KEY EVENTS THIS WEEK:
Continued Brexit talks on draft treaty ahead of Council summit
Theresa May and EU Commission President, Jean Claude Juncker met on Wednesday to discuss the final elements of the withdrawal package ahead of the EU Council summit on Sunday. Negotiators from both sides subsequently agreed to a draft political declaration on the future EU/UK trade relationship, which will accompany the withdrawal agreement. The now 26-page draft document outlines the future relationship between the EU and the UK, which will be “ambitious, broad, deep and flexible.” According to European Council President, Donald Tusk, the draft has been “agreed in principle at political level,” awaiting the endorsements of EU leaders.
Not all EU members were entirely satisfied by the draft withdrawal agreement that was released last week and have voiced concerns over UK fisheries, Gibraltar and future “frictionless” trade. Negotiators have continued to try to resolve these remaining issues to ensure that the draft agreement and political agreement will be endorsed on Sunday. EU27 leaders have emphasised that Sunday’s Summit will not be a return to negotiations and should end before noon. Mrs May and Mr Juncker will meet again on Saturday to discuss how the process will be concluded. Neither the EU nor the UK want to see a repeat of the standoff at Salzburg.
The EU is evidently not the greater threat to the current deal. At home, Theresa May and her allies revived the idea of using technology to facilitate non-invasive customs checks in Northern Ireland, in order to appease those concerned about the backstop arrangement. This technological solution, known as “maximum facilitation” was rejected by the EU as “aspirational”, but Brussels has now included wording in the draft political declaration to support the use of technology on the border in the future if it is proven to work. This wording is unlikely to satisfy some of the Brexiters who fear the backstop arrangement could keep the UK in a permanent customs union. The reaction to the declaration in Westminster yesterday afternoon was belligerent.
The UK Prime Minister survived the threat of a no confidence motion earlier this week. However, that is not to say that the draft EU-UK Brexit agreement has the required support to be passed in the Commons next month. Speculation has increased on how the government might proceed if the deal is indeed rejected, with calls being made for a second referendum, a Parliamentary vote and a change in leadership. This lack of consensus suggests the possibility of an accidental “no deal” exit if MPs reject the draft agreement.
France and Germany agree on Eurozone budget blueprint
This week France and Germany agreed to an outline for a Eurozone budget, which has been a long-term goal for French President Emmanuel Macron. Mr Macron was elected on a pro-Europe platform and he has pushed for greater EU convergence, significantly for the eurozone, but progress for his proposed reforms has been stymied by German reticence and the more pressing questions of immigration, EU rule of law and Brexit.
The Franco-German proposal would see the creation of a Eurozone budget that would serve to protect against instability and crises across the Eurozone. Mr Macron has had to significantly scale back his intentions to suit Germany’s more conservative approach. The Eurozone budget would be part of the EU’s long-term budget, and not a separate mechanism. It would require the assent of all EU members, though only Eurozone countries would contribute. No size for the fund, nor mechanism to decide the size of countries’ contributions were specified in the proposal.
Bruno Le Maire and Olaf Scholz, the finance ministers for France and Germany, respectively, said the proposal would deliver the greater economic “convergence” that the Eurozone bloc needs to secure its future. They suggested it could be in place by 2021. The plan has gained support from other EU members, largely due to its limited scope, but it has still received some criticism, notably from the Netherlands and the Nordic states, who are not in favour of increasing EU spending. Mário Centeno, president of the Eurogroup of eurozone finance ministers praised the proposal as a potential “breakthrough.” Eurozone integration measures will be agreed at the December EU Council summit.
Spain sets sights on becoming EU power player
Pedro Sánchez, the Socialist Prime Minister of Spain is leading in national polls and looking to raise his international profile, in part by claiming a stronger role for his country on the European stage, alongside Germany and France.
“I believe that the challenge facing the EU is to write a new social contract that we are not going to be able to build or write at the level of the member states, and we have to do it at a joint level, at the level of the EU. And in that sense, with the misfortune of Brexit, with the anti-Europeanism that Italy, the Italian government, is showing right now, I believe that … the axis that should be articulated is that of Berlin, Paris, Madrid — to which I would also add Lisbon.” Sánchez said in an interview.
However, there are still issues for him to tackle at home. Catalonia remains Sánchez’s Achilles’ heel, both at the national and the international level. The Spanish leader has adopted a softer approach than his conservative predecessor Mariano Rajoy on the rebellious region. He advocates dialogue and greater autonomy as a way out of the conflict. He has also left the door open to granting pardons to the 18 Catalan leaders who will face trial before the Supreme Court for last year’s secession push — which saw an illegal referendum and declaration of independence. They could be sentenced to decades in prison.
Days after taking office in June, Sánchez announced that Spain would accept more than 600 migrants who were stranded aboard the rescue ship Aquarius, after Malta and Italy refused to accept them. Sánchez has played into the hearts of many European leaders by allowing those migrants into the EU, he has also warned that no good would come from Brexit. He advised his British counterpart Theresa May to call a second Brexit referendum “in the future,” so that the UK could return to the European club “in another way.”
Mark Rutte denies Brussels top job rumours
The current mandate of the Dutch Prime Minister ends in 2021. Mark Rutte has been tipped as a potential candidate for president of the European Council. Rutte is a member of the liberal political family, which said it will present a list of candidates for top EU jobs in a move designed to push back against the Spitzenkandidat system for picking the European Commission president.
Rutte said he wouldn’t swap The Hague for Brussels even if German Chancellor Angela Merkel and French President Emmanuel Macron put strong pressure on him. “I won’t do it,” Rutte said. “The answer is no.”
Commission rejects Italian draft budget for the second time
This week the European Commission again rejected Italy’s non-compliant draft budget for 2019 and took their first official steps to sanctioning the government in Rome. The EU and Italy have been in dispute over the budget since the new government, a coalition of the right-wing League and the anti-establishment 5-Star Movement, announced its intention to increase public spending to finance increased social protections and tax cuts. Both sides appear to be tightening their stance as Italian deputy prime minister Matteo Salvini said that fines against Italy would be “disrespectful”.
The European Union stated it cannot allow Italy to sharply increase their public debt, which already stands at 131% of GDP, three times the allowed amount. Brussels issued a report that suggests the increased deficit could exceed the 3% ceiling, rather than the 2.4% set out in the budget. EU officials have also suggested that Italy’s proposed measures are unlikely to bring about the economic growth that the populist government is counting on.
Rising concern for Romanian Council Presidency
Romania has come increasingly into conflict with the EU just weeks before it is scheduled to take over the six-month rotating presidency of the European Council. The EU Commission has demanded that the ruling party in Bucharest suspend the country’s changes to its justice system and criminal code, which the EU have deemed a threat to judicial independence and the EU rule of law. The Commission has also expressed its concern over Romania’s ability to address corruption, for which it is ranked among the worst in Europe.
Frans Timmermans, First Vice President of the Commission responded to the situation, threatening that the EU Commission might be “brutal” in their assessment of Romania’s democratic backsliding. He suggested the possibility that Bucharest will not be ready to take on the leadership role from January 1st. Similar concerns have been expressed by Romanian officials. Their ability was further put in doubt by the recent and unexplained resignation of their European Affairs minister, Victor Negrescu, who was tasked with preparations for the takeover.
Compliments of Vulcan Consulting, an EACCNY Member