Member News

The weekly Vulcan View for the 14th to the 18th of May featuring analysis of the latest EU developments


UK considers EU customs rules extension as ‘’bridge’’ to future eventual arrangement
The British government is developing plans to stay within the EU customs union beyond 2021 in order to act as a ‘’bridge’’ to an eventual future customs system and prevent a hard border emerging on the island of Ireland.  This temporary scheme would mean that rather than the UK moving immediately to a post-Brexit customs scheme at the end of the transition period on the 1st of January 2020, it would temporarily remain within the EU’s common external tariff until a future arrangement is agreed upon.
It comes as fears mount within the British cabinet that no customs position had been agreed upon in order to ensure that no border re-emerges between Ireland and Northern Ireland. Brussels and Dublin are demanding that a backstop proposal be included in any agreement which would ensure that no divergence in customs and trade rules would occur between the Republic and Northern Ireland without agreed solutions on how to avoid a hard border.
Reports suggest that this latest time-limited idea floated by London was approved by the British Brexit cabinet and it arises after Brussels expressed doubts over the two previous British proposals, the ‘’customs partnership’’ and ‘’maximum facilitation’’. While the Prime Minister Theresa May’s cabinet may have reached agreement on the matter, getting EU negotiators over the line is another matter as the EU is unlikely to accept an alternative plan for an Irish backstop proposal.
Eastern member states slam budget plans
Poland and Hungary have formed a unified front against plans by the European Commission to link funds to member states’ respect for the rule of law, labelling it as a ‘’massive power grab’’. EU ministers met this week for the first time to review Brussel’s €1.25tn spending plans for the next long-term budget of 2021-2027 and while there was widespread division amongst governments, Warsaw was the harshest in its criticism.
Brussel’s financial blueprint, laid out earlier this month, plans cuts to development funding and farm payments, two critical funds that the Polish and Hungarian governments rely heavy on. Paris and Berlin have been the primary drivers behind creating a link between funding and the respect of law and it is this prospect that has provoked the strongest condemnation from the eastern member states.
Earlier this week, Hungarian Prime Minister Victor Orban made a state visit to Warsaw and his Polish counterpart Mateusz Morawiecki stated that both he and Mr. Orban shared ‘’absolutely identical’’ views on the need to protect farm subsidies and funds for poorer member governments. The Commission have made numerous warnings to Warsaw and further confrontation is inevitable after France and Germany stressed ‘’the importance of strengthening the cohesion of the Union on the basis of our shared values and encourage Poland to work with the Commission to this end’’.
EU stands united against Washington in attempt to save Iran deal
European leaders re-affirmed their continued commitment to the Iran Nuclear deal this week, despite intense pressure coming from Washington after it pulled out of the historic agreement last week. Federirca Mogherini, the EU’s top foreign policy diplomat, reaffirmed the bloc’s resolve to implement the nuclear deal after holding talks with foreign minister of France, Germany, the UK and Iran itself.
The united position follows warnings made by the President Trump’s national security adviser, John Bolton, that European companies could be hit by US sanctions if they defy calls by the US to sever commercial links with Iran. In a bid to ease the impact of potential secondary sanctions on EU companies, Brussels was considering several options including directing greater investment into Iran via the European Investment Bank, paying for Iranian oil with euros rather than in dollars and making a World Trade Organisation (WTO) complaint.
The stakes are high as any of these measures will further deteriorate the already poor transatlantic relationship, heightening the concerns of many major EU companies. However, while Europe is digging its heels in on the Iran issue, Brussels is ready to offer the Trump administration a series of concessions in order to secure EU exceptions from US tariffs. According to officials, the Commission is ready to engage the US over eliminating reciprocal tariffs on industry products, undertake in ‘’voluntary regulatory cooperation’’, and co-operate with the US to address ‘’meaningful WTO reforms’’ so as to appease President Trump’s concerns. 

Italy on the brink of populist party coalition deal 
Negotiations between Italy’s two main populist parties are reaching their concluding stages as both sides have confirmed that they are close to sealing an alliance that would send reverberations across the eurozone. Although the anti-establishment Five Star Alliance and the far-right Northern League stand at completely opposite ends of the political spectrum, deep discussions over the past week in Rome and Milan have led to a tentative agreement being reached on a joint policy agenda.
While several issues still need to be resolved before a coalition agreement is in place, most noticeably who assumes the position of prime minister, the two parties have asked the Italian President Sergio Mattarella for ‘’a few more days’’. The potential governing alliance would be a nightmare scenario for Brussels and the wider bloc as it would result in a profoundly Eurosceptic governing alliance taking control of the eurozone’s third largest economy.
Italy has struggled to keep pace with the eurozone recovery and the radical policies of both parties has generated widespread concern around the bloc. Primarily the planned €100bn investment into the economy through massive income tax cuts, a ‘’citizens income’’, and a halt of VAT rises. Anxiety was heightened even further when a leaked report showed that the parties wanted to introduce further measures such as dropping sanctions on Russia, asking the ECB for €250bn debt relief, re-negotiating European treaties and revising Italy’s EU budget contributions.
Newly elected regional president intent to drive on independence mandate
Months of political deadlock that grinded the Catalan regional government to a halt were brought to an end this week with the election of a new president of the Catalan regional government. Quim Torra, a close ally of the former president Carles Puigdemont, was voted in on Monday after the chamber back the lawyer with 66 voting in favour, 65 votes against and 4 abstentions. Although Mr. Torra will assume the position of president, he made clear that the exiled Mr. Puigdemont was still ‘’our president’’.
The newly elected leader will prove to be a major headache for Spain’s Prime Minister Mariano Rajoy as Mr. Torra labelled his own mandate as ‘’provisional’’ and that ‘’we will be loyal to the mandate of October 1: build up an independent state in the form of a republic’’. Given Mr. Torra’s strong independence rhetoric, the political and constitutional war of words between Madrid and Barcelona is set to continue.  
The months following Catalonia’s independence referendum have been a nightmare for Prime Minister Rajoy’s tenure as his government has struggled to deal with the nationalists. So poorly has his cabinet handled the independence issue that many polls now put the rival liberal party Ciudanos ahead of Mr. Rajoy’s Popuplar Party (PP) and this week’s election of Mr. Torra means that there will be little chance for the Prime Minister to recover. 

Dates ahead: Monday 21st May – Sunday 27th May
Thursday 24th May: Eurogroup Meeting
Friday 25th May: ECOFIN Meeting
Friday 25th May: EU GDPR Implementation date
And Beyond 
Mon 28th – Thurs 31st May: European Parliament Plenary Session