© REUTERS/Kevin Coombs

The Conference on the Future of Europe was supposed to kick off on Europe Day on May 9, 2020. It was French President Emmanuel Macron who first floated the idea to organize a conference to sketch out EU reform. Ursula von der Leyen picked up on this endeavor, in a move to appease a European Parliament critical of her nomination as Commission President. In her opening statement to the MEPs, she called for a “new push for democracy” and confirmed that the European institutions would organize the conference.

Recently, however, Dubravka Šuica, the European Commission Vice-President in charge of organizing the conference, announced in an interview with the Financial Times that the formal launch might be postponed at least until September due to the COVID-19 pandemic. This is understandable. For practical reasons it is difficult to imagine how such a two-year reflection process with comprehensive citizen involvement would work in times of social distancing and confinement measures. And European leaders’ political attention is currently rightly focused on managing the immediate crisis.

Open Process

Either way, beyond the kick-off date and the general commitment from all three institutions, it is still unclear what the conference will look like. Before the EU switched into crisis management mode in March, the European Parliament, the European Commission, and the member states had not been able to agree on the composition, process structure, and mandate of the conference. The European Parliament was the first institution to set out its ideas for the conference, backing a rather ambitious resolution which “commits itself to a genuine follow-up of the conference with legislative proposals and possibly treaty change.”

The proposal foresees a Conference Plenary with representatives of the European Parliament and national parliaments, Council ministers, Commission Vice-Presidents, and representatives of other EU institutions, bodies, and social partners meeting on a regular basis. In parallel, citizens from all member states would gather regularly in several Citizens’ Agoras in different cities around Europe. At least two Youth Agoras are planned, too, whose members would be invited to present their findings at the Conference Plenary. A Steering Committee and an Executive Board would ensure a smooth functioning of the Conference.

The Commission’s response was relatively timid. It did not go into the same detail regarding the EU’s governance structure, nor did it refer to the possibility of institutional reform. Since then, all eyes have been on the European Council, where member states have so far shown little enthusiasm to push the Conference forward and have not even formulated a common position.

Thus, there are more questions than answers. To what extent will European citizens really be able to co-create the process throughout the duration of Conference? How often will the Conference reach out to stakeholders on the local, regional, and national level to allow for the widest possible participation and inclusion of views? How will the outcome of the Conference be translated into concrete policy proposals including legislative initiatives? Will treaty changes be an option?

The fact that the interinstitutional bargaining to define the conference’s approach and scope has not even taken place yet has lowered expectations significantly in the past months—despite initial excitement and push from the European Parliament to get the ball rolling. Even before the COVID-19 crisis management absorbed all attention, the focus had diverted from the debate on the Conference to other pressing issues such as the European Green Deal and the Greek-Turkish border crisis. Even in the Brussels bubble, where interest in such exercises is usually much higher than in the member states, it was no longer a top priority on the political agenda.

New Impulses Needed

In principal, the Conference on the Future of Europe has great potential. It can serve as an important new impulse to European democracy and bring the EU closer to its citizens, while at the same time also aiming to make progress with respect to the implementation of the EU’s key policy priorities. Yet its mandate and objectives must be made clear. Otherwise, the good intentions will backfire, eroding citizens’ trust in such exercises and more generally in the EU. There have already been enough fruitless ad-hoc or on-again-off-again participatory processes, pretending to give European citizens a say in the debate on the future of Europe. This time, the European institutions should get it right. Proper preparation is key.

Now that the formal launch has been postponed, the unexpected timeout should be used to prepare the ground for what would otherwise have likely become a “going through the motions” exercise. The far-reaching economic, social, and political consequences of the COVID-19 crisis for the EU will make the conference even more pressing.

Lockdown measures throughout Europe have already led to a sharp spike of unemployment; a deep recession looms. Cross-border solidarity has been once again severely tested as the countries most affected by the health crisis initially could not count on the support of their European partners, who instead turned inward and closed their borders. In the eyes of too many citizens, the EU played too small a role, particularly when coordinating the necessary restrictive measures and distributing medical equipment. Old conflicts between the North and the South have resurfaced, with even more intensity and emotion. And in Hungary, Prime Minister Viktor Orbán has abused the COVID-19 crisis to undermine democracy, further strengthening his autocratic rule.

Push the Member States

The public health crisis has revealed the limitations of the EU’s capacity to act and has challenged the concept of European solidarity. At the same time, it has laid bare the already existing institutional shortcomings. The Conference on the Future of Europe will not only be an opportunity to jointly assess the EU’s crisis management and come to terms with the initial lack of European action as well as the reflex for national solutions. It will also allow to explore what should really be at the core of the EU, and which public goods it should deliver to European citizens. At the same time, it can serve as an important instrument to channel citizens’ feedback and to distill necessary reforms in order to strengthen the EU’s cohesion and capacity to act—on institutional reform as well as on political substance.

The first task is to ensure that the conference will take place at all. The delay could tempt member states to scrap it entirely from the political agenda. Most of them had been rather skeptical from the beginning anyway, having expressed doubts about how effective the exercise might be and fearing it could open the door to talk of changing the EU’s treaties. As member states will have to fight the fallout of the COVID-19 pandemic in the coming months, they might completely lose their appetite to engage in such an exercise.

Therefore, the European Parliament as well as civil society organizations across Europe should push the member states to ensure that the latter stick to their commitment of launching the conference once confinement and social-distancing measures are lifted. With its recent resolution on the subject, the European Parliament has already sent a gentle reminder for it to be convened as soon as possible. And the signs are encouraging: a group of five ministers of EU affairs from Austria, Ireland, Greece, Bulgaria, and Belgium followed the Parliament urging their colleagues to commit to the conference.

Furthermore, the Parliament and the Commission should find common ground for an ambitious mandate and process to be discussed with the member states in order for the conference to be ready in time. The upcoming German EU presidency could provide an important impulse to broker an agreement between member states and steer the way toward an interinstitutional agreement. Any compromise should address the following two aspects:

Strategic Priorities

First, the participatory dimension of the conference should build on similar experiences in the past, such as the European Citizens’ Consultations that took place last year. In fact, there is a long history of efforts by the European institutions aiming to better connect citizens with the EU, which offer valuable lessons that should be taken into consideration. Experiences from democratic innovations at the local, regional, and national level across Europe should also be harvested, such as the Irish citizens’ Constitutional Convention or the Ostbelgien Citizens’ Council in the German-speaking community in eastern Belgium. Success requires clarity and clear communication of the ultimate goal of the Conference in order to manage expectations, to enable citizen involvement at both the national and transnational level, and ideally a long-term participatory process that establishes a regular communication channel between citizens, civil society, and elected representatives that goes beyond a one-off exercise.

At the same time, all stakeholders should be aware of the risks that come with organizing such a participatory endeavor: euroskeptics will be keen to push forward their own agenda calling for returning competences back to the national level. Thus, pro-integrationists should be prepared to have a convincing communication strategy throughout all phases of the conference to counter misinformation and to deliver credible responses when being confronted with dissent regarding the European project.

Second, the point of departure should be an evaluation of the main consequences of the COVID-19 crisis for the EU and its member states. However, reducing the Conference to the health crisis debate would be shortsighted. It should also concentrate on strategic priorities such as the green transition, the digital agenda, the EU’s role in the world, and democracy and governance, based on the EU Strategic Agenda 2019-2024 defined by the European Council and the von der Leyen Commission. In addition, as the EU focuses solely on fighting the pandemic and its consequences, and certain policy fields face deadlock due to longstanding conflicts, the Conference could serve as an important tool to keep reform debates alive.

Debating the EU’s strategic priorities will also reveal the necessity of institutional reform, for instance the introduction of qualified majority voting in specific policy fields. Also, other roadblocks such as electoral reform or the Spitzenkandidaten process will need to be addressed. Thus, all institutions should clearly commit themselves to deliver concrete financial, legal, institutional, and policy reforms, and—if necessary—even treaty change.

In every crisis, there is an opportunity. Postponing the launch of the Conference buys time. In a post-COVID-19 period, the need for a comprehensive European soul-searching exercise will be greater than ever. European institutions should not waste the opportunity.

The post Extra Time appeared first on Berlin Policy Journal - Blog.

Source: Bureau of Economic Analysis; foreign affiliate sales: estimates for 2018; total trade: data for goods and services 2018

The novel coronavirus COVID-19 is currently wreaking havoc on the world economy. Disrupted supply chains are forcing companies to throttle back production. As China was the epicenter of the crisis, headlines thus far have focused on how German and European companies have had to adjust because they are so reliant on deliveries or component production in China.

These stories seem to have reinforced a fairly widespread—yet false—view that China has become Europe’s top commercial partner. Spending time in Germany this year I have been struck by repeated assertions by German government representatives that this is so. Those making such statements usually point to sizable bilateral trade in goods.

There is no doubt that commercial ties with China have become more significant for Germany and Europe. But that does not mean that China is the country most important to the health of the German or European economies.

Reducing complex commercial ties to one metric—trade in goods—ignores the commercial importance of investment links, services, digital connections, innovation ties, and foreign sources of “on-shored” jobs for the European economies. On each of these other metrics, the ties that bind Germany and Europe to the United States are much thicker and far deeper than those with China.

These additional arteries are literally the lifeblood of the transatlantic economy. If COVID-19 chills these connections, the ripple effects on the German and European economies are likely to be far worse than what we have seen thus far from China. On the other hand, if the United States and its European partners are able to avoid additional commercial tensions and actually sustain their deep commercial bonds during this crisis, the overall impact of a COVID-19-induced recession is likely to be much lower.

Half Right, All Wrong

US exports of goods to the EU totaled $337 billion in 2019, up 6 percent from 2018 and more than three times larger than US goods exports to China ($107 billion in 2019). US imports of goods from the EU were even larger, $515 billion in 2019. 2019 figures for trade with China are not yet available, but in 2018 the EU exported €351.2 billion in goods to the US and €210 billion to China. The EU imported €213.4 billion in goods from the US and €395 billion from China. That means that total EU-China trade in goods of €605 billion was roughly €40 billion more than EU-US trade in goods.

Keying in on this single metric, on March 6 Germany’s statistics office, the Statistisches Bundesamt, issued a bald statement that “China was Germany’s largest trading partner in 2019 for the fourth year running.” I have heard many government and industry representatives parrot the same line. Strangely, the professional number-counters only count trade in goods. They omit trade in services—the fastest growing segment of the global economy. In short, Germany’s official statisticians get it only half right, and therefore all wrong. Apparently, one of the best kept secrets in Berlin is how German and European firms actually operate.

The Trade Flows You Can’t See

In 2017, the last year of available data, the EU exported €236 billion in services to the US and €42.6 billion to China. It imported €223 billion from the US and imported €30.2 billion from China. So, in sum, EU services trade with the US was €469 billion compared with only €72.8 billion with China.

Here’s the reality: the US and Europe are the largest services economies in the world. They are each other’s largest services market, and dense transatlantic services linkages mean that the transatlantic services economy is the geo-economic base for the global competitiveness of US and European services companies. Europe accounted for 38 percent of total US services exports and for 42 percent of total US services imports in 2018.

In short, if you put trade in goods and services together, then it is clear that the largest trading partner for Germany and the EU overall is actually the United States. And it has been thus for decades.

And this is just the beginning of the story. Most German and European companies actually prefer to deliver services via their investment ties rather than through exports. Allianz of America provides insurance, DHL Holdings offers courier services, and SAP Americas delivers software services across the United States. Volkswagen, Daimler, and BMW all supplement their US-based manufacturing operations with a range of customer services. In 2018, sales of services by European companies based in the US amounted to $585 billion, more than double European services exports to the US in the same year. Similarly, sales of services by US companies based in Europe of $882 billion were 2.5 times larger than US services exports to Europe. And all of this dwarf the sales that American and European companies are able to make in China, due in part to the many restrictions the Chinese impose on Western companies.

Why Export When You Can Invest?

These numbers highlight an additional reality: trade itself is a misleading benchmark of international commerce. The real backbone of Germany’s international economic standing is investment, not trade. And here again, America is the preferred destination. The US accounted for 62 percent of Europe’s non-European assets around the world in 2018. The total European stock in the US of $3.0 trillion was four times the level of comparable investment from Asia. Germany’s total FDI stock in the US totaled $324 billion in 2018, and German investment flows to the US grew 54 percent in the first three quarters of 2019. China plays a marginal role in comparison.

Europe’s role vis-à-vis the United States is very similar. Europe accounted for about 60 percent ($18 trillion) of total US global assets in 2018. This is more than four times the amount of comparable US investment in the entire Asia-Pacific region. Moreover, Europe’s share of total US FDI is going up, not down—57.5 percent over the past decade. And when US FDI flows to Caribbean offshore financial centers are subtracted from the total, Europe’s share climbs even higher, to almost two-thirds of US direct investment flows.

An inordinate fixation on trade ignores the reality that most German and European companies prefer to deliver goods and services by investing in other countries in order to be close to their customers, rather than sending items across the ocean. Sales by European companies based in the US in 2018, for instance, were more than triple European exports to the United States. Sales by US companies based in Europe, in turn, were roughly one quarter larger than the comparable US sales throughout the entire Asian region. Ford, GE, Amazon, IBM, Hewlett-Packard, 3M, Caterpillar, Goodyear, Honeywell—American companies have a long-established presence in Germany and other European countries, and their sales reflect that. Sales by US companies in Germany alone were over two-thirds larger than combined US sales in Africa and the Middle East.

So, despite the headlines about US-European trade wars, American and European companies also earn their money on each side of the Atlantic, not in China. In 2019, US affiliate income in Europe rose to a record $295 billion and European affiliate income earned in the United States in 2019 was also at a record $140 billion. Over half of the income US companies earn abroad comes from Europe. That is roughly three times more than what US companies earn in all of Asia.

At Home, Abroad

All of these facts run counter to the fashionable narrative that US and European companies prefer China or other low-cost nations to developed markets. The reality is different, for several reasons.

First, investing in Europe or the United States is relatively easy, while investing in China remains difficult because of onerous restrictions on foreign ownership and forced technology transfer rules. Second, growth prospects in China have slowed not only because of the coronavirus but because Beijing has shifted toward more consumption- and service-led growth and away from export- and investment-driven growth. Third, in addition to being two huge markets, the US and Europe are wealthy, which is correlated with highly skilled labor, rising per capita incomes, innovation, and world class R&D infrastructure, among other things. Together the US and Europe account for half of global consumption, and gaining access to wealthy consumers is among the primary reasons why US and European firms invest in each other’s markets.

Deep and thickening transatlantic investment ties contrast starkly with FDI coming to each continent from China. For some years Chinese FDI in both the US and Europe soared from a relatively low base. However, Chinese investment is now plummeting on both continents due to bilateral commercial tensions and tighter US and European scrutiny of such investments. Chinese investment flows to the US declined to approximately $4.5 billion last year, and Chinese FDI in Europe fell by 40 percent to $13.4 billion. Looking at the paucity of deals in the pipeline even before the coronavirus crisis struck in such dramatic fashion, it appears 2020 will be a year of weak Chinese investment in both North America and Europe.

Finally, the transatlantic economy is also the fulcrum of global digital connectivity. North America and Europe generate approximately 75 percent of digital content for internet users worldwide. Transatlantic flows of data continue to be the fastest and largest in the world, accounting for over one-half of Europe’s data flows and about half of US flows. 55 percent more data flows via transatlantic cables than over transpacific routes. In 2018 US exports of digitally-enabled services to Europe were double US digitally-enabled services exports to the entire Asia-Pacific region. Similarly, EU exports of digitally-enabled services to the United States alone were greater than EU exports of such services to all of Asia and Oceania.

Misleading Focus

An inordinate focus on trade in goods is deeply misleading. The health of the German economy and Europe’s international competitiveness is not just dependent on this one particular segment of commerce, but on the many other ways Germany and its European partners are bound to others around the world. A fuller understanding of these forces makes it clear that, despite much talk of de-globalization and de-coupling and siren calls of “America First” or “Europe First,” the United States and Europe remain deeply intertwined and embedded in each other’s markets, and that their respective links with each other—not China—remain the driver of the global economy. To argue otherwise is to miss the forest for the trees.

COVID-19’s hit to European-Chinese commercial connections was simply the first phase of this cascading crisis. A shutdown of transatlantic commercial ties, which are much deeper and wider, would be far more devastating. Now is not the time to exacerbate transatlantic commercial tensions. On the contrary. Ensuring that transatlantic flows of goods, services, and investment are sustained is one of the most important things that can be done right now to mitigate the economic impact of the pandemic.

N.B. This article is based on the author’s and Joseph P. Quinlan’s publication The Transatlantic Economy 2020, which will be released on March 26, 2020.

The post Transatlantic Commerce: Ties That Bind appeared first on Berlin Policy Journal - Blog.

© REUTERS/Johanna Geron

Over the past decade, each successive crisis has been deemed to be a “critical test” for the European Union. And each time, from the eurozone debt crisis to the migration crisis to Brexit, the EU held strong. This time is different.

In those past crises, the EU stuck rigidly to its rules in the initial stage—sometimes in the face of great criticism. As Greece collapsed, the EU at first stuck to dogmatic thinking about collective debt. As migrants drowned in the Mediterranean, the EU would not deviate from its system that left border countries entirely responsible. And as the British have sought to secure privileged and unprecedented access to the European single market without following its rules, the 27 remaining EU countries have been united in saying no.

But in the initial days of the Coronavirus crisis, the EU response has been the opposite.

The European Commission has shown remarkable flexibility. Countries were able to close border to other member-states, a violation of the EU fundamental freedom of movement and normally one of the most politically sensitive issues for Brussels, without facing significant criticism. Even the most staunch Europeans let it slide. “We shouldn’t have an ideological approach on this border issue, we should be pragmatic,” said French MEP Pascal Canfin, a close ally of French President Emmanuel Macron. “The point is, Does it make sense? Is it proportionate and justified from a sanitary perspective?”

It isn’t just borders. Normally sacred restrictions on state aid were suspended until the end of the year so that member-states could save companies from bankruptcy. Rules governing national budgets, put in place after the debt crisis, were quickly suspended too. Even the eurozone’s famous reluctance to collectivize debt with eurobonds now seems to have vanished.

EU Flexibility

Commission President Ursula von der Leyen’s flexible approach has won plaudits for some and condemnation from others, but the reality is she probably had little choice. Unlike in the financial and internal market realms, healthcare is almost entirely a national competence. A health crisis, therefore, was always going to see more national responses than European ones.

EU member states have gone ahead with their own diverging measures, from closing borders to instituting lockdowns to restricting the export of medical equipment. Von der Leyen has been playing catch-up, trying to find a consensus direction where all the governments are moving and creating around that as much of an “EU policy” as possible.

This was the main purpose for the Commission’s proposal on Monday, implemented by national governments this week, to only allow EU citizens through the bloc’s external borders. Von der Leyen hoped that the external border ban would convince countries to drop their internal border restrictions, which are holding up goods transport, risking empty shelves at grocery stores.

But so far, countries have not relented. Two-thirds of EU member states right now have closed borders with EU neighbors, erecting blockages where none existed before. The closures in Hungary and Poland are so extreme that people are prevented from even transiting through on the way back to their home countries.

Similarly, the Commission’s ban on EU countries exporting medical equipment outside of the EU was meant to convince countries like Germany to end their restrictions on exports to other EU countries. But Berlin and others have been slow to let this equipment spread throughout the bloc.

In such a fast-moving crisis that has manifested itself in different ways in different countries, the EU has shown flexibility on its rules and has given a green light to varying national solutions. The key question is this: now that this Rubicon has been crossed, is there any going back?

European Council President Charles Michel has said this crisis calls for “more Europe.” In reality, the exact opposite is happening—for now at least. But it may be that while the initial health and security response is national, the economic recovery efforts to come are European.

Europe’s Forte: The Economic Response

After initial stumbles, the European Central Bank decided Wednesday night to finally issue a “whatever it takes” plan to launch an additional economic stimulus program worth €750 billion. The Pandemic Emergency Purchase Program will buy corporate and government debt from across the eurozone to spread the money among countries in need.

“There are no limits to our commitment to the euro,” said ECB chief Christine Lagarde. “We are determined to use the full potential of our tools, within our mandate.”

The funds are in addition to the ECB’s €120 billion measure announced last week and a €20 billion-a-month bond-buying program. It would be the largest monetary stimulus package ever in under a year. This is on top of the European Commission’s €37 billion emergency funding from the EU budget to prop up economies, and the €50 million “RescEU” fund to stockpile medical equipment.

These structures will provide the basis for the EU response to come—a response that will be coordinated from Brussels once the initial panic has subsided. But will these temporary suspensions on normally sacred EU rules really end at the end of the year?

Schengen rules stipulate that internal EU borders can be temporarily shut in a health emergency for an initial period of twenty days. This can be renewed, with approval from the European Commission, for a total period not exceeding two months. If the national border closures are still in place in June, it will be the first indication that the Coronavirus may have dealt the European project a fatal blow.

Getting Stronger

For pro-Europeans, there is still hope. A temporary relaxation of sacred EU rules in such an acute crisis does not, as many are now opining, signal the demise of the European project. “Europe was blamed ten years ago for not doing enough and doing it too late,” says Canfin. “So what we’re now working on is a full package response that would use first all the flexibilities of the growth and flexibility pact. The commission is saying, Okay, do whatever you have to do to help your economy recover in the short term.”

The previous crises forced the EU to take unprecedented action, which in fact strengthened its powers rather than weakening them. Brussels gained control over budgets and received commitments to share the burden of border policing, with new funds for the EU’s Frontex border force. America’s retreat from the world under Donald Trump, another crisis for the EU, has forced countries to drop their long-standing opposition to the EU taking on a military defense role. The result has been the first-ever European Defense Union and a new defense department in the Commission.

It’s notable that the first place the world looked to for a European response to the Coronavirus crisis was Brussels, rather than national capitals. Brussels may not have been able to give the world the definite answers it was looking for in the first weeks of the crisis, but the fact it was even asked shows just how much things have changed over the past 20 years.

No one knows how the virus is going to evolve in the coming weeks and months. But as the initial panic stage subsides, Brussels has the tools to step in and lead the longer-term response. And in that process, a crisis could again turn into a moment where the EU finds its authority strengthened rather than diluted.

The post The Pandemic Means Less Europe—For Now appeared first on Berlin Policy Journal - Blog.

© Frank Augstein/Pool via REUTERS

After the Brexit negotiations is before the Brexit negotiations. The first phase was difficult enough. The major difficulties stemmed from the UK’s side: Theresa May suffered more parliamentary defeats than her five predecessors together, and Boris Johnson also lost his theoretical majority within a few weeks. Only the snap elections at the end of 2019 provided clarity, after which the United Kingdom was able to leave in an orderly fashion after all on January 31, 2020.

The EU-27, on the other hand, were characterized by unusual unity. The Withdrawal Agreement secured the rights of EU citizens in the UK and the British commitments to the EU budget, and set a transition period until the end of 2020 and how to deal with the special situation in Northern Ireland. However, only the divorce issues of this complex separation are sorted out, with the exception of Northern Ireland. Now the real question of the Brexit needs to be answered: under what conditions should the EU cooperate with this ex-member, Europe’s second largest economy and a close NATO partner?

The political context for the next negotiations has changed significantly. First, Brexit has become irreversible, at least in the medium term. Until the end of January, remaining within the EU was still a possible outcome for the UK. According to the ruling of the European Court of Justice, London could have withdrawn the withdrawal notice at any time before the country had formally left the EU. The opponents of Brexit therefore focused on a second referendum: time and again, MPs in the House of Commons fought over whether Brexit should happen at all, and less about what should happen afterwards. This political struggle has now been decided.

Second, the negotiations are taking place under even greater time pressure than before. Article 50 set a two-year deadline for the withdrawal negotiations, which because of the internal political blockade in London had to be extended three times in order to prevent a no-deal Brexit. Partly because of these extensions, the transition phase set for the end of 2020 shrank to just eleven months, during which the future relationship is now to be negotiated. This is very ambitious compared to the average duration of about five years in EU free trade negotiations.

Moreover, the post-Brexit agreement is intended to regulate many more complex areas: economic cooperation in all its facets (goods, capital, services including financial ones, data, energy, mobility of persons, transport, aviation, fisheries), internal security (operational cooperation, data exchange), external security (foreign policy coordination, sanctions, CSDP operations) and a common institutional framework. Nevertheless, Prime Minister Johnson has publicly rejected the legally available option of extending the transition period and had it anchored in law that the UK shall not use it.

Danger of a No-Trade-Deal Brexit

The negotiators will thus have to finish a new accord within the remaining few months. At the end of the transition period, however, the threat is no longer a chaotic “no-deal Brexit”—after all, the UK has already left the EU in an orderly fashion. Instead, “only” a no-trade-deal Brexit looms, i.e. the UK leaving the EU single market and customs union without a trade agreement in place. It would be possible to avoid major chaos, but the economic consequences of the reintroduction of customs and border controls between the EU and the UK would be significant, in particular for the UK. However, London is playing down concerns about this outcome: Johnson now speaks of an “Australia model” as an alternative to a trade agreement. Australia does not have a fully-fledged trade agreement with the EU, but it does have arrangements for regulated dealings, for example regarding aviation. The political conclusion is paradoxical: precisely because the consequences of a no-trade-deal Brexit are less than those of a no-deal Brexit, political inhibitions are lower so the scenario has become more probable

Last but not least, the domestic political conditions in London are completely changed. Until December 2019, the British government, parliament, and society were deeply divided on Brexit and could not agree on a clear negotiating position. Compromises agreed by the UK government in Brussels rarely survived the infighting in the Conservative Party. The House of Commons in particular rejected a no-deal Brexit, but also voted down the Withdrawal Agreement, a second referendum, or any other Brexit option.

No Tory Rebels Left in Power

Although British society is still divided—a narrow majority now views Brexit as a mistake—the Brexiteers have achieved a resounding domestic success. With the slogan “Get Brexit Done,” Johnson captured the mood of the British electorate and won a clear majority in parliament. The much-contested ratification of the Withdrawal Agreement became a formality. At the same time, Johnson decisively triumphed in the Conservatives’ internal power struggle over their European policy, which has lasted for over 30 years. All members of the government and Tory deputies have had to subscribe to a policy of hard Brexit. Since the latest reshuffle, all major ministerial offices in cabinet were given to politicians who supported Brexit before the 2016 referendum.

It is symbolically important that none of the Tory rebels who pushed through the anti-no-deal legislation against the will of the government in autumn 2019 made it back into the House of Commons. Domestically, Johnson now has a largely free hand to set his Brexit policy. The only restraint may come from Northern Ireland and Scotland, as a hard Brexit would exacerbate the pressure on the union of the British state. Nevertheless, the direction for the UK government seems clear—a full break with the EU, with a regular free trade agreement but no conditions that would prevent the UK from setting its own standards, laws, or autonomous trade policy.

The EU and the United Kingdom are thus facing a different round of very critical negotiations. Unlike before, the line of conflict will no longer run through the British Parliament, but between London and Brussels. Although many structural factors are similar, this different political dynamic will fundamentally change the next phase of the Brexit negotiations. Therefore, the EU should not make the mistake of uncritically maintaining its—so far successful—approach. In the short time available for the negotiations, the EU-27 face four strategic challenges.

Developing a UK Model

The overarching challenge is to find a new model for cooperation with a large European third country that does not want to integrate into the EU. Until February 2020, the EU has avoided defining this model and retreated to the position that future relations with the United Kingdom could only be negotiated after the United Kingdom has withdrawn. Politically, the chaos in London and the possibility of a second referendum contributed to the fact that the EU-27 did not have to answer this question. In consequence, the most crucial matters of Brexit remained ambiguous in the first phase of negotiations, with the legally non-binding “political declaration” only sketching in what areas the UK and the EU want to cooperate in the future.

Now Johnson has clearly expressed a preference for a model with the greatest possible distance from the EU. He has also distanced himself from May’s ambitions to negotiate at least frictionless trade in goods, if not services. All the “soft” models of Brexit, from a customs union to deeper access to the internal market, are thus politically off the table. The EU member states, in their mandate for the next phase of the Brexit negotiations, are also aiming for a regular free trade agreement.

Viewed positively, there is thus common ground to start from. However, due to the UK’s geographic proximity, its economic size, and its close economic links to the EU after almost 50 years of joint membership, the EU and its member states want stricter provisions in terms of a level playing field than in other comparable trade agreements. Within the short time frame, the negotiators will therefore have to develop a new “UK model” of partnership―a new balance between close partnership, British and EU sovereignty, more limited access to the common market and to EU programs, and corresponding obligations.

Expanding the Barnier Method

Closely related to this is the second strategic task: to preserve the unity of the EU-27. In the first phase, the EU-27 succeeded in asserting their interests in part because they were more united than ever before. This unity was based on two factors.

On the one hand, the EU institutionally developed a clear, consistent negotiating line with the “Barnier method.” The European Commission and its chief negotiator Michel Barnier were given sole responsibility for the negotiations, and national governments did not conduct their own bilateral negotiations with London. At the same time, Barnier kept everyone on board with high transparency, a lot of technical coordination at the working and political level as well as very regular reassurances of support from the national capitals. On the other hand, the EU-27 also benefited from the political framework of the Article 50 negotiations, in which they were able to agree on a common objective—to protect the integrity of the EU and the internal market—with solidarity toward the special concerns of individual member states (Ireland in regards to its border to Northern Ireland, Central and Eastern Europeans in relation to their citizens in the UK, and so on).

In the negotiations now to come, the Commission will continue with the same method, as Barnier has been re-appointed and given a new mandate. Technically, the EU-27 are again very well prepared. However, it will become more difficult to maintain political unity. The EU-27 will have to make a dual strategic choice— both in terms of the trade-offs outlined above, but also of the priorities to be negotiated in the short transition period. The mandate that the EU states have given to the Commission is extensive, partly because they have not yet been able to decide between different priorities of the member states. Should the focus be on fisheries (important for North Sea countries), the level playing field (important for EU countries with strong economic ties to the UK) or security cooperation (important for Central and Eastern Europe)? Confronted with a British government that is strengthened at home and prepared to play off and promote differences between EU member states, the EU-27 therefore needs, in addition to good technical preparation and negotiation management by Barnier, stronger political coordination of the national governments.

Triangular negotiations

The third strategic challenge lies in a potential struggle with the United States over Britain’s trade, but also foreign and security policy anchoring. With Brexit, the UK is losing its already weakened role as a “transatlantic bridge.” Instead, London needs to reposition itself. From a European perspective, it is important to prevent London from turning fully toward the US.

In trade policy, triangular negotiations are on the agenda for 2020—the UK wants to negotiate simultaneously with Washington and Brussels, and the EU and the US government have also begun talks on a (less ambitious) trade agreement. Although the UK trades much more with the EU than the US, a quick agreement with Washington is of the utmost political importance for the Brexit proponents. US President Donald Trump also has an interest in a success before the US elections in November 2020. Publicly known US negotiating goals include opening up the UK markets for US products that would not be admissible under current EU regulatory standards. Similarly, the EU wants to establish level playing field provisions to ensure that existing European standards are maintained in the UK, if not—as demanded by some national governments—a “dynamic” alignment to EU standards. London wants to use these triangular negotiations to its advantage. The EU will thus also have to consider the global dimension in the negotiations with the British government. Protecting existing standards, for example, may be more in the European interest than a very hard negotiation stance insisting on dynamic alignment, and thus driving London into the arms of Washington.

Albeit under different circumstances, this also applies to foreign and security policy. Remarkably, since 2016, the British government has taken a stronger European stance on foreign policy issues where the Trump government and the majority of Europeans differ. This applies, for example, to dealing with Iran, the Paris Climate Accords or, most recently, Huawei in 5G infrastructure. So far it has also been possible to separate tensions in the Brexit negotiations from foreign policy cooperation. Even after Brexit, the EU states, above all Germany and France, have an interest in involving London in foreign and security policy. This will not, or only to a very limited extent, be achieved through the EU institutions, where the UK as a third country cannot have a seat. What is needed here is close bilateral and multilateral cooperation such as the E3 group on Iran, without undermining the EU framework.

Forging a New Partnership

The forthcoming negotiations with London will be difficult and again tie up a lot of political energy and attention in the EU. The pressure on the unity of EU-27 will increase. The changed political dynamic in London also means that the risk of a domino effect is returning. Until now, the chaos in London encouraged a perception of Brexit as a deterrent in other EU countries. Now Johnson is the political winner, at least domestically, whereas negative economic consequences have not (yet) materialized to such a large extent. In the medium to long term, the UK can become a close partner, but also an economic and political counter-model to EU integration. Even now, hard-core Brexit supporters argue that London should support euroskeptics across Europe.

The EU’s response to this challenge cannot be to “punish” Britain by making negotiations as tough as possible. While the EU should draw a clear dividing line between membership and partnership, it has a vested interest in placing the partnership with London on a lasting and successful footing. The fourth strategic task is therefore ultimately the most important one for the EU: strengthening itself and increasing the attractiveness of EU membership. After all, the best response to the challenges posed by the Brexit would be to demonstrate the advantages of the successful model of European integration.          

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© REUTERS/Francois Lenoir

“We know very well the sun rises tomorrow and a new chapter for our union will start,” European Commission President Ursula von der Leyen said wistfully in a speech on Brexit Day. “With it comes a once-in-a-generation opportunity to make sure the EU leads the way.”

Standing aside European Council President Charles Michel and European Parliament President David Sassoli in Brussels, von der Leyen and her cohorts were keen to stress they were here to talk about the EU, not about the United Kingdom. On the previous day, the three had held a retreat at the Jean Monnet House in France to talk about their visions for a post-Brexit EU. More specifically, they were discussing how they want to organize the upcoming Future of Europe conference.

They reiterated their insistence that in order for the UK to have access to the EU’s single market, it cannot diverge from EU rules, but that was it. They let a joint op-ed in European newspapers today more fully explain their negotiation position.

Today was not a day to focus on the future EU-relationship, but a day to talk about Europe, and what might be possible now that the UK is leaving. “It’s an exceptional day for the EU, and we have mixed feelings,” said Michel. “It’s never a happy moment when someone leaves, but we are opening a new chapter. And we will devote all our energy to building a stronger and more ambitious EU.”

No More Holding Back

Ambitious is the key word. In Brussels, there has long been a feeling that the UK has held the EU back from taking the measures that would make it a more powerful force in the world. This has always particularly irked the French. Now, with the British leaving, things are possible that weren’t possible before. And French President Emmanuel Macron wants to push forward with them.

The UK had always blocked attempts to create a defense role for the EU, fearful it would be in competition with NATO. With the UK leaving, work on creating a “defense union” for the EU has already been ongoing for over a year. EU enlargement—always pushed by London, but resisted by Paris and Berlin—has had the brakes thrown on. It is only a matter of time before Turkey’s EU accession bid, pushed for so long by London and Washington, will be officially ended. Endless enlargement dilutes the ability of the EU to be a strong unified bloc, Paris and Berlin believe, and would turn it into nothing more than a free trade area. This, of course, is what London always wanted—hence why they pushed expansion.

Rather than believing that Brexit portends the end of the union, many in Brussels think the experience of the Brexit negotiations over the past three years has put the wind in Europe’s sails. Contrary to expectations, the EU27 showed remarkable unity throughout, with not a single member breaking ranks to conduct bilateral negotiations with London, despite the most intense efforts on the part of the UK.

Across Europe, polling has shown that the percentage of Europeans who want their country to leave the EU has plummeted since the Brexit referendum as Europeans have watched the car crash of Brexit. Polling shows there is no country in the EU in which anything close to a majority of people want to leave.

“Within these three-and-a-half years there was a very precious experience made by the EU27,” von der Leyen said. “The experience of how much unity counts, how strong we are in unity—way more than each single country would have on its own.”

So now, what to do with that momentum? The leaders acknowledged that though the idea of other countries leaving the EU is not a winner with the public, they are also skeptical of the idea of a stronger EU. The idea of the Future of Europe conference, which is set to start in May with citizens agoras hearing from people about what they want from the union, is to both take on citizens’ desires and communicate to them the benefits of a strong sovereign Europe.

“We have to work to make sure Europe is better loved among citizens,” said Michel. “Our concern is going to be to stop using jargon, to cut down red tape. We have the digital agenda, the green deal, and on security we will defend our values. On top of that we need the right methods to implement our short and long-term plans.”

“It’s essential in the future to take much more into consideration the expectations of the citizens, and it’s also important to explain what’s the daily added value of this political project,” he added.

Skeptical Forces from Without and from Within

European Parliament President David Sassoli acknowledged that it isn’t just the British who are skeptical about the idea of a stronger EU. There are strong forces trying to disrupt the European project—forces from without, and forces from within.

“Why are so many people working so hard to break up the EU?”, he asked. “That is the question. Because within our countries, too, there are certain people who are trying to run with this torch. There are groups, forces who are trying to weaken the EU, but what’s their agenda?”

“We want proper rules to govern this European dimension. You can defend the more vulnerable when you have rules. In the absence of rules, it becomes the jungle. Might becomes right. But there are those who want to defy us because they are afraid of a rules-based world.”

Michel agreed. “When we are together and united, when we share a common approach, we are a real political and economic force, believing in personal dignity. These are the values that underpin the European project.”

The question now will be convincing the citizens of a post-Brexit EU that these values are worth fighting for.

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©REUTERS/Regis Duvignau

This week the European Commission adopted its stance on how to run the “Conference on the Future of Europe,” a two-year soul-searching exercise aimed at changing the way the EU works after Brexit—the pet project of French President Emmanuel Macron. But if the commission and national governments get their way, it may be a useless exercise that will be quickly forgotten.

Last week the European Parliament was the first of the EU’s three governing institutions to adopt its position on how to run the conference, set to begin in May. Their position, adopted by 494 votes to 147, would create a highly organized system of citizens’ assemblies across Europe, composed of up to 300 people each. Several bodies would be set up to run the conference, including a “conference plenary,” a “steering committee” and an “executive board.” Former Belgian prime minister Guy Verhofstadt, who has been the parliament’s Brexit spokesperson, was chosen to lead the process.

Constitutional Convention

Most significantly, the parliament would give citizens specific questions to wrestle with, involving structural changes to the EU to make it more fit for the challenges to come in the 21^st century. They want to ask citizens if they think EU elections should be more direct, for instance by directly electing the European Commission president, and if they think it should be easier for the EU to make foreign policy and tax decisions by removing the ability for a single country to use its veto. The prospect of achieving this through treaty change, something that still terrifies EU national governments since the Lisbon Treaty nightmare ten years ago, is embraced by the European Parliament. MEPs say this conference should result in major changes in how the EU works.

Indeed, what the parliament is envisioning resembles the Convention on the Future of the European Union which ran from 2002 to 2003 and ended with the Treaty Establishing a Constitution for Europe. That constitution was notoriously rejected by French and Dutch voters in 2005. The EU then set out on a long arduous process of ratifying the Lisbon Treaty, which contained most of the structural changes of the defeated constitution without the trappings of a federation (and therefore not subject to a referendum in France).

That was then, this is now. Macron, backed by the European Parliament, believes that the situation has changed dramatically in the last 15 years. The combined lessons of Brexit and Donald Trump have shown Europeans that a strong EU is needed to guarantee European sovereignty. In 2005 the EU was a backburner issue few people thought about, and indeed polling showed the reason for the constitution’s defeat had more to do with punishing sitting national governments than its actual contents.

The Dreaded T Word

The conference should “propose all the necessary changes to our political project, without any taboos, not even treaty revision,” Macron said when proposing the idea last year. But outside Paris, national capitals don’t feel the same way. The crises prompted by the French and Dutch constitution rejection in 2005 and the Irish Lisbon Treaty rejection in 2008 still haunt them. Last month the European Council of 28 national leaders showed little enthusiasm for the project when they half-heartedly endorsed the idea but refrained from saying anything about it.

National EU ambassadors are expected to discuss the issue this week ahead of the EU affairs ministers’ first discussion on the conference next Tuesday. But it’s very uncertain whether leaders will adopt a position at their March European Council summit—something that would be necessary for the conference to start in May as planned. More than likely, they will delay the start of the conference as long as possible—to Macron’s great irritation.

While Angela Merkel has publicly spoken positively of Macron’s idea, privately she is said to be terrified of the idea of it leading to treaty change and would prefer for it to remain a purely public relations exercise. Once again, Macron’s appeals for EU reforms are hitting a German wall.

Ursula’s Open-Ended Plan

It was within this context that the European Commission set out its vision of the conference this week—caught, as it so often is, between the ambition of the European Parliament and the conservatism of the European Council.

Commission President Ursula von der Leyen couldn’t be in Brussels herself for the adoption of the commission’s position on Wednesday, as she was speaking at the World Economic Forum in Davos at the same time. “This is about Europe shaping its own future,” she told the world’s rich and powerful meeting in the Swiss mountain resort. “But to be more assertive in the world, we know we must step up in some fields. Recent events have exposed where we have to do more.”

However, the commission’s position on the future of Europe unveiled just 30 minutes later in Brussels didn’t seem to reflect this sense of urgency. Instead, the communication to citizens seems to say von der Leyen believes the EU is functioning just fine.

The commission goes into little detail about how the conference should be run, but it rejects the parliament’s idea for citizen assemblies saying instead it should “build on the well-established citizens’ dialogues.” One could be forgiven for having never heard of these town-hall-style dialogues, even though 1,850 have been held between citizens and commissioners in 650 locations across Europe, according to the commission.

Announcing the commission’s proposal to the press, Dubravka Šuica, Vice President for Democracy and Demography, said the conference should first focus on the EU’s headline policy ambitions of climate change, economic equality, and digital transformation.

A second, seemingly less important strand would focus on structural issues. A reference in an earlier version of the text to taking legislative action and proposing treaty change “if appropriate” was taken out.

“This will be a bottom-up forum for open and inclusive debate accessible to people from all corners of the union,” said Šuica. “We want to go beyond the cities, beyond the capitals, we want to reach also those who are critical toward the EU.”

Conducting the conference at sporting events or festivals could be one way of reaching those citizens who are not currently engaged, she said.

Šuica said an open-ended approach is better than one which already tells the citizens what the structural problems are that need to be solved. “This will be more a listening exercise than talking. And when we hear what citizens want, we will try to transpose this into policies and maybe some legal acts.”

An Unusable Cacophony

“We are not going to pre-empt what will be the outcome of these roundtables. We will allow citizens to tell us what they want. If they want treaty change, we are open to this. Parliament and council have more to say on this than the commission—but we have nothing against it.”

It might sound very democratic, but critics point out that it is unrealistic to expect citizens to know what the structural problems are or what treaty change means. Without asking citizens specific questions about what they want, and rather just sitting back and saying, “Tell me what you want,” the feedback is likely to result in an unusable cacophony of voices. This may perfectly suit those national leaders who don’t want the exercise to result in a specific mandate to change how the EU works.

Critics have also questioned the commission’s decision to primarily focus on current policy priorities and place secondary importance on long-term governance issues. Given this is a conference on the future of Europe, why is it being restricted to the policy preoccupations of the present?

German MEP Gabriele Bischoff, a Social Democrat member of the European Parliament’s working group on the conference, told the EUObserver news website that the commission’s position is “not very ambitious, not very clear, not very outspoken, and is not addressing what should come out of this conference.”

However, she said at least the commission has not ruled anything out, as the council seems likely to do.

Once the council adopts its position, the presidents of the three institutions will meet to agree a consolidated approach. Given that the parliament’s position will be drastically different than the council’s, von der Leyen will be the one casting the deciding vote. If she sides with the MEPs she will score points with Macron, but anger Merkel and others.

Observers say that if she decides to demure to Berlin and other national capitals on how to run the conference, it could render it a useless exercise that is ignored and then quickly forgotten.

The post Has EU Reform Ended Before It Began? appeared first on Berlin Policy Journal - Blog.

© REUTERS/Kai Pfaffenbach

Given the economic environment and prevailing uncertainty, there is a growing debate in Europe and in Germany about fiscal rules, or more precisely: the insistence on balanced budgets and avoiding debt.

Given the economic environment and prevailing uncertainty, there is a growing debate in Europe and in Germany about fiscal rules, or more precisely: the insistence on balanced budgets and avoiding debt.

The European Fiscal Board, an independent advisory board of the Commission, for example, has made a number of recommendations to European finance ministers for reforming the Stability and Growth Pact and promoting investment. However, these recommendations have fallen on deaf ears, mostly because Germany both in Europe and at home refuses to have this sensitive discussion, and because many prefer the constructive ambiguity of the current framework. There is therefore a strange alliance of all parties who either support or disagree with the rules in principle, but who both coalesce as a matter of fact on their “flexible” application because they share the fear that reform could make things worse.

But this ambiguously constructive compromise is at odds with the legal and political weight that these rules have carried in Germany since the 2009 constitutional reform that elevated the Schuldenbremse (“debt brake”) into the German constitution. And it deters policymakers from considering ways to amend the rules in order to make them more suited to the challenges of our times.

Four Objectives

Indeed, a modern and effective fiscal rule should achieve, at the very least, the four following objectives:

First, while it should foster the stability and sustainability of public finances, it should allow sufficient stabilization during downturns and recognize that this may require discretionary expansion over and above the simple use of automatic stabilization.

Second, it should be robust enough to meet the investment needs that are required to achieve energy and climate transition. Indeed, fiscal sustainability cannot take precedence over environmental sustainability. There is not much sense in having low debt for the future if there is no future on the planet to start with.

Third, in a federal (or quasi-federal) system, it should allow for sufficient allocation and transfers between different parts of the federation so as to ensure its economic and political integration.

Fourth, it should be transparent and democratic so as to guarantee appropriate parliamentary checks and balances on the fiscal policy of the government, both at the federal and state level. In other words, in the case of Germany, the budgetary rights of the Bundestag constitute an eternal clause in the constitution and therefore take precedence over abiding by the fiscal rules.

The reality is that Germany’s Schuldenbremse performs very poorly against these four sensible objectives. Limiting the maximum structural deficit to no more than 0.35 percent of GDP only works in a world of great moderation where economic cycles are small and automatic stabilizers are sufficient to counteract a slowing economy. In the real world, where trade and currency wars, financial crises, and technological disruptions can create large swings in economic activity, a more active fiscal policy is required.

In today’s world, where Germany needs to prepare for a profound transition of its economic model, these rules are potentially preventing the country from undertaking the appropriate fiscal and economic policy.

Climate Protection

The Schuldenbremse also treats all fiscal expenditure the same and as such is blind to public investment needs in general and in particular to the immense investments required to achieve the necessary energy transition. For example, the cost of moving away from coal alone is estimated to be in the range of €40 billion by 2038. But when the German government put together its “climate package” in September, it showed no sign of reconsidering either its political commitment to a balanced budget or the debt rule.

It is shocking that politicians would choose the appearance of fiscal sustainability over the very possibility of sustainable life on earth. At a minimum, fiscal policy should introduce a golden rule to protect public sector investments and, even more importantly, a green rule to ensure that climate mitigation and energy transition policies never get abandoned for an elusive debt reduction objective.

What is more, it is striking that in Germany fiscal rules are not only applicable to the federal government in Berlin, but also to the 16 federal states (the laender). Indeed, the Schuldenbremse was as much a reform of German federalism―with the explicit objective of centralizing more economic and political powers in the hands of the federal government―as it was a fiscal rule. One motivation for the centralization was to reduce the transfers from the federal government to the states. But more fundamentally, centralization was an effort to reduce the tensions between “rich” and “poor” states regarding transfers. The illusion persist that each state could stand on its own feet provided it kept its house in order.

This illusion ignores the fundamental workings of economic agglomeration: without transfers economic regions will diverge, provoking political disruption. Indeed, the very foundation of Germany’s unity is the solidarity between its more dynamic and less advanced regions. A federation that attempts to operate in violation of this fundamental solidarity principle is doomed to fail. This is the central reason why the Schuldenbremse in its current form will have to go.

In fact, lawmakers have already started discretely rewriting the Schuldenbremse, for example with the Constitutional reform of 2017 which (i) basically renewed the Laenderfinanzausgleich by allowing transfers (potentially permanent) to Saarland, Bremen, and Berlin implicitly acknowledging that they won’t be capable of meeting the balanced balance budget rule in 2020 and thereafter; (ii) extending the outsourcing of autobahn and other infrastructure (from 2020 onward the domain of the government in Berlin) to public-private partnerships so as to optically limit the debt of the federal government and the laender. Another example of such a work-around would be Economy Minister Peter Altmaier’s proposal to set up a Citizens’ Climate Foundation to finance green initiative without breaking federal debt rules. Each of these amount to stealthily undermining the “debt break” rules rather than opening a debate about its reform.

Time for an Honest Debate

This is not the economic and political debate that the German and indeed the European public deserves. The current approach of preaching the status quo and reforming by stealth risks obfuscating much-needed changes in economic policy and obscuring an essential aspect of it from oversight by the Bundestag. This is endangering both Germany’s prosperity and democracy.

Living the “debt brake” lie is also holding back a critical debate about fiscal rules and governance in the eurozone. Indeed, so long as a proper discussion about fiscal federalism in Germany is lacking, we are unlikely to have an informed debate about fiscal union in Europe. If Germany cannot accept the principles of stabilization and transfers inside its own federation, it won’t accept them in the European monetary union. For Europe to go forward, this has to change.

The post Living a Lie appeared first on Berlin Policy Journal - Blog.

Artwork © Dominik Herrmann

The life of Josep Borrell Fontelles, the next high representative of the European Union for Foreign Affairs and Vice-president of the European Commission, is extraordinary, as is the man himself. The son of a baker, he was born in 1947 in the small town of La Pobla de Segur, in the Catalan Pyrenees, near Andorra.

After attaining several degrees in aeronautical engineering and economics (including a masters in oil industry economics and technology in Paris) he had a doctorate by the age of 29 and was a full professor in economics at Madrid’s Universidad Complutense by the age of 35. He then turned to politics, becoming secretary of state for the Treasury at 37 and then minister of public works and the environment under the Socialist PSOE government of Felipe González at 44.

He became president of the European Parliament at 57, president of the European University Institute at 63, and then returned to Spanish politics to serve as minister of foreign affairs under Pedro Sánchez. Now at the age of 72 he is to become the chief diplomat for 500 million Europeans, with 4,000 civil servants under his command––quite an intense journey even for such a brilliant mind.

Intensity is actually one of Borrell’s defining character traits. His drive and single-mindedness have brought him great success. He was responsible, for example, for the modernization of the Spanish tax system, including the introduction of VAT, necessary to finance the welfare system when Spain entered the EU in the mid-1980s. In the 1990s he also played a key role in the decision to start building much of the infrastructure that today makes Spain the envy of the world. No small feat.

A Loner, Not a Team Player

However, his strong character and occasional irascibility have sometimes worked against him. At the core, Borrell is a mathematician, and an exceptional one. Not many Spaniards would have been able to get a Fulbright scholarship in the 1970s, still under the Franco dictatorship, to study Applied Mathematics at Stanford University. Yet he did. This outstanding mathematical mind allows him to be Cartesian in his approach to problem-solving but also means that he can easily become impatient when things don’t work out. This is reflected in his favorite hobby: hiking. Having been born in the mountains, wherever he goes he is immediately looking around for the highest mountain to climb.

Hiking, though, is more an individual than a group effort, and that is also one of Borrell’s traits. He is more of a loner than a team player. His intellectual mind is somewhat allergic to social conventions. In a country obsessed with football, he does not like the sport. He also hates networking (maybe the reason he never led the PSOE, although he was close in 1998 when he won the support of the party base). This does not mean, however, that he does not have a full book of contacts. Even after he left power, people would call him to pick his mind. This is a sign of his strong personality and independent thinking.

Recently a senior official at the German Foreign Office told me that Borrell needed to be brave. He must help unite the Europeans internally (starting with the European Commission led by Ursula von der Leyen) and project European power externally. If courage is required, Borrell has tons of it. Keen on rafting and other extreme mountain sports, he does not shy away from a good fight if he is convinced it is for a good cause. Already as a junior civil servant he fought his bosses, voicing his opposition to the first fiscal amnesty of the González era, and more recently he stood by Pedro Sánchez when the PSOE apparatus wanted to get rid of the leader and very few thought he had any chance to become the Spanish prime minister. Yet another example of Borrell’s determination paying off.

What You See Is What You Get

People who work under him highlight that Borrell is extremely demanding, and that this also extends to himself. Slightly workaholic, he prepares the dossiers in-depth and tries to look at the problems from different angles. He has a critical mind and is always looking for improvement. And above all, he is sincere. He does not suffer fools gladly. What you see is what to get with Borrell. This makes him come across as blunt but has also given him the courage to criticize obvious misbehavior.

In 2006, as president of the European Parliament he told Russian President Vladimir Putin face-to-face in a summit in Lahti, Finland, that he was a human rights offender. Later, in 2010, when, in the middle of the euro crisis, he became the president of the European University Institute in Florence he also dared to tell the faculty that they should climb down from their ivory tower and do more policy-oriented research.

This brought positive changes, like the introduction of the now well-established “state of the union” conference, the Migration Policy Center, and the Global Governance Program, as well as the chairs on the “Governance of EMU” and “Energy and Climate Change.” However, it also led to a conflict of interests for being on the board of the energy firm Abengoa and his ultimate resignation. This was not the last time his involvement in Abengoa would give him headaches. In 2015 he sold €9,000 worth of shares belonging to his wife with insider knowledge and was later fined. But overall it is clear that Borrell has never used his power to get rich. His austere lifestyle proves that.

Hatred of Catalan Separatism

The biggest fight of his political life has been with the Catalan separatists. Influenced by the French state culture, which earned him the reputation for being something of a “Jacobin,” he has never understood the obsession of so many of his fellow Catalans with the creation of an independent state. Borrell is proud to be Catalan, speaks Catalan, but has always hated Catalan nationalism. This has been a thorn in the side of secessionists. His successful career has been a vivid example that Catalans are not oppressed by the Spanish state.

He has also sought to counter the idea of the “economics of independence” by publishing a book entitled Las Cuentas y los Cuentos de la Independencia (“The numbers and fairy tales of independence”) where he contests the myth that Catalonia pays annually €16 billion into the coffers of the Spanish state. And he also gave a significant speech on October 8, 2017 (one week after the referendum which Spain declared illegal) in Barcelona in front of 1 million people calling for the unity of Spain. His speech showed that he is a convinced Catalan, Spaniard and European, who is adamantly opposed to any form of ethno-nativist nationalism.

This open Weltanschauung—already as a young student he left Spain to work on a farm in Denmark and in the construction sector in Germany, and he even spent some time in an Israeli kibbutz—will be useful for his job as high representative for the EU. In a time when US foreign policy has become much more nationalistic and reemerging powers like China have become more assertive, the chief European diplomat needs to be a tough negotiator, but also someone convinced that the multilateralist path is the right one.

Dealing with China

A lot of his attention over the next five years will no doubt be devoted to problems in the Middle East and North Africa, including issues like migration and Iran. The future of Africa will be a big dossier too. But hiker Borrell needs to look for higher peaks. Dealing with the Chinese challenge is one of them. Strategically it might be the most defining issue during his mandate. And here, he is convinced that only engagement and cooperation are viable routes.

In short, Borrell will be different to his predecessors. He will not try to find the lowest common denominator in foreign policy. After thinking hard about the problem at hand, he will present his vision and negotiate his way through in order to find a consensus for it. He is determined to make the EU a heavyweight in foreign affairs, expanding today’s G2 into tomorrow’s G3. His experience and determination will be his main advantages. As a convinced European, I wish him luck.

Editor’s note: Watch out for our November/December issue which will focus on European foreign policy.

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© REUTERS/Francois Lenoir

Over the past 15 years, the European Union has undertaken many overseas civilian missions as part of its Common Security and Defense Policy (CSDP). For instance, the largest mission so far has been the EU Rule of Law Mission in Kosovo (EULEX Kosovo), which has helped the country build an independent judiciary and law enforcement institutions and even carries out some executive functions. A more recently deployed mission is the EU Capacity Building Mission in Mali (EUCAP Sahel Mali), which trains and advises the country’s internal security forces.

With the number of crises around the world growing, the EU decided last year that it was time to take stock and discuss much-needed changes to the instrument. The Global Strategy of 2016 had set new priorities for the EU’s external action, which made a strategic refocusing of its instruments necessary. Long-standing issues hampering the missions’ effectiveness, such as understaffing, also needed to be tackled. The aim was to make civilian missions more capable, more effective, and to increase the often low engagement from member states.

As the result of a one-year process, in November 2018, all the member states finally agreed on 22 political commitments, taking the form of a Civilian CSDP Compact (CCC), to be implemented by the summer of 2023. If successful, many of these solutions could transform the civilian CSDP.

Traditional Focus, Greater Flexibility

First, on the strategic level, member states have reaffirmed the traditional strategic focus of the civilian CSDP on policing, rule of law, support of civil administration as well as security sector reform and monitoring. Although missions can now also contribute to addressing new security challenges abroad, such as irregular migration, terrorism, and organized crime, this general affirmation of the traditional focus should help to maintain the character of civilian CSDP as an instrument responding to local needs in partnership with host countries.

Second, when it comes to decision-making, the CCC introduced the possibility of flexible mandates, which could be a gamechanger for civilian missions: They could adapt to developments on the ground by increasing or decreasing the number of personnel, or by adding and taking away mission components. Also, this new flexibility could increase the tactical autonomy of heads of missions, thereby helping to limit the member states’ micromanagement in everyday mission conduct. Another important aspect, when it comes to decision-making, is that the CCC foresees an effort to foster cooperation between different instruments and programs of external action. This is important to strengthen the EU’s self-declared trademark when it comes to its engagement abroad, the integrated approach.

Strengthening Responsiveness

As a third dimension, member states have identified the key challenge of strengthening the quantity and quality of civilian personnel for missions. In terms of quantities, the low level of engagement by member states in civilian CSDP in the last years was reflected in the steadily decreasing number of personnel sent into mission (called seconded personnel, in contrast to personnel directly contracted by the EU). In order to reverse this trend, member states now want to increase the share of secondments from the current 59 percent to 70 percent. With another target aiming at quantities, member states plan to raise the number of experts on the Core Responsiveness Capacity—the closest in civilian CSDP to a standing capacity, deployable within days—from 30 to 50. They also plan to build a new capacity of 200 personnel, deployable within 30 days. Both measures could strengthen responsiveness and quick reaction.

Concerning the quality of personnel, a key issue will be the fostering of cooperation and coordination among member states in recruitment and training. Also, national structures must be reviewed and improved. Therefore, all member states will draft individual National Implementation Plans (NIPs) by the fall of 2019 to sketch how they will implement the compact commitments with reference to national capacities.

More Engagement Needed

With all these important commitments, the CCC has laid the groundwork for professionalizing further the EU’s civilian missions. Nevertheless, success is not a given, as two important issues are unresolved: first, decision-making in the civilian CSDP remains complicated. And second, it is still doubtful if the current momentum can lead to an increased long-term political engagement of a larger share of member states.

While decision-making was a topic of debate, member states were unable achieve anything beyond a general commitment to improvement. In the past, it often took months to come to an agreement among the 28 EU members to deploy a new mission. Unlike peacekeeping deployments by other organizations like the United Nations, EU missions require the member states to take several decisions before deployment and a lot of them during the mission as well. So far, most member states have not shown a great willingness to give away competences. This has led to something close to stalemate in recent years.

Tough Decisions Lie Ahead

While there is no shortage of crises in the EU’s neighborhood, it is important to note that the number of new civilian missions deployed has decreased dramatically since 2010. Responsiveness in secondment and flexible mandates are of little use, if the decision-making structures among member states are rigid and slow. Therefore, EU member states must seriously explore the range of options available to improve decision-making. From Qualified Majority Voting to the idea of a European Security Council or smaller EU coalitions supporting particular missions, all possible options should be tested for advantages, risks, and workability.

But ultimately, the best way to strengthen civilian missions as an instrument is sustained political engagement from member states. In the past, the lack of relevance attributed to the civilian CSDP by many member states was the biggest obstacle to improvement. It was, therefore, an encouraging sign that all EU member states took part in the Compact process.

Nevertheless, how many member states will truly make an effort is unclear. Tough decisions lie ahead in the second half of 2019, for example the decision on a process design for the new annual civilian capability review. Also, they must decide whether to make use of the new mandate flexibility right away, for example when possibly setting up a civilian mission in the Central African Republic later this year. Member states should aim high. To continue to rely on the smallest common denominators will no longer work.

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© REUTERS/Fabrizio Bensch

From its very beginnings, the European Parliament has often been the target of scorn from commentators. They claimed it was a mere bauble of European integration with little power to challenge the member states of what was then the European Community. This reputation for institutional weakness fostered a tendency to treat elections to the European Parliament as a sideshow, where the strength of parties on a national level could be assessed in contests that were unlikely to cause them existential trouble. Yet through the Lisbon Treaty of 2009, the power of the European Parliament to shape legislation and affect the composition of the European Commission has expanded to a level far beyond the expectations of those first MEP candidates who stood in 1979.

In the process, gaining MEPs in European elections has become a central goal for any party or movement that wants to exert decisive influence over a European integration process that is reconfiguring Europe. Moments of turmoil such as the eurozone crisis, the Syrian refugee wave, the tensions between Ukraine and Russia or the end of old regimes in North Africa have underlined how the fate of member states is intertwined with the development of the EU and the states along its collective borders. Moreover, the Brexit crisis has starkly demonstrated the extent to which EU institutions can exert enormous pressure on states who attempt to challenge the structural foundations of European integration.

The ongoing nature of this process of institutional transformation has turned this year’s European elections, on May 23-26, 2019, into a crucial test for the political survival of newer as well as more established political groups, as part of the wider struggle to shape Europe’s future course. In the process, the long-term trajectory of key party families could be crucially affected by successes and failures on the European level. Right-wing populist parties, the Green movement, traditional Social Democrats, the alliance of center-right parties organized in the European People’s Party (EPP), and groups oriented toward liberalism as well as the far left could each experience a massive boost through these electoral battles or be plunged into a difficult position if its results point to further setbacks to come.

Far Right’s Change of Tactics

Of all these different political forces, right-wing populists have attracted the most attention. The recent entry of such parties into government in Austria and Italy in combination with the successes of the Leave campaign in the United Kingdom have fostered a misleading tendency to portray such movements as a new force within European politics. In reality, French parties under the leadership of the Le Pen family have been a force to be reckoned with since the 1980s, while Italy’s Lega and Austria’s FPÖ have gained power on the local and national level since the early 1990s. Even in Germany or Spain, where right-wing populist parties have only broken through at the national level since 2014, they have built on activist networks that have been operating on a regional level for several decades.

This history of right-wing populist parties in the EU means that there is also a track record that can be examined when it comes to assessing their ability to build a cohesive EU-wide party family. Such efforts have often foundered as the particular national interests of such movements hampered their ability to cooperate effectively on the European level. Yet the emergence of figures who have become Europe-wide household names, such as Lega leader (and Italian interior minister) Matteo Salvini, could well mark the beginnings of a decisive shift toward cooperation within the European Parliament and other institutions. Also, transnational far-right networks such as the Identitarian movement show an increasing interest in capturing EU institutions rather than bringing them down

European parties committed to defending an open society face many of the same strategic dilemmas as their right-wing populist rivals. Yet though they share an abhorrence of the populist right, the liberal parties grouped in ALDE as well as France’s La Republique En Marche, the German Green Party, Poland’s Wiosna or Romania’s USR, to name just a few examples, each draw on their own distinct set of ideological traditions. The way the Remain movement in the UK has splintered politically is typical of how attempts to push back against right-wing populism do not make other ideological dividing lines disappear.

Green Surge, Flailing Center-Left

Green surges in Germany and the Netherlands are likely to bolster the number of Green MEPs, who will want to carve out their own distinct ideological niche. By contrast, the way the votes of those who identify with social liberalism have fractured across different parties will make coordination more difficult for the ALDE party family. Far-left parties like Spain’s Podemos that enjoyed rapid growth in the wake of the Eurozone crisis face their own struggle to retain voters. They may be tempted by new populist options while still trying to maintain a coherent ideological identity to ensure that core supporters who abhor far right ideas remain loyal.

As elections in Europe increasingly become affected by mobilization for the populist right and counter-mobilization against it, parties that are not strongly identified with either position are struggling. Having presented itself as being neither left nor right, Italy’s Five Star Movement (M5S) has become ground down as the voter coalition it constructed has become difficult to sustain. Perhaps most severely affected have been traditional Social Democratic parties such as Germany’s SPD, who in trying to triangulate to appeal to voters on both sides of the divide in the battle over populism have ended up satisfying none. Others like Spain’s PSOE have been more successful. All in all, however, the center-left group, the Progressive Alliance of Socialists and Democrats, is likely to return to the European Parliament in a weakened condition.

Dramatic Structural Shifts

In an environment where established party networks are fragmenting while emerging ones are struggling to coalesce, the EPP can still maintain dominance despite losses and internal tensions of its own. Even if Hungary’s Fidesz breaks with the EPP, all it needs to do is to remain stronger than any rival in a fragmenting party landscape is to control ad hoc processes of coalition-building and shape the composition of the European Commission. One of Europe’s many paradoxes at this juncture is that, at a moment where the EU’s emergence as a central global actor has accelerated the fragmentation of European politics, the political network most likely to take advantage is made up of center-right parties that have dominated the politics of member states for decades.

The relentless emphasis on the rise of right-wing populism in much of the US and British news media in particular has diverted attention from how the EU’s growing geopolitical power and the European Parliament’s rapidly expanding influence within its system have led to more dramatic structural shifts in European society. These dramatic structural shifts have fostered the emergence of different players as new parties have risen to prominence during moments of crisis that link the individual fate of voters with that of the EU as a whole. Yet while some parties that have dominated the European Parliament since that first election of 1979 have come under enormous pressure, others have adapted to sustain a strong grip on Europe’s future. In a period when so much in European politics is in flux, perhaps being the least noisy player in the game can ultimately be the cleverest move of all.

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