The weekly Vulcan View for the 10th to the 14th of September featuring analysis of the latest EU developments

VULCAN VIEW- KEY EVENTS THIS WEEK:

BREXIT

Glimmer of hope for possible Brexit solution
The embattled British Prime Minister Theresa May was thrown a possible lifeline on Wednesday when the President of the European Commission Jean Claude Juncker broadly welcomed her Chequers’ proposals as a ‘starting point’ to establish a UK-EU ‘free trade area. Despite many aspects of the future relationship still yet unresolved, the Prime Minister’s aides are now eyeing up a possible Brussels summit in mid-November for the signing of a Brexit deal, which would include some elements of her Chequers plan.
 
Mr. Juncker’s warm words on Downing Street’s Chequers plan came during his State of the European Union speech in the European Parliament on Wednesday when he said that while he would not accept any break-up of the single market, he did welcome ‘’Prime Minister May’s proposal to develop an ambitious new partnership for the future’’. In a sign of just how much of a boost the Commission president’s speech was to Ms. May, she quoted Mr. Juncker directly at the weekly Prime Minister’s question time in the British parliament.
 
Mr. Juncker’s speech was timely for Ms. May as she had to endure two hostile fronts from within her party in just a matter of days. After reports emerged that a group of almost 50 Tory MPs met to discuss a plot to remove the Prime Minister, several leading Conservative Eurosceptic MPs, including the former Brexit Minister David Davis, published their own plan for the Irish border post-Brexit.
 
As the issue of Northern Ireland remains as one of the trickiest issue in the Brexit talks, hard-line Brexiters such as David Davis or Jacob-Rees Mogg are growing frustrated that it is hampering plans for a possible EU-UK Canada like trading relationship. Although the publication of the plan by the Eurosceptic group garnered media headlines, it offered little more than the already proposed ‘fixes’ that had been previously been rejected by the EU as unacceptable. While these latest efforts by Tory Brexiters to undermine the Prime Minister were largely ineffective, the pressure will continue to mount on Ms. May until a credible Brexit agreement is reached.
 

EUROPEAN PARLIAMENT
 
MEPs vote to rebuke Hungary
The Hungarian government suffered a blow on Wednesday after lawmakers in Brussels voted overwhelmingly to censure Budapest over repeated breaches of EU rules and values. The decision to trigger the EU’s most serious disciplinary procedure known as article 7 against Hungary was passed with the support of 448 MEPs, narrowly overcoming the required two-thirds majority. Claiming that the Hungarian government poses a ‘’systematic threat’’ to democracy, the move is set to deepen rifts across the bloc.
 
Significantly, the almost 450 votes that carried the vote included many members of the bloc’s largest political group, the centre-right European People’s Party (EPP), with which Hungarian Prime Minister Viktor Orban and his ruling Fidesz party is affiliated. Further to the vote in the Parliament, Wednesday also saw fellow EPP members German Chancellor Angela Merkel and European Commission President Jean-Claude Juncker warning against growing nationalism and any further deterioration of rule of law, adding to the likelihood of a messy rift splitting the EPP.
 
With European elections scheduled for next May, the timing of the vote for the EPP is not timely. However, in a sign of the changing political climate, the head of the EPP Group Manfred Weber came out ahead of the vote and vowed he would back any action against Budapest. While the article 7 procedure is commonly known as the EU’s ‘’nuclear option’’, the process involves several more steps but could end with punishments being imposed on Hungary. With the vote passed in Parliament, the process will now move to the European Council where four-fifths must decide if there is a ‘’clear risk of serious breach’’ by the accused country. 
 
 
EUROPEAN COMMISSION
 
Juncker delivers last State of the Union speech of his tenure
In his fourth and final State of the Union speech on Wednesday, the European Commission President laid out his vision of the bloc’s goals for the next twelve months. While the Luxembourg native had probably hoped that his last delivery be remembered as a memorable legacy speech, it appeared to be more of a long and often disjointed rambling goodbye.
 
With the issue of Brexit continuing to dominate the business of Brussels, Mr. Juncker reiterated the bloc’s continued unwavering support and solidarity for Ireland when it comes to finding a solution to the Irish border but added significantly that the UK would ‘’never be an ordinary third country for us. [The] UK will always be a very close neighbour and partner’’. Although the vote by the European Parliament to trigger article 7 proceedings against Hungary came later that day, Mr. Juncker showed his support for the move during his speech as he made clear that the rule of law and the freedom of media must always exist in Europe, stating clearly that ‘’article 7 must be applied whenever the rule of law is threatened’’.
 
Reflecting on the migration crisis that has continued to trouble the bloc over the past few years, Mr. Juncker called for a vast increase in the size of the EU’s border protection and coast guard forces, with 10,000 additional guards by 2020. Further points which the President touched upon during his final speech included foreign policy, relations with Africa and his ambitious vow to turn the euro into a global reserve currency that could rival the US dollar.
 
While the concept of the EU’s State of the Union speech is still a work in progress and Mr. Juncker’s final farewell is unlikely to be remembered in years to come, the President signed off saying ‘’a few years ago, standing in this very same spot, I told you that Europe was the love of my life’’ before ending with ‘’I love Europe and shall do so forever’’.
 

SWEDEN
 
Election delivers hung parliament as far-right party makes significant gains
The much anticipated and highly observed Swedish general election last weekend saw the country’s ruling Social Democratic party topping the polls with 28.4 per cent of the vote. This result will give the ruling centre-left bloc the narrowest of leads with 144 seats to the centre-right blocs’ 143 seats in a parliament that requires 175 to secure a majority. With both of Sweden’s major traditional parties almost neck and neck in the polls, any government formation will require some sort of coalition.
 
While the main parties secured the majority of the votes , attention was mainly focused on the potential rise of the anti-immigration Sweden Democrats. While they did not make the major breakthrough as expected, the party still made significant gains in the election and secured 62 seats meaning that it could have a chance to play a potential important role as kingmaker in any negotiations.
 
However, such chances are low as Stefan Lofven, the centre-left Prime Minister of the Social Democratic Party, called on the parties of the centre-right to work together in order to avoid any potential delay in the formation of a working government and deter any further rising support for the Swedish Democrats. Although Mr. Lofven is believed to favour a grand coalition with the centre-right bloc, it could be weeks or even months for a government to be successful formed.

EU – US TRADE
 
Hopes for partial EU-US trade deal
Signs that a possible trade deal between the United State and EU may be on the cards appeared early this week, after talks between negotiators delivered a partial breakthrough on terms of the relationship. The tense transatlantic relationship between Brussels and Washington was repaired somewhat in late July when the European Commission President Jean Claude-Juncker and US President Donald Trump agreed on a truce to roll back on some of the tariffs that had been imposed.
 
This initial truce was built upon further last Monday after some agreement was made following talks between the US trade commissioner Cecilia Malmstron and US trade representative Robert Lightizer. According to the Mr. Lightizer’s office, ‘’an early harvest in the area of technical barriers to trade’’ could be brought about as early as November. This reduction in trade barriers refers to the possible deal to reduce regulatory differences between both blocs that disrupt trade across the Atlantic.
 
While major differences still remain between both sides on sectors such as agriculture and financial services, the progress made on Monday should help limit any risk of a potential new flare-up in trade tensions. Signals from Washington are encouraging as the White House stated it will now seek to fast-track Congress approval for a trade deal with the EU by applying a legislative tool known as the Trade Promotion Authority that allows for a simple yes-or-no by lawmakers on a final deal.

Dates Ahead:

Monday 17th  – Sunday 23rd  September
Tuesday 18th September: EBA Meeting
Tuesday 18th September: Opening day of the Seventy-third UN General Assembly
Tuesday 18th September: EU General Affairs Council
Wed 19th & Thurs 20th September: Basel Committee on Banking Supervision

Compliments of Vulcan Consulting, a member of the EACCNY