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June 21, 2018

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Will Salvini foil Merkel’s latest diplomatic manoeuvre?

Maybe it will not be Horst Seehofer who is going to be Angela Merkel’s nemesis. Or Donald Trump. At this stage, it looks like Matteo Salvini is the most dangerous protagonist for her because he is about to sabotage her grand masterplan to extricate herself from her little local difficulty. 

This Sunday, there will be a working meeting of a number of EU leaders with the draft declaration already written before the meeting. Spiegel Online has the six-page document, which makes a number of commitments Merkel needs to save her coalition. It says explicitly that asylum seekers have no right to choose their favourite country, and crucially, there will be negotiations for a flexible mechanism for member states to return registered refugees. This is sucking up to Seehofer, but we are not sure that this will help him. The negotiations of the bilateral agreements will be up to the interior ministers - in other words to himself and Salvini. 

Spiegel Online suggests that this is a clever move by Merkel - to let Seehofer negotiate his own bilateral deals. We are not so sure. Seehofer can say on Sunday that Salvini has already rejected it - there can be no deal without Italy. 

And that position seems to be consistent with what we are hearing from Italy. Corriere della Sera writes this morning that Giuseppe Conte is more co-operative than Salvini, but also not happy with the idea of a pre-negotiated draft declaration to which he was not a party. There is no way he can sign up to a document that suggests that Italy would take refugees back without any commitments to a quota system, which is really now off the agenda. Salvini is quoted as saying (our translation)

"If we go to Brussels and find the work is already stitched up by France and Germany, if they think that they are sending us their migrants instead of helping us, then we do not even go. We can save the money for the trip." 

Salvini also noted that Spain had committed to accepting 3265 asylum seekers but taken only 235. He calculated that the gap is another four boats Spain could easily accommodate. France had committed to 9816 but taken only 640, while Italy received 640,000 migrants over four years. 

So how will all of this go down with the CSU? It is our reading of the situation that the CSU does not want to be seen as stabbing Merkel in the back. Her refugee policies are deeply unpopular in the country, but she remains one of the most popular politicians herself. On the other hand, we see no way Seehofer can extricate himself from the commitment to enact the executive order to send refugees back from the first week of July. The summit is not going to bring sufficient hope that there will be a European solution. The EU can no longer take it for granted that Italy will continue to sign up to agreements that are manifestly not in the country’s best interest - like the ESM or the bank resolution directive. This is a changed situation. 

A majority of German commentators believes that the summit diplomacy has done enough to avert the threat to the German coalition, but we are not sure that this is necessarily so. Merkel has an alternative coalition option. And the Insa poll is telling us that a split between CDU and CSU would come almost entirely at the expense of AfD and FDP, not the CDU. Separately, the two Christian parties would raise their joint share of the vote to over 40% if they separated. They can still form coalitions at the federal level. We are not predicting that this will happen, but we see the incentive to separate for the CSU leadership very clearly. 

As a postscript, we note the bilateral meeting yesterday between Markus Söder, the Bavarian prime minister, and Sebastian Kurz. Kurz went out of his way to support the CSU in its position against Merkel, and said that there would be no progress on the immigration issue at least until September. Soder express a fear that Merkel might do a eurozone budget/refugee trade off - buying Italy’s consent for a refugee deal and give Italy more financial leeway. 

We don’t see such a trade-off. And we don’t think the CSU will blow up the Merkel/Macron eurozone budget deal. It will not go much beyond what Merkel promised in her newspaper article. But we don’t see that the refugee issue is about to be resolved in time. 

Our other stories

We also have stories on France and Germany proposing NPL caps and rejecting the safe asset proposal; and not agreeing any macroeconomic stabilisation function for a eurozone budget; on Merkel’s next political crisis; on Anel’s trouble with Northern Macadonia; on what will happen in Greece after the memorandum; on what it means for the euro not be a reserve currency; and on the defeat of the Brexit rebellion.

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