Monday 7th December 2015

Updates from over the weekend on European news, including further concerns about British demands, threats to Schengen, Merkel’s further political isolation, and the recent elections in France. 

EU considers suspension of Schengen rules: European Interior Ministers have considered suspending elements of the Schengen free movement zone, after the area has come under increased pressure during the refugee crisis. The move will allow governments to suspend Schengen rules for up to 2 years. German representatives led the push for the move at a recent EU Council meeting in Brussels, following clear signs that there are cracks in the Schengen Convention’s operation. Luxembourg was first to float the measure at a meeting this week, in response to the series of countries on the ‘Western Balkans’ route closing their borders under pressure from refugees entering those countries. Greece has seen over 700,000 people cross its borders into the EU Schengen Areas since the start of the year. Article 26 of the Schengen Convention does permit member-states when facing persistent deficiencies to introduce extra border control measures. Luxembourg Minister for Migration, Jean Asselborn, said after the meeting “The ministers agreed that if there are serious shortcomings that endanger the area” which needed to be addressed at the European level, and another senior EU official said “We have run out of easy answers. . . We only have bad options left. These are options that are painful and require breaking taboos and taking actions that we do not instinctively want to take. This is the responsibility on our leaders now”. Another possibility discussed at the meeting was temporarily excluding Greece from the area. Greece rebuked the idea that they were not doing enough, blaming lack of promised support from the EU. Meanwhile, Athens agreed this week to allow Frontex border guards to operation at the Greek border. The European Parliament has agreed to the new Passenger Name Records system, which has been at the top of demands from France since the Paris attack.

ECB disturbed by British demand for a ‘multi-currency union’: The British demands for the EU to be recognised as a ‘multi-currency union’ has raised concerns in the ECB, who are worried it will be used as an excuse for current non-Eurozone members like Poland, to remain outside of the currency union. The proposal was raised by the UK in order to prevent future discrimination against states which are not a part of the Eurozone, however ECB President Mario Draghi fears it will weaken the commitment of some countries to join the euro. Polish Prime Minister Beata Szydlo has said that the euro would be a bad idea for Poland, making it into “a second Greece”. Draghi’s concerns are mirrored in Brussels who fear the permanent division of the single market into 2 regulatory spheres – the Eurozone on one side and a ‘lighter touch’ regime on the periphery. The proposal was raised in a meeting between Chancellor of the Exchequer George Osborne and President Draghi in London, where  Osborne called for an EU treaty recognising that the Union has more than one currency. At the moment, the EU has one official currency, which all other member-states, bar Britain and Denmark who have opt-outs, have to adopt at some point. Currently 19 member-states out of 28 use the currency. Recently, slow growth in the Eurozone and issue with sovereign debt have made the currency union a less attractive prospect. Draghi fears this could be worsened by the declaration of a multi-currency union. However British negotiators believe this can be overcome, through further recognition that only Britain and Denmark have the ability to not adopt the euro. One British official asserted that British demands were not supposed to divide the EU. saying “[safeguards for Britain must not] permanently divide the ins and outs”.

Syrian peace doesn’t require Assad’s removal, says Fabius: French Foreign Minister Laurent Fabius said on Saturday that the end of Bashar al-Assad’s regime is no longer necessary for peace and political transition in Syria. During the interview he gave on Saturday, Fabius said that “A united Syria implies a political transition. That does not mean that Bashar al-Assad must leave even before the transition, but there must be assurances for the future”. The Minister’s thinking behind this was that Syria must be united if it is to counter the threat of IS. However the paper which conducted the interview, Le Progrès, highlighted a couple of problems with the new French position – namely that Assad has committed many atrocities against his population, and a large part of that population has now turned against him. The prior French position on the dictator was that he had to go, describing him as a butcher of his people. With the shift of priorities towards IS however, this position has been moderated somewhat. Despite this change, Fabius did reiterate last Monday that it was ‘obvious’ that Assad could not work alongside the moderate rebels, and that if the Syrian army were to be engaged alongside those rebels, then Assad could not lead them. Finally, the Minister reinforced the point that France would not send ground troops into the Middle East, given the experiences of the last decade.

Merkel loses more ground over Refugee policy: On Sunday the FAZ reported that the economic council of Federal Chancellor Angela Merkel’s ruling CDU party has also voiced criticism of the Chancellor’s refugee policy, as Merkel loses more ground within her party and abroad. In the report, the economic council spoke of a ‘suction effect’ in Germany after false messages had been sent to refugees, and has demanded tough upper limits to restrict the number of refugees entering the country. They called Merkel’s previous policy a ‘Sonderweg’ or special path, which has led to Germany being increasingly isolated in Europe. The Council has said that as a result, the number of asylum seekers must be severely reduced; now over 950,000 have claimed asylum in Germany, and there are more who haven’t been yet registered. The Council predicts that the number of asylum seekers will reach 1.5 million before the end of the year. It also predicted that the impact of all these refugees entering the country with bad employment prospects will be enormous.

Greek Parliament approves austerity budget for 2016: The Greek parliament passed on Sunday a budget for 2016 that focusses heavily on tax increases and spending cuts, by 152 votes to 145. The closeness of the vote demonstrated the reluctance of pro-Europe parties in opposition to vote with the Syriza led coalition in implementing unpopular reforms. The reforms will unlock a further bailout package totalling up to €86bn – these reforms including further pension cuts among other things. For their reluctance, Greek Prime Minister Alexis Tsipras said the opposing parliamentarians were showing “an attitude of irresponsibility”, continuing “We asked for consensus on a critical national issue, the pension system, and they refused”. The Greek economy is set to shrink a further 0.7% next year, following  a year of no growth in 2015, dismissing forecasts from June that the implementation of capital controls would lead to a 2.3% fall in national output. Euclid Tsakalotos, Greek Finance Minister, predicted that growth would return in the second half of 2016 resulting from a return of confidence in the Greek economy and the lifting of capital controls. The current government primary surplus, before principle and interest payments, is forecast to grow by 0.3% next. Tax increases and spending cuts will total around €5.7bn saved, €1.5bn  of which will be collected this year. Privatisation income is predicted to be around €2bn – the long term goal is €50bn to be raised from these sales. The two troublesome reforms will be increases on farmers’ income tax, and further pension cuts, which over the past 4 years have already been cut by 40%.

Front National triumphs in French regional elections: Front national won the greatest victory in the party’s history on Sunday, thus giving party leader and presidential candidate, Marine Le Pen, a huge boost before the presidential elections in early 2017. The extreme-right party won almost 29% of the vote, up from 11.4% in 2010. Is has been predicted that nationwide, the party will become the strongest political force. President François Hollande’s ruling Parti Socialiste came in 3rd position with only a 23% vote share; Prime Minister Manuel Valls has decided not to comment on the poor performance of his party on Sunday. Instead he has announced he needs a period of reflection, to consider the defeat of his party after having called for everything possible to be done, in order to prevent a extreme-right victory. Les Republicains, conservative party of the former French President Nicolas Sarkozy, came in 2nd position with 27% of the vote; Sarkozy said that the vote was a sign of the increasing annoyance of the French people. He said “we must understand their annoyance”, and went on to criticise the policies of the ruling socialist party under President Hollande. He also ruled out an ad hoc alliance between his party and the socialists in the second ballot. He said instead that his party was the only real alternative to give the people a voice. The second round will be held next Sunday. Le Pen called the election a “wonderful result”, and that her party has been called to “create a national union of all patriots”. In the town of Calais, home to the refugee camp widely referred to as ‘the jungle’, Le Pen’s party received 0ver 50% of the vote according to the AFP. Many of France’s eastern regions in the south and north, including the Nord-pas-de-Calais/Picardie, Alsace/Lorraine/Champagne-Ardenne and the Mediterranean region Provence-Alpes-Cote-d’Azur, saw Front National win the largest share of the vote. The capital region, Ile-de-France, as well as Normandie among others saw Les Republicains with the largest share. The Parti Socialiste only won the largest share in the north western region of Bretagne and southern region of Poitou-Charentes/Aquitaine/Limousin.

Sources: FT, FAZ, France 24, AFP, DPA