British public broadcaster, the BBC, is also considering opening a new major base in Europe, where it already has a news bureau in Brussels. The reason for this being that BBC is funded by British TV license fee as well as overseas sales, and needs to have a European presence.


Experts at Davos forum urged caution to avoid global recession amidst geopolitical risks
The World Economic Forum (WEF) in Davos highlighted the message that the world economy is slowing down with political risks abound. According to a survey of 1,000 experts and decision-makers, the outlook of investors and companies for the world economy is pessimistic. The world faces long-term and complex challenges, including climate change, the digital revolution, and an ageing population. However, CEOs are worried about some megatrends such as hardening political divisions, threats to multilateralism and cybersecurity risks, which point to an “era of insecurity”. There were calls for more cooperation and togetherness at the WEF buttressed by a feeling of urgency.

Despite the geopolitical instability, experts warn that the perception of a worsening economic situation could actually make the risk of a self-inflicted recession higher. Chairman of consultancy firm, PwC, Bob Moritz, said that while the global economy is slowing, it is “not one that is catastrophic or going in the wrong direction” or going into a recession yet. Moritz believes that amidst the ups and downs, there are still opportunities for companies and decision makers to capitalize on. Citibank’s chief economist, Catherine Mann, also reinforced the danger of a self-fulfilling prophecy and said “expansions do not die of old age, but of policy mistakes”.

The present concerns at Davos were US-China trade tensions and Brexit; George Soros articulated the loudest concern against Xi Jinping’s use of technology in governance. He encouraged Trump to maintain pressure on his counterpart and called Xi a threat to democracy and “open societies”. Soros was referring to cybersecurity concerns that hit Poland as an employee of Chinese mobile company Huawei was charged with espionage activity.

Many European leaders have similar concerns about China’s challenge to democracy and international norms but take a more nuanced view of China. According to an EU bulletin report, the EU is careful to not take sides in the US-China tensions and is developing a “Europe First” approach with “more pragmatic, hard-nosed policies” in line with their economic and strategic interests.


Big tech firms urged to do more against disinformation
Ahead of the European Parliament elections and in line with the Action plan against disinformation that the European Commission and High Representative presented in December 2018, big players in tech and advertising sectors that have signed the Code of Practice on Disinformation to address the spread of disinformation and fake news, were tasked to provide comprehensive reports on the actions they have undertaken since then to comply with their commitments. The reports were published on Tuesday, 29 January 2019 by the commission on their webpage.

The four online company signatories Facebook, Twitter, Google and Mozilla have taken efforts to meet their commitments. For instance, Facebook’s political advertisement transparency system will be in place throughout the European Union prior to the elections. Google seeks to fight against fake accounts and websites and better promote and secure the transparency of political advertisements and their placements. Twitter has taken strict actions against fake or suspicious accounts and automated bots that perpetuate the distribution of disinformation and fake content. Mozilla will soon launch an update for its browser to block cross-site tracking by default, in the hopes that to limit information that can be used maliciously to perpetuate disinformation campaigns.

However, complying with all the commitments in the Code of Practice still requires significant efforts.

The European Commission issued a warning on 29 January to the tech and advertising companies to intensify their current efforts to combat disinformation before the elections, or risk regulations. In a press release by the European Commission, Věra Jourová, Commissioner for Justice, Consumers and Gender Equality had said: “With the launch of European election network with EU authorities last week and this report today, we are stepping up the pace on all fronts to ensure free and fair elections. I expect companies will fully follow up on their rhetoric and commitment. Time is short so we need to act now.”

Andrus Ansip, Vice-President for the Digital Single Market echoed Jourová’s statement, calling for signatories to “make sure these tools are available to everyone across the EU, monitor their efficiency, and continuously adapt to new means used by those spreading disinformation. There is no time to waste.”

The tech giants are expected to provide detailed information to the Commission in the coming days. Monthly reports will be published from February 2019 onwards till May 2019. This will allow the Commission to ascertain the efficacy of the policies implemented to protect the integrity of the electoral processes that will be put in place before the elections start. Should these measures prove ineffective or unsatisfactory at the end of the Code’s initial 12-month period, the Commission may propose further actions or even regulations against these tech giants.


Pro-European groups gearing up for the European Parliament Elections in May
Guy Verhofstadt, the former Belgian Prime Minister, would be running for the European Parliament elections, leading the Flemish Liberals party (Open VLD). Verhofstadt currently heads the wider Alliance of Liberals and Democrats for Europe (ALDE) in the Parliament, and is the Parliament’s Brexit coordinator. He has been earmarked as a potential leading figure to represent ALDE alongside European Commissioner for Competition Margrethe Vestager and Commissioner for Justice Věra Jourováof the Czech Republic. Verhofstadt said in a tweet that it was “now or never to reform Europe and to put a halt to nationalism.” However, according to POLITICO’s polls, his Open VLD party is set to be one of Belgium’s biggest losers in the election, losing half of their votes and dropping from three seats to two.

In Germany, Liberal Free Democratic Party (FDP) on Sunday (27 Jan) elected Nicola Beer as its spitzenkandidat (top candidate) at its European party congress. At the congress, the FDP stressed its pro-European position and attempted to dispel the impression that it is predominantly concerned about economic liberalism.“Europe is not only an economic union but also a community of values,” said Beer before she was elected as lead candidate. For the coming election, Beer makes clear that the FDP intends to focus on strengthening the EU in areas where there are “genuine European added value”, such as fighting climate change, defence policy and in external representation. The FDP is concerned about achieving “both more and less Europe,” where “EU can make the difference in the world if it speaks with a single voice,” but should also independently solve issues that are better managed on a local level. To this, the FDP will champion for a leaner EU by reducing the current 28 Commissioners to a maximum of 18, abolishing the European Economic and Social Committee (EESC), and ending the European Parliament’s “travelling circus” between Strasbourg and Brussels.

Yanis Varoufakis, the leading candidate for leftist Democracy in Europe (DiEM25), told EURACTIV Germany on Monday (28 Jan) that he would run against the disunited and uncivilised European Left. “If the European Left were united, coherent and civilised, we wouldn’t have created Diem25, we’d have joined them. Now we are running against them, which is very painful to us,” the former Greek finance minister told EURACTIV Germany in an interview. Varoufakis also lashed out at leftist parties in Europe, arguing that their lack of unity cannot bring tangible electoral results and, hence unable to bring about changes in the continent. On the same day, Greek Prime Minister Alexis Tsipras stressed the importance of progressive, pro-Europe parties to discard their ideological differences and uniting together in an alliance to ward against far-right, anti-Europe populists in the upcoming election. Referencing Portugal and Spain, Tsipras praised the two countries for successfully forming an alliance between the leftist and socialist parties.“This broad progressive alliance will have a clear position against neoliberalism and those policies that fuel the far-right and anti-European populism,” the leftist premier said. Tsipras also warned about the rise of the “new Right”, represented by Hungary’s Viktor Orbán, Austria’s Sebastian Kurz and Italy’s Matteo Salvini. “There is a great risk that the forces of anti-European right-wing populism will have significant gains in the coming years, and they will also take the lead in the forthcoming EU elections,” he added.

A pertinent issue that all parties on either sides of the political dissonance have to address is the hotbed and polarizing issue of migration that has plagued the EU ever since the refugee crisis of 2015, when arrivals peaked that year to a million.

Former Italian Prime Minister, Enrico Letta, said on Monday (28 Jan) that pro-European forces need to talk about migration at the European Elections. According to Letta, the lack of response to this critical issue from the pro-European left has given “decisive influence on the political earthquakes in several European countries”. Letta, chairman of Jacques Delors Institute, spoke in Brussels at a presentation on a report titled “For a European policy on asylum, migration and mobility”. He encouraged member states to show solidarity, make asylum processing more homogeneous, and the gradual integration of European and national border agencies.


EU defies U.S. on Iran Sanctions
Germany, France, and Britain have launched the so-called special-purpose vehicle (SPV), on Thursday (31 January 2019) to adhere to the European Union’s (EU) efforts to keep Iran from quitting the 2015 accord to constrain its nuclear activities in exchange for sanctions relief. The U.S. pulled out of the deal in May 2018 and has since re-imposed sanctions on Iran. The SPV known as INSTEX – Instrument in support of trade exchanges – will help European firms with legitimate business interests to use barter techniques to conduct business in Iran. Additionally INSTEX also includes measures to protect European firms from US court actions and allow them to recover any financial damages related to the sanctions.

While the EU is not directly involved in the instrument, it is backing INSTEX. A draft EU statement seen by Bloomberg welcomes the initiative as providing “a positive impact on trade and economic relations with Iran, but most importantly on the lives of Iranian people.”

In response, the Trump administration is said to be closely watching Europe’s efforts, and has threatened strong economic consequences if Europe attempts to circumvent US sanctions on Iran, inclusive of stiff fines and penalties. The EU remains undeterred by the threats, and trans-Atlantic relations could potentially worsen over the SPV deal.

AP noted that the U.S. is worried that the EU SPV could become successful enough to contend with and ultimately replace SWIFT, an international bank transfer system. Additionally, the U.S. is concerned that other countries would follow in the EU’s footsteps to sidestep US sanctions.

According to the UN nuclear watchdog, the International Atomic Energy Agency (IAEA), Iran has so far abided by the terms of the deal in regard to nuclear development. However, Iran has continued to test its ballistic missiles and this has led to the EU imposing its first sanctions on Iran since the 2015 deal.

Concerns have also been raised in a report by the European Union Agency for Network and Information Security (ENSA) that if relations between Iran and the West worsen, Iran is likely to increase its cyber espionage activities. According to ENSA “Newly imposed sanctions on Iran are likely to push the country to intensify state-sponsored cyber threat activities in pursuit of its geopolitical and strategic objectives at a regional level,” On January 25, France had said it stood ready to impose new sanctions on Tehran if talks on its missile program make no progress.

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