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December 14, 2017

Macron gives up on Euro reform... for now?

Like Nicolas Sarkoyz and François Hollande before him, Emmanuel Macron has taken six months to drop his eurozone reform agenda. Faced with a German reaction ranging from Angela Merkel's indifference to outright hostility from other quarters, French officials tell Reuters that Macron does not want to get bogged down in technocratic discussions over the eurozone budget, but to focus on other areas of policy where agreement on a way forward is more likely, such as defence, energy, and the digital economy. Reuters adds migration to this list of more promising issues, but as we note in our parallel story today, it is far from clear EU politicians even agree on what the ultimate goal of the EU's migration policy should be.

What strikes us is the change of tone in how the Franco-German discussion s being described, also in the German press. Now the narrative is one of an indecisive Merkel hindering a newly ambitious France. We note that Macron's predecessors didn't start out any less ambitious than Macron. But, as is the case now, their ambitions didn't last more than a few months - at least when it came to eurozone reform. What is different now is Merkel's personal situation. Where in the past she presided over coalitions built on rock-solid parliamentary majorities, she now has trouble putting together a majority, with coalition talks having failed once already. In a comment in Tagesspiegel, Albrecht Meier is outright enthusiastic about Macron's leadership in Europe and his effectiveness at home. Macron has delivered on what Merkel had expected of him, like the pace of the labour reforms and deficit reduction. Internationally, Meier is also impressed by Macron's initiatives regarding Africa or climate change. By contrast, the political impasse in Berlin prevents Merkel from setting the tone. She is past he zenith, Meier writes, and Paris can sense it.

But, on the eurozone, little has really changed other than perception. Merkel stonewalling Sarkozy and Hollande was perceived as a show of strength because she was strong at home. Now the delays are interpreted as weakness because she's weak at home. But the end result is the same: the French president drops his eurozone reform proposals.

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December 14, 2017

Refugee quota controversy hides disagreement over ultimate policy goal

As we reported two days ago, alongside his letter of inviting EU leaders to the Council Summit today and tomorrow, Donald Tusk had included a note about refugee policy calling the mandatory refugee resettlement quotas decided in 2015 divisive and ineffective. This has invited blistering attacks from migration commissioner Dmitris Avaramopoulos, as well as vice-president Frans Timmermans. The latter rebuffed Tusk at a debate in the European Parliament where also several MPs strongly criticised Tusk, notably ALDE leader Guy Verhofstadt and Swedish MEP Cecilia Wikström who is the parliament's rapporteur on the reform of the Dublin regulation. Avramopoulos called Tusk's letter anti-European and unacceptable, for undermining the principle of solidarity which underpins the European Union; while Timmermans denied Tusk's assertion that the refugee resettlement policy had been ineffective. Verhofstadt declared himself shocked, while Wikström called Tusk's letter one of the worst examples of European leadership in recent years. As a result of the controversy, Tusk has amended his letter. Where it used to say 

"only Member States are able to tackle the migration crisis effectively. The EU's role is to offer its full support in all possible ways to help Member states handle the migration crisis. But the EU has neither the capacity not the legal possibilities to replace Member States in this regard"

it now reads 

"the EU can only tackle illegal migration effectively with the full involvement of Member States and by the coordinated use of EU and Member States means and instruments; no Member State can deal with this common challenge on its own ...; migration flows differ, and it is important to distinguish between refugees and economic migrants in developing our policies;

The criticism of the resettlement quotas stands, as does the assessment that the ad-hoc financial resources brought to bear on the problem are inadequate. On the positive side, what does Tusk propose as an alternative?

  • to incorporate funding for refugee policies in the multi-annual financial framework as opposed to the current ad-hoc mechanisms;
  • long-term partnerships with neighbouring countries and countries of origins to stem migration;
  • increased returns of illegal immigrants through the use of the safe third country concept;
  • ensuring the EU external borders are protected;

It is unclear what exactly Tusk means when he talks about "combining responsibility and solidarity" in the reform of the Dublin process, which he says is necessary to rebuild trust among member states. Also Tusk advocates "the promotion of resettlement as the chief legal pathway for international protection" from human trafficking, without going into specifics. What is clear is that he thinks resettlement between EU member states should not be promoted.

The disagreement on the effectiveness of the resettlement policy betrays a disagreement on the goal that EU migration policy should pursue. When Timmermans says in the Parliament that the policy has been effective, he means that 90% of those willing and eligible for resettlement have been resettled. On the other hand, Politico quotes Council officials saying that the policy has been ineffective because the number of illegal migrants arriving in Europe is not being reduced.

Wikström warns that the Parliament will never accept a policy that does not change the reality that frontline member states like Italy and Greece are being left alone to deal with the problem. Huffington Post Italia notes that the Visegrad countries have organised a pre-summit meeting with Jean-Claude Juncker and Paolo Gentiloni where they intend to pledge a financial contribution to the fiduciary fund for Africa, in a show of solidarity with Italy. In his letter, Tusk highlighted Italy's efforts in Libya as an example of how decisive action by member states can be effective.

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December 14, 2017

Can't pay, won't pay

It is no surprise that there are unpaid taxes in Greece, an economy hit by crisis and austerity. But the size of the unpaid tax debt is still staggering. Since 2014, expiring tax debts have been rising by about €1bn per month, adding more and more to a pile that has reached a staggering €100bn, or 55% of Greek GDP. There is no way this is ever going to be repaid. Only €10bn-€15bn is still considered collectable.

The latest data shows that unpaid taxes year-to-date until October rose €10.44bn, while at the same time public revenues were down by €2.5bn. Kathimerni expects this trend to continue next year, as the new tax burdens and increased social security contributions look set to send debts to the state even higher. Every second taxpayer owns the state money, and less than half of those are face the risk of forced tax collection. This looks like a vicious circle.

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