The weekly Vulcan View for the 22nd to the 26th of January featuring analysis of the latest EU developments

By Vulcan Consulting

KEY EVENTS THIS WEEK:

GERMANY

Brief coalition breakthrough reached as remaining hurdles mount
Berlin experienced a temporary reprieve early last week when the Social Democrats (SPD) voted on Sunday in favour of formal coalition talks with Chancellor Angela Merkel’s conservative CSU-CDU bloc. The centre-left party has grown exceedingly divided over whether to re-enter another grand coalition with Ms. Merkel or spend a term rebuilding the party in the opposition benches.
 
As anticipated, the vote was extremely tight with only 56 per cent of the party’s 642 delegates giving the green light. The passing of the vote was welcomed with only lukewarm applause, prompting SPD leaders to begin calling for further concessions in coalition talks with the CDU-CSU in an attempt to shore up further support from party membership. Such demands were quickly quashed by allies of Ms. Merkel who refused to begin unravelling any terms that lay within the draft agreement.
 
Sunday’s approval of the vote meant that formal coalition talks were allowed to commence this week. However, it is currently unknown how long these discussions will take but commentators believe that it could well be Easter before any coalition government is formed. Mounting obstacles lay ahead before any such arrangement can be reached.
 
Once a final coalition agreement has been reached between the CSU-CDU and the SPD, it must be put to a vote to the entire grassroots membership of the Social Democrats. The party’s youth wing is vocally against the deal and party membership has experienced a surge in numbers joining over the last few days, provoking fear among senior party officials that a Jeremy Corbyn-like revolt is occurring within the party and the pact will be shot down.
 

BREXIT
 
May urged to use budget payments to secure EU trade deal
Pro-remain ministers in the British cabinet are pushing Prime Minister Theresa May to offer Brussels Norway-style budget contributions as a means of sealing a bespoke trade deal that would cover the lucrative financial services sector. The European Commission is facing a looming Brexit blackhole in its next budget and London is well aware of the difficulties facing Brussels, encouraging soft-Brexiters to propose ‘’Norway-style’’ payments that could facilitate any trade agreements.
 
Although earlier suggestions that London could pay into the EU budget for single market access was dismissed by Downing Street, there has been a noticeable reversal in position with several Whitehall officials noting that money could be used a way for the UK to take part in certain programs such as science and research. A source close to the British cabinet revealed that ‘’money is what [Brussels] really care about’’.
 
Securing overall support both from within the cabinet and the entire Tory party for such an arrangement would be exceptionally difficult given the UK will already be paying the EU a Brexit of bill of €40-€45bn and the level of resistance that pro-Brexiters would put up. Ms. May is already facing a mounting challenge in keeping both sides happy as a new survey revealed that 75 per cent of Conservative MPs believe that free movement should end as soon as the UK leaves the EU on the 29^th of March 2019.
 
Brexit secretary admits UK will be bound by ECJ during transition phase
London will remain subject to the decisions set by the European Court of Justice (ECJ) during the two-year transition phase after the UK formally leaves the bloc in March 2019, the Brexit secretary David Davis has revealed. Addressing fellow MPs on the influential committee on exiting the EU, Mr. Davis admitted that ‘’we’re happy to accept ECJ jurisdiction in that period’’.
 
In addition to being subject to ECJ rules during this phase, the Brexit secretary added that London would bring into force any new EU laws passed before the exit date in 2019. However, he refused to disclose whether these new laws adopted during the transition period would be implemented in the UK.
 
The Brexit secretary’s revelation provoked an angry rebuke from the hardline Eurosceptic Jacob Rees-Mogg who claimed that such a scenario would leave the UK acting as a ‘’vassal state’’ to Brussels. Mr. Rees-Mogg continued by putting forward that it would be simply be more ‘’honest’’ for the UK to extend its EU membership by another two years after the 2019 Brexit date so that it could retain influence in the bloc. Although MPs will have a final vote on whether to accept the final exit agreement, the verbal clash highlighted just how divided the Conservative party are over the conditions in which the country leaves the bloc. 
 

EUROPEAN PARLIAMENT
 
MEPs back vote to shrink size of European Parliament
Parliamentarians sitting on the influential constitutional affairs committee this week backed a proposal to reduce the size of the European Parliament from the current 751 seats to 705. Ever since the UK voted to leave the EU, there has been numerous debates and propositions thrown up over what to do with 73 seats that were occupied by British MEPs.
 
The committee voted, by 24 in favour to 4 against, to decrease the number of MEPs by 46 seats and redistribute the remaining 27 among the existing EU27. France, Spain, Italy and the Netherlands will benefit the most by gaining the most seats while Ireland will be next in line by having its number of seats grow from 11 to 13. Nine countries including Denmark and Estonia have been allocated one extra seat but the remaining cohort of members such as Germany and Malta will be unaffected.
 
The decision to redistribute the 27 seats rather than abolish them entirely is due to the claim that the current allocation is not deemed to be fair to all member states. The remaining 46 seats that belonged to the UK will not be occupied and it is intended to use them for any new future member state. Now that the proposal has been approved at the committee stage, it will be voted upon by the entire European parliament in early February, before eventually reaching to the European Council for final approval.
 
 
EUROPEAN UNION
 
Brussels contemplates initiative to link funding with respect for law
The European Commission has begun to draw up plans that could see the level of EU funding received by member states linked to the independence of the country’s judicial system. Britain’s departure from the EU has left Brussels planning a new tighter long-term budget and this latest proposed scheme would provoke sensitive clashes with eastern states such as Poland and Hungary who have been accused of meddling with its judicial system.
 
The idea backed by the European Commission at a meeting last week would set out the need of member states to have a ‘’functioning and independent judiciary’’ when deciding how to divvy up the EU’s budget. The commissioner for justice, Věra Jourová, confirmed the initiative on Wednesday and told reporters that ‘’it is logical that if we use the money collected from European taxpayers, there must be a guarantee that we have independent justice and rule of law’’.
 
Brussel’s will present the idea again in May when it lays out how the next EU budget is to be structured from 2020. Large budget contributors such as Germany and France have sought tougher conditions being put in place in order to bring beneficiaries including Poland and Hungary into line. The Commission has already triggered Article 7 against Warsaw over its planned judicial changes which could see Poland stripped of its voting rights. This latest proposal emphasizing the importance on the rule of law will only add to the deep divisions emerging between Brussels and Warsaw.