Member News

The weekly Vulcan View for the 16th to the 20th of July featuring analysis of the latest EU developments


European Commission issues “no deal” Brexit contingency plan
After a fortnight of political turmoil in UK, the European Commission has called on member countries to step up preparations for a “no deal” Brexit. In a published 15-page document, Brussels warned that a “no deal” scenario seemed increasingly likely and detailed the “significant disruption” to be expected for both business and individuals.
The warning offers a blunt analysis of the potential economic and social implications of the UK crashing out of the EU with no agreement and no transition period. It says that upon failure to reach an exit agreement by the 30thof March 2019, border checks would immediately be implemented, which would cause significant delays in road transport and at ports, as well as to planes and data transfers. There would also be an immediate need to shut out UK services from cross-border trade and to exclude UK individuals and bodies from EU grants and bidding for public contracts.
The document also addresses the legal void for the 4 million expats living in the UK and EU, highlighting that British citizens are not guaranteed a visa-less entry to the EU. Emphazising the necessity for all member countries, regional authorities and businesses “of all sizes” to assess the impact of no deal on their own activity and to plan accordingly in advance of the deadline, Brussels highlighted the “very real” consequences for citizens, workers and businesses.
The publication of the document comes after Prime Minister Theresa May’s Chequers proposal was significantly hampered by four Brexiteer amendments that, according to the opposition Labour party, has left Ms. May’s plan for a soft Brexit all but ‘’dead in the water’’. With last week’s hope for a soft Brexit diminishing and reports indicating that resumed negotiations between the UK and EU were proving difficult, the Commission’s ‘’no deal’’ warning is a timely reminder that the exit date is fast approaching and an no-deal outcome is appearing ever more likely.
Brussels hits internet giant Google with €4.3bn fine over market abuse 
The long-waging battle between the European Commission and global internet tech giants escalated this week when Google was fined an enormous €4.3 billion for abusing its dominant market position by its Android mobile phone operating systems, the largest ever anti-trust fine handed down by Brussels. Following a lengthy eight-year antitrust battle with the US firm, the European Commission concluded that the use of the Android operating system unfairly entrenched Google’s dominance.
While Google has denied any wrongdoing and is expected to appeal the decision, the fine has hit at the core of the tech company’s future revenues as Android is the operating system for more than 80 per cent of the world’s smartphones. The imposition of the fine is the second in as many years as Google was hit last year by the Commission with a €2.4 billion fine for abusing its market position in favouring its shopping services over others in internet searches.
Stating that those in dominant positions ‘’must compete on their merits’’, the EU’s commissioner for competition Margrethe Vestager claimed that Google ‘’denied European consumers the benefit of effective competition in the important mobile sphere’’.  Google now has 90 days to rectify the abuse or face daily fines that could amount to 5 per cent of its global turnover.
EU looks east as it seals the largest ever trade deal with Japan
History was made earlier this week when leaders convened in Tokyo for the EU-Japan summit which saw the signing of the largest bilateral trade deal ever. This monumental free trade agreement (FTA) will remove 99% of tariffs paid by EU companies exporting to Japan and create a trade zone covering 600 million people and nearly one third of the global GDP. With traditional allies receding from the global trading sphere, many will see this as a calculated snub of Donald Trump’s protectionist policies with Donald Tusk, President of the European Council stating: “At a time when some are questioning this order, we are sending a clear message that we stand against protectionism.”
This FTA is expected to particularly benefit the Japanese automobile industry, with the 10% tariff being removed from Japanese case such as Toyota, Nissan and Suzuki. The deal will also give a boost to Europe’s food and beverage sector as the high tariffs on imports of premium European food and drink products are set to be removed. Once the deal takes full effect, the European Commission expects that exports of processed food, including meat and dairy products will rise by €10 billion.  One of the Irish industries particularly celebrating the official signing of this deal is Irish Whiskey, with the Irish Whiskey Association stating that sales of Irish Whiskey were up by 16 % last year with this expected to grow with the removal of tariffs.
Further cooperation on another front is also planned as the EU-Japan strategic partnership agreement was signed which will see deeper and more strategic cooperation. Signaling a united front, both sides also reaffirmed their commitment to the Paris Agreement, the denuclearization of the Korean Peninsula, the Iran nuclear deal and Ukrainian sovereignty. Further talks on concluding adequate levels of data protection across the EU and Japan were welcomed by the leaders which could give rise to the world’s largest area of safe data transfers.
Beijing and Brussels meet for major Summit
The EU and China held their 20th EU-China Summit on Monday in Beijing with discussions focusing on the further development of the bilateral strategic partnership, touching on the cooperation between the two blocs on trade relations and foreign and security policy.  Celebrating the 15th anniversary of the strategic partnership, leaders affirmed their commitment to deepen the ever-strengthening and increasingly relevant partnership.
As the U.A. administration continues its increasingly isolationist approach to international relations, this summit stood in stark contrast as there was strong mutual agreement for further cooperation on several important fronts.  Brussels and Beijing highlighted in particular their continued collective commitment to implementing the Paris Climate Change agreement, as well as adhering to the rules based trading system of the WTO agreement.
Allies fume as Trump ends European tour with warm words towards Russia
The President of the United States concluded his dramatic tour of Europe last Monday with a meeting with his Russian counterpart, Vladimir Putin that has led to wide-spread condemnation from both sides of the Atlantic Ocean. Controversy ignited even before the two world leaders met for the press conference and working lunch in Helsinki when President Trump labelled the EU a ‘’foe’’ ahead of China and Russia, the latter of whom he praised as a ‘’good competitor’’.
Mr Trump was also forced to react to reports from his government’s intelligence agencies that found the Russian government to have deliberately intervened in the 2016 US presidential election. Donald Trump threw doubt on the verdict and gave credit to the “extremely strong and powerful denial” made by Vladimir Putin.
However, on returning to the U.S. the US President attempted to “clarify” remarks in which he had said he doesn’t “see any reason why it would be” Russia, claiming he had meant to say “wouldn’t.”  He also stated “let me be totally clear in saying that … I accept our intelligence community’s conclusion,” but immediately went on to say: “it could be other people also.”
Despite calls leading up to the meeting with Putin, the US President failed to confront the Russian president on the annexation of Crimea and the alleged poisoning of a former Russian spy in the UK. EU leaders fear the implications of this unity between the US with Russia, especially what it means for relations in the Baltic states. European Council President Donald Tusk responded to the concerning events, saying: “the architecture of the world is changing before our very eyes,” and called on Europe, China, the US and Russia to work together to “prevent conflict and chaos.”

Dates ahead: Monday 23rd – Friday 27th July
Thursday 26th July: ECB Monetary Policy Meeting

And Beyond 
Wednesday 1st August: ECB non-monetary policy committee meeting
Wednesday 1st August: US Federal Reserve Open Market Committee meeting
Thursday 2nd August: Bank of England Monetary Policy Committee meeting

Compliments of Vulcan Consulting, a member of the EACCNY