EU news focus

EU news focus: 13-19 December 2013 – Candidates for EC President, end of Irish bailout, populism, Serbia, banking union

EU News Focus

In this week’s newsletter, we focus on the following five topics: the leftist candidate for EC President will be the Greek Alexis Tsipras; Ireland officially exits its bailout programme; a choice between technocracy and populism in Europe; Serbia will begin talks with EU about a potential future EU membership; and finance ministers agreed on the 2nd pillar of the banking union. Enjoy the reading and share with us your opinion about these topics! 

Home Affairs

Tsipras candidate of communists for President of EC; Rehn in good position among liberals

Alexis Tsipras, leader of the Greek Syriza party (the leftist main opposition party), was designated by his peers as the left/communist candidate for President of the European Commission. His nomination reflects “an encouragement for the efforts of the Greek people” according to the “European United Left”, which has currently 34 MEPs.

As to the race among the liberals, Olli Rehn, the Finnish current Commissioner for Economic and Monetary Affairs, seems to get an edge as he received this week the support of 14 member parties of the ALDE (Alliance of Liberals and Democrats in Europe), including the British and German ones, although the British Lib-Dems are divided on the issue. His main rival, the Belgian federalist Guy Verhofstadt, has the support of the Benelux liberal parties and the Austrian and Romanian ones. The final choice will take place at the ALDE Congress on February 1st.

Sources: Le Monde, Euractiv.


Ireland exits its bailout programme but efforts are not over!

As Ireland became the first Eurozone country to exit its bailout programme, after years of hard sacrifices, its PM Enda Kenny talked about the restoration of Ireland’s credibility. Mr Noonan, his finance minister, said that the Irish people were “the real heroes and heroines of this”. However, both men have also warned that difficult times were not over and that, although the economic situation is improving, the exit from the international financial assistance programme (€85 billion / £71 billion over 3 years) was only a “milestone” and not the end of the efforts. Indeed, ending the programme means that Ireland can borrow money on capital markets again at an acceptable interest rate. Now that Ireland does not rely anymore on foreign money, it will also have more leeway in how to shape its economic policy.

Regarding the future, PM Kenny stated that the country would continue pursuing a balanced budget policy. He claimed that his country had “already completed over 90% of the necessary cuts and tax increases” and that consequently Ireland could now “begin to reduce the national debt burden”. With a growth forecast of 2% for next year, and unemployment slightly below 13%, Mr Kenny will launch an economic plan centred on job creation. To achieve this aim, he intends to further liberalise the job market, removing “the barriers to new jobs in key sectors” and reforming the welfare system “to provide supports and incentives for unemployed people to take up new jobs”. Mr Noonan also added that, if it is fiscally possible, the government will introduce income tax cuts to spur growth.

Portugal may be the next country to exit its bail-out programme, next year, particularly if growth in the EU stimulates its exports.

Sources: BBC (Kenny, Noonan).


A choice between technocracy and populism?

In El País, André Ortega, a writer and analyst, claims that at EU level rather than the choice between left and right, European voters have the choice between technocracy and populism. He underlines that transferring the decision-making to the ECB or the “Troika” during the crisis allowed governments to circumvent their domestic voters. By asserting that decisions to solve the crisis are technical and must be adopted by technicians politicians have given free way to the rise of far-right and far-left anti-European populism. Ortega points to the difference between the content of a measure and the form of the decision-making process. Regarding the content of the measures, he says that they aimed at shrinking the Keynesian Welfare State. As to the form, the decision-making process has “emptied national democracy in the past years […] without replacing it with a European democracy”. According to the author, the solution is not to give more powers to the European Parliament, but to strengthen the national democratic discussion (first of all, in national parliaments) about European issues.

But this is not the only problem: Ortega thinks the rise of anti-European populism also finds its roots in the fact that the European integration is badly explained and, in the eyes of many citizens, attacks national identities.

Although Spain is relatively shielded from populism, due to the memories of the dictatorship that ended only in 1975, there is nevertheless a strong anti-politics feeling that could push abstainers towards populists like in Italy (with Grillo) or in France (with the National Front). Ortega warns that the absence of strong populist movements in Spain for now does not mean that they will not appear if the social situation does not improve and if the crisis of the political system (following various scandals and corruption cases) continues.

The author also hints that a populist victory in one Member State would have bad effects for other Member States as well, as it would “paralyse” this State’s politics and the efforts to build a more integrated EU. So, “even if the EU elections in May still look like a sum of national elections, they will have a European effect.” Fighting against populism requires abandoning technocracy, looking for alternative policies and implementing concrete answers to citizens’ problems at EU level. We need to recover politics and democracy both at national and European level.

Source: El País.

International Relations

Opening of negotiations with Serbia about a potential future EU membership

The Council decided that the negotiations with Serbia about a potential future EU membership could start in January 2014. An intergovernmental conference shall be organised in Belgrade, Serbia’s capital city, on 21 January. This follows an improvement of the Kosovo-Serbia relationship in the course of the past months (in particular an agreement in April which recognises the authority of the government in Pristina over Kosovar institutions), which is supported by the EU and its High Representative, Lady Ashton. The EU Commissioner for Enlargement, Stefan Füle, indicated that the speed of the process “very much depends on the political will of the country to do various reforms”. Serbia hopes to become an EU member by 2020. If it is successful, it would be the third Balkan country (after Slovenia and Croatia) to become part of the European Union.

Sources: Financial Times, FAZ (Frankfurter Allgemeine Zeitung).


An agreement on the second pillar of the banking union

After lengthy negotiations, the 28 ministers of Finance meeting this week have finally reached an agreement on the second pillar of the banking union which is about how to deal with banks in trouble: who would decide a bank is not to be saved (and must be put into bankruptcy) or, if it is to be saved, how would that bank be refinanced to avoid a repetition of the extremely onerous bail-outs that took place in the recent years and brought countries such as Ireland on the brink of bankruptcy. As already explained last week in our newsletter, following a pre-agreement among the ministers, the new directive established a bail-in mechanism: first, the owners of a bank near bankruptcy will have to pay, then its creditors, then the people having deposits above €100.000, and only then the taxpayers. In addition, the decision to shut-down a bank would be requested by a “resolution council” made up of national authorities. These rules shall start to apply on 1 January 2016.

On the thorny issue of a common resolution fund for the Eurozone, Member States decided that banks would pay a levy to finance this fund, which is expected to gather €55 billion during the first 10 years. During this period, the money will remain in national “compartments”. Only in 2026 will the funds be fully mutualised. In addition, the ESM (European Stability Mechanism) will be involved in the scheme during the 10-year transitory period. After that, the resolution fund will have the possibility to borrow money if the €55 billion are not enough (and banks would have to pay the borrowed amount back).

Sources: BBC, El País, Le Monde, Tageschau.

Note: Although the existence of a deal must be welcomed, several observers hinted that it was insufficient: the time frame is too long and the amount (€55 billion) is too small compared to the size of Eurozone banks’ balance sheets, especially if the stress tests to be conducted next year reveal bigger holes than expected. Finally, the fact that a “resolution council” rather than the European Commission becomes the “resolution authority” deciding what to do with banks in trouble may create political obstacles to the effectiveness of the scheme.


This is our last weekly EU newsletter for 2013! Indeed, due to the holidays, there will not be any in the next 2 weeks.

We will be back in January for another year of discussions about the EU. Keep an eye on the blog around New Year, as we will publish an article on our views for the year ahead!

Thanks a lot for following us and we wish you a MERRY CHRISTMAS!

Pierre-Antoine KLETHI

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