We use cookies to help improve and maintain our site. More information.
close

September 04, 2019

Alternatives to the backstop - what are the chances?

Ireland insists on the backstop as a guarantee that the border between Northern Ireland and the Republic will stays pretty much as it is, and that any UK negotiations are with the EU. However, Boris Johnson and his team are working on alternatives to the backstop and bilateral solutions. Their view is that the only UK commitment to keep is that there are no border checks or infrastructure. This is far less than what Leo Varadkar wants. Johnson said in the Commons that he wants to talk to the Irish about agrifood, one of the trickiest areas as EU rules specify that animals and animal products must be checked on entry to the EU single market. There is no straightforward solution here. It may well mean that Northern Ireland will have to abide by regulations set in Brussels, a point objected to by the DUP.

Johnson wants to bin the backstop entirely. Where would that lead to? The only obvious way forward according to the Irish Times would be a return to the original Northern-Ireland-only backstop. But the DUP would presumably shoot this down, and it seems at odds with Johnson's comments. If Johnson wins an election outright, he could pursue this option. 

At the moment Dublin has no incentives to negotiate with London. Only if no deal looms Varadkar might be ready to get to the table.

Show Comments Write a Comment

September 04, 2019

How to unlock European investment beyond monetary easing

There is a growing consensus among economists that monetary policy has reached the end of its rope as the next recession looms, and so fiscal policy will need to do the heavy lifting this time. An example is Guntram Wolff of Bruegel, who blogs that finance ministers cannot rely on the central bank as the first line of defence against a recession as they did in the past. The ECB is indeed getting ready to loosen its monetary policy further even before the eurozone finds itself in a recession, but the reality of the situation, Wolff says, is that the ability of central banks to manage inflation and the business cycle has become very limited. He argues that eurozone finance ministers should change their mindset: automatic stabilisers are no longer enough because they tend to kick in after recession has already set in. Instead of reacting to loss of employment, eurozone governments need to be proactive and mitigate chronic underinvestment. Wolff proposes that governments include pre-designed contingent spending plans in their 2020 budgets, to be activated in case a recession materialises. 

The problem with suggestions such as these coming from economists is that they ignore the legal and political constraints on policymaking. Attaching contingent spending plans is just not the way state budgets are made. Every single line item in a regular budget is usually scrutinised and criticised as part of the political process. Imagine a spending plan predicated on a hypothetical recession! We agree, of course, that large investments boost the economy and can now be funded at near zero or negative interest rates. But the problem the finance ministers face is not necessarily one of the wrong mindset, but fiscal rules that have been enshrined deep in the constitutional make-up of the EU and its member states, like the fiscal compact. 

Wolff himself insists that the fiscal space in some national budgets is severely constrained, even at the current ultra-low interest rates. For this reason, when he argues that the European economy needs large public investments to green the European economy he turns his attention to the European Investment Bank, which could issue its own bonds on a large scale to fund the necessary green investments across Europe. We agree that here is perhaps where a change of mindset of the finance ministers, in their role of governors of the European Investment bank, would be most effective. To date, the EIB has been more concerned with preserving its AAA credit rating than with ensuring that the necessary investment that is not happening does happen. Then again, some necessary public investments may be nominally loss-making, and in that case the appropriate tools are deficit-funded grants, not bank loans.

Show Comments Write a Comment

This is the public section of the Eurointelligence Professional Briefing, which focuses on the geopolitical aspects of our news coverage. It appears daily at 2pm CET. The full briefing, which appears at 9am CET, is only available to subscribers. Please click here for a free trial, and here for the Eurointelligence home page.

 

Recent News

  • January 24, 2020
  • Is Germany anti-semitic and racist?
  • Did the Greek financial crisis play a role in Brexit?
  • September 18, 2019
  • No doubt, this is a constitutional crisis
  • Macron's immigration bid
  • May 13, 2019
  • Brexit Party has already changed UK politics
  • Orbán visits Trump, after a very long wait
  • Le Pen's appeal to the PiS likely to fall on deaf ears
  • January 04, 2019
  • Will the AfD become the Dexit party?
  • Romania's corruption problem in the spotlight of its EU presidency
  • August 28, 2018
  • Urban politics and national crisis - the Irish case
  • How anti-semitism became one of the main issues in British politics
  • April 25, 2018
  • Macron's pitch to Trump
  • Montoro in Schleswig-Holstein
  • The old world and the new
  • December 22, 2017
  • Will Macron be the new de Gaulle?
  • 2018 through the looking glass
  • August 21, 2017
  • Soft, getting softer
  • Tsipras' chances of a boost
  • On the fallacy of a middle-ground option for the eurozone
  • April 20, 2017
  • Don’t bet on Trump turning globalist
  • A note on UK election polls
  • December 20, 2016
  • The politics of terror
  • On Lagarde
  • Is a disruptive Brexit possible?
  • August 22, 2016
  • Gold for Brexit
  • EU and Turkey talking past each other
  • Switzerland is the next migrant transit country
  • On the death of neoliberal economics
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • February 07, 2020
  • Is Macron the best guarantor against Le Pen?
  • Catalan turmoil means Spain will struggle to pass a budget
  • January 22, 2020
  • Erdogan and European Libya diplomacy
  • On the importance of mutual recognition agreements in the Brexit trade talks
  • January 06, 2020
  • A decade that started with a bang
  • What to expect of Spain's next government
  • Divide et impera: Macron's pension reform strategy
  • December 23, 2019
  • What’s behind the NordStream2 sanctions
  • An important ruling by the Dutch constitutional court
  • This time Popolare di Bari brings EU bank resolution into question
  • The reversal of the eurozone external balances
  • No Christmas truce in France
  • Brace for Erdogan's foreign policy ambitions
  • On the decline of the centrist left
  • December 09, 2019
  • The next three days
  • November 26, 2019
  • Disrupting and glueing: on Anglo-Saxon clichés about France and Germany
  • November 14, 2019
  • Are France and Germany finally converging on security policy? We think they might.
  • November 04, 2019
  • Brexit tactical voting is happening - on both sides
  • Merkel promises 1m charging stations - but doesn't tell us how
  • October 24, 2019
  • Will the Bundestag stop Merkel's 5G unilateralism?
  • October 15, 2019
  • Germany chooses Huawei for 5G
  • US and EU respond to Turkey - too little, too late
  • October 07, 2019
  • What did Conte know?
  • September 30, 2019
  • A pyrrhic victory for Kurz
  • Will there really be UK elections?
  • September 23, 2019
  • Corbyn’s last big battle
  • Germany’s CO2 compromise meets all targets - except the climate targets
  • September 17, 2019
  • Beware of the diplomacy of humiliation
  • Germany’s climate hypocrisy
  • September 12, 2019
  • DUP opens up to compromise
  • Spain to repeat elections after all
  • September 09, 2019
  • Chances of no-deal are rising and rising
  • Resist the beginnings
  • September 05, 2019
  • Would Keynes be in favour of Brexit?
  • September 04, 2019
  • Alternatives to the backstop - what are the chances?
  • How to unlock European investment beyond monetary easing