Thursday, September 14, 2017

Juncker’s State of the Union speech – the good, the bad and the ugly

Published on Open Europe's blog
Yesterday, Commission President Juncker gave his most eye-catching State of the [European] Union” speech yet. In theory, he’s only a humble servant of the EU member states, delivering and defending the objectives of the EU Treaties. Yesterday, he set out a wide-ranging vision for the future of the EU, much of which is likely to test the limits of what EU citizens or even EU leaders might support. Here’s an overview of his proposals, starting with the positive.
The good
 It’s great to see Juncker pushing to finalise EU trade deals with Canada and Japan and even Mexico and the South-American trade bloc Mercosur by the end of his mandate. He also announced his intention to open trade negotiations with Australia and New Zealand. Perhaps a call to also start trade talks with Britain would have been even better, but it’s welcome to see this level of ambition.
It was also nice to see is his support for the “better regulation agenda” and the creation of a “Subsidiarity and Proportionality Task Force to take a very critical look at all policy areas to make sure we are only acting where the EU adds value”. He was a bit light on specifics but Open Europe has always strongly supported this agenda. Juncker boasted that his Commission had proposed “less than 25 new initiatives a year where previous Commissions proposed over 100”, which is step in the right direction towards quality over quantity.
The Commission President’s calls to “maintain a credible enlargement perspective for the Western Balkans” as well as opening up the Schengen area to Bulgaria, Romania and Croatia were a positive contribution (the existing Schengen countries would need to agree and conditions need to be fulfilled but it’s important to keep the prospect open). The EU deserves credit, alongside NATO, in having helped stabilise Central and Eastern Europe after the Cold War. The EU can also do much good for the historically unstable Balkans.
He also pledged that “the Commission will be open to compromise” in the heated debate on refugee relocation and the posted workers directive, which has pitted East against West. This is a great concern among top EU insiders, and Juncker is wise to seek to defuse the situation. A concession may be on its way to Central and Eastern European states, who feel it’s insensitive to force them to take refugees from other EU states, especially as people can travel freely within the Schengen zone anyway. It remains to be seen what compromise can be brokered in the dispute over the posted workers directive, which allows companies to “post” EU workers in other member states more easily, triggering accusations of “social dumping”, despite the fact that for example in France, most posted workers come from wealthy neighbouring countries. It would be a pity to sacrifice this important tool, which has removed barriers to trade, merely to deflect attention from domestic reasons why Western European labour markets are uncompetitive.
The bad
 Juncker is an unashamed federalist. This means pushing for more concentration of money and power as a solution to the eurozone’s problems.
His speech demanded a “strong Euro area budget line within the EU budget”, but stopped short of a separate budget or even Parliament for the Eurozone, as suggested by French President Emmanuel Macron. Another proposal is to transform the Eurozone’s bailout scheme, the “European Stabilisation Mechanism (ESM)” into a “European Monetary Fund” and create a “European Minister of Economy and Finance”. This would basically entail letting the EU Commissioner for economic and financial affairs preside over the Eurogroup, something that the Dutch PM rejected out-of-hand right after the speech.
Juncker really was on a roll. He also suggested creating an EU “Labour Authority for ensuring fairness in our single market”, never mind that, as the Confederation of German Employers’ Associations pointed out, “we have 28 different labour markets with different [market] structures”. Last but not least, Juncker proposes scrapping the job of EU Council President Donald Tusk, by merging the presidencies of both the European Council and the Commission.
Juncker also tempered his emphasis on striking free trade deals by voicing his support for an EU framework to screen investments made by foreign state-owned companies, something which liberal member states already have deemed “a Trojan horse for protectionism”. Juncker stressed that “we are not na├»ve free traders” and that “there must be reciprocity” in international trade, echoing US President Trump and many other contemporaries, ignoring the benefits of free trade for the consumer. The victory of “liberal” Macron over “protectionist” Le Pen might yet mean making the EU more protectionist to halt the protectionist hordes.
The ugly
Instead of seeking a solution to the fact that a very high percentage of citizens in countries such as Sweden, Poland and the Czech Republic do not want to join the common currency, Juncker instead thought it best to remind them of their legal obligation to do so, although he played this down afterwards. It seems David Cameron’s efforts – supported by several euro-outs – to establish that the EU could be a genuinely multi-currency union have been thrown out with the bathwater.
Despite Juncker’s encouraging rhetoric that “we should not (…) seek ever growing competences”, he went on to say he was “strongly in favour of moving to qualified majority voting for decisions on the common consolidated corporate tax base, on VAT, on fair taxes for the digital industry and on the financial transaction tax”. Ireland, for one, will strongly resist this. Fostering more harmony in the Union won’t happen by taking more decisions where a minority is being outvoted on deeply sensitive issues.
Finally, Juncker stated that “by 2025 we need a fully-fledged European Defence Union” but did not explain what for. He pre-empted criticism by adding that “NATO wants it.” Indeed, NATO’s Secretary General has endorsed the idea, however on the conditionthat “as long as we make sure or the European Union makes sure that what the EU does is complementary to NATO”.
European countries, especially the steadfastly Atlanticist and those in the East with an eye on Russia, should really think this through. How likely is it that such a “European Defence Union” will actually deliver real defence capacity and not end up as another empty shell? Why would EU member states give up defence powers when they’re already wary of outsourcing foreign policy? What if the existence of such a “European Defence Union”  one day is used by another Trumpian in the US to remove Europe from the American security umbrella? These questions should be answered before the EU embarks on any new initiative in this area, not at the end.
 This was not a great speech for those hoping the European Commission would see Brexit as the moment to take stock and reconnect with those across Europe who feel that the EU has over-reached. Ever more EU centralisation has already contributed to growing anti-EU sentiment, so why will it be different this time?
This was clear evidence that much of the Brussels establishment thinks that the response to Brexit can and must be ‘more Europe’. Some of the speech was blue sky thinking that is unlikely to see the light of day but enough of the ideas will have been run past Berlin and Paris that they will be tabled in some form. Without the broad consent of voters across Europe, they will provide yet more ammunition for the likes of Le Pen, who, despite recent election results, have not disappeared.

Tuesday, September 12, 2017

What to expect from Jean-Claude Juncker’s “State of the Union” speech

Published on Open Europe's blog

Open Europe has obtained the minutes of a dinner discussion on 5 September between Juncker’s chef de cabinet, Martin Selmayr, and the 28 deputy permanent representatives to the EU. The discussion covered preparations for Juncker’s speech tomorrow as well as the EU Commission’s “Working Programme” for 2017-2018. 


On Juncker’s “State of the Union” speech:

Selmayr provided a preview of the contents of what was apparently the 14th version of a draft of Juncker’s speech. According to the minutes, there would be “more Schengen”, “more banking union”, “more eurozone” and “a prospect for enlargement in 2025”, specifying that this would be “for the Balkans. At the meeting there was complete silence about Turkey”. Also, “democracy, participation and transparency” would be included as key themes.
Treaty change is apparently not a taboo for Juncker but Selmayr’s words were summarised as “everyone hoping for grand declarations about this will be disappointed”. Interestingly, Selmayr thinks it could be possible to use the “passerelle clauses” from the EU Treaties which allow progress to be made on certain things while avoiding Treaty change. However, unanimity in the European Council is required to use this route, as is the consent of the European Parliament. Separately, The Times has reported that Juncker may be proposing “the creation of a federal eurozone finance minister and treasury” – in line with Emmanuel Macron’s ideas – so perhaps that could be achieved using the passerelle clauses. Introducing a permanent eurogroup chairman should not be too challenging, as the eurogroup is an “informal” institution anyway.

On the EU’s future:

Back in the spring Mr Juncker proposed five scenarios for the future of the EU, and Selmayr said he was pleased with the reactions received by the Commission. Selmayr however did not disclose whether a possible “sixth scenario”, about which there has been some speculation, might be unveiled in Juncker’s State of the Union speech.
De Volkskrant meanwhile reports that Juncker has sent MEPs a confidential letter setting out that the EU would finally have “the wind in its sails” after eight years of crisis, adding “this chance may possible not be around for along”. The newspaper notes that Juncker will urge EU27 leaders to make a choice between one of the scenarios he set out.
According to Selmayr, Juncker’s main concerns are “European values”. The minutes reveal that this is “not just with regards to Turkey but also with regards to our [the EU’s] internal situation, although Selmayr didn’t name Poland or other Member States by name”. Concerns are also raised in the minutes about a possible “fatal divide” between East and West, suggesting worries that Eastern Europeans could somehow become second rate citizens within the EU. The so-called Dual Foods controversy was mentioned in this regard, which concerns how consumers in the relatively poorer eastern countries of the EU could be sold inferior products by food companies. A Summit in October is intended to help bridge the gap on this topic, as well as covering the digital single market, cyber security, and a “European industrial strategy”.
As also reported by The Telegraph, Selmayr mentioned that EU countries wishing to remain at the “core” of the European project after Brexit will probably have to join the Euro. This followed a suggestion by the Belgian representative that the Eurozone should form the core of the EU after Brexit, something which was challenged by both the Czech Republic and Hungary. The Czech deputy permanent representative pointed out that the EU should try to be more “inclusive”, and that if the eurozone was to become the “core” of the EU’s future, more incentives were needed to truly make the monetary union attractive for all Member States.
Apparently, Selmayr responded that without the UK, 85% of EU citizens are already living in the eurozone and that therefore it “probably” will become the core of “our” [the EU’s] future. He also added that “inclusion” could only be possible if there’s sufficient engagement coming from certain Member States (pointing at the Eurosceptic stance of the Visegrad countries).
Selmayr also discussed how he thinks that the pessimism resulting from Brexit and a number of recent European elections is slowly fading in favour of optimism about the European project.

On the EU Commission’s Working Programme:

Selmayr revealed how the European Commission intends to exploit the positive momentum economically and politically in the run-up to the European Parliament elections in 2019. The Commission is not planning to introduce any legislative proposals after May 2018 but instead to complete as many standing issues as possible.
At the meeting, there was discussion about a long list of technical issues that Member States consider to be priorities. These will be listed in the “Letter of Intent” to be attached to the State of the Union address. Completing the single market was just one of a somewhat unsurprising list of priorities. At the dinner, France and Germany were also pushing for “investment screening” – which they want to use to create a so-called “global level playing field”.

On the current functioning of the EU legislative process:

An interesting remark was made by the Belgian representative at the dinner, which reveals some unease with the way the EU legislative process is currently functioning, specifically within the Council of the EU, where Ministers gather to decide legislation. According to the Belgian participant, “these are not sufficiently oriented towards offering Ministers the chance to conclude a political deal. Council meetings relating to specific topics therefore have too often seemed to be a diplomatic convention, while COREPER I [where the deputy permanent representatives gather] has too often become an extension of technical working groups. The Council needs to get its political character back. Only in this way will there be an opportunity efficiently to get to agreements on these – essentially – very political issues so our politicians will also feel more involved again.”

On the EU Budget:

A number of questions were being asked by Member States regarding the future financing of the EU and the long term budget framework. Selmayr only gave very general answers to this, from which little could be deduced. It seems to be too early for greater clarity on this question, and, of course, the whole thing is linked with the sensitive negotiations with the UK over its financial “divorce settlement”.

On Brexit:

Brexit wasn’t discussed in detail, probably given the presence of a top UK diplomat. Unsurprisingly, Juncker’s priority is to maintain the unity of the remaining 27 EU Member States. Selmayr thinks this unity could be endangered if a number of crucial EU policy discussions aren’t settled, such as “social dumping” (referring to attempts to restrict posted workers in the EU, something Eastern European Member States oppose), “energy union”, “climate change” and “migration”. These topics were discussed in detail during the dinner. The Commission wants to achieve political agreement on these topics before Brexit enters a decisive or critical stage, supposedly to limit the UK’s potential to exploit these differences in Brexit negotiations.
The discussion mainly focused on the future of the Union. According to the minutes, the UK official in attendance said that negotations on that future of the EU are also of importance for the UK, given that the Union will remain the most important neighbour for the UK. Selmayr confirmed that at an upcoming Summit in Tallinn a discussion will probably be planned between heads of state and government in the margin of the informal digital summit. According to the minutes of the dinner meeting, at the time it was “not clear if this will be with [the EU] 27 or with 28”, although Theresa May has since confirmed that she will attend.