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Tag: Council

It’s (not) the economy, stupid!

  • June 2018
  • Andrea Lotesoriere

It’s (not) the economy, stupid!

Migration crisis takes over Eurozone reform as number one priority

As I’m writing this piece, one of the most important summits in recent EU history is taking place. The importance is not given by the topics, which will be discussed, but rather by the mutated political situation in the Continent. The issues that have been swept under the rug are all coming back in the light now, and there are no more rugs. The immigration issue, even though the situation is not on the same scale as in 2015, has been brought to its final stand by the new Italian government, which refused to continue the policies of its predecessors in allowing NGOs to dock on Italian ports. This has sparked a debate, which was already lingering in Italy, about the effective solidarity of the rest of the EU outside of vague promises and speeches. Under the push of its Interior minister Matteo Salvini, the government adopted a tough stance and forced the hand of the EU in two cases: one ended with Spain accepting the burden and the last one with a more choral response (yet Merkel’s Germany is a notable absent). Angela Merkel said that the focus of the summit will be migration and that this very issue could decide the fate of the whole EU. More than that, she is betting her whole future as Chancellor on this, with consequences for her, for the German government and for Europe as a whole that are hard to predict.

Yet, this is not what I want to talk about today. What I found interesting as of late, is that the migration issue completely hijacked (and for good reasons) public and official debate in Europe and relegated an issue that was, up until now, the priority number one: the reform of the Eurozone. With president Emmanuel Macron finding hard to reach a compromise with Germany on the issue and having very little to show of these negotiations, it has become clear that, at least for the moment, we cannot expect any major change of pace on the issue.

This would be, in my opinion, a huge mistake. While the migration is indeed a very important issue, it has less structural ramifications than the Euro area concerns. Indian economist Ashoka Mody recently published a book called “EuroTragedy: A Drama in Nine Acts”, in which he points out how, in his opinion, the common currency was created with several fatal flaws that have had the effect of amplifying the economic differences between member states and, in particular, the south of Europe against the North. In his view, a country like Italy has suffered disproportionally high the consequences of the financial crisis both because of its structural problems but also because they couldn’t rely anymore on a sovereign central bank to pull through the crisis. He argues that the economies of the southern member states are too rich to compete with eastern and central Europe in terms of wages but are also not advanced enough to compete with northern Europe. Add to that the fact that Northern prices are being kept artificially low by the common currency thus hindering the export efficiency of the south and you have a recipe for a vicious cycle that has been plaguing the south and, more importantly, the whole EU for a decade now.

The fact that the crisis was handled with austerity measures and that the so-called “hawks” in the north are advocating for more stringent rules on debt making and public spending, has effectively created a chasm within the EU that has left a scar on the public. Even reversing the trend now (and subsequently causing a stir in the northern electorate) it will be too late and the past actions will not be forgotten by the Italian or Greek citizens. This trauma, this euroscepticism that has brewed for a decade, is all political and it will be hard to re-conquer a broken heart. To be clear, the structural problem of the countries are to blame for the economic situations in the south but, from the moment that the European leaders accepted the power of the common currency, they implicitly also accepted the responsibility of it all, even if they technically do not have the instruments to be as effective as a national central bank.

To conclude, I don’t have a solution, if I did I would be leading the summit at the moment. What is clear though, is that in the face of political and economic decline compared to the emerging Asian giants and with challenges that go beyond the internal squabbles of the EU, it’s time to be bold. But unfortunately, it’s the worst time to do so. The heavy reform needed will be unpopular everywhere on the continent, one way or the other.  A new social and political pact is needed, one that will require sacrifices from everybody as an investment for future prosperity. Yet, for the moment, the Eurozone discussion is postponed and the closer we get to the next European elections the more unlikely it becomes.

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Our Man in Vienna

  • June 2018
  • Edo Katanic

Our Man in Vienna

Some thoughts on the Austrian EU presidency

 

Source: Krone.at

 

Next week Austria will be taking over the EU presidency from Bulgaria. It will be the third time for the Alpine country to preside over the EU and it will be the last full presidency before the EU elections, which will take place next May. Therefore, a lot of work lies ahead, especially regarding the legislative proposals. Some initial thoughts and priorities have already been discussed many times in the European media. Just to name a few, there are significant issues such as the MFF, security and defence, managing migration and asylum, as well as the one and only Brexit. However, in reality what can we expect? The motto for the Austrian presidency is “The Europe that protects”, so that can be quite revealing from the start.

 

 

First of all, Austria has been (now notoriously) vocal in shifting to the political right after last autumn’s parliamentary elections. The country has been ruled for the past 6-7 months by a coalition government of an increasingly right-wing Austrian People’s Party (EPP group in the European Parliament), led by young and charismatic Chancellor Sebastian Kurz, and the far right Freedom Party of Austria (ENF group in the European Parliament), led by the not-so-young but quite charismatic Heinz Christian Strache, now the Vice Chancellor of Austria.

 

 

What can be visible nowadays, especially having in mind last Sunday’s mini-EU summit on migration, is Kurz’s plan to promote himself as the leader of the new and rebranded European conservatives, basically the same thing that he did in Austria last year. Ideally, he would like to give Austria a stronger voice in dictating European politics than anyone would have expected. This would mean that he wants to promote the new and a more right-wing EPP, which would be much tougher on migration and security issues, obliterating the legacy of Angela Merkel and her 2015 approach. That is why special attention will be paid to the reform of the asylum system and the issues on the Mediterranean. His recent clumsy statement on the “Axis of the willing” and the latest ideas such as building EU screening centre’s for migrants outside the EU, are probably the best examples of that.

 

 

Source: World Bulletin

 

Regarding the EU enlargement, Kurz will try to influence other Member States into adopting an approach where the Western Balkans are encouraged to enter the EU, as Austria has a strong economic interest in that, while strictly opposing the entrance of Turkey. It is a view that gains him a lot of points on the domestic (Austrian) field, where the majority opposes Turkish EU membership, and he believes that countries with a large Turkish diaspora, such as Germany and The Netherlands, can be his allies on the topic.

 

 

At the same time, while he takes control of the EU presidency and focuses on these issues, he will leave his coalition partner FPO to play a more prominent role in Austrian internal politics. After all, there is a reason why Kurz insisted that all the EU work should be placed under the Chancellor’s office, while leaving the other issues to FPO-led Ministry of Foreign Affairs. Finally, everyone is aware that there are certain limits that the EU presidency brings, so Kurz is playing on the same card that brought him the victory in the Austrian elections. To present himself as the “saviour of EU” and as a solution-oriented conservative. All in all it will be a very interesting presidency, with many challenges and issues that have to be solved.

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New equilibrium

  • June 2018
  • Admin

New equilibrium

The battle for the top positions in the institutions is already underway

In less than a year we will have a whole new EU. No, I’m not talking about the much-needed reforms, I’m talking about the European elections that will take in the spring of 2019. In the immediate aftermath, the European Union will have to choose another president for the  European Parliament and one for the European Commission, a new High Representative and, critically, a new president for the European Central Bank.

Much has evidently changed since the last elections in 2014. Just to give a few example, we had pre-brexit United Kingdom lead by David Cameron; an overwhelming social-democrat majority in France and Italy with François Hollande and Matteo Renzi, a pre-Tsipras Greece still in turmoil under Giorgios Samaras; a USA still led by Barack Obama together with some of the same as Chancellor Angela Merkel (but with a weaker GrosKo now), Orbàn (now enjoying a 2/3rd majority needed for constitutional reforms), the recently resigned Mariano Rajoy (pre Catalonian crisis) together with an extra-EU world that saw continuity with Vladimir Putin in Russia, Shinzo Abe in Japan, Xi jimping in China and Recep Tayyip Erdoğan in Turkey.  In merely four years the situation has drastically changed and the European elections of next year will see (if the trend stays the same) radical change in the power balance of the political groups. Anti-establishment parties are at their historic peak, the social-democrats are in disarray, the EPP has its own internal problems and French President Emmanuel Macron still hasn’t decided where to stand.

Nevertheless, this is but a piece of the puzzle. If the Spitzenkandidat method will be confirmed, then Manfred Weber (current leader of the EPP) is a likely candidate for the role of President of the European Commission. Other strong candidates are chief negotiator for Brexit Michael Barnier and President of the IMF Christine Lagarde. It is an open secret that Angela Merkel would prefer his economic minister Peter Altmaier, in which case Weber would target the presidency of the Parliament. In the S&D camp the Slovak Maros Sefkovic is a potential candidate, together with Pierre Moscovici, the Danish Helene Thorning Smitt and the former Parliament President Martin Schulz but, given the current state of affairs of the group, it is unlikely that they will be anything more than a name-only candidacy.

For the European Council it seems the most likely at the moment is Netherlands Prime Minister Mark Rutte, in order to appease both the ALDE group and the Dutch, which have been out of top positions for a while. This coupled with the candidacy of either the German Hawk Jens Weidmann or the Finnish Erkki Liikanen for the role of Mario Draghi as the head of the BCE, would consolidate a Nordic-led duo that, coupled with the possible influence from France and Germany in the Commission and Parliament, would create more than a head-scratch for Southern and Eastern Europe.

In fact the spotlight would mainly be on Italy and Poland and their governments. While Italy is enjoying an unprecedented representation with the European Parliament President Antonio Tajani, the ECB president Mario Draghi, and the High-Representative Federica Mogherini, it is also true that all of these represent the “old” establishment that the new government vehemently fought and won against. Poland (and the rest of the east, for the matter) still suffer from that east/west divided that sees the newer member of the EU struggle to relevancy almost 15 years after they joined the block.

Clinically underrepresented, Spain secured the vice-presidency of the ECB in what somebody thought it was a move to install a hawk in the top spot and put an end to Draghi’s quantitative easing (which I bound to end anyway) and be more strict with Southern Europe. But as I said at the beginning, key role will be played by the elections and with the UK leaving in March 2019 (supposedly) and Macron’s decision for which group to join or found, a semi-revolution will take place which could put a wrench in all the official and unofficial plans for these power plays. All in all, I expect the next elections to be the most interesting to date and a real stress test for the battered establishment, will this be its swan song or will it come back with a vengeance?

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