Brexit won’t absolve EU of its staple diet of reform headaches

Brexit won’t absolve EU of its staple diet of reform headaches

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In the minds of many, the Brexit negotiations are having the effect of crowding out consideration of fundamental reform across the EU.

This is a strange outcome, indeed, given that Britain’s impending — or, at least, anticipated — departure from the union is set to deprive the EU of billions in annual income. The implications for a host of cherished EU projects are obvious.

France’s energetic new president, Emmanuel Macron, has been quick to spot an opening. At the end of September, he published a plan which aims at a “profound transformation of the EU” with the core idea being that by engineering deeper political integration, the support of an increasingly sceptical European public can be once again secured for the project.

Mr Macron revives some traditional French proposals including the idea that member states could operate at ‘different speeds’ on the journey to integration, along with the concept of the financial transactions tax which has long attracted Parisian officials and thinkers.

The proposals are more cautious in nature than those put forward in the past by Euro federalists. They aim at fixing particular pressing pan-European problems in areas such as asylum seeking, security and tax gathering.

Sadly for Ireland, Mr Macron appears particularly focused on his idea that technology companies should be taxed on the basis of where they make their revenues and profits within the EU rather than on the place of headquarters. There are moves to try and be accommodative. The French leader appears to accept that another overhaul of the Common Agricultural Policy is inevitable.

Over the years, too much resources have been handed out to entrenched lobby groups and, by extension, to wealthy landowners. If EU reform is to mean anything, it will surely involve a general clampdown on lobbyist-driven resource allocation.

It is fortunate that the Irish commissioner Phil Hogan published detailed reformed proposals of his own for the CAP in December. The Hogan proposals, involving greater focus on environmental promotion, have been positively received.

The EC budget for 2018 has recently been approved. It is set at €160bn, a rise of just 0.2% on 2017. There are a few eye catching increases, such as a 12% rise in backing for the Erasmus student exchange programme, which is allocated €2.3bn.

A separate series of reforms are being promoted by the European Commission and its president, Jean Claude Juncker.

Mr Juncker is seeking an enhanced role for the commission within the eurozone. He has a ‘cunning plan’ under which control of the European Stability Mechanism (ESM), the EU bailout fund, would be handed over to the commission by the Euro group of finance ministers.

Many believe that such an idea is dead in the water given the reluctance of national governments to surrender such resources and control.

A rival idea, being promoted by ESM boss Klaus Regling and some finance ministers, is for the transformation of the bailout funds into an EU-style IMF known as the EMF with broad powers of supervision and crisis management. Funds would be used to aid countries not officially on a bailout programme.

Ireland is mentioned as a potential beneficiary should its economy be tipped into turmoil on the back of a breakdown in Brexit talks.

Another plan being floated is for a much looser set of rules on national deficits under the Stability Pact.
This idea is backed by budget commissioner Pierre Moscovici, but is fiercely opposed by the Germans as giving a free hand to governments to run big deficits.

The path to reform is complicated by the current political impasse in Germany. Back in September, few anticipated that Angela Merkel would be facing a struggle to form a new coalition government. Mr Macron faces the prospect of losing an ally in the reform cause.

Even if Ms Merkel can cobble together another grand coalition with the SPD, the expectation is that the German leaders will opt for a period of introspection as they set about trying to rebuild a national consensus.

Meanwhile, new crises bubble over while existing ones fester, or occasionally resolve themselves. Europe continues on its merry way.

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