Brexit News, Member News

The weekly Vulcan View for the 11th to the 15th of December featuring analysis

EU leaders gather for critical two-day summit. European leaders descended on Brussels yesterday for the beginning of a significant two-day European Council summit. While Brexit will dominate the headlines, other pressing issues such as migration, the eurozone and the PESCO defensive cooperation initiative will be deliberated over. Following on from preparatory meetings in advance of the European Council, it is expected that the leaders of the EU27 will back the recommendations of the European Commission and determine that ‘’sufficient progress’’ has been made on the first phase Brexit issues.
In the days leading up to the summit, it was not Brexit that was provoking controversy in Brussels but rather migration. The latest flare-up over Europe’s contentious asylum policy was caused by a document prepared by the Council president Donald Tusk. He raised some eyebrows when he suggested that the compulsory quotas that forced EU countries to take a share of migrants arriving in the Union, as ‘’ineffective’’ and ‘’highly divisive’’.
Tusk’s proposals were heavily criticized by the European Commission and some western member states, most notably Germany who took in a large number of migrants in 2015. The European Commission is adamant that its asylum policy works and the Migration Commissioner, Dimitris Avramopoulos, denounced Tusk saying the proposals were ‘’unacceptable’’ and ‘’anti-European’’. 
Those who backed Tusk’s document said his plan was a blunt acknowledgement that the current quota system has been counter-productive as some member states simply refused to take in asylum seekers. The heated issue of migration was discussed at last night’s traditional European Council dinner, as well as education, social rights and a brief mention of Brexit. Today meanwhile will see EU leaders discuss the future of the monetary union and progress of the ‘’Article 50’’ process where they are expected to discuss the state of Brexit negotiations.
EU’s ‘Big 5’ issue warning to US over proposed tax plan
Europe’s five largest economies – Germany, France, the UK, Italy and Spain – have written to the White House warning President Donald Trump that a planned tax overhaul could undermine international agreements and global trade. Finance ministers from the five economies wrote in a letter that if the plan materialised then Europe may be forced to retaliate.
The letter signals that a radical US Republican tax cut could lead to a potential transatlantic dispute at a time when the EU-US relationship is already fraught with tension. While the ministers insisted that they had no desire to intervene in domestic US tax policy, they warned that Washington should not start a trade dispute under the guise of anti-avoidance measures in taxation.
The measures proposed in the tax plan would treat US operations differently than those from overseas entities and EU ministers claimed such practices would violate international tax norms. Further proposals include a provision that would tax US exporters more favourably if they make their profits from brands and other intangible assets which the letter argues could ‘’face challenges as an illegal export subsidy’’.
Trump’s plan to overhaul the country’s tax system has faced widespread domestic criticism and this letter shows that it could face significant resistance on an international level. In addition to being sent to the US President, the letter was also issued to the US Treasury Secretary, Steven Mnuchin, and Gary Cohn, the White House’s top economic adviser.

Tory rebels hit May with Brexit defeat
Opposition MPs and some members of the Conservative party inflicted the British government with their first major parliamentary loss on Wednesday evening when the House of Commons narrowly passed an amendment to the European Union (Withdrawal) Bill. Defeating the government by 309 votes to 305, the vote now means that MPs will get to vote on the final Brexit withdrawal agreement.
The amendment was tabled and led by the Tory MP and former attorney-general Dominic Grieve. He was backed by the opposition parties and ten fellow Conservative rebels, including former education secretary Nicky Morgan, former business minister Anna Soubry and long-time Tory Europhile Ken Clarke. One of the Conservative MPs who voted against the government, Stephen Hammond, was swiftly dismissed as vice-chair of the party.
The defeat was highly embarrassing for the Prime Minister as she prepared to meet fellow EU leaders yesterday in Brussels, where they concluded that sufficient progress had been made on the first phase Brexit divorce issues.  Although the Department of Exiting the European Union attempted to spin the defeat in a positive light by claiming that the ‘’amendment does not prevent us from preparing our statue book for exit day’’, it highlights the challenging parliamentary arithmetic facing the government since it lost its majority in last June’s general election.
Brexit secretary attempts to salvage EU relations after damaging comments
The UK’s Brexit Secretary, David Davis, was forced to spend this last week engaged in ‘’urgent telephone diplomacy’’ with Brussels following remarks he made that the Brexit agreement reached last Friday between the EU and the UK was more of a statement of intent rather than being a legally binding deal.
His comments on a BBC politics show last Sunday were quickly shot down by the European Parliament’s main parties and led to accusations against the Brexit secretary that he had damaged trust in the Brexit negotiations. The backlash saw Mr. Davis scramble to recover from the embarrassing gaffe with phone calls to the European Parliament’s Brexit coordinator, Guy Verhofstadt.
Mr. Davis later u-turned on his initial comments, saying that his comments had been misinterpreted. Speaking on the radio a day later, he suggested that the deal is ‘’legally enforceable under the withdrawal agreement’’. Brussels warned the UK that there would no such backtracking and many were dismayed with the Brexit secretary’s remarks, with one claiming his combative stance was akin to ‘’fighting after the fight is over’’.

SPD float confidence-and-supply type of government to Merkel
The leader of the Social Democrats (SPD), Martin Schulz, has offered to support Chancellor Angela Merkel’s Conservative CDU-CSU bloc in a new form of ‘’co-operation coalition’’ government that has never been seen in German politics before. Fearful of entering another grand coalition like that of the previous government, the SPD leader appears to be favouring an alternative structure whereby his party would straddle government and opposition.
This so called ‘’co-operation coalition’’ or ‘’KoKo’’ for shorter would see Mr. Schulz’s party support the CSU-CSU on a range of policies in exchange for support for some of their own initiatives. The KoKo format would be to fix in the coalition agreement a few key projects that both parties agree on and leave everything else open to further negotiations with other parties in the German bundestag.
The idea has already been dismissed by parts of the German broadsheet press and Ms. Merkel is arguing strongly for a return of the grand coalition with the SPD’s. Such a prospect has been resisted by large swathes of the SPD’s membership as they pin the blame of the party’s poor results in September’s election to the previous administration.  

The three party leaders met last Wednesday in an attempt to hammer out an agreement, but with ten weeks already passing since the general election, it may be many more before a new working government is formed.
EU trade deal with Mercosur bloc pushed back to 2018
Talks between the EU and the South American bloc Mercosur around a potential trade agreement will have to be extended out to next year after European negotiators admitted that they needed more time. Both sides had hoped that a deal could have been sealed this year and announced at this week’s World Trade Organisation (WTO) ministerial conference being held in Buenos Aires.
According to the Brazilian Foreign Minister Aloysio Nenes, the two sides had exchanged documents detailing how much they were both willing to cede. A source from within the talks revealed that after Mercosur issued ‘’new indications’’ of changes it was willing to take, an impasse arose when the EU were unable to present new proposals of their own.
The same source admitted that the EU ‘’was not in a position to reciprocate and would be better able to respond next year’’.
The EU Trade Commissioner, Cecilia Malmström, attempted to portray the delay in a positive light, claiming that ‘’we have made good advancement but there’s still stock taking today’’. She continued by saying that we will ‘’see the end of this’’, but the deal still faces stiff resistance from some of the bloc’s member states. Countries such as France, Ireland and Poland have delayed trade negotiations due to fears that the deal could liberalise the agricultural sector and significantly damage their agricultural-dependent economies.

Dates ahead: 
Monday 18th December – Sunday 24th December
Monday 18th – Fri 22nd: European Parliament Green week
Sunday 24th December: Christmas Eve

Compliments of Vulcan Consulting, a member of the EACCNY