Member News

The weekly Vulcan View for the 3rd to the 8th of June featuring analysis of the latest EU developments

KEY EVENTS THIS WEEK:

BREXIT
 
British government propose time-limited ‘Irish backstop’ customs proposal 
Downing Street yesterday published its proposal for a temporary customs arrangement between the UK and the EU which it hopes will resolve the long-standing issue of avoiding the re-emergence of a hard border between Northern Ireland and the Republic. The text of the proposal will now be presented to the remaining EU27 later on this month to the European Council Summit.  Significantly, the proposal makes clear that the temporary arrangement ‘’should be time limited, and that it will be only in place until the future customs arrangement can be introduced’’.
 
In the days leading up to its publication, deep divisions had emerged within the British cabinet over the time-limited nature of the plan. The initial draft plan, which had been developed by the Prime Minister and her chief Brexit official Olly Robbins, did not include an end date to make it clear that such emergency measures to ensure a smooth Irish border would only be temporary. Sources revealed that the Brexit secretary, David Davis, reacted furiously to the plan as he feared that a plan with no end date would leave the UK tied to the customs union indefinitely.
 
Before the publication of the proposal, it had appeared that Ms. May and her allies in cabinet were going to press ahead with the original version of the customs proposal. However, despite suggestions that Ms. May would face down her Brexit secretary, she conceded to Mr. Davis’s demand for a time-limited backstop. While the official proposal does make some reference to a time-limited solution, the language is vague as it says the UK ‘’expects the future [trade] arrangement to be in place by the end of 2021 at the latest’’.
 
The time-limited backstop will now be reviewed by the remaining EU members but it is a hard sell and it is difficult to see the Irish government accepting it as a suitable solution. Whether it will be deemed fit by Brussels seems unlikely but this latest proposal is yet another example of the UK kicking the can down the road.   
 

EUROPEAN UNION
 
EU Interior ministers fail to reach agreement on migration reform
A gathering of EU interior ministers in Luxembourg on Tuesday ended in deadlock after they were unable to come to consensus on urgently-needed migration reforms to the EU’s asylum system. Migration has become an increasingly challenging issue for the bloc ever since the EU was faced with the 2015-16 migration crisis when almost 2.5m people applied for protection. Brussels is determined not to make past mistakes but despite its best effort, there appear no signs of the issue being resolved as the member states remain hopelessly divided.
 
Following Tuesday’s impasse over the matter, there is little expectation that an agreement will be reached by the European Summit at the end of June. Interior ministers attending Tuesday’s meeting stressed that the so-called Dublin asylum regulation, whereby asylum seekers make their application in the first EU country that they arrive in, needs to be completely overhauled if any agreed reform is to be reached. This system results in front-line countries such as Greece and Spain forced to should an unfair burden of millions of migrants.
 
Most EU members agree that greater solidarity in sharing the burden is required to tackle the issue but central and eastern states such as Hungary and the Czech Republic are opposed to any mandatory quotas. Austria, who will take over the EU’s rotating presidency next month, favours taking a more hard-line approach to migration in order to tackle the long-running dispute and believes Europe should make it even harder for migrants to enter the EU.
 
A more stringent system of migration envisaged by Vienna would find favour amongst Italy’s new populist coalition government, particularly its newly appointed interior minister, Matteo Salvini, who has already made immigration a top priority. Promising to cut both the number of incoming migrations and increase the level of expulsions from the country, the arrival of a new government in Rome will certainly add to the division that continues to plague the issue of migration.
 
Google expected to be hit with massive antitrust penalty 
The internet giant Google is bracing itself to be fined with an enormous EU fine for abusing its dominance through its Android mobile operating system. The ruling on the antitrust case is expected to be announced early next month and will conclude the third of a trio of major EU investigations into the technology company. Although the size of the fine is currently unknown, Brussels is empowered to impose fines of up to 10 per cent of a company’s global turnover. For Google, this could amount to up to $11bn but penalties are usually towards the lower end of the spectrum.
 
Sources familiar with the case revealed that they expect Margrethe Vestager, the EU’s competition commissioner, will announce the ruling within weeks and it could represent the most significant blow against the US company so far. The Commission’s investigation is against Google’s mobile system Android which represents 80 per cent of the world’s smartphones. Brussels believe that the internet company set illegal terms on Android device makers which they argue harmed competition and cut consumer choice.
 
By targeting the mobile operating system, the Commission’s decision could hit at the heart of the company’s future growth potential as more and more consumer shift their internet usage to smartphones. The case will mark a pivotal point of the EU’s battle against Google which began over eight years ago when it first launched an investigation into the tech company’s comparison shopping. That ruling ended in a €2.4bn fine and many expect that a similar ruling will be handed down on this case.
 

G7 SUMMIT
 
EU & allies take united front against President Trump
Brussels is seeking to build a common united front with its trading partners of Canada, Japan and others targeted by Washington’s trade tariffs ahead of the G7 summit in Canada this weekend. President Trump’s announcement last week to impose steel and aluminium tariffs has infuriated its allies and produced severe rebukes from fellow world leaders. The EU has already responded by filing a legal challenge to the WTO and has promised to retaliate with targeted €2.8bn extra tariffs on US products ranging from whiskey to motor boats.
 
Speaking in an interview to US media, the EU’s Trade Commissioner Cecilia Malmström said Brussels was reaching out to its trading allies of Mexico, Japan and Canada with trade agreements in order to offset Trump’s tariffs. In the same interview, Ms. Malmström claimed that Brussels was last week willing to lower its tariffs on automobiles and cooperate with Washington in order to reach some kind of agreement on the trade dispute but this gesture was dismissed by the Trump administration.
 
With the relationship between the US and its traditional allies at its lowest point in decades, the atmosphere at this weekend’s summit in Canada is certain to be tense. US officials themselves have privately admitted that gathering could be filled with awkward moments, with one official predicating that it will be a ‘’mess’’. The already bitter relationship deteriorated even further on Wednesday when the US ambassador to Germany claimed in an interview that he is seeking to boost anti-establishment parties across Europe, leaving German politicians fuming and calling for the ambassador to be expelled.
 
 
SLOVENIA
 
Anti-immigrant nationalist party tops Slovenian election
The Slovenian Democratic Party (SDS) emerged as the victors of last weekend’s parliamentary election after winning 25 per cent of the vote, sparking fears across the EU that yet another anti-immigrant party could take the helm of an eastern member country. However, despite winning 25 per cent of the vote and taking 25 seats in parliament, the party faces an uphill battle is attempting to form a governing coalition.
 
The president has given the leader of the right-wing party, Janez Janša, a mandate to form a government but even the party leader himself acknowledged the difficulty in linking up with other parties as most other groups have already ruled out any form of coalition with the SDS due to their extremist views. Observers in the country now believe that Slovenia will face long drawn-out post-election talks as nine parties have gained seats in the parliament.
 
Concern around Europe began to mount during the campaign trail as Mr. Janša often peppered his campaign drive with calls to ‘’drain the swamp’’ and anti-immigration rants that seemed to be appealing to the general public. Slovenia was impacted severely during the 2015 migration crisis after neighbouring Hungary closed its borders, leading to an increase in right-wing rhetoric in the country and amongst some politicians. Although some sort of centrist coalition government made up of a few smaller parties is more likely than an SDS government, many fear that Slovenia could follow down the anti-immigrant path taken by fellow eastern states such as Poland and Hungary. 
 

 
Dates ahead: Monday 10th June – Sunday 16th June

Monday 11th – Thursday 14thEuropean Parliament Plenary Session
Tues 12th & Wednesday 13th June: US Federal Reserve Open Market Committee meeting
Thursday 14th June: ECB Monetary Policy Committee meeting
Thursday 14th June: Opening of 2018 FIFA World Cup, Russia

And Beyond 
 
Wednesday 20th & Thursday 21st June: Basel Committee on Banking Supervision
Thursday 21st June: Bank of England Monetary Policy Committee meeting

 

Compliments of Vulcan Consulting, a member of the EACCNY