European Union

Demonstrators hold up placards urging a "no" vote in Sunday's bailout referendum

[UPDATE] Late on Monday, Donald Tusk, the European Council president, wrote to Alexis Tsirpas, the Greek prime minister, to inform him that his request for reconsidering an extension of his country’s bailout had been denied. We’ve obtained a copy of that letter, too, and posted it here.

In it, he notes the eurogroup of finance ministers already decided the issue, adding:

After consultations with leaders, in the absence of new elements, I see no willingness to go against the position expressed by finance ministers at their 27 June meeting.

This is likely the last chance Tsipras had to avoid having Greece’s EU bailout expire on Tuesday night. With that gone, on Wednesday his country goes without an EU safety net for the first time in five years.

There may be less than 48 hours remaining in Greece’s EU bailout, and Saturday’s decision by eurozone finance ministers not to extend the programme through next Sunday’s Greek referendum on creditors’ “final” offer was largely seen as the final nail in the rescue’s coffin.

But could it still be extended at the 11th hour?

That’s clearly the hope of Alexis Tsipras, the Greek prime minister, who has written to all eurozone heads of government asking them to reconsider the decision. We’ve obtained a copy of the letter sent to Xavier Bettel, the prime minister of Luxembourg, who takes over the EU’s rotating presidency this week. A copy of the letter is posted here.

Tsipras at Saturday's parliamentary debate in Athens on legislation to call a referendum

The decision by Alexis Tsipras to hold a referendum on the creditors’ final bailout offer may have changed the political dynamics of the standoff between Athens and its international lenders, but what’s at stake financially really hasn’t changed.

On Friday, there was a bit of buzz that creditors had tabled a new €15.3bn offer to Greece to extend the current bailout through the end of November. But in reality, there was nothing new to it at all. It is essentially all the money left in the bailout, which was presented to Athens in a more fully articulated two-page memo.

Brussels Blog got its hand on the memo, and we’ve posted it here (apologies for its slightly rumpled appearance…I put it in the wrong pocket of my briefcase).

The main question that needs to be addressed with this document is: why are creditors offering €15.3bn rather than the €7.2bn tranche that they’ve been discussing for nearly a year?

Finance minister Yanis Varoufakis, left, with Greece's negotiating team at the eurogroup

Athens’ final counterproposal to its trio of bailout monitors would re-impose many of the large-scale corporate taxes and pension contributions that creditors demanded be stripped out amid concern it would plunge Greece into a deeper recession.

According to a copy, distributed to eurozone finance ministers Thursday and obtained by the Financial Times, Athens has stuck with its demand for a one-time 12 per cent tax on all corporate profits above €500,000, a measure the government estimates will raise nearly €1.4bn by the end of next year.

In addition, it would raise employer contributions to Greece’s main pension fund by 3.9 per cent and would more slowly implement measures to raise the country’s retirement age to 67 and “replace” rather than phase out a special “solidarity grant” to poorer pensioners.

We have posted a copy of the Greek counterproposal here.

Greece’s bailout creditors – the International Monetary Fund, European Central Bank and European Commission – eliminated the one-time profits tax and the increase in employer contributions to the pension system in their offer to Athens yesterday, arguing that such heavy levies on companies would severely hit economic growth. It also pushed for more aggressive timeline for raising the retirement age and cutting the special top-up for poorer pensioners.

Still, the Greek plans contain some key concessions from the original proposal submitted by Alexis Tsipras, the Greek prime minister, to creditors in an offer made on Monday. Although legislation raising the retirement age would not be implemented until the end of October – creditors want it to kick in immediately – it accepts the 67-year retirement age should be hit by 2022. Originally, Athens was proposing 2025.

From the beginning, the European Union has been polarising in Britain. The past four decades of membership have been marked by sustained debate on the extent and shape of British participation in the European project. Some have always rejected the notion that Britain can and should integrate with the rest of Europe. Others have supported Britain’s involvement in parts of the EU, particularly in the economic sphere. Few have wholeheartedly embraced European integration to the levels historically seen in the ‘core’ of Europe.

European Council 7-8.2.2013, European Council, CC BY-NC-ND 2.0

In this respect, British reluctance to sign up to different aspects of the EU has been a function of internal prevarication on setting a foreign policy that reflects Britain’s place in the world. The question of ‘Europe’ has divided parties from within and without. Consequently, the UK’s ongoing renegotiation and eventual referendum on EU membership need to be filtered through the lens of national context. Both are the result of electoral politics in Britain rather than momentous change in the EU’s design.

The Prime Minister’s renegotiation will naturally derive its objectives from domestic political considerations. The outcome of the renegotiation, however, will depend greatly on the willingness of Britain’s European partners to work with the suggestions placed before them. This external dimension – the politics at European level – is fundamental to any deal which may be agreed.

By definition, a negotiation necessitates negotiating partners. In this case, the UK government’s main interlocutors are the governments of the other EU Member States (with a role for the EU institutions as well). These governments do not all share the same interests nor have they presented a united front against Britain in its desire to change how the EU works – far from it. A number of EU countries support some of the options for reform emanating from London. At the same time, three main points on which they broadly agree might make the renegotiation more challenging than hoped.

First, they have other pressing issues on the European agenda. The sovereign debt difficulties facing Greece, garnering great attention is recent weeks, is only one of a number of serious questions preoccupying European leaders. These pressing issues may take priority over discussing the details of the UK government’s demands to amend EU rules. Considering the tight timetable the Prime Minister has set himself, the postponing of solving the ‘British question’ to a later date could make securing a deal even more complicated.

Second, Europe’s leaders are generally happy with the EU’s architectural framework and not predisposed to making dramatic alterations. Desire to weaken the integrity of the internal market by altering the rules of the free movement of persons, for example, is minimal. Nor are other EU countries keen to see the multiplication of opt-outs or special rules just for Britain. While the will exists to work with the UK government to address its concerns, any EU changes agreed are likely to be relatively modest.

Third, the countries which share the single currency may well amend the governance of the Eurozone without changing the EU treaties. It seems unlikely, therefore, that Britain can simply tack on its demands to treaty reform certain to happen. The EU treaties could eventually be updated to incorporate the Fiscal Compact and related measures, but this prospect seems years down the line. In any case, securing treaty change in time for a referendum by 2017 would be a Herculean feat.

The obstacles to securing a substantive renegotiation within the set timetable are numerous. However, the actual renegotiation is but one part of the equation in (re)shaping Britain’s relationship with the EU. How the deal is presented at home and the arguments made in the campaign are likely to be much more influential to the referendum result. The external dimension may well determine the substance of the renegotiation, but the national context, as ever, will determine the outcome of the referendum.

This article was originally published on European Futures.

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Shortened link: britainseurope.uk/20150626

How to cite this article:

Salamone, A (2015) ‘The External Dimension to Britain’s EU Membership’, Britain’s Europe (Ideas on Europe), 26 Jun 2015, britainseurope.uk/20150626

The post The External Dimension to Britain’s EU Renegotiation appeared first on Ideas on Europe.

To address the question of whether Federica Mogherini can shape a smarter foreign and security policy for the EU than Catherine Ashton did, the answer, assuming there is one, must come in several parts.

The first concerns the nature of the position itself. When Ashton was appointed EU High Representative (HR) in 2009, many commentators, reacting to the widespread feeling that several other higher-profile candidates would have been preferable, argued that the personality of the incumbent was irrelevant because all decision-making power lies in the hands of the member states. Whoever is in post, it was argued, will simply have to toe whatever line member states collectively think appropriate or desirable. This line of reasoning has also greeted the appointment of Mogherini, though it is at best a half-truth, as most member states are actually looking for guidance in defining and promoting their interests. Institutionally, the HR indeed has to work within clear political constraints. But she also enjoys a considerable margin of manoeuvre and, given creativity and imagination, can succeed in influencing, if not actually setting, the agenda to a meaningful extent. Commentators agree that Javier Solana, with far fewer resources than Ashton, succeeded far better in making a real difference.

As a result of Ashton’s tenure, there are those who suggest that the position of HR has been weakened or even undermined – precisely because of her relative failure to deliver on the undoubtedly exaggerated expectations of the security community. But that view overlooks the extent to which the new post-holder has succeeded in avoiding the many early mistakes for which Ashton was constantly pilloried. It also ignores the new geopolitical context in which Mogherini is operating, with the specific remit given to the HR by the December 2013 Council. That remit confers on the new HR a clear mandate to develop, not a new institution as in the case of Ashton (the EEAS), but a new strategy and new policy preferences for the EU as a whole.

“A smart policy is one that is clear, appropriate to the objective being pursued and achievable”

The second issue is the respective candidates’ qualifications for the job. Here, Mogherini scores heavily, with her previous experience as Italian Foreign Minister and Secretary of the Italian Parliament’s Defence Committee. Whereas Ashton had to start from scratch and learn on the job, Mogherini hit the road running. During her October 2014 audition hearings before the European Parliament, all observers were as impressed by her solid mastery of the issues as they had been disconcerted five years earlier by Ashton’s apparent amateurishness. Mogherini is also solidly advised and assisted by her chef de cabinet, Stefano Manservisi, one of Italy’s most distinguished European officials. Whereas Ashton appeared constrained by ambivalent signals from the UK’s Prime Minister David Cameron, Mogherini benefits from the enthusiastic Euro-credentials of Matteo Renzi.

The third issue is the political content of the word “smart” as applied to European foreign policy. A smart policy is one that is clear, appropriate to the objective being pursued and achievable. Ashton put more time and effort into the Middle East than any other geographical area. But it was not clear what she hoped to achieve, and her actual achievements were extremely modest. Her main diplomatic successes – Kosovo and Iran – stemmed from her personal human qualities rather than from diplomatic finesse. Whereas Ashton toed the British line of ambivalence towards the Common Security and Defence Policy (CSDP) and appeared to consider it with indifference, expressing a clear preference for NATO, Mogherini strongly believes in and attaches genuine importance to European defence and security co-operation, which she perceives as necessarily operating in harmony with NATO.

It is in the area of the respective post-holders’ main priority remits that the biggest difference can be detected. Ashton was charged with creating the EEAS and she is rightly credited with achieving this – and within a year of taking office. Yet the mid-term reviews of the EEAS were generally critical, and in her own observations of the service, she seemed far more concerned about its internal workings than about its diplomatic reach or objectives. Mogherini has been charged with developing an EU “grand strategy”. The Council remit specifically asked her to “assess the impact of changes in the global environment” and to report to the Council on “challenges and opportunities” for the EU arising from that shifting global context. The way she has gone about this offers considerable reason for optimism. The most important element is that she is asking the correct questions. Not, ‘how do we export our values to the Southern and Eastern neighbourhoods?’ But, ‘what can the EU realistically hope to achieve in these neighbourhoods given the massive changes they have recently undergone?’

The strategic review process will not be rushed. In the first phase, it has sought to understand shifts in the global environment, assess internal changes within the Union and their foreign policy implications, and review EU foreign policy instruments across the board (CSDP, cyber, energy, trade, development, counter-terrorism). In a second phase, starting immediately after the June Council, it will address the real questions required behind a genuine strategy: what are the EU’s interests, what are its realistic goals and how does it link these to appropriate means?

Mogherini has established a clear set of priorities, has developed a good working relationship with the policy community, with national and European officials and above all with the media. Whereas Ashton, for the overwhelming majority of commentators, got off to a decidedly rocky start, Mogherini’s performance to date has been virtually flawless. Whether this eventually delivers a “smarter” policy than that of her predecessor, of course, is largely in her own hands.

The post Is Federica Mogherini to make a real difference? appeared first on Europe’s World.

Only four years after the European Neighbourhood Policy (ENP) underwent its first major review at the time of what was over-enthusiastically being called the ‘Arab Spring’, the ENP is once again in flux. The adoption of a consultation paper in March earlier this year called ‘Towards a new European Neighbourhood Policy’ so soon after the previous review was supposed to have made the ENP fit for purpose says much of the Barroso Commission’s shortcomings. Certainly, a genuine overhaul is now timely and much needed.

The EU’s eastern and southern neighbours have been going from crisis to crisis, with 12 out of 16 of them now directly exposed to unresolved conflicts, territorial occupation or even war. Bad governance, untransparent and ineffective state institutions, corruption and frequent violations of civil and political liberties are the rule rather than the exception in most of the partner countries in Europe’s neighbourhood. The European Union’s policymakers, whether in the Commission, the Parliament, the External Action Service or in EU member states’ capitals have all pointed to the ENP’s failure to respond adequately to these challenges.

Europe’s domestic problems are obviously an important factor. These times of austerity, rising nationalism and xenophobia, of growing concerns over illicit immigration, together with the looming threat of a Grexit and a disintegrating eurozone make costly and unpredictable foreign policy initiatives unattractive to public opinion. The latest ENP review is therefore faced with considerable constraints and seemingly bleak prospects. Yet meaningful reform of the ENP can be achieved, and it doesn’t necessarily have to come with a high price tag. For this to happen, though, decision-makers in the EU institutions and in member states’ capitals need to take five points into account.

In the first place, they must resist the ‘back to basics’ logic that some say should be put at the centre of the ENP review. Much as this sounds sensible, it is flawed. Not only did the basics of 2002 and early 2003, when the concept of a ‘wider Europe’ was agreed, relate to a neighbourhood very different to today’s, but also these basics were rooted in a false belief that the recipe for enlargement – conditionality and incentives for lasting reform – could be replicated without the carrot of EU membership.

“Playing for time is no longer an option now that the neighbourhood is in reality a ‘ring of fire’”

The second point to be emphasised is that although all concerned on the EU side underline the central importance to the ENP of Association Agreements and Deep and Comprehensive Free Trade Areas (DCFTA), they have all stayed tellingly silent as to whether full implementation of these stipulations is a means to an end or the end itself. The absence of a clear end-goal is hugely problematic on the EU side in terms of foreign policy planning and the appropriation of targeted funds, and for EU neighbours it saps their efforts to generate domestic support for the approximation, implementation and enforcement of EU rules and norms.

Third, although the revised ENP of 2011 spoke of a ‘new response to a changing neighbourhood’, in practice its marked lack of innovation led to a gradual erosion of its credibility and therefore its effectiveness. This resulted from the de facto perversion of its ‘less-for-less’ principle into a ‘less-for-more’ practice which rewarded instead of sanctioning reform laggards in the neighbourhood. Also, it was the consequence of an overly-ambitious incorporation of issue-areas and policy fields the ‘new response’ was suddenly supposed to address, lacking, however, the means to do so.    

Fourth, ENP partners are shown by various EU Neighbourhood Barometers to have very different views of the EU. Last year, 56% of respondents in the eastern neighbourhood had a negative or neutral image of the EU, while in its southern neighbourhood only 38% held a positive view of the EU. This looks like being a major constraint on governments’ room for manoeuvre on ENP-related reforms.

Fifth, the original 2003 ENP and its 2011 successor fell victim to ill-informed and misleading interpretations of the underlying dynamics of the wider neighbourhood. The consequence has been that many in Brussels and in EU member states misinterpreted as signs of stability the stagnating politics of the countries in the neighbourhood and in some the re-emergence or even consolidation of authoritarianism.

Provided the consultation process now underway takes these points into account, a number of recommendations are in place.

The first is that further reform of the ENP will be bound to fail unless all 28 EU member states increase their involvement in both the review process and the implementation of a new policy framework. Developments like Russia’s unlawful actions in the EU’s eastern neighbourhood and Saudi Arabia and Qatar’s rivalry in the EU’s southern backyard compel all EU governments to incorporate the ENP into their foreign policy DNA. That also means the EU will need to abandon the ENP’s open-endedness because playing for time is no longer an option now that the neighbourhood is in reality a ‘ring of fire’. Europe’s neighbours need to be given a clear-cut roadmap; only an end-goal – not necessarily EU membership – will allow them to glimpse light at the end of a long reform tunnel and help justify costly and painful reforms.

Increased financial assistance and a wide-ranging liberalisation of trade, services and public procurement would undoubtedly benefit any neighbour implementing DCFTA stipulations. But because they remain confined by EU commercial policy, future ‘more-for-more’ formulae should envisage the more far-reaching integration of successful neighbours into some parts of the EU’s single market providing they approximate to EU rules and norms, and even adopt and enforce them.

To be taken seriously by reform-reluctant neighbours, the EU must start to use its leverage on trade. It should suspend trade preferences in the event of non-compliance with mutually agreed commitments. Other than Algeria, none of the 16 neighbours ranks among the EU’s top-20 trade partners. What the neighbours have in common is that they are more dependent on preferential EU market access than vice versa. This applies even to energy suppliers like Algeria and Azerbaijan, whose downstream networks are directed towards Europe and which desperately need the oil and gas sales if their governing regimes are to survive.

“The absence of a clear end-goal is hugely problematic”

The EU is present in all 16 neighbours through its delegations and representative offices or through the embassies of member states. To benefit more from this presence and enhance the ENP’s visibility, greater coordination and cooperation, as well as a reduction of overlaps should be a priority. Hand-in-hand with this streamlining, the EU should engage more in political coordination, and perhaps joint programming, with external actors and donors particularly on economic, technical and infrastructure.

The EU’s search for harmony and security in its neighbourhood has forced it to rethink its policies vis-à-vis the near abroad once more. This offers a unique opportunity for stakeholders to show they have learned the lessons of past failures. But that demands the new ENP policy framework generates results so that the populations of the 16 neighbours feel that responding to EU-induced reforms pays off. Only then will the EU truly be able to help reform-minded neighbours to increase and sustain the legitimacy of their domestic reform efforts. However, this requires consistency on the part of the EU and greater coherence between the policies of the 28 EU member states and EU institutions.

The post How to make the European Neighbourhood Policy fit for purpose appeared first on Europe’s World.

Jeroen Dijsselbloem, eurogroup chief, confers with Mario Draghi, ECB president, on Wednesday

Eurozone finance ministers have begun to gather for their fourth meeting in a week, attempting yet again to strike a deal on a package of Greek economic reforms to release a desperately-needed €7.2bn in bailout funds to Athens.

The ministers have been sent what one official termed a “feasibility blueprint” – but the Financial Times has obtained a copy and it looks very much like the version creditors annotated and sent back to Athens on Tuesday. We’ve posted a copy of the document here.

The first place to look is page three of the nine-page document, where the section on pension reforms begins. This has become the major sticking point between the two sides and, while it makes some concessions to the Greek government, it is very much in keeping with creditor demands that early retirement schemes be curtailed and the effective retirement age be raised very quickly.

Under the plan sent to finance ministers, Athens would ensure the retirement age is moved to 67 by 2022, significantly faster that Alexis Tsipras, the Greek prime minister, had sought. Originally, Athens was pushing for 2036, but Mr Tsipras’ compromise plan submitted on Monday moved that to 2025.