Vulcan Insight | Analysis of the latest EU Developments 28 October – 1 November 2019

Key Events This Week

Brexit is just a stage
This week the European Council opted to extend Article 50 until 31 January 2020 to allow more time for the ratification of the Withdrawal Agreement. If the UK Parliament passes the Withdrawal Bill, Brexit could take place earlier on 1 December 2019 or 1 January 2020.

In Brussels Michel Barnier called for a close partnership between the EU and UK after Brexit, acknowledging that peace in Ireland must remain a priority and that the “integrity of the single market is not negotiable”. He said the “risk of Brexit happening without a ratified deal still exists” – at the end of January 2020, or on 31 December 2020 if the EU and UK fail to reach an agreement on their future relationship and the transition period is not extended. Barnier insisted on the idea that “Brexit is just a stage, not a final destination”.

Across the pond, a general election will be held in the UK on December 12th. Boris Johnson’s fourth attempt to secure an early general election was finally backed by the SNP, Labour, the Liberal Democrats and the DUP, with MPs voting 438 to 20 in favour, following the extension granted by the EU. The Conservatives currently have a significant lead of 10% over Labour, and while the Tories have restored the whip to 10 of the 21 rebel MPs who backed a Bill aimed at blocking no-deal Brexit, party grandees Ken Clarke and Philip Hammond, as well as David Gauke, have not had the whip restored, calling into the question the future of the moderate centre-right in the UK and the ability of the party to win an overall majority.

In Ireland, Taoiseach Leo Varadkar ruled out a pre-Christmas general election, saying he doesn’t believe it is in the public interest. He suggested Ireland could find itself in a “difficult period” in the run up to 31st January and it would not be suitable to try to put together a new government during this time of ongoing uncertainty. A general election is likely to take place in spring 2020.

 

Draghi passes the torch to Lagarde
Christine Lagarde has officially commenced her new role as President of the European Central Bank. At the handing over ceremony on Wednesday evening outgoing President Mario Draghi used his final speech to urge unity amongst members of the governing council.

Trade and geopolitical tensions forced the ECB to restart its bond buying programme in September, and to cut deposit rates further into negative territory. The effectiveness of the decisions were questioned by members of the ECB’s governing Council, including France, Germany, Austria and the Netherlands.

Leaders of the Eurozone’s biggest economies attended the ceremony and paid tribute to Mr Draghi’s commitment to do ‘whatever it takes’ to save the Euro – a key intervention by Draghi in 2012 which is widely seen as having averted catastrophe at the height of the Euro crisis. French President, Emanuel Macron, said “It’s now up to us, heads of state and government, to carry this ‘whatever it takes’ to measure up to your courage and your clear-sightedness.”

Ms Lagarde has pledged continuity in loose monetary policy, but also signaled that a rethink of the institution’s strategy — something some officials have openly advocated for — may be needed.

 

European Parliament lays down rules for multinationals
This week the European Parliament made an attempt to progress legislation on “country by country” tax reporting which has been deadlocked in the Council of Ministers.

In an effort to break the deadlock in the Council of Ministers in order to begin “trilogue” negotiations, the European Parliament adopted a non-binding resolution on 24 October urging the Council to agree on rules obliging multinationals to disclose what taxes they pay in each country.

During the debate preceding the vote, MEPs said that without agreement, the EU would lack credibility to engage in tax matters on internal fora. Moreover, it was stressed that citizens have a right to know where multinationals pay their taxes and that such a degree of transparency was necessary in light of recent recurring tax scandals.

They also said that unless the EU is able to tackle tax havens within its own borders, it will be difficult for Europe to present itself as a credible interlocutor on the international stage in tax matters.

EU governments view the European Parliament as having no legal basis to decide on a tax proposal. However, the Parliament views the file as relating to accounting and therefore within its remit. It can be expected that this and other tax matters will loom large in the debate within and between EU institutions in the coming months.

Key Dates 
  • 7 November: Eurogroup
  • 8 November: Education, Youth, Culture and Sport Council
  • 8 November: Economic and Financial Affairs Council
  • 11-12 November: Foreign Affairs Council
  • 13-14 November: European Parliament Plenary

Compliments of Vulcan Consulting, a member of the EACCNY