Member News

Vulcan Consulting View: Key Events of the Week

By Vulcan Consulting


EU lands UK with fresh demands over Brexit bill and Northern Ireland
As EU and British negotiators met yesterday to begin the sixth round of Brexit discussions, Brussels has hit Britain with renewed demands. It has given London until the end of the month to make a substantial financial offer, warning that the bloc may not be able to adopt guidelines at a crucial December meeting of EU leaders required to move on to the second phase of negotiations.
This demand to settle first phase issues escalated further again when reports began to emerge last night that the EU was demanding that Britain accept that Northern Ireland may have to remain inside the EU customs union and single market in order to avoid ‘’a hard border on the island of Ireland’’. A European Commission document circulated on Wednesday and seen by media sources reveals an update on negotiations that notes that the avoidance of ‘’regulatory divergence’’ on the island of Ireland is ‘’essential’’ to protect the peace process.
The UK wants to move on to the second phase of discussions which revolve around future trade arrangements and a possible transition phase as soon as possible in order to alleviate fears within the British business community about falling off a cliff-edge. Although there have been signals from Prime Minister Theresa May’s government that they will offer more clarity on any outstanding budget commitments, Brussels wants a firm indication from London before moving on to any transition deal.

While there may be some hard progress on the Brexit bill, the issue of the Irish question had recently been perceived to have been politically softened in the overall objective by EU states in order to agree on some form of exit deal at the EU summit on the 14th and 15th of December so talks could move on to the next phase. These latest leaks indicate otherwise however, as it appears that the EU and the Irish government in particular are hitting the UK now with demands to make concessions. One EU official noted that the Irish were ‘’really worried’’ by the UK position and therefore were reaching a point of ‘’maximum leverage’’.
Given that the UK government rely on the Northern Ireland DUP for its parliamentary majority, any guarantees from London at this point in negotiations to keep Northern Ireland in the customs union or single market are highly unlikely.   While tensions will remain high right up to the December summit, we expect that the meeting will mandate the negotiating team to move to the next phase even though meaningful agreement on the Irish border question will not have been reached. 
Mr. Barnier also shared a detailed timeline of this month’s talks, as seen below.

Date Meeting Content
8th Nov (am) Working Parties Art. 50
  • State of play on negotiations and preparation of Round 6
8th Nov (pm) Coreper Art.50
  • Orientation debate on internal preparatory discussions
  • ADA for the December European Council Meeting
9th – 10th Nov Negotiating round
  • 6th Negotiation Round
10th Nov (pm) Working Parties Art.50
  • Internal preparatory discussions – Seminar mode:
    – Identification of issues related to the framework for future relationship and transitional arrangements
    – Trade issues
16th Nov Working Parties Art. 50
  • Internal preparatory discussions – Seminar mode:
    – Economic and security cooperation with third countries
17th Nov Working Parties Art. 50
  • Internal preparatory discussion – Seminar mode:
    – Horizontal and institutional issues
20th Nov General Affairs Council Art. 50
  • Agencies: vote
  • Stocktaking on Negotiations under Art. 50 (Phase 1)
  • ADA for the December European Council Meeting
22nd Nov Coreper Art. 50
  • Internal preparatory discussions relating to transition and framework for future relationship. State of play
29th Nov Coreper Art. 50
  • (Possible) Draft European Council conclusions/guidelines
6th Dec Coreper Art. 50
  • Draft European Council conclusions/guidelines
11th Dec Sherpa
  • Draft European Council conclusions/guidelines
12th Dec European Council Art. 50
  • Assessment of progress
  • Adoption of conclusions
20th Dec Coreper Art. 50
  • Follow-up European Council December meeting

Double-cabinet blow further weakens May
The British Tory government has experienced a nightmare week after it suffered the loss of two key cabinet ministers within a few days of each other. Late on Wednesday night, the International Development Secretary Priti Patel was forced to resign after it emerged that she had an undisclosed meeting with top Israeli officials while on holidays.
The departure of Ms. Patel will force Prime Minister Theresa May to undergo a ministerial reshuffle once again, only seven days after the defence secretary Michael Fallon stood down amid sexual allegations and his conduct around women. Ms. May’s selection of Penny Mordaunt as the next International Development Secretary went down better than her decision to replace Mr. Fallon with the former chief whip Gavin Williamson which was received very badly by her conservative colleagues.

Unfortunately for Ms. May, such indignities did not end there. The ever-controversial Foreign Minister Boris Johnson was heavily criticized for comments he made a British charity worker imprisoned in Iran. Calls for his resignation were made after his remarks led to the possibility of the charity worker Nazanin Zaghari-Ratcliffe facing a further five years of detention.
The loss of two key cabinet figures will put further pressure on the Prime Minister and her entire government as it seems to oscillate from one embarrassing scandal to another. While her position seems to weaken every day and EU leaders fear that she soon may be ousted, no clear successor has appeared, largely because many of her cabinet colleagues view the position of a Prime Minister leading the exit process as a poisoned chalice. For the time being, it appears that this lame duck Prime Minister will be staying put.
EU leader agree to draw up blacklist of tax havens
In the wake of revelations coming from the publication of the Paradise Papers, EU finance leaders agreed on Tuesday to create a blacklist of tax havens that they will approve next month. The impetus to draw up such a list came after the release of the paradise papers which showed how widespread the use of tax avoidance schemes was by some the world’s richest and most powerful figures.
Given the public outcry, EU finance ministers at their monthly meeting discussed plans for a common blacklist that would reduce the appeal of such jurisdictions that apply little or no taxes. The Estonian finance minister, Toomas Tõniste, who currently holds the EU’s rotating presidency noted that ‘’there was strong support for the idea of moving forward quickly’’, noting that ‘’most countries’’ were in favour of it which indicates that not all EU members are equally keen to accelerate such plans.
Although the initiative received the backing from the majority of countries, the issue of whether or not to impose sanctions on jurisdictions on the list will be a divisive matter. France would be a leading driver in imposing sanctions but would face opposition from the likes of Luxembourg and Malta who, according to an EU official within the meeting, said that sanctions would be unnecessary because investors would be deterred from putting money in highlighted tax havens.
Candidates emerge to become next Eurogroup President
As EU finance ministers met in Brussels on Tuesday, reports and speculation began to mount about a possible successor to the current Eurogroup President, Jeroen Dijsselbloem. The Dutch finance minister has been in the position since January of 2013 and is set to step down in January of next year. Although no formal rules exist to select the next President, the vote is expected in December as Berlin, still without a coalition government, is eager to avoid a delay.
While a number of possible candidates exist, the leading contender is currently Pierre Gramenga of Luxembourg who has been the Grand Duchy’s finance minister for four years. His centrist leanings, experience as one of the bloc’s longest serving ministers and the fact that he does not belong to Europe’s largest centre-right group, the EPP, which holds several top EU jobs, makes him a likely choice. However, given that the European Commission president Jean-Claude Juncker is also from Luxembourg, some may feel that the country is already punching above its weight.
Other possilbe candidates include Slovakia’s Finance Minister Peter Kažimír and Portugal’s Mário Centeno. The former is seen as a moderate and currently holds experience from holding the EU presidency, while Mr. Centeno is from a successful Socialist government that helped exit the country from its EU bailout. One possible outsider comes in the form of Dana Reizniece-Ozola from Latvia. She would be the first Baltic politician to secure a top EU job and her appointment would be widely lauded as another young EU leader arriving on the scene. Despite the numerous possible candidates, it appears that the tipped Mr. Gramenga will pip the others to the post. 
Group of EU countries set to agree joint defence pact
Foreign and defence ministers from the majority of EU countries are poised to sign up to a new joint defence plan on Monday signalling the beginning of a new phase of military cooperation across the union. Twenty-two states will become part of the new Permanent Structured Co-operation on security and defence (Pesco), a Franco-German led initiative that aims to enhance European defence collaboration.
Pesco is seen as the best way to deal with tight defence budget restrictions, addressing calls from Washington for EU countries to shoulder a greater burden of defensive responsibility and solving the issue of interoperability that comes from the various types of weapon systems used across the continent.
The landmark initiative will not bring about a European army or a common EU military alliance but rather allow member states to collaborate easier with one another in a time when the bloc faces increasing threats. The arrival of Pesco coincides with Nato announcing it plans to implement new command structures in more than 30 years.
Emerging threats on Europe’s eastern borders such as the Crimea conflict has led to a shift in focus by Nato to emphasise collective defence in Europe rather than expeditionary deployments to conflict zones. Nato secretary-general, Jens Stolenberg, was adamant in his views that the military alliance did not want a ‘’new cold war’’, warranting the shift was needed as ‘’the world is changing, so Nato is changing’’.
Exiled Catalonian leader released by Belgian judge as extradition request proceeds
A Brussels judge decided late last weekend to release Catalan leader, Carles Pugidement, and four of his former ministers, after the group turned themselves into the Belgian authorities in order to comply with a European arrest warrant issued against them by the Spanish government. A Belgian court now has just over a week to rule on the execution of the warrant and any appeal against it could take up to another thirty days which could conflict with Catalan regional elections scheduled for December 21st.
The Catalan leader and his ministers face a number of serious charges by the Spanish government such as rebellion, sedition and the misuse of public funds. The fate of Mr. Puigdemont, who has a European arrest warrant issued against him, lies now with the courts of Belgium. The Belgian Prime Minister has found himself in an uncomfortable situation and was keen to stress that any decision of whether Mr. Puigdemont should be sent back to Spain ‘’will not be a government issue’’.
With regional elections just on the horizon and opinion polls still indicating a close split between the pro- and anti-independence movement, the outcome of Mr. Puigdemont’s extradition process will be seized upon by both sides.  


Dates ahead: Monday 13th – 19th November

Mon 13th – Thurs 16th November: European Parliament Plenary Session
Friday 17th November: ECOFIN meeting

And beyond

20th November: General Affairs Council (Article 50)
22nd November: ECB Governing Council non-monetary policy meeting  


Compliments of Vulcan Consulting, a member of the EACCNY