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October 21, 2016

Wallonia says No for the third time

What part of the word "No" do they not understand? Wallonia has said No three times to the Ceta trade deal with Canada. They are really digging their heals in. This is a much more serious issue than many people think. It is not about to go away if you just talk to the guys, or threaten them, or appeal to reason, or the greater good. We think that there is still a chance for the Ceta agreement to come into force, but probably only after a revision of the treaty itself, and thus not under the envisaged schedule. 

The European Council has given the Wallonians a deadline until today to allow them to close the matter so that the scheduled October 27 EU/Canada can go ahead, where Ceta would be formally approved. The Wallonian prime minister, Paul Magnette, jumped the gun on the deadline and said last night that Wallonia would not change its mind. There had been some progress in the talks with the European Commission, he said, but not enough. Today, he will meet Canada's trade minister and Canada's chief trade negotiator for the second time to explore whether there is scope for renegotiation. Canada has signalled readiness to compromise further but we don't know the details.

La Libre Belgique reports this morning that one of main obstacles is the role of US companies that are based in Canada, and which might be able to piggy-back on the trade deal to get preferential access to the EU market through Ceta. Le Soir adds thats the other two big problems is the uncertain legal status of the various declarations that have been given, and the role of the arbitration courts. There has been some progress on reciprocity clauses for agriculture, as Ceta allows tariff-free access to Canadian agricultural goods, like maple syrup.

We are struck by the angry comments of Magnette's deputy, whose Christian Democratic party is after all a member of the EPP. Maxine Prevot noted it was not Canada who set the Friday deadline for Wallonia, but the European Council. She notes that there remain serious obstacles in meeting Wallonia's concerns. It was incomprehensible that the Commission is less open to talks on this issue than the Canadians themselves. And then this:

"We hope that the expectations of civil society as expressed by the [Walloon] parliament are finally respected and that democracy is not sacrificed to international finance."

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October 21, 2016

Do you remember that Dutch referendum on Ukraine?

After the Dutch 'no' to the Ukraine association agreement with the EU in a referendum last April, the Dutch government gave itself time to find a solution that did justice to the referendum result. The time is running out, as the Dutch parliament is scheduled to vote on the association agreement on November 1st. Mark Rutte said yesterday he does not want to make a proposal to the European Council until he knows that it has the support to pass the Dutch parliament. The obstacle he faces is that the PVV-PvdA coalition does not have a majority in the Dutch upper house, the Eerste kamer, which also must approve the treaty. The only option mentioned by NRC is adding a declaration to the agreement that it will not lead to Ukrainian EU membership. But Rutte still needs to gain the approval of at least some opposition parties, which he is trying to do by using Putin as the bogeyman. It the agreement does not pass, Putin will be uncorking champagne, Rutte said.

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October 21, 2016

How narratives are destroying the EU

We would like to juxtapose two very long comments we have seen today that are seemingly unrelated. One is by Daniel Korski, who was deputy director of David Cameron's policy unit, and the other by three former German central bankers and a former economics minister. The first is about why the UK lost the referendum, and the second about why the EU needs to allow the eurozone to break up. The two essays read like a time sequence. The Germans are at a place where the British were 15 or 20 years ago - fundamentally at odds with what is happening in Brussels. If this goes on, Germany will end up where Britain ended up this year - maybe not outside the EU, but outside the eurozone or as the anchor of small core eurozone without the south.

Korski's article is a long rambling narrative that tries to combine a rather intriguing account of how the Brexit campaign felt from inside the Cameron camp with a somewhat less successful attempt to analyse why they lost. But he makes a number of good observations. He said the problem was not that the campaign focused on the economic benefits of the EU, but the failure to change the way Britons feel about the EU. One of Cameron's proudest achievement was to have taken the Tories out of the EPP. Essentially, Korski is telling us that Cameron was not a credible pro-EU advocate because he was, at his heart, a eurosceptic.

We are only picking up on this small excerpt from what is one of the most detailed insider accounts on Brexit we have read so far. What interests us in particular is not so much the who-said-what-to-whom parts, but how narratives, if pursued for long enough, have a material impact on political outcomes. Korski is telling us that the StrongerIn campaign was not able to overcome decades of eurosceptic propaganda. And that affected also Labour MPs (not just Jeremy Corbyn) who were unable to explain the benefits of the EU to their constituents because they did not have a clue what the benefits are.

What does this have to do with the German debate about the euro? The German policy establishment's narrative about the eurozone has a lot of parallels with the way the eurosceptics in the UK have been portraying the EU for decades. As a very long article by Wolfgang Clement, Rainer Dulger, Otmar Issing, Jürgen Stark, Hans Tietmeyer in FAZ shows, their wish is not to safeguard the euro, but to save what they consider to be the ordo-liberal principles of the Maastricht Treaty - such as the focus on fiscal discipline and subsidiarity. They argue that the ESM and the proposed deposit insurance EDIS constitute the first steps towards a transfer union, a concept they abhor with the same verbal violence as British eurosceptics treat the EU. Just as UK newspaper readers were exposed to anti-European diatribes for two decades, the same is happening in Germany. The hostility towards the ECB is unrelenting (see also our other report on the latest press conference by Mario Draghi). German readers are treated to constant accusations that the ECB is breaching the law, or that its policies disadvantage German savers at the expense of Italian borrowers. The authors' goal is not to destroy the EU but to reduce the EU to focus on foreign and security policy, a common migration policy, and to encourage economic growth through a common climate policy, energy policy and a policy on digital development. That list does not include a common macroeconomic policy. Nor does it include the euro. They want to include specifically the ability by countries to opt out of the euro. Or to be forced out - they are not clear on this point.  

If this goes on for another five or ten years, watch out.

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