If Boris can survive September, the EU may rethink its stubborn stance

Published in The Daily Telegraph

It was always predictable how the first few weeks of Boris Johnson’s premiership would play out. It would have been astonishing to see him abandoning his demands to “scrap the backstop” right after entering office. The same can be said about the EU side, which has repeated ad nauseam that the binding part of the Brexit deal agreed by Theresa May is non-negotiable. 

Now, ahead of the Biarritz G7 Summit, and as the Prime Minister prepares to meet his counterparts in Paris and Berlin, things are getting more interesting. Johnson has come out with a document detailing – to an extent – how his Government wants to renegotiate the binding part of the deal. This was swiftly followed by the EU side – including Ireland – ruling out any renegotiation of the Withdrawal Agreement, with the EU Commission arguing that the Government’s “letter doesn’t provide a legal operational solution to prevent the return of a hard border”.

In other words: the European side is telling Boris Johnson to explain how he would solve the border conundrum. It’s the EU’s view that this may well take up to 15 years. At least that’s what Austria’s leading diplomat charged with Brexit estimates. The UK Government does admit that “alternative arrangements” may not be ready by the end of the transition stage, on 1 January 2023, but Boris Johnson vows in his letter to "look (...) at what commitments might help" so to reassure the EU that he is interested in a solution.

It used to be the case that many in the EU were hoping Brexit would simply not happen. By now, the chances of Brexit being stopped have flattened, partly due to the Brexit Party's success in the European elections. The EU side is nevertheless still hoping that Parliament will somehow depose Johnson and his Government, with a successor requesting another extension of the UK’s membership which would then be followed by the UK agreeing to the terms of the Withdrawal Agreement negotiated by Theresa May. Few have considered how Parliament would pass this – after an election which may terminate the careers of many Remain-supporting MPs.

The first week of September, therefore, will be crucial. It should give an indication of the chances that Boris Johnson will still be Prime Minister by the end of October. The EU knows this; so do not expect any major concessions from them until the situation in Parliament becomes clear.

After that, rationally, there should be movement. One would expect the EU to at least have some kind of “plan B” in case it did need to make some concessions, and it's not difficult to imagine what this would look like; likely an offer to make the backstop time-limited, for, say, 20 years. This offer would then of course need to be communicated by the Irish government, so it doesn’t appear as if the other EU members had pressured one of the smaller member-states. 20 years would of course be unacceptable to the UK, but we should not forget that when the EU wants a finger, it asks for an arm. Even those more wary about making concessions to Boris Johnson in the EU could support such a plan B - it would at least shift the blame away from the EU for any ensuing “no deal” disruption.

The Prime Minister, meanwhile, now thinks “an agreement is possible” on “a” Withdrawal Agreement, which should build confidence among EU countries that Boris is not aiming for “no deal” and that any concessions made by the EU won’t be futile. If the UK government now becomes more specific about what it wants to replace the backstop with, this would deal with EU concerns that Boris has only promised to “look at” a possible solution in case alternative arrangements wouldn’t be ready by the end of the transition period. The work of Prosperity UK is inspirational here. 

However, if the EU refuses to discuss reopening the binding part of the deal even if it is clear that the alternative is, in fact, Britain leaving without one, Brussels will truly be responsible for no deal. Denmark won concessions in 1992 and there are several precedents of the EU reconsidering deals agreed with governments after referendums and parliamentary votes contesting them. Importantly, Theresa May did tell EU leaders in November that she could very well fail to push the deal through Parliament, so the UK cannot be accused of having acted in bad faith here.

It is fair to demand that Boris comes up with more detail, but how responsible is it to continue to refuse any changes whatsoever to a draft agreement which both sides knew had a slim chance of being accepted by Parliament? The Irish Times reports that “there is as yet no real detail” provided by the Irish government “about how the border will be managed in the event of no-deal”. So a disruptive “no deal” troubling the peace process is not all that far-fetched, sadly, unless the Irish government decides to throw all of its obligations to guard the EU’s external border out of the window.

In his letter, Boris Johnson writes that the EU "presents the whole of the UK with the choice of remaining in a customs union and aligned with those rules, or of seeing Northern Ireland gradually detached from the UK". When the UK is attempting to formulate compromises, the time has come for the EU to make a move towards abandoning their excessive demand.

Interview with BBC Newsnight

Given how important #Brexit is for the EU economy, you would expect the EU to show some flexibility

- @pietercleppe on @BBCNewsnight earlier this week pic.twitter.com/P111Qg50Er

— Open Europe (@OpenEurope) August 8, 2019

Can we expect the EU to behave "rationally" in the face of "no deal"?

Published in The Daily Telegraph:

Brexit negotiations have descended in a game of chicken, with the EU repeating that it is unwilling to reopen talks on the binding part of the deal Theresa May struck. This rules out pretty much any concession to the UK..

It was predictable that the EU wouldn't simply change its tune the day after Boris Johnson became PM, but what will happen in the next few weeks? Will EU capitals look at the withdrawal agreement again, and perhaps change the terms of the Brexit negotiation mandate  they have given to the European Commission in order to offer concessions?

Rationally, that's what they should do. Avoiding a "no deal"  Brexit would deliver much more of what Ireland is trying to achieve than letting a no-deal Brexit happen. After all, a o deal may hit Ireland's economy harder  even than the British, and because the Irish government would need to put up a border of some kind, both the peace process and Irish relations with its EU partners may come under strain.

As for the other EU member states, a deal is rationally preferable to no deal too. Any damage to the UK economy would do little  to soothe the pain inflicted upon the Belgian, French, Dutch and German economies. Amid predictions of a German recession and the escalating trade tensions between the US and China – to which the EU is particularly vulnerable given its weaker industrial base – one can hardly think of a worse time for Europe for a "no deal" Brexit to occur.

So will the EU be rational? Nobody can predict the future, but there are a number of reasons to suppose there is at least a chance.

First of all, the EU side has  shown some flexibility already during the Brexit process. In November, it conceded that as part of the "backstop", the whole of the UK – and not just Northern Ireland – could enjoy tariff-free access to the EU. Another example is how, in the spring, after weeks of grand statements that the EU was "prepared" to go for no deal, it was ultimately only an isolated French President still pretending this that this was true. It wasn't very credible then, given how Calais had been plagued by customs strikes for weeks, with question marks hanging over bureaucratic preparedness for all to witness. Various reports, including one from the CBI, have highlighted how  today, too, the EU isn't exactly as well-prepared as it claims.

More fundamentally, claims that the EU would be unable to violate certain sacred – and often arbitrarily defined – "principles" are simply factually incorrect. During the eurozone crisis, emergency bailout funds worth billions and billions of euros were agreed over a weekend, in open violation of the letter and the spirit of EU rules, given how Germany had only sacrificed its D-Mark in return for a Treaty ban on bailouts. During the chaos of the migration crisis, member states simply stopped applying the letter of the Schengen agreement, which scraps passport checks, once again dubiously bending the law.

Over the years, the EU has reconsidered deals it had struck with governments, after referendums and parliamentary votes contesting them. In the 1990s, the Danish received an opt-out from having to join the euro and other grand EU schemes, after the Maastricht Treaty was rejected in a referendum. Lesser concessions were granted to the Irish after they rejected a new European Treaty twice in the 2000s, to the Dutch after they rejected the EU-Ukraine Treaty in 2016 in a referendum, and to Wallonia's Parliament when it refused to agree the EU-Canada trade deal in the same year.

Some have argued that these were all concessions to member states, which are not likely to be offered   to  the UK since it is  leaving. But, given how economically integrated the EU27 are, that overlooks the fact that this is really a negotiation to prevent damage due to a part of the pan-European economy breaking off. This is an intra-European divorce and the UK leaving is no minor  matter, as its economy is equal in size to the economies of the EU's 19 smallest member states.

The EU has, moreover, been flexible to non-EU countries in the past – for example to Switzerland and Ukraine, entering into trade frameworks with both in which the sacred "four freedoms" were split. The EU-Ukraine Treaty, for example, does not include freedom of movement of persons, something which EU propaganda has in other circumstances described as intrinsically linked to openness to goods and services trade.

There are nevertheless also good reasons to think the EU won't be rational and will continue to refuse concessions. If Boris Johnson doesn't reassure them that any concessions will actually result in a deal, it gets tricky. And  the EU side may be complacent when it comes to no deal. They may think that predicted massive job losses can reasonably be avoided through mitigation measures, while forgetting that they may also  find themselves in a context of mutual blame sharing, which would make such measures harder to agree. How big would French President Macron's room to be flexible be, for example, if French fishermen lose access to UK waters, which is an automatic consequence of no deal? And how much room for manoeuvre would Irish politicians have, if they attempt to blame the UK to deflect domestic criticism that they had not properly prepared for no deal? It's not clear that the EU side have thought this through, so don't bank on them being the adults in the room.

Interview on new EU Commission President Ursula von der Leyen

An Ursula von der Leyen presidency would be a huge victory for Angela Merkel

Published on The Spectator's Coffee House Blog

German defence minister Ursula von der Leyen has been put forward by European leaders as the candidate to succeed Jean-Claude Juncker as the President of the EU Commission, a powerful position. If she is approved by the EU Parliament (which is not yet certain) it would be a victory for German Chancellor Angela Merkel, and a bad thing for Europe.

Von der Leyen attended the European School in Brussels, just like Boris Johnson. Like Boris, she’s the child of a European Commission official, but that’s where her similarities with the potential prime minister end. She wants a ‘United States of Europe’, a political union for the Eurozone and a ‘European army’, even if her own track record as defence minister ‘is regarded as a failure among friends and foes alike’. Rupert Scholz, who was defence minister under former German Chancellor Helmut Kohl thinks that the German army’s ‘condition is catastrophic’, something he calls ‘totally irresponsible’.

Are we then witnessing something similar to an episode of the Danish political drama Borgen, where an elder politician is promoted to Brussels against their will? Not really. German Chancellor Merkel values the European Commission job highly. In August 2018, the German daily Handelsblatt reported that Merkel was no longer aiming to secure the ‘top job’ of president of the European Central Bank (ECB) for a German, and would instead push for Germany to obtain the EU Commission Presidency. Already, von der Leyen’s name was being floated.

Interestingly, it was not Merkel but French President Macron who first came up on Monday with von der Leyen’s name, when socialist Dutchman Frans Timmermans was opposed by the Eurosceptic governments of Italy and Central and Eastern Europe. This very much looks like a traditional EU negotiation: France and Germany dividing the two top jobs amongst each other, by first putting a candidate forward to be ‘burned’.

Ursula von der Leyen received public support from the four Central European ‘Visegrad’ countries, who were on a ‘anyone but Timmermans’ mission, as he had been plaguing their governments with EU challenges against their judicial reforms. Von der Leyen had also played a constructive role in posting German troops in Eastern Europe, which undoubtedly created some goodwill. Hungarian PM Viktor Orbán claimed victory on Wednesday, saying Timmermans had been replaced with a German mother of seven, which ‘…in itself shows that change is afoot in Europe.’

Macron’s motives to go for this deal are easy to read. As a former banker, he knows the importance of the ECB Presidency, so he secured this for the French head of the IMF, Christine Lagarde. It’s not the first time his love for banking has come to the fore: in 2017, Macron negotiated the move of the European Banking Authority from London to Paris.

Macron was also victorious in killing off the Spitzenkandidaten system, whereby EU leaders would be supposed to endorse someone picked as the lead candidate by one of the political groups in the European Parliament. In a way, this system had already failed because MEPs themselves couldn’t gather around a candidate to propose to EU leaders. Fundamentally, Spitzenkandidaten was a failed attempt to claim it would be ‘democratic’ to bypass European national democracies.

For Merkel, this process has been about making sure that the EU Commission Presidency goes to an EU federalist. She was willing to sacrifice Germany’s prospects with the ECB for this aim, even if it meant that for the third consecutive time someone from the ‘Latin’ part of the Eurozone will be in charge of the bank. The President of the ECB has a lot of power. Only last month, Mario Draghi, who occupies the position now, hinted at new stimulus measures without even discussing it with the ECB’s Governing Council, which drove down the value of the Euro. The Euro fell again with the announcement this week that Draghi would be succeeded by yet another ‘dovish’ Eurozone money-printer – European savers have already been hit by Lagarde before she even enters office.

Merkel was obviously not going to sacrifice the powerful ECB just to promote an inconvenient politician away. Just like von der Leyen, Angela Merkel is an EU federalist. Some may take issue with describing Merkel this way, as she has never come out in favour of things like a ‘European army’, but in her actions she has always struggled for more transfers of power to the European level. That’s been the case since she came to power, when she announced that her government would work to revive the EU Constitution that had been rejected in referendums in France and the Netherlands the previous year. The EU Constitution, which removed national vetoes and gave more power to the European Parliament and bureaucracy, was recycled as the Lisbon Treaty.

After that, Merkel was pivotal in allowing the creation of emergency bailout funds, such as the ‘European Stability Mechanism’, an embryonic Eurozone Treasury in all but name, handing out transfers veiled as emergency loans, with conditions attached that increased centralised control over national economic policy. In 2015, she further overruled her Chancellor, Wolfgang Schäuble, who had threatened to exclude Greece from the Eurozone. During the migration crisis, Merkel worked hard to push through mandatory quotas for member states to accept asylum seekers, outsourcing a sensitive decision to the supranational EU level. This has further undermined support for the EU in Central and Eastern Europe, where governments such as Viktor Orbán’s in Hungary have used the quotas to hurt the EU’s legitimacy. Last but not least, in 2014, Merkel did not assist the UK in preventing the appointment of the EU-federalist Jean-Claude Juncker. Later, she also didn’t help David Cameron secure EU reforms when she swiftly ruled out EU Treaty change.

In sum, Angela Merkel is an avid EU federalist and she very much wants a soulmate leading the European Commission, to secure her legacy for the next five years. In practice, von der Leyen may of course plot her own course, but given that most people in ‘Eurocratia’ favour business as usual the longer they stick around, no one should get their hopes up. In any case, picking someone in favour of even more concentration of power at the EU level is the wrong choice. To regain trust, the EU should instead focus on its core business: scrapping barriers to trade.

As Brexit negotiations have stalled, tensions between the EU and Switzerland are ramping up

Published in The Daily Telegraph

Since 2014, Switzerland and the EU have been trying to amalgamate their existing 120 bilateral treaties into a single agreement. Yet the Swiss refused to concede to EU terms without clarification on certain issues; in response the EU now looks likely to cut off Swiss stock exchanges from the Single Market within days in retaliation for their failure to ratify the treaty quickly enough. 

As a leak last week revealed, their reasons for doing so are, quite transparently, to make an example of Switzerland “in what is probably the decisive phase regarding Brexit”, according to the commissioner in charge of the talks. In other words, Switzerland, a member of EFTA and Schengen, a country that has paid billions into the Brussels coffers over decades, and enjoyed a largely amicable trading relationship, has become mere collateral in the EU’s desire to cow Britain into submission. 

But the Swiss are refusing to back down, threatening to retaliate by banning EU stock exchanges from trading Swiss shares. About 30 per cent of trading in Swiss blue-chips takes place in London. Opposition is not only coming from the right-wing populist Swiss People's Party, but also from trade unions. The Swiss Parliament has instructed the government to return to the negotiating table. 

For the EU, these problems date back to the 1980s, and an initiative by then-Commission President Jacques Delors, who inspired the legendary Sun headline “Up Yours Delors!” following one of his clashes with Margaret Thatcher. Delors, keen to design a uniform system to deal with neighbouring “third countries”, proposed to grant them full access to the single market, but only in return for adopting all the EU’s rules and standards. Lack of a veto over these rules inspired Jens Stoltenberg, the PM of Norway, which did adopt this arrangement, to brand his country a “fax democracy”. It didn’t take sovereignty-loving Swiss voters long to figure this out, and they rejected a similar arrangement in a referendum in 1992.

Back then, the EU respected this outcome and went on to negotiate a package of bilaterals, granting the Swiss selective market access in return for selective rule-taking. Today, however, the EU dismisses this arrangement, which closely resembles the government’s “Chequers plan” for the future EU-UK relationship, as “cherry picking”.

There are many parallels between Brexit and the EU-Swiss relationship, and in fact the British government should be ramping up coordination with Switzerland, to counter the EU’s attempts to increase its regulatory power on the back of disrupting business.

The proposed framework agreement between the EU and Switzerland contains two issues that would be troubling not just for Swiss politicians, but could be rejected in the Swiss public referendum which will follow if their government concedes to the EU terms. First of all, the agreement introduces an arbitration mechanism, with a role for the European Court of Justice, into the Swiss-EU relationship. Until today, that wasn’t the case - all previous disputes were resolved by politicians. The arbitration mechanism anticipated in the framework agreement is effectively the same as that agreed by Theresa May with the EU in November. The Swiss government seems to have conceded on this issue, but whether it will survive its own direct democracy is another question.

Secondly, the EU favours “dynamic alignment”, which means that the Swiss would be forced to accept updates of the EU rules they have aligned with in return for market access. It is a long-standing EU frustration that this wasn’t negotiated in the 1990s. The reason was of course the deep Swiss attachment to democracy and suspicion of agreeing to accede to EU rules that aren’t properly understood.

All in all, the Swiss-EU relationship has been so smooth that the EU’s ultimatums and threats to restrict trade look disproportionate and uncharitable in the extreme. Switzerland has contributed billions to EU projects, and granted free movement, so that today almost one in four inhabitants of Switzerland does not have Swiss nationality, 80 per cent of which are Europeans. How can the EU treat a friendly neighbour in this way? 

In 2018, eleven EU countries, including Germany and the UK, opposed the EU Commission when it suggested cutting off access for Swiss stock exchanges. Now the Commission is getting its way, ignoring warnings from Business Europe, the confederation of European industry, not to escalate. 

One EU diplomat told the FT that because “we’re not going to treat the Brits any worse than Switzerland”, hinting that failure to punish Switzerland with loss of market access for refusing to bow would be seen as a dangerous precedent. Though Switzerland will likely manage to mitigate the damage through its protective measures, it would signal that the EU is willing to restrict market access when it fails to increase its regulatory control over a trading partner.

Given the deep seated love of self-government in both Switzerland and the United Kingdom, two of the oldest democracies in the world, self-destructive attempts to hurt trade in a bid to gain more regulatory control will only fail. When faced with a European country that does not seek to belong to the customs union or single market, yet nevertheless enjoys a smooth trading relationship with the bloc, the EU should not seek to restrict the flexibility that has driven prosperity on both sides, over decades. Instead, it should channel some of its past pragmatism in approaching its future relationship with the United Kingdom.

What are the chances of a Brexit deal in case Boris Johnson becomes the new British PM?

Published on The Daily Telegraph

It seems almost inevitable that Boris Johnson will become the next Prime Minister of the UK, tasked with delivering Brexit. Boris may not be universally loved in Brussels, given his role in swinging the referendum vote towards Leave, but it would be wrong to assume that concluding a Brexit deal has become less likely as a result.

In many negotiations, it takes a hardliner to close the deal. Theresa May, a Remainer, would always have had a much harder time selling concessions to the British public than a Brexiteer would. For Boris, there are two options: either he goes full-on Trump or he chooses a more diplomatic path. It is not obvious what will work best with the EU. Jacob Rees-Mogg, a key ally of Boris, summed up the basic idea of a “Trumpian” strategy well, when tweeting: ‘To misquote Vegetius "If you seek a deal prepare for no deal."’

Contrary to the popular narrative, the EU does seem willing to compromise - at least a bit. Boris is keen on delivering the “Brady amendment”, the only thing UK MPs could agree upon, apart from rejecting no-deal. This entails renegotiating the Withdrawal Agreement relating to the Northern Ireland backstop, an arrangement whereby the UK would remain under the EU’s customs regime until further notice, and replace it with ‘alternative arrangements’.

From talking to diplomatic sources, the Telegraph’s Europe Editor Peter Foster, has gathered that a time limit to the backstop, is “not beyond realms of possibility if we're talking five to seven years [and if there is a] clear baked in Parliamentary majority as price of a deal.” Foster however thinks that the Trumpian approach would fail, as “a demand to ‘bin the backstop’ will be rejected outright and very quickly scupper any chance of a reset”.

In a way, the question isn’t even which approach will appeal to the EU. The real question is what will appeal to Ireland. A senior French official recently stated that "only Ireland can say the backstop is no longer necessary, but that’s not the case.” So when push comes to shove, the EU will ask the Irish what they think.

Following the increased discussion of a no-deal Brexit during the Conservative leadership contest, Irish Taoiseach Leo Varadkar said, “to me, no backstop is effectively the same as no deal”. Will Varadkar and the Irish political class respond positively to a Trumpian approach or will they dig in deeper instead?

Well, we can’t know for sure, and even if Ireland were to concede to a time-limited backstop, discussions would only resume in a few years time. This is why it’s so important to have a plan B, to prevent a traumatic no-deal Brexit.

While it’s true that the effects of “no deal” can and will be mitigated, given how both sides have a clear interest in doing so, it would spark a terrible blame game. French President Emmanuel Macron would no doubt blame the UK when confronted by French fishermen angry over the loss of access to British waters. The UK, meanwhile, would blame Ireland and Ireland would blame the UK. Everyone would be right to blame each other, but as a result of this, there would be less political capital to agree the deals necessary to mitigate no-deal.

A plan B could therefore consist of proposing to negotiate “alternative arrangements” to the backstop immediately. Both sides agree that the backstop should be replaced by something else at some point, so why not try to agree it now, so the UK can leave the EU, knowing for sure that it won’t have to enter the backstop?

So far, the Irish government has been very sceptical about the possibility of alternative arrangements preventing a hard border with Northern Ireland. Then Christian Bock, the head of the customs department of Switzerland, which is outside of the EU’s single market and customs union, has told British MPs at a hearing that he thinks an “invisible border” on the island of Ireland is “possible”.

The EU will of course come up with shaky legal arguments that it wouldn’t be able to talk trade before the exit date, even if Jean-Claude Juncker himself suggested just that in December. Then if the EU accepted to talk about future trade, Boris could claim that an extension of UK membership is warranted.

The actual “alternative arrangements” are likely to entail a lot of concessions from all sides. The UK may need to concede to some regulatory alignment, perhaps by Northern Ireland alone, which would cause some extra regulatory checks in the Irish Sea. Ireland may need to accept that Northern Ireland will simply also leave the EU’s customs union and the other EU member states would need to tolerate that Ireland and the UK will not bother to impose burdensome border checks. If goods entering the Irish Republic from Northern Ireland were compliant with single market standards, there isn’t much for the EU to fear, beyond the loss of a tiny bit of tariff income, which Ireland and the UK could compensate for.

Fundamentally, if we want to protect the extensive trade between the world’s fifth biggest economy and the world’s largest trade bloc, there is no alternative to perpetual negotiations and flexibility. Even when the EU-UK divorce and future relationship have been sorted, negotiations will remain necessary. If market access were granted on the basis of regulatory alignment, any regulatory changes would once again trigger negotiations. That is certainly the case in the stormy relationship between Switzerland and the EU. The EU’s relationship with post-Brexit Britain will be no different.

Five myths about the European parliament election results

Published in The Spectator 

In the analysis of last week’s European Parliament elections, a number of claims which should be categorised as 'myths' have emerged. Here, I’ve singled out five of them that should be challenged:

1. The 'major development' that the centre-right EPP and centre-left lost their majority isn't a major development

For the first time since 1979, the centre-right European People’s Party (which included the UK Conservatives until 2009) and the centre-left S&D group (to which Labour belongs) do not command a majority of seats in the European Parliament.

Danish EU Competition Commissioner Margrethe Vestager, who belongs to the centrist, soon to be renamed 'ALDE' group, and is a candidate to succeed European Commission President Jean-Claude Juncker, commented: 'I have worked with breaking monopolies, this is basically what I’ve been doing for five years,' adding 'the monopoly of power is broken.'

But, it is all but certain that the two major groups will simply turn to her ALDE group to obtain a majority in the European Parliament, which has gained a lot more power since the Lisbon Treaty entered into force ten years ago.

And Vestager herself, who is part of the Danish Social Liberal Party, is pretty close to the policy consensus of the EPP-S&D 'duopoly' anyway, which is strongly in favour of more powers for the EU and wary of proposals to let the EU focus on its core business – scrapping trade barriers. US President Trump dubbed her the 'tax lady'. Her views are closely aligned with the ALDE, which is being strengthened by a merger of the forces of French President Macron, and former Italian social democratic Prime Minister Matteo Renzi, whose party would further weaken the influence of the free-market supporting German FDP in the group. It all indicates that the EPP-S&D groups are simply being supplemented by something which is very similar anyway.

2. The 'influence' of anti-establishment eurosceptic parties will be indirect rather than direct 

Matteo Salvini, the leader of Italy’s governing 'rightwing-populist' Northern League, basked in triumph after the election, where his party gained 34 per cent of the vote share, doing even better than the polls had predicted.

In Hungary and Poland like-minded governing parties did well, while in France, Marine Le Pen’s National Rally managed to beat Macron's party for first place. Elsewhere, the results for eurosceptics were more disappointing, even if they consolidated past successes. The Alternative for Germany (AfD) for example, which will likely join Salvini’s new group in the European Parliament, only secured 11 per cent of the vote, which is an increase, but only a modest one.

Reacting to the results, Salvini stated that 'Europe is changing'. That is true, but it would be wrong to expect that his new group will have a lot of pull in the new European parliament. For a start, the 'business as usual'  parties – in the sense of creeping centralisation of EU power and money - still have a solid majority.

Also important are the internal divisions between the populists. Salvini just urged the ECB to 'guarantee' government debt, in order to keep bond yields low. This kind of Zimbabwe-style economics won’t go down well with the German AfD, which was founded due to German opposition to Eurozone bailouts and debasement of German savings as a result of ECB policies aimed at financing struggling governments in the eurozone’s periphery.

As well, mainstream parties will sooner or later learn from lessons from the Netherlands and Austria, where mainstream conservatives have enjoyed electoral success after taking up the concerns of anti-establishment parties without copying their often problematic solutions. In the case of the EU, that means refraining from outsourcing choices that are already controversial at the national level, on topics such as migration, taxation or national spending, to a supranational bureaucracy that doesn’t have the political legitimacy to make those choices.

Also in the UK, the massive success of the Brexit party will no doubt have an effect on Conservative party politics. No other politician like Brexit party leader Nigel Farage has been able to exploit the opportunity to exert influence on the political discussion through his European parliament speeches. Because the Brexit party will refrain from joining Salvini’s group, it looks like Farage will continue to enjoy the opportunity to get good 'speaking slots' in the EP, as leader of his existing group, the EFDD.

3. Talk of a 'green wave' is exaggerated

It is true that the greens have been doing well in this election, supposedly on the back of the climate debate, but at the end of the day, they will only have 69 seats, of a total of 751. Even if in relative terms their success is greater than other groups, it is still lower than the relative growth enjoyed by the ENF group, which includes Salvini and Le Pen. Also in absolute terms, they only gained 18 extraseats, which is less than the 39 seats gained by the ALDE or the 22 gained by the ENF.

The greens did very well in Germany but the trouble is that they are not particularly popular in Southern or Eastern Europe. They also can’t be used by the centre-right EPP and centrist ALDE to replace the left-wing S&D, as this combination does not deliver a majority. Also replacing the ALDE as the vehicle to prop up the EPP-S&D won’t work, given that such their majority would be too small, especially as Hungarian PM Viktor Orbán may be about to leave the EPP.

4. The European Parliament is unlikely to determine Juncker’s successor with its 'Spitzenkandidaten' system

Five years ago, MEPs designed a system aimed at complying with the EU Treaty’s requirement that EU leaders 'take into account' the result of the EP election when deciding the President of the European Commission. The idea is that EU leaders simply endorse whoever can secure an EP majority, with the respective EP groups each nominating a 'Spitzenkandidat' or lead candidate. Back then, Merkel was pushed by the German media and her social democratic coalition partner SPD to go along with it and appoint Jean-Claude Juncker, who had been chosen as the EPP’s lead candidate.

An ambassador of a major member state told the Financial Times that EU leaders are today still 'traumatised' over losing the initiative to the European Parliament over Juncker, stating: 'The wounds are still fresh. It won’t happen again.'

At the moment, MEPs are struggling to agree on a candidate, while French President Macron is a powerful opponent of the idea, clashing with Merkel who supports the process, possibly in a bid to gain extra concessions, as the nomination of the Commission President is part of a package of other EU top jobs.

Today, only 26 per cent of Germans have heard of their own compatriot Manfred Weber, a Bavarian CSU MEP who was chosen as the 'Spitzenkandidat' of the EPP. He has never run a government, nor has he ever had any important Ministerial job. Soon, we may find out that this particular EP innovation will be ditched by the leaders of Europe’s democratically elected governments.

5. Turnout is up, but this isn’t proof of the EP’s legitimacy

Until now, European-wide turnout for the EP elections had been dropping at every single occasion since 1979. That trend has been reversed, with turnout now above 50 per cent – the highest level in 20 years. The reasons why are unclear, as Eurosceptic successes have been combined with both high and low turnout in different countries.

In any case, a higher turnout or even the fact that it is directly elected do not provide the European Parliament with the necessary legitimacy to take the important decisions it is taking.

In its verdict on the Lisbon Treaty, the German Constitutional Court ruled that the EP is 'not sufficiently fit' to take 'representative decisions on the basis of majority', at least as long as there was 'no uniform European demos' – a condition that looks unlikely to be satisfied any time soon. Surely, Germans wouldn’t find it fair if a majority in Europe imposed nuclear energy on them. Would it be in line with the idea of majority voting? Yes. Would the EU be seen as a constituency where it is fair that the minority is outvoted on important matters by the majority? Surely not.

In the debate on the EU’s upsides and downsides, the European Parliament has often correctly been singled out as contributing to many of the EU’s downsides. Fundamentally, it is part of the 'political' arm of the EU project. Whether the turnout for the direct election of the EP is up or not, won’t do much to improve the legitimacy of the 'political EU'.

Interview with CNN, discussing the results of the EP 2019 election

https://openeurope.org.uk/impact/open-europes-pieter-cleppe-discusses-european-elections-results/

Euronews interview on the Dutch EP election

The good, the bad and the ugly of Jean-Claude Juncker’s presidency

Published in The Spectator 

Also published in German by Achgut.com, in French for Contrepoints and Belgian newssite Express, in Dutch for Het Financieele Dagblad, Express and originally for Dutch foreign policy think tank Clingendael. 


For five years, Jean-Claude Juncker has been head of the European Commission. Luxembourg’s former Prime Minister is known for always being able to crack a joke, but as his term ends this year, it’s a good time to look at the good, the bad, and the ugly of his track record as president of the European Commission.

The good

The Juncker Commission has achieved some results when it comes to concluding new trade deals. Most prominently there are its trade agreements with Canada and Japan, with the latter creating the biggest trade area ever. It may not be an orthodox free-trade agreement, as its standards could function in a protectionist manner, but the perfect is the enemy of the good. Juncker, and especially his Swedish Trade Commissioner Cecilia Malmström, deserve credit here. Unfortunately, Juncker was unable to conclude the TTIP trade deal with the United States, but it may have been killed off by President Trump anyway. The EU Commission hasn’t been perfect during the trade tensions with Trump, as it engaged in counter-tariffs that have hit EU consumers, but in the end it managed to convince EU member states to relaunch an attempt for a more modest trade deal with the US, and the EU also offered to reduce some of its own import tariffs

Another policy area where improvements were made by the Juncker Commission is the EU budget, which amounts to a whopping €1,000 billion over seven years. In 2017, the EU’s Court of Auditors concluded, for the first time ever, that a significant amount of EU payments had been largely error-free. That’s not to say the EU budget is managed well, to put it mildly. For a start, this issue only relates to errors in spending and not to outright fraud. The latter is supposed to be fought by the EU anti-fraud agency OLAF, an institution with a controversial reputation.

It also doesn’t refer to poor spending choices. The EU still spends €340 billion on agriculture, with more than 70 per cent simply paid out to those who happen to own agricultural land. Its second biggest spending area, regional spending, also ‘does not seem to contribute effectively to foster income convergence across regions’, according to a 2016 CEPR report, and EU spending on administration, staff and bureaucracy has an even worse reputation.

That said, the first necessary reform to the budget was for the EU’s own auditor to declare that its spending was materially free from errors. As the Chinese saying goes: ‘a journey of a thousand miles begins with a single step.’

The bad

Brexit

The one big failure of Jean-Claude Juncker and his Commission is of course the loss of the United Kingdom as a member state. In the UK, Prime Minister David Cameron announced his resignation the morning after the referendum result was announced in June 2016. That Juncker did not do the same is not only due to a difference in political culture, it’s mainly because of a belief within EU institutions that they shouldn’t be blamed for anything Brexit related. That’s bizarre thinking. Brexit is partly the result of the EU ignoring British discontent over the ever greater concentration of power and money at the EU level. Juncker and co. even obstructed Cameron when he attempted to reform the EU and the UK’s relationship with it, even if Cameron himself wasn’t ambitious enough in the negotiations.

There is very little introspection within the EU institutions as to why Brexit happened, even if two out of five of Juncker’s recent objectives for the EU were about ‘less EU’. But these objectives were also partly a response to the recent success of eurosceptic ‘anti-establishment’ parties across Europe. It seems that Juncker hasn’t been able to respond to the rise of populism. During the last five years, people only supported the EU Commission’s preferred option in one in six referendums. Opinion polls also indicate that in mainland Europe, people want the EU to lose powers.
In response, the European Commission has not done much more than coming up with mere pledges supporting ‘subsidiarity’. In practice, the body has simply continued with business as usual, proposing to scrap national vetoes for foreign policy and taxation, while it pushes for European taxes.

Over-regulation

The failure of the ‘subsidiarity’ agenda is most visible when it comes to the EU Commission’s ‘better regulation’ agenda, a competence of Dutch EU Commissioner Frans Timmermans. Even if it started ambitiously, the results are disappointing.

From 2014 until 2018, the Juncker Commission came up with 370 legislative proposals, which represents a drop from the period between 2009 and 2014, but is in line with the problematic situation before. After 2008, Brussels came up with a lot of new financial regulation, something which could be described as hysteric, because not lack of regulation but expansive monetary policy was at the heart of the financial crisis. However, it’s of course not the number of proposals which is the problem, but their overall impact. There have been a number of complaints that proposed EU legislation has been issued without proper impact assessments being undertaken.

Nevertheless, it would be simplistic and wrong to only hold Timmermans and Juncker responsible for the European regulatory mania. The controversial recent update to the EU’s Copyright Directive is a good example. Irrespective of Juncker’s close ties with Axel Springer, Europe’s biggest publishing house and Google competitor, a number of countries were against this particular piece of legislation. A joint statement was issued by the Netherlands, Luxembourg, Poland, Italy and Finland, warning that it represented ‘a step back for the digital single market’, as it disproportionally benefited intellectual right holders. Regardless of who is right and who is wrong, it’s a good example of how only a restoration of national vetoes would be an effective guarantee against EU over-regulation.

Free movement

Another problematic aspect of the Juncker Commission was its misguided efforts to limit the free movement of workers within the EU when updating the posted workers directive. New EU rules said that companies temporarily posting workers in other EU member states would only be able to do so for a maximum of 12 to 18 months – shorter than before.

Unfortunately, this update to the posted workers directive doesn’t really solve the problem. For posted workers, social contributions that need to be paid on top of their salary still need to be paid in the country of origin. This makes sense, as a company needs to be able to temporarily post workers in different member states, so these workers can then simply continue to be dependent on the social security system of their own country.

These social contributions are however much lower in countries like Poland as compared to for example France or Belgium. That the new rules require employers to pay slightly higher salaries to posted workers does not compensate for their much lower social security contributions. The Belgian and French governments are wary of tackling the problem of high social contributions at home. Instead, they have preferred to support the EU Commission’s attempts to restrict the free movement of workers, as the Commission went around stressing the importance of this EU freedom in the Brexit context.

Services

Jean-Claude Juncker has suggested ‘coalitions of the willing’ as a possible future model for the EU, but this idea hasn’t been applied by his Commission to opening up Europe’s services market, which could potentially generate a lot of growth.

In 2018 and 2019, the Juncker-Commission simply ignored requests from 17 member states to ‘scrap the remaining obstacles for labour and training’ when it comes to services. Instead, the Commission preferred to restrict the single market, while at the same time using the single market as an excuse during the Brexit negotiations.

The eurozone crisis

When heavily indebted Greece got into trouble once again in 2015, the European Commission pushed hard to keep the country in the eurozone, despite the fact that it had been given two bailout packages already.

Together with France, the EU Commission heavily opposed the temporary euro exit proposed by German Finance Minister Wolfgang Schäuble. In the end, however, German Chancellor Angela Merkel overruled Schäuble, and decided instead to give Greece a bailout package of 86 billion euro. The fear that a Greek exit could lead to a eurozone break-up had trumped concerns that this would lead to even more irresponsible budget policies and internal strife within the eurozone. In 2019, Juncker himself declared that keeping Greece in the eurozone was one of the biggest achievements of his Commission.

The EU’s response to the eurocrisis has been about short-term gain in return for long-term pain. The question, however, is if the common currency can survive by issuing ever more debt to heavily indebted member states. Greece has had some economic growth since 2015, but its debt burden of 181 per cent to GDP still hangs over its future. Meanwhile, the whole house of cards is being supported by the European Central Bank at the expense of savers and European productivity, as the ECB’s extraordinary loose monetary policies have less and less impact on economic growth.

The ugly

Martin Selmayr

Less important from an economic point of view, but concerning when it comes to popular support for the EU was the appointment of Juncker’s cabinet chief, Martin Selmayr, to secretary-general of the European Commission, one of the most powerful positions in the institution. According to the European Parliament, this appointment ‘could be viewed as a coup-like action’, and the European Ombudsman described it as ‘a violation of European law and the Commission’s own internal rules’. This of course fed the rumours that Juncker was heavily dependent on Selmayr, in part because of the president’s rumoured alcohol abuse. Whatever the truth, Selmayr has played an important role in the Brexit negotiations, and his hard-line approach has complicated the already difficult talks.

The ‘political’ Commission

In 2014, Juncker declared that his European Commission would be ‘very political’, even if he himself had not bothered to run as a candidate in the European Parliament elections in his native Luxembourg. In practice, his desire for a ‘political’ Commission didn’t signify anything good. Juncker has expressed all kinds of wild opinions, such as support for a ‘European army’, which has worsened tensions with the UK.

It’s not normal for a supranational bureaucrat to go around making political proposals that go directly against what many EU governments think. The Dutch Foreign Minister, Stef Blok, certainly thinks so. He recently wrote in the FT that ‘A less political European Commission is needed… A Commission that prides itself on being political undermines its own objectivity.’

Elsewhere, European competition policy is also getting more and more politicised. Margrethe Vestager, the responsible European Commissioner, declared when entering office that she found ‘it only natural that competition policy is political,’ although she did add that when it comes to enforcement, ‘there is simply no room for political interference’. But the Commission has in fact been making clear political choices when deciding whether to take action against countries it feels have violated its competition policies.

Belgium, the Netherlands, Luxembourg and Ireland were all attacked by Vestager over their tax agreements – ‘rulings’ – with big companies, often from the US. But she let the Italian government bail out banks – despite new EU rules aiming to hit investors instead of taxpayers first. Exceptions were also made for the pro-European French president, Emmanuel Macron, who was allowed to nationalise a French shipyard to prevent it from being bought by an Italian company. As enthusiastic as Vestager has been when it comes to enforcing the grey areas of competition law, like the question whether a tax ruling is open to all, she has been nowhere to be seen when there were clear violations of the rules, like bailouts or nationalisation.

Also good relations with the US were all but served by Vestager. President Trump dubbed her the ‘tax lady’ and the CEO of Apple, which she saddled with a retroactive tax bill of billions of euros, called her policy ‘total political crap’.

For the EU, competition policy isn’t an obscure side show. It is at the very heart why especially smaller countries are a member. Undermining it by politicising it will destroy all legitimacy for the already ailing project.

Foreign policy

The EU’s relations with its neighbours have not improved under Juncker’s ‘political’ Commission. It may have been the American President who started the trade conflict, but the EU could have refrained from counter-tariffs (which hurt consumers) and its refusal to include agriculture in trade talks. The EU’s sanctions against Russia have also hurt Europe’s agricultural industry, no matter how bad Putin’s actions may have been. Even the EU’s relationship with Switzerland isn’t very warm. Although trade relations with the country are stable, the EU continues to try to renegotiate the relationship, insisting on imposing its top court, the ECJ, as the arbiter of judicial disputes. In late 2018, the EU even threatened Switzerland with an ‘ultimatum’, which has failed to resolve the issue until today.

Whether a country is suffering and on its way towards a dictatorship or whether it has a booming economy isn’t a metric for good relations with the EU: both ties with Turkey and with economically thriving Israel, whose Prime Minister has called the EU ‘hostile’, have worsened considerably.

The migrant crisis

Last but not least, there was the reaction of the Juncker Commission to the greatest migration crisis seen on the European continent since the second world war. 2.5 million migrants entered the EU in 2015, 2016, and 2017. Naturally, the European Commission only had limited control over this, because border protection is rightly a responsibility of member states. Nevertheless, the Commission tried to abuse the crisis to once again grab more power.

Despite French warnings, the Commission and the German government together made sure to outvote Central and Eastern European countries, when deciding on mandatory quotas for member states to welcome asylum seekers. In practice, this policy has of course proven impossible to apply – there are no passport checks in the Schengen zone, so one cannot enforce people staying in a certain member state. The policy did, however, lead to more euroscepticism in Central and Eastern Europe, undermining decades of efforts to embed those countries in the West. It also undermined the EU Commission’s questioning of the rule of law in Hungary. There, PM Orbán thankfully used the opportunity to hurt the EU’s credibility, by subjecting the idea of mandatory migration quota to a referendum.

The EU Commissioner for Migration, Dimitris Avramopoulos, also failed to create ‘disembarkation platforms’, where asylum seekers crossing the Mediterranean would be received, something that EU leaders had backed in 2018. Nor did the EU put a lot of effort into coordinating readmission agreements with migrants’ countries of origin.

If asylum seekers had been able to await their asylum requests in a safe area at the EU border, the business model of human smugglers would have been destroyed and thousands would not have died at sea trying to reach Europe. Terrorists would also not have been able to exploit the migration chaos.
Of course, the migrant crisis is a massive challenge, but the EU Commission’s focus on non-effective and divisive mandatory quotas for asylum seekers and more money for border patrol staff – ideally under EU sovereignty – missed the point completely. By now, it should be clear to everyone that the chaotic influx of migrants was not due to a lack of border guards, but the fact that those caught entering were allowed to continue their journey into Europe.


Overall, the Juncker Commission may have done well when it comes to international trade, but otherwise his presidency has been a wasted five years, with his greatest defeat being the loss of the UK as a member state.