Strange Harmony
Who has emerged a Brexit plan? Sort of lists.
It is a UK-wide backstop proposal for a legally binding “Temporary Customs Arrangement”, which Theresa May sees as unnecessary and “unpalatable”, yet might last forever so a hard-border in Ireland can be avoided. Like much Brexit policy, its gestation may be as important as its content or coherence. But for a moment we want to avert our eyes from the heart-stopping cabinet fandango in London, and take it literally. From an EU perspective does it work? What questions will be asked in today’s talks?
Is it a backstop. The EU wants a backstop specific to Northern Ireland that is all-weather and water-tight. It must, in other words, protect the EU’s regulatory coherence and last until and unless a better option is found.
Britain included an expected date of 2021 for the backstop to come to an end. Given it is inspirational, rather than binding, Brussels won’t make a big fuss. The tougher question is establishing a mechanism for deciding when the backstop should come to an end. Who decides? On this the docs are silent.
What is the rule-taking system? There are other big omissions on the question of alignment. The UK pledges to adopt some but not necessarily all customs and trade rules, while sidestepping the issue of automatic updates, and how adoption would be policed.
It also calls for waivers on security and safety checks on UKASE trade – something that the EU would only allow if there was full, automatic and binding alignment on standards for goods. That rule-taking question is left for another UK paper. Can it be UK-wide? The biggest question of all is scope. Can a backstop, which is supposed to be Northern Ireland specific, be applied to the entire UK?
At first sight it certainly looks like a covert trade deal – and breaches various EU red lines. It’s a big political judgment call, and will require input from Emmanuel Macron of France and Angels of Germany.
Two transitions? The British prime minister justified the 21-month transition after Brexit by arguing business and government would only need to make one set of changes.
This backstop text, by contrast, creates a separate, second transition, lasting from the end of 2020 until the point a steady-state is agreed. Consider the amount of adaptation that will be required for a supposedly temporary arrangement.
The UK plan has bespoke features, for instance the VAT regime, IT arrangements, budget arrangements and co-operation on F/ETAs. So it requires the EU to invest in new IT arrangements, committees, processes, establish new enforcement regimes, implement them and possibly renegotiate dozens of EU Free Trade Agreements.
It’s a big ask. That makes some senior EU diplomats suspect this plan isn’t really a temporary backstop, but Downing Street’s furtive attempt to describe a steady-state for UKASE relations – a partnership that dare not speak its name.
Greece
Greece’s debt level (by far the highest in the EU as a percentage of GDP) is front and centre of EU finance ministers’ minds now. Only two weeks remain until a critical ministerial meeting in Luxembourg that is supposed to sign off a long awaited debt relief package for Greece. That would give investors crucial reassurance ahead of the end of the country’s bailout in August.
With time running out, Athens' creditors (euro area governments and the International Monetary Fund) are holding intensive negotiations, with senior national officials holding talks in Paris last night. But all the reasons why, for years, the debt relief issue has proven so pernicious to negotiations on Greece are still there: Germany and the IMF hold fundamentally different views about the country’s needs, but the euro area as a whole is desperate to secure a seal of approval from the Washington-based fund that Athens’ debts are manageable.
According to euro area officials, one of the major stumbling blocks is how far to extend the maturity of some €130bn of loans from Greece’s second bailout programmed, which ran from 2012 to 2015. German finance minister Olaf Scholz has so far refused to consider any extension beyond three years, whereas the IMF wants something far closer to the maximum of 15 years outlined by finance ministers last year. There are also persistent disagreements over a “growth adjustment mechanism” that would link further debt relief to the performance of the Greek economy, with Germany insisting on regular reviews from the Bundestag that the IMF considers unworkable.
Elsewhere in Europe
Emmanuel Thatcher? French president Emmanuel Macron’s showdown with the rail unions has been dubbed his “Thatcher moment”. But, according to Sophie Pedder, his mix of market economics and social protection carries more echoes of Tony Blair’s Third Way politics. And Macron would probably dislike the comparison with either of the UK ex-prime ministers, she adds.
A hint of Blair perhaps, but a Thatcherism vision this is not. Mr Macron, like many of his generation, may speak English. But he does not seek to emulate les Anglo-Saxons.
Money talks Bruno Le Maire, France's economy minister will be in Berlin today to continue trying to thrash out a deal on euro zone reforms with Germany ahead of a summit of EU leaders later this month. The deepest point of disagreement in the talks is how far to go in creating a common budget or "fiscal capacity" for the currency bloc – an idea that is central to French President Emmanuel Macron's vision but that is eyed warily by the German government.
In a speech, Le Maire will argue for a budget that can support economic convergence, and allow countries to "maintain investments in innovation and training at times of economic shocks". He will also try to tackle deep rooted German concerns that the plan could end up with the country's taxpayers subsidizing other parts of Europe, saying that "France would never support a mutualisation of past debts".
Kurz v Kneissl Austria’s new foreign minister Karin Kneissl speaks a good handful of languages, is a fan of UK foreign secretary Boris Johnson and has worked as an academic, a diplomat and journalist. She is also a nominee of the Freedom party – though not a party member. Ms Kneissl told the FT that her appointment is a revival of the 1970s Austrian “neutrality” policy of having an independent foreign minister.
However Lothar H?belt, history professor at Vienna university sees it a bit differently:
“A Freedom party member as foreign minister would have created much more of a stir…. On the potentially controversial, ie. European issues, the chancellor takes the decisions, but when it is relations with the wider world, where Austria does not really matter, he has a stand-in in the foreign ministry.”
Horizon Europe The European Commission proposed a seven-year €200bn R&D programme starting from 2021. Sure advancing brings lot of burdening. The plan opened the door to allow the UK to continue to participate in EU-funded science and innovation projects, but it comes with safeguards to prevent post-Brexit Britain from getting more money out of the program me than it will pay in entry fees.
Quick exit Head of the European Asylum Support Office, José Carreira, unexpectedly quit on Thursday, just as EU member states are at loggerheads over an asylum system overhaul proposed in an effort to prevent a repeat of the 2015-16 migration crisis.
Mr Carreira led the Malta-based organization since 2016 but resigned in the face of internal disputes and a probe by Brussels’ Olaf anti-fraud agency into allegations of procurement rule breaches. He has previously denied any wrongdoing.
No beating about the Borrell Josep Borrell, Spain's new foreign minister, has said that Spain must "contribute decisively" to overcoming the European Union's "crisis of confidence".
Speaking to a room full of officials as he formally took up his duties on Thursday, the former EU parliament president gave a refreshingly blunt assessment of the deteriorating health of the European project:
"If I had gone to sleep in the year 2007 and woken up 11 years later, I would not have recognized the Europe that I found," he said, adding that Spain was not interested in "forming blocking minorities but rather in finding ways to advance. This is our challenge."
Gentle decline The Eur-ozone economic growth slowed in the first quarter of this year to 0.4 per cent, the lowest rate since mid-2016, according to Eurostat. While it is forecast to pick up again, recent second-quarter data has underwhelmed.
It wasn't just the Eurozone, the US also had a tough start – with first-quarter growth of 0.6 per cent, down from 0.7 per cent for the prioritized quarters.
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