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October 17, 2019

A dangerous game for the EU

Brexit aside, the really big political development in the EU right now is the sudden isolation of Emmanuel Macron and France in EU politics. We note a lot of French-bashing at the moment, and wonder whether there is something more to it than meets the eye. More importantly, are we about to lose sight of the bigger picture of what is at stake for the EU?

EU diplomats and MEPs are clearly no fans of Emmanuel Macron. He is an active foreign-policy maker who takes initiatives, disrupts carefully worked-out plans, works best with other EU leaders, and does not rely on their advice, as Rym Momtaz describes it brilliantly in Politico. The ambitious Macron is delivering one coup after another and moves with a fast pace hard to keep up with. To propose Ursula von der Leyen as commission president was one of his stunts. It cut the Gordian knot of the nominationsfor EU top jobs. France's No to open accession talks with Northern Macedonia or its warning over Brexit red lines show that Macron dares to stand out against the status quo and to create opportunities, even painful ones, that could provide a possibility for change. 

French bashing avoids the argument itself. It was easy for everybody to agree the principle of linking the deepening the EU to enlargement on the debating circuit, but in reality this link never existed. The opposite view usually prevailed under the mantle of pragmatism and geopolitical raison d’état. This helped to push underlying divisions about the future of the EU under the carpet. The Germans especially have no interest in a deepening of the EU. We believe Macron misjudged Angela Merkel's willingness to reform the EU. He is not the first EU leader to misread her. Another problem is that Merkel’s influence is fading at home too.

The virulent criticism of the French rejection of Northern Macedonia accession talks or the EU parliament’s rejection of Sylvie Goulard as commissioner appear to be the EU’s revenge. But this strategy, too, comes at a price. Important decisions in EU politics have to be taken by unanimity. If the EU pushes back too hard, Macron may be less inhibited to exercise his veto in areas he deems important - the question of Brexit extension is an immediate one. So is the continuation of sanctions against Russia. And, as we write below, France is also taking a firm line against Germany on the EU budget.

France-EU relationships have been complex since the days of Charles De Gaulle’s empty chair. Macron, too, stands accused of not playing by the rules. Isolation is not a new experience for Macron. The gilets jaunes movement happened just when the French started to turn against their hyperactive and demanding president. It is also not a new experience for the French in foreign policy terms. They were known to play their chevalier seul if it suits their interest. This is game they know how to play.

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October 17, 2019

After Brexit, get ready for a German EU budget rebate

The UK was long the awkward partner in the EU, a role Germany is now intending to fill. FAZ reports this morning that Germany will insist on an EU budget rebate. Germany’s net contributions to the EU are set to rise from the current €18bn per year to €30bn - that is, if member states agree to increase the size of the EU budget from a current 1% to 1.11% of GDP, or €1.13tr for the entire seven-year budget period from 2021 to 2027. Berlin says it cannot sell an increase in the EU budget at home. That’s largely because the EU is widely portrayed by the German political system as a bogeyman. We noted before the parallels between the situation in Germany now and that of the UK twenty years ago. Brexit was preceded by a long process of alienation.

FAZ reports of what it calls a bloodbath in a recent meeting of EU ambassadors discussing the 2021-2027 EU budget. After the exit of the UK, the Commission wants to get rid of all the remaining budget rebates, including for Sweden and Denmark. This is resisted not only by the Hanseatic League, but also by Germany which wants to participate in the rebates. France is also a net contributor, but sides with the Commission on this point. Here is another breaking point in the Franco-German alliance. 

The Finnish government, which holds the rotating EU presidency, has tried a compromise - a financial corridor of 1.03 to 1.08% of GDP. This compromise triggered the ill-tempered discussion by the EU ambassadors in the Coreper meeting. The net recipients want more, and Hungary and Poland reject any link between the budget and Article 7 procedures about whether member states respect democratic rights. There is also no agreement on whether the EU should emphasise regional or structural funds, or how much it should divert spending away from agriculture and towards modern investments. The Germans could live with the low range of the Finnish estimate, but they fear that the next EU presidency - by Croatia - could tilt the balance in the opposite direction.

A side remark from us: given the complexity of the budget process, we see no chance that the EU would extend Brexit beyond next summer. Just think of what would happened if you added an non-cooperative UK to the already explosive budget mix.

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