Malmström impresses in her hearing, but is she on the same page as Juncker on TTIP?

Cecilia Malmström during her hearing today

The European Parliament kicked off its hearings of Commission nominees today, with most of the attention focused on Sweden's Cecilia Malmström, the current Home Affairs Commissioner who has been handed the hugely important Trade portfolio. The hearing was eagerly anticipated due to the controversy around certain aspects of the EU-Canada (CETA) and EU-US (TTIP) free trade deals; specifically around investor safeguard clauses (ISDS).

Indeed, the hearing managed to make waves in Germany (where the issue is particularly sensitive), after Malmström's written response to initial questions from MEPs suggested that she rejected the need for ISDS in TTIP. German Green MEP Sven Giegold posted the relevant section on his website:

As the President-elect Juncker has committed himself to in his Political Guidelines..."no limitation of the jurisdiction of courts in the EU Member States will be accepted in [TTIP]; this clearly means that no Investor-State Dispute Settlement mechanism will be part of that agreement."

However, this version - sent out to MEPs on Friday - was subsequently re-called, and the new version published on the Commission's website now reads:

As the President-elect Juncker has committed himself to in his Political Guidelines... he will "not accept that the jurisdiction of courts in the EU Member States is limited by special regimes for investor disputes."

In other words, a clear change from ruling out ISDS altogether to a much more qualified acceptance. This change was subject to much speculation on Twitter, and Malmström herself claimed it was "simply the wrong version".

However, at today's hearing, Dutch MEP Marietje Schaake claimed that the Microsoft Word version sent out on Friday contained 'track changes' made by none other than Martin Selmayr, Jean-Claude Juncker's chief of staff (seemingly confirming rumours in Brussels about Selmayr's "Rasputin-like qualities"). Malmström replied that she had agreed to Juncker's office inserting a quote from Juncker and tried to brush off the affair as a "misunderstanding" and an "over-interpretation", basically denying that she and Juncker were at odds over the ISDS question.

In her opening remarks and in answers to questions, Malmström strongly endorsed the principle of free trade and TTIP specifically, which rather dominated the debate, while also defending European social and environmental standards (there is always something for everyone in the European Parliament). On ISDS, she defended the principle, while clarifying that she was committed to transparency and qualifications - such as protections for national parliaments to legislate in the national interest. She claimed that there was no need to renegotiate ISDS in CETA, as without it the deal could fall apart, that the EU itself would want to include ISDS in future agreements with other parties, but added that possibly it could be excluded altogether from TTIP - so far from a coherent line overall.

Malmström put in a solid performance - with the right mixture of assertiveness and reassurance - and it is certainly good to have a pro-trade voice in that role. However, as the shenanigans over her written answers demonstrate, there are questions over whether Malmström and Juncker are on the same page on TTIP.

Have the SPD and German unions endorsed TTIP? Not quite...

While the Labour Party's conference dominated the coverage in the UK over the past few days, its German sister party, the SPD, held its own 'mini' conference over the weekend. Opposition to TTIP - the EU-US free trade deal currently being negotiated - was a big factor at both, certainly we picked up on this in Manchester.

Ahead of the SPD's conference, several local and regional SPD associations tabled motions calling on the party leadership to suspend the negotiations due to concerns about investor-state dispute settlement (ISDS) - a mechanism which allows investors to sue governments - as well as the potential watering down of labour laws and environmental standards.

In order to head off the opposition, the Economy Ministry - headed by SPD leader Sigmar Gabriel - issued a joint position paper on TTIP along with the DGB - Germany's trade union confederation including the country's largest trade unions like IG Metall and Ver.di. The paper praises elements of TTIP but pledges that any moves to eliminate non-tariff barriers to trade (such as parallel regulatory regimes) will not threaten Europe's high employment, consumer and environmental standards, and calls on both parties to ensure "compliance with core ILO standards" - something which has little hope of getting past Congress.

On ISDS, they key passage reads:

“Investment protection provisions are generally not required… In any case, investor-state arbitration and unclear definitions of legal terms such as ‘fair and just treatment’ or ‘indirect expropriation’ must be rejected.” 

The SPD and German trade unions have therefore endorsed TTIP in principle, although the mass of caveats that made this possible will hugely complicate the negotiations and could wipe out many of its expected gains. It does however remain unclear to what extent the paper is binding on the SPD, as it includes the caveat that the German Economic Ministry and the DGB "do not have the same stance on TTIP on all points”.

Significantly, in approving the paper, party delegates insisted that its provisions should also be applied to the EU-Canada free trade deal (CETA) which has already been largely concluded and due to be signed off by Commission President Jose Manuel Barroso and Canadian PM Stephen Harper later this month pending implementation. CETA, which many see as the blueprint for TTIP, includes ISDS and could therefore face last-minute opposition having largely flown under the radar up until now.

In a separate development, which could delay CETA even further, the German government and the European Commission are at odds over whether national parliaments will need to ratify the deal alongside the European Parliament; the Commission says no, but Berlin argues that as a "mixed agreement" with some of the issues, goods and services covered by CETA falling outside of the EU's sole jurisdiction, the Bundestag and Bundesrat should also get to scrutinise the agreement and vote on it. The German government has said that it is willing to go all the way to the ECJ.

All in all, it looks like progress towards concluding ambitious trade agreements with Canada and the US will be rather rocky.

The AfD bandwagon rolls on - what are the implications?

Germany's anti-euro AfD party has hit a rich vein of electoral form building on its success in Saxony two weeks ago (where it scored 9.7% and won its first seats in one of Germany's 16 regional parliaments) to win 12.2% in Brandenburg and 10.6% in Thuringia; a considerable improvement on pre-election polls.

As the graphic below shows, AfD won votes across the political spectrum, In net terms, its success came at the expense of the left - Die Linke in Brandenburg and the SPD in Thuringia - although in gross terms it also won a lot of votes from the CDU and FDP.

Where did the AfD's votes come from in Brandenburg and Thuringia?

This reflects the nature of the AfD campaign in these areas which combined an explicit pitch to Die Linke voters emphasising Ostalgie (nostalgia for East Germany), AfD's opposition to TTIP and to the sanctions on Russia with more traditional 'small c' conservative messages on crime and immigration (for example, AfD wants to re-impose border checks). On the whole, the question of Europe and the euro barely featured.

While AfD's recent successes should not be over-interpreted, inflated as they are by higher rates of disaffected voters in East Germany and low turnouts, it does nonetheless pose difficult questions for the established parties. This is particularly true for the CDU/CSU for whom, as we've noted, AfD is too big to ignore, yet too controversial to team up with. In the longer term however this might change if it becomes evident that the AfD is the only alternative to permanent 'grand coalitions' at the regional and federal level, a scenario which would arguably strengthen AfD even more.

We expect that this will be hot debate within the CDU in the coming months and years. Meanwhile, the AfD itself faces a big test; 12 months on from narrowly missed out on winning Bundestag seats the party has performed well in European and regional elections, however, with next year's Hamburg regional elections the only significant entry in the electoral calendar over the next year and a half, can the party sustain its recent momentum? If it stalls, could we see deeper splits between the economic liberals and protectionists/social conservatives who make up the party's uneasy internal coalition?

Is Germany emerging as the biggest obstacle to a liberal EU-US trade deal?

If you read our press summary, you will have noticed that the debate around the US-EU free trade deal (TTIP) is really picking up in Germany, with even the euro-critical AfD coming out against key elements of the deal ahead of the European elections.

Of all the mainstream newspapers in Europe, Süddeutsche Zeitung is the one that has devoted the most time and effort into covering the on-going negotiations over TTIP, and it has also published a number of comment pieces - both for and against.

In an opinion piece today, the paper's Economics correspondent Alexander Hagelücken argues that the debate around the EU-US free trade agreement (TTIP) has become “schizophrenic” amid mounting public opposition (as highlighted by the cartoon above). However, he argues that:

"European governments can escape the impasse by making it clear that they want to expand free trade via the TTIP principle while at the same time meeting the legitimate concerns of their citizens who do not want increased prosperity at the cost of losing environmental and health standards. GM foods? Only after passing the European approval procedure and with clear labeling. Investor lawsuits against environmental legislation such as Vattenfall’s legal challenge against the nuclear phase-out? Not before secret tribunals, but only in the ordinary courts."

He concludes that:

"Yes, such a path would not lead to unfettered capitalism with a neoliberal flavour but free trade with constraints. In other words, it would be the kind of social market economy which has given the [German] Federal Republic decades of prosperity after World War II, while tensions decreasing rather than increasing tensions between the social classes.” 

German public opinion will be a crucial factor in determining the success or failure of the TTIP negotiations. As with everything else these days, we suspect, on TTIP, as goes Germany, so goes Europe. 

Which Commission post should the UK push for (clue: not energy)?

When it comes to EU top jobs, if you snooze you lose, as
Gordon Brown discovered to his cost in 2009

In a new briefing published this morning we argue that after the row over Jean-Claude Juncker’s appointment, David Cameron can regain the initiative by sending a heavy-hitter - and not simply someone who happens to be available - to Brussels with the view to securing a top job in the new European Commission. But here is the crucial question - what job should the UK push for?

Here are the key points from our briefing:

• Even though conventional political wisdom says that it’s impossible for the UK to bag the internal market portfolio, this is precisely what David Cameron should ask for, not least given that Germany, in particular, may want to give the UK a quick win in order to reduce the risk of Britain leaving the EU.

• To boost the chances of this happening, financial services could be split off from the internal market portfolio. However, in this scenario, the key is for this portfolio to go to a country that actually has a meaningful financial services industry, or the strategy could backfire.

• The second best outcome for the UK would be to secure the competition portfolio. competition is by far the most powerful DG, with the power to impose multi-million euro fines, prevent mergers and restructure banks. The portfolio would allow the UK to ensure a business-friendly environment and ensure fair competition within the single market by preventing discrimination against non-euro member states. It also establishes a political link to eurozone - it’s impossible for eurozone leaders not to engage with the Competition commissioner.

• The Trade portfolio is often mooted as a good one for the UK, and on substance it certainly is. Being able to conclude the EU-US free trade deal (TTIP) would be a great scalp. However, it is important to remember that Commissioners’ ability to impact EU policy is not limited to their own briefs; many policy proposals are debated within the College of Commissioners offering every Commissioner the opportunity of raising any concerns at an early stage. Just as the EU’s High Representative for Foreign Affairs – currently held by Baroness Ashton - the Trade Commissioner is often absent from Brussels, thereby limiting the UK’s overall influence.

• The energy portfolio would be a relative disappointment for the UK. Yes, energy is a hugely important issue for Europe – and liberalised single market could help tremendously in both boosting energy security and keeping cost down. The Energy Commissioner could also play a key role in keeping the EU out of shale gas regulation – a key UK objective. However, the big push needed to change the political culture in Europe for this to happen won’t come from the European Commission and will take a long time to achieve anyway. This battle will first need to be won in national capitals. Taken together though, the Competition Commissioner probably has more sway over the EU energy market by being able to strike down attempts at creating national champions and new forms of intervention – as illustrated by the current stand-off between Germany and the Commission over Berlin’s rebate for energy intensive industries from its domestic renewable surcharges.

• Arguably, the social affairs brief would be better than the energy portfolio given how hugely important the rules on access to benefits for EU migrants are for the wider debate in the UK.

Just as important as the UK’s portfolio is the distribution of other key portfolios among reform-minded countries like the Netherlands and Sweden. Cameron needs to be far cleverer than Gordon Brown was in 2009, when France got internal market and Romania agriculture. This won’t be easy though. Having lost out on one of the three ‘top jobs’, France could push for either the competition or internal market brief. However, if France keeps the internal market, financial services should be split off as well.

Finally, the appointment of the new President of the European Council will also be crucial – in some ways just as significant as that of the Commission President – given that this will be the person in charge of brokering Cameron’s negotiations with other heads of state and government.

It's certainty all to play for.

Is this really the best EU leaders can come up with?

The continuing furore over whether Jean-Claude Juncker will this week be crowned European Commission President has diverted attention away from the important issue of what he, or whoever else eventually gets the job, will be expected to do.

Like most others, we have seen a copy of a draft statement from EU leaders, expected to be announced at the conclusion of this week’s summit, setting out a “strategic agenda” for the EU for the next five years.

Safe to say, it is a very mixed bag. The preamble starts off with some reassuring words about subsidiarity:

“In line with the principles of subsidiarity and proportionality, the Union should only act when together we can achieve more than individual countries on their own. It should show self-restraint in exercising its competences when member states can better achieve the same objectives.”

There is another passage that – presumably as a consequence of the Euro elections results – warns against making promises the EU cannot keep:

“The credibility of the Union depends on its ability to ensure that its institutions follow up on decisions and live up to commitments.”

However, some of the subsequent action points seem to interpret both these points very liberally. For example, EU leaders look set to pledge to “further reduce early school drop outs” and “improve educational outcomes.”

Clearly, the futures of young people in Europe is of huge importance, but surely this is a matter for national governments - what will the 'EU', in the narrow sense, do in terms of policy to help school drop outs?

Similarly, the document talks of making “our social protection systems fit for the future”, an area of public policy explicitly reserved for national governments. What happened to the Dutch mantra “Europe where necessary, national where possible”? The next five years risk starting off with the same hollow commitments and lack of focus – responsibilities should be clearly divided and it should be clear where member states and/or the EU will take the lead.

Meanwhile, as Bruno Waterfield notes, there is limited reference to the reforms David Cameron has been arguing for. On national parliaments, the language is pretty vague:

“A greater place should be given to national parliaments, including by strengthening their means of participating in the debate and making their voice heard in the decision-making process.”

There are some more positive elements for Cameron, such as a commitment to “complete negotiations on international trade agreements, including TTIP, by 2015” and tackling “at all levels” the abuse of labour mobility.

One important inclusion is that the document follows the lead set out by UK Chancellor George Osborne and German Finance Minister Wolfgang Schaueble in the FT recently, by calling for:

"The integrity of the single market and openness towards non-euro EU countries should be preserved."

How exactly this will be done is unclear but the formal acceptance of the euro vs. non-euro split as an issue is at least a start.

That said, there is also an extended list of foreign policy commitments, such as "promoting stability", strengthening a common defence policy, etc, which could have been copied and pasted from any such document from the last 15 years.

All in all then, this is not an inspiring first draft. Much work needs to be done to improve it.

Anti-euro Alternative für Deutschland now likely to join Tories' European Parliament group - what will it mean for Anglo-German relations?

Relations between Berlin and London are potentially about to become a lot more complicated.

The Tories raised some eyebrows last week when they allowed the Finns Party and Danish People’s Party – two parties with controversial histories, but who, according to Tory MEPs, have cleaned up their act – to join their European Conservatives and Reformers (ECR) group in the European Parliament.

Even more eyebrows could be raised soon as it now looks highly possible that Alternative für Deutschland (AfD) will also join the ECR.

A vote amongst ECR MEPs is imminent. Number 10 isn't keen at all on the idea, but doesn't actually have a veto over who joins. That’s entirely down to a vote amongst the actual MEPs in the group, with a simple majority needed to approve new applicants.

Number 10 will probably try to make Tory MEPs vote against AfD, but the Tories account for only 19 of 55 ECR MEPs. Most non-UK MEPs will likely vote in favour of allowing AfD to join. This means Number 10 is effectively powerless, short of removing the whip from Tory MEPs or withdrawing from the ECR altogether. Cameron could try to hit the phones to the national leaders of the other parties to try to get them to convince their MEPs to vote against AfD. If successful, he could maybe still block AfD joining.

If AfD joins, it will be explosive. The party would bring seven MEPs to the ECR group, allowing it to potentially overtake the liberals, ALDE, as the third-largest group in the European Parliament (unless ALDE also gets some new recruits). An enlarged ECR would attract additional cash and staff, as well as more important committee posts. Also, the group may well become a more influential voice by virtue of being bigger, and therefore much harder to ignore. It can serve to put significant pressure on the European People's Party (EPP) in particular. You can’t blame Tory MEPs for seeking to maximise their influence.

Also, the ECR strategy appears to involve a concerted effort to strip UKIP's EFD group of its member parties, leading to the its collapse, depriving them of cash and demolishing their platform. Denying them the DPP, the Finns and AfD as members (assuming AfD would even want to join Farage) is a key part of the strategy – which seems to be working so far.

However, with AfD, as with the DPP and the Finns, there’s a big trade-off here: numbers versus image. With the Nordic parties, it was the risk of turning off allies on the liberal right, who are vital to achieving EU reform.

With AfD, it’s all about Angela Merkel. She doesn't deal with AfD. In fact, she barely acknowledges its existence. She once said,

"We consider a collaboration [with AfD] to be out of the question."

Merkel wasn’t happy when Cameron left the EPP-ED group to form the ECR in 2009. Now, joining forces with her arch-enemy will be like chucking a tank of fuel onto the fire. It will also surprise Berlin, since Number 10 has previously ruled out this possibility. In fact, only in February he said:

"In terms of the parties that are going to join that, we have a sister party in Germany, the CDU/CSU. We’re not looking for a new sister party. So I don’t anticipate that situation arising at all."

With AfD, the Independent Greeks (interesting to see whether the two of them will get along) and 'Germany-wary' Law & Justice, the new-look ECR could perceived by some in Berlin as outright anti-Merkel. It's hard to see how this will help Cameron's 'stop Juncker' campaign.

But is it a deal-breaker for a wider Anglo-German bargain on EU reform? Well, to some to some extent the European Parliament follows its own logic. And by having Tory MEPs vote against AfD joining, Cameron will seek to convey a “I did what I could” approach. Indeed, if the plan is for the ECR to become a vehicle for pushing a reformist agenda, there was always going to be a time when the group was no longer going to be “owned” by David Cameron.

Here's a second big potential risk though: yes, these parties share a basic scepticism of current EU. However, parties like the Danish People's Party, Finns Party, Law & Justice are, at best, lukewarm on issues like free trade, reflecting their social democratic core for the first two, and the small 'c' conservative base of the last one. Even AfD has come out against the EU-US trade deal - TTIP - as currently proposed. Remember, TTIP is one of the key items in Cameron's reform package. So, much like the AfD itself, there will be a massive struggle within the ECR over whether it wants to be a solid force for EU reform and free trade or a catch-all sceptical block with a penchant for populism, protectionism and illiberal economics.

You can say that Cameron has no control over his party, or you can say this is an example of a type of devolved democracy (if you’re a federalist, ‘European’ democracy over national politics: this is the system you want) but only time will tell whether this trade-off will be worth it for the wider goal of sweeping reform in Europe.

Merkel and Cameron won't run out of conversation topics any time soon...

What does Alternative für Deutschland really stand for? Its getting hard to tell

Beatrix says change direction - but where to?

When the anti-euro Alternative für Deutschland was first founded, it was derided as a fringe party for professors obsessed with ordoliberalism that would struggle to make a lasting impact on the German political scene.

However, the party got within 0.3% of the vote of winning seats in the Bundestag in September and is polling at around 6%-7% ahead of the European elections, meaning it looks certain to win seats in Brussels/Strasbourg. Yet the party's relatively strong showing in the polls masks serious internal divides along personnel and policy lines.

At the start of the year, it was being reported that some founding members were leaving in disillusionment in the belief that the party was abandoning its liberal roots and embarking on a sharply 'rightward' trajectory, which was manifested by the embracing of traditional Christian moral values and taking a tough line on immigration - AfD were notably the only mainstream German party to praise the results of the Swiss referendum on curbing free movement.

Initially, it seemed that this shift to the 'right' was limited to social policy, with AfD still maintaining its liberalism on economic policy; Hans-Olaf Henkel - the former head of the Federation of German Industries - described it as "Germany's last liberal party". However, this also seems to have been consigned to the past following the party's convention over the weekend at which it voted on its manifesto for the European elections.

Crucially, the party's grassroots voted to reject the EU-US free trade deal (TTIP) currently under negotiation despite strong support from the leadership including party leader Bernd Lucke, who argued that it was a "positive, constructive objective which is very much in Germany's interest". Beatrix von Storch (pictured), an MEP candidate and high profile AfD activist - who for many epitomises the party's recent lurch towards conservatism - argued that the agreement "is not fair and will burden our country".

Interestingly, when it came to the recent events in the Crimea, the party's deputy federal spokesperson criticised the independence referendum but also called for greater "understanding" for Moscow and described the interim Ukrainian government as "not democratically legitimate". A motion was passed (to thundering applause according to FAZ) rejecting German taxpayer assistance for Ukraine and economic sanctions on Russia.

Such sentiments - scepticism of free trade deals (or 'directed trade' as libertarians would say) and emphasises on isolationism in world affairs, puts the AfD closer to either the American "Old Right" (which Europeans tend not to even remotely understand) or the European Socialist Left.

So what does all this mean? Well it seems that AfD are at risk of becoming a catch-all populist party with strongly ideologically contradictory factions rather than one which can be easily placed on the traditional 'left/right' axis. This applies to a number of other European parties which combine elements of both including the National Front, PVV, the (True) Finns party and UKIP (although UKIP economic policy is more liberal than the others'). It also shows that those Tories keen for AfD to join the ECR group in the European Parliament may wish to pause for thought.

To some extent this is not surprising given that even in its early stages the party paradoxically drew disproportionate support from former FDP and Die Linke voters. We also noted after the elections that the party had done particularly well in Eastern Germany, which tends to vote more heavily for left-wing parties than West Germany. In the East, AfD has also struggled to contain creeping take-over attempts by more nationalist elements.

The question for the party is where does it go from here: does it establish itself as a permanent protest party borrowing ideas and policies from the political smorgasbord as it sees fit  - there is clearly a gap in the market - or does it try to remain a genuine economically liberal party angling for a spot in the mainstream?

The closest Cameron has got to setting out an EU "shopping list" yet few have noticed

What do David Cameron's seven EU 
reform commitments mean?

Writing in the Sunday Telegraph, David Cameron set out seven objectives - or eight if you read between the lines - for a Conservative EU reform agenda ahead of that potential 2017 EU referendum. Surprisingly, despite this being the most explicit that David Cameron has been in setting out a 'shopping list' (an unfortunate term), it has generated surprisingly little attention, in the UK and abroad.

To be fair, none of these objectives are completely new, one is not strictly to do with the EU, while in the case of some of the others it would be rather difficult to define success. Interestingly only the point about removing the commitment to “ever closer union” would definitely require treaty change.

In large parts, these are broad principles rather than specific policies - which is wholly appropriate given that it would be silly to set out a set of clear polices so far in advance (though some of these could easily get under way now). Here are the seven:

Commitment	What does it involve?	Treaty Change?
“Powers flowing away from Brussels, not always to it”	This is an overarching principle which would take a number of forms, including repatriating entire areas of EU powers, such as regional policy, to repealing specific regulations, to structural changes in the EU (incl. possible Treaty changes) that makes it easier to roll back the acquis such as a "green card" for national parliaments.	Depends. Reforms to regional policy and repealing individual rules, such as the Working Time Directive, would not require treaty change. Removing entire EU powers or structural changes might.
“National parliaments able to work together to block unwanted European legislation.”	At present a third or more of national parliaments can require the European Commission to reconsider proposals (a yellow card) - but it has only been used twice. There are various proposed ways of strengthening this mechanism to allow national parliaments collectively the power to strike down EU laws. This could give them a legal veto – the ‘red card’ or simply strengthen the existing mechanism.	If placed into EU law it would require treaty change. However, the Dutch Foreign Minister has suggested this could also be done through a "political agreement" between the Member States requiring the Commission to treat the yellow card as a de facto veto.
“Businesses liberated from red tape and benefiting from the strength of the EU’s own market – the biggest and wealthiest on the planet – to open up greater free trade with North America and Asia.”	De-regulation is very difficult to quantify. It could involve proposals to exempt small business from EU regulations. It could also involve imposing a repeal mechanism (a green card operated by national parliaments), sunset clauses, for EU laws as well as reviewing old EU regulations. This agenda also suggests further services liberalisation and the completion of the Trans-Atlantic Trade and Investment Partnership (TTIP) and further free trade agreements.	None of the "competitiveness agenda" requires Treaty Change. However, it is far from certain that TTIP will be agreed and then ratified while cutting EU red tape is always a challenge in the face of interest groups and the European Parliament - but far from impossible in the face of political will.
“Our police forces and justice systems able to protect British citizens, unencumbered by unnecessary interference from the European institutions, including the ECHR.”	This could involve withdrawal from the ECHR, successful reform of the ECHR or a UK Bill of Rights limiting its impact in the UK. The reference to “European Institutions” could imply removing the European Court of Justice’s (ECJ) jurisdiction over EU crime and policing law.	Withdrawing from the ECHR would not require EU treaty change as it's not to do with the EU. Removing ECJ jurisdiction over EU crime and policing laws would.
“Free movement to take up work, not free benefits.”	This could involve a number of changes to EU rules around free movement including strengthening the link between economic contribution of EU migrants and access to benefits and ending "exportability" of child benefits.	Reforming the Free Movement Directive and the Social Security Regulation could be done without treaty change. Putting an outright cap on EU migration - which Cameron has NOT suggested - would require Treaty change.
"Support for the continued enlargement of the EU to new members but with new mechanisms in place to prevent vast migrations across the Continent.”	This would involve imposing tougher transitional controls on all future EU accessions, for example by extending the existing 7 year maximum transitional period or linking the right to free movement to population size and/or relative wealth levels.	EU enlargement requires a new Treaty with the accession state(s) over which all existing EU members would have a veto, so London could push this demand as the price for its agreement. However, enlargement does not alter the underlying EU Treaties themselves.
Dealing properly with the concept of “ever closer union”.	The EU treaties currently include a commitment to “ever closer union”. Removing these words would be largely symbolic but could have some political, and possible indirect judicial, impact.	Yes, given that the concept is itself enshrined in the treaty.

In addition, though he has not said so specifically, apart from a passing reference to need to achieve a union for both eurozone and non-eurozone countries, another priority for David Cameron will most definitely be to secure safeguards against eurozone caucasing.

A number of questions still remain of course, including the various reform ideas not touched on this article, including the EU budget, employment law or dealing with the ECJ (though they all could fit under the general principles he has laid out).

Lastly, David Cameron has said he will pursue this reform agenda followed by a referendum “if he is Prime Minister”. This is important as he appears to be setting down a red-line in any future negotiations with the Liberal Democrats to continue the Coalition.

The big question is if these reforms were to fail, would he campaign to leave or stay in regardless?

Rutte: Don't blame voters for anti-EU sentiments - blame politicians

Dutch PM Mark Rutte is often seen as a key UK ally who is able to maintain warm relations with both the Liberal and Conservative sides of the coalition. In London today to deliver the Isaiah Berlin lecture he talked about the big challenges facing Europe, making the following key points:

• The EU is greater than the sum of its parts but it is a means to an end - prosperity, security etc - rather than an end in itself.
• As a liberal, he said that he believes that decisions should be made as close as possible to those whom they affect - and therefore the EU should not be involved in areas that can be better handled at the national level such as the minimum wage, pensions, social security and taxation.
• However, where the EU could add more value is in expanding the single market, particularly in services (it was Rutte who first made the suggestion that this could take place under enhanced co-operation, an option we explored in our recent report).
• Commenting on the NSA spying scandal, he said the Dutch government would support the Franco-German initiative to clear up the issue with the Americans to prevent a repeat but added that he opposed any new competences for the EU in this area. He also said that it would be "totally counter-productive" to suspend the US-EU free trade negotiations over this issue, and that he strongly opposed this (Business Secretary Vince Cable who was in the audience appreciated that one).
• He said that he backed David Cameron's 'business task force' report which aims to cut red tape and promote competitiveness and innovation which Europe needs in order to maintain the high standard of living many of its citizens have become accustomed to, and that he supported efforts to demarcate EU competences from national ones, but that he opposed unilateral opt-outs which could damage the single market.
• On the political side, he said that there was widespread disillusionment with the European project among much of the public, but that rather than blaming the voters for opting for fringe parties on the left and right, established parties have to shoulder the blame for creating the political space for them to operate in.
• Finally, he stressed that although he was not opposed to referenda per se, his strong preference would be for any eurozone related changes (banking union, competitiveness contracts) to take place under the existing legal framework as opposed to re-opening the EU treaties which would trigger votes in several countries which would inevitably become in/out votes.

All in all then a mixed bag for David Cameron - strong support for his vision of a leaner, business friendly, trade-orientated and more accountable EU, but scepticism towards opening up the EU Treaties which could offer possibilities for more fundamental changes.

US-EU free trade deal could be collateral damage of latest NSA allegations

So we wondered what the big story of the European Council would be. Now we have the answer: Merkel’s cell phone. Der Spiegel today alleged that Merkel's phone may have been targeted by US security services. Merkel called President Obama to make clear that she "unequivocally condemns such practices” and was told that the US is not monitoring and will not monitor her communications (which as German media commentators have identified leaves open the possibility that this could have taken place in the past). The US Ambassador in Berlin was also summoned for a dressing down which follows similar action taken in France over allegations the US also spied on French diplomats.

Because this issue has been hyped-up by the media, this has the potential to be more damaging to Anglo-Saxon-Continental relations than arguably any other episode since the Iraq war - and there are lots of things going on here.

Civil liberties vs. security: As ever, this encapsulates the very sensitive trade-off between the obligation of the state to ensure the security of its citizens and the right of the citizens not to have the state arbitrarily snooping in their business. The Germans – given the painful memory of Stasi and Nazi surveillance – are particularly sensitive to this (and that the German Chancellor herself is the alleged victim adds fuel to the fire). Forget everything else on the agenda of the EU summit today, this is what really is creating the headlines in Germany.

Data protection - EU vs national: Some EU leaders and politicians - including Justice Commissioner Vivianne Reding (for whom this issue is like ideological steroids) are keen to use the long planned overhaul of EU data protection rules to enforce greater EU-level safeguards, though the link to the tapping of Merkel's phone isn't entirely clear. France and Poland are reportedly keen on fast-tracking this issue through the EU legislative process while others including the UK and Scandinavian countries countries are less keen. Germany has not committed itself either way (although German Interior Minister Freidrich said the current version would have to be revised).

The UK vs France: However, the same Data Protection Directive that France wants to pass also featured in the recent UK business taskforce report as an example of EU rules which hurt innovation and growth, and argument echoed by Rohan Silva in today’s Times. Medical research charities have also warned that the new rules - specifically a series of amendments tabled by the Green MEP Jan Philip Albrecht - could starve them of the data they need to work on new treatments. So this issue might also indirectly pit the UK versus France.

Germany vs. the Anglo-Saxon world: This is a critical one - any souring of relations between the US and Germany is bad news, and the UK could well be implicated by association (remember Tempora). The thing to watch out for will be the impact on the EU-US free trade deal currently under negotiation (TTIP) as Germany could now well insist on various complicated privacy safeguards and guarantees which Obama will have hard time delivering (not least since getting a deal past Congress perceived as undermining national security could prove very tricky). If TTIP were to fail, it would embolden those claiming that the UK needs to leave the EU to maximise global trading opportunities,

This is also putting Cameron in a very awkward position as he doesn't want to offend either the Germans or the US - but he'll most certainly be pressed on taking a position.

Secondly, the European Parliament – which also needs to approve the final deal – may see an opportunity here to hijack TTIP to exert its own power. The EP has form on privacy and civil liberty issues, as seen by its attempt to take SWIFT hostage. In fact, SWIFT itself could be complicated by the accusations against the US (we’re not saying that the EP doesn't have any valid arguments in this area).

So this is an episode that most certainly will reverberate for quite some time.

Why is Berlin so outraged over spy claims? Because they evoke nightmarish memories in Germany

The 'Big Brother State' is a sensitive issue in Germany

The allegation that the US allegedly spies on the EU and its member states - and the related allegations that the UK also tapped German calls and internet traffic - has caused a huge scandal and plenty of anxiety in Germany.

More than in any other country, as details of US whistleblower Edward Snowden’s leaks become public, German politicians are lining up to condemn America for treating Germany like a "third-tier partner" (apparently Germany was spied on quite a lot), while press headlines are bristling at the indignity of it all.

This has pitted the "Anglo-Saxon" world against the, in this case, Berlin-led continental block in a most unfortunate way. As we pointed out yesterday - even before Hollande made it 'official' - this incident is now putting a dark cloud over the fledling EU-US free trade talks.

But beyond the spectacular headlines what, exactly, lies behind the deep-felt German unease about the entire episode? Well, it's a fascinating study into national sensitivities - and incidentally an illustration of just how difficult it is to move towards a common justice system in Europe.

Germany suffers from a lingering memory of the 'Big Brother State' in two of its nastiest forms:  under the Nazis and the former East Germany (GDR). Any hint at massive data collection or snooping always evokes a sharp backlash in Germany.

The systematic collection of data by the state, as witnessed under the Nazis in the 1930s-1940s, was not only used to identify and systematically exterminate groups such as the Jews or Gypsies, but also to keep others in check by infiltrating every aspect of life.

And the surveillance and collection of data was even more intrusive in the GDR. By time the Berlin Wall came down, the Stasi had some 91,000 full-time staff, in addition to a huge network of informants who provided information on their friends, colleagues and families.

The suggestion, then, that the Obama administration is amassing swathes of  personal data indiscriminately makes Germans extremely nervous. (And these fears won’t have been soothed by the comments from Wolfgang Schmidt, a former Stasi honcho who said the magnitude of the purported US surveillance would have been “ a dream come true” for the Stasi.)

Symptomatically, Germany still hasn't implemented the EU's Data Retention Directive due to concerns over privacy and arbitrary data collection (there's also a constitutional discussion involved - despite the fact that one part of the Directive was supposed to be implemented in 2007, the other in 2009.)  This has lead to the European Commission taking Germany to court.

Germans are reserved, coalition-building and and tempered in international affairs (too tempered some would say), but given the country's recent history, this is one area global partners should tread carefully around if they want to keep Berlin happy.

I-spy: EU-US trade talks under threat?

To what extent have the latest leaks harmed the EU-US trade talks?

Fugitive whistleblower Edward Snowden’s leaks just keep giving.

First there was Prism, then Tempora. And now, as reported by online by German magazine Der Spiegel over the weekend:  the US has allegedly been spying on EU missions and institutions on both sides of the Atlantic.

Here's a round-up the European response at the national and EU levels:

National

The leaks have caused the most outrage in Germany, which was allegedly monitored more than other countries, leading the Federal government to respond on Monday.

"If it is confirmed that diplomatic representations of the European Union and individual European countries have been spied upon, we will clearly say that bugging friends is unacceptable...We are no longer in the Cold War", said a government spokesman in Berlin. He added that Chancellor Merkel will soon be speaking to President Obama about the matter.

Other German politicians that had been clamouring for a US explanation include German President Joachim Gauck (who quoted Benjamin Franklin: "Those who give up liberty to gain security will lose both'"), Vice-Chancellor Philipp Roesler and Justice Minister Sabine Leutheusser-Schnarrenberger. The SPD, the Greens and Die Linke had also been agitating for Chancellor Merkel to intervene.

France isn't happy either, with French President François Hollande calling for an "immediate" end to the alleged spying if the EU-US trade negotiations are to continue. "We cannot accept this kind of behaviour between partners and allies...There can be no negotiations or transactions in any areas until we have obtained these guarantees, for France but also for all of the European Union, for all partners of the United States."

French Foreign Minister Laurent Fabius added the reports were "completely unacceptable," if corroborated, while his colleague, Christiane Taubira, the Justice Minister,  called US actions “an act of unqualified hostility.”

Italy’s Defence Minister Mario Mauro weighed in this morning, saying that US-Italian relations would be “compromised," if the reports are true. "If we are allies, if we are friends, [then] it’s not acceptable that someone in this relationship behaves like the Soviet Union used to behave towards its satellite states,” he added.

EU

EU officials, political groups and MEPs are miffed too.

Catherine Ashton, The EU's foreign policy chief said the EU is seeking  “urgent clarification." Meanwhile Martin Schulz, President of the European Parliament, said he was “deeply worried” by the reports, and warned of a “severe impact” on EU-US relations if they are true (remember, the EP's role in EU trade talks was enhanced under the Lisbon Treaty).

Schulz told French radio station France 2 that the US had crossed a line,"I was always sure that dictatorships, some authoritarian systems, tried to listen ... but that measures like that are now practiced by an ally, by a friend, that is shocking, in the case that it is true."

This was echoed by Viviane Reding,  the EU justice commissioner: “Partners do not spy on each other,” she said. “We cannot negotiate over a big transatlantic market if there is the slightest doubt that our partners are carrying out spying activities on the offices of our negotiators."

“How should we still negotiate [a free trade agreement with the US] if we must fear that our negotiating position is being listened to beforehand?” said Elmar Brok, the chairman of the European Parliament’s Foreign Affairs Committee.

In an interview, Czech MEP Libor Roucek, the deputy chairman of the S&D group for Foreign Affairs and Transatlantic Relations, said he "can't exclude the option that [he's] being monitored by the US secret services."
 
Some went further, calling for a suspension of the US-EU trade talks altogether. This included the European Parliament's Green Group, and MEPs like the Dutch social democrat Thijs Berman: "[The] US spies on EU diplomats. That's not how we can negotiate a free trade deal. Suspending is logical step," he tweeted on Sunday.

Press
 
The revelations have caused an uproar in the European press (Le Parisien’s ‘hammy’ front page of Obama ‘listening in' captures the general drift), and most of all in Germany. 

Spiegel Online published a commentary today that not only criticised America, but also the lack of action by the government.“The federal government has failed to protect Germans from America’s spy-attacks. This is unacceptable to citizens," it says, calling for an “independent education”  for the US from the German Constitutional Court and a European Committee.

Meanwhile, Austrian Daily Der Standard published a commentary that diverged from the general thrust of European media feeling. Spying is to be expected says the piece: "It would be surprising indeed if the opposite were the case. Being spied on by an ally is about as normal as the systematic surveillance of political opponents."
  
Perhaps Der Standard is right that much of this skulduggery does go on, even amongst allies. But, still, although this is unlikely to deal a fatal blow to EU-US trade talks, the political consequences could well be that certain European countries dig their heels in a little firmer in the negotiations.

On a more general note, for individuals concerned about their privacy and civil liberties, this type of issue only heightens fears that the increasing amount of personal data shared among EU governments isn’t safe and that the protections are inadequate.

In recent years the EU has been developing more and more data sharing databases, and it is not always clear to the general public what happens to their data – this will only fuel ‘big brother’-type fears that is open to misuse, abuse or simply could be accessed by anyone.

Le Monde's 'Up yours Delors' moment: Barroso is 'a 57-year-old chameleon in search of a good job at NATO or the UN'

As we reported in our daily press summary, European Commission President José Manuel Barroso has drawn criticism from the French government after he described France's insistence to exclude the audio-visual industry from EU-US trade talks as "completely reactionary". Now, the French press has caught up as well.

And it's pretty harsh.

Le Monde has a tough editorial under the headline, "Monsieur Barroso, you're neither loyal nor respectful!" We thought it was worth translating it almost in its entirety. Here goes,

For once, the Europeans were united vis-à-vis the Americans […] The President of the European Commission, José Manuel Barroso, has torpedoed this unity by stating, right before the start of the [G8] summit, that France’s position on the cultural exception was “reactionary”. 

It is of little importance to know whether France is [reactionary]. Or whether or not one needed to exclude, in the name of the cultural exception, audio-visual services from the negotiating mandate handed to the European Commission. In order to be ready, the 27 [EU member states] negotiated at length and until late at night on Friday, 14 June. France ended up imposing its views and scored a political victory.

And whether Mr Barroso was satisfied with this outcome or not is of little importance, too. He’s the President of the Commission and is bound by the mandate he’s been given by the [member] states. By denigrating the agreement the day after it was concluded, Mr Barroso is not acting as the guardian of the [EU] Treaties, as his mandate requires.

[…]

The Trade Commissioner, Belgium’s Karel De Gucht, has adopted a comparable attitude. He didn’t manage to impose his views. A bad gambler, he pretends that it will be possible to re-introduce audio-visual services in the negotiation. That’s empty talk: everything is possible under unanimity. In reality, France retains its veto on the issue. But Mr De Gucht has an excuse: he will negotiate with the Americans and is afraid that the latter retaliate by excluding from the negotiations some domains that are strategic for the Europeans. He wants to be able to go back to the 27 [EU member states] to amend his negotiating mandate, if necessary.

Mr Barroso, on the other hand, seems to pursue far more personal ambitions. During eight years, the President of the [European] Commission has stood out for his ductility. Defender of small states as Portuguese Prime Minister, a liberal at the time of his appointment in Brussels ahead of the 2008 crisis, pro-Sarkozy during [former French President] Nicolas Sarkozy’s presidency, and incapable, since, of taking the smallest political initiative to revive the Union, he has accompanied the decline of the European institutions.

Today, aged 57, this chameleon is searching for a future. In search of a good post, at NATO or the UN – who knows? – he has chosen to pander to his Anglo-Saxon partners, the British Prime Minister and the US President. At the head of the Commission, Barroso has been a good reflection of Europe: a decade of decline. 

This is "Up yours Delors" territory - and arguably the strongest attack on Barroso until date.

A European Commission spokesman was quick to point out that Barroso didn't have France in mind when he made his remarks. There are several layers to this episode, but if anyone thought that the French are becoming any less sceptical of the Commission, they are mistaken. If anyone thought that turning the Commission into an all-powerful eurozone budget police was only one German election away, that is...

Would an 'independent' UK get a better US trade deal than the EU?

Could the UK sucessfully negotiate a trade deal with the US?

Yesterday MEPs voted on a resolution to back defensive measures to exclude cultural and some agricultural products, such as genetically modified foods from a proposed free trade deal with the US (TTIP).

Understandably US farmers have already taken exception to what they see as EU protectionism. This raises concerns that the potential gain from an EU/US trade deal may be watered down, delayed or even blocked all together by vested interests on both sides of the Atlantic.

As a member of the EU the UK's foreign trade is governed by the EU's common commercial policy and so has to be done via an EU deal. After the EU the US is the UK's most important trading partner. Some involved in the UK-EU debate - particularly Outers - suggest that if the UK left the EU it could negotiate a deal with the US on better terms than it could potentially gain via the EU. But is that the case? Here are some of the factors that could be important.

UK exports to the US in £bn (ONS 2011) are big...

A mismatch in negotiating power. Although the UK exports a lot to the US, as a % of it's total exports, the US sends only 4% to the UK. So although a trade deal should be mutually beneficial, reaching a solution would be disproportionately in the UK's interests. Therefore, there would be an imbalance of negotiating power. For this the EU's weight could help on issues where the UK's interests are aligned with it.

Would the US want to go through the hassle? Given this asymmetry, and the relative small market the UK is for the US, one question is if the US would go through all the political hurdles -  approval in Congress, taking on the unions etc. Indeed, talk to people in Washington and there's some scepticism about this. (However, the US has signed agreements with 23 states, some very small, so perhaps it is more a matter of the terms you would get?)

But US exports to UK (US BEA 2011) are small...

Fewer protectionist hold ups. At the same time, the US and the UK are more compatible economies than are the US and EU. The UK negotiating on its own account would not be hindered by protectionist issues emanating largely from France and MEPs, that could hold up US agreement or require concessions, such as the protection of agriculture, genetically modified foods or geographical indicators. However the UK is still unlikely to wish to see the US allowed to subsidise its agricultural exports, so tough negotiations would still be required.

Access for financial services could be a tough negotiation. The UK negotiating with the US on financial services would come up against a powerful US lobby attempting to protect its banks from what is New York's main rival - London. However, the UK negotiating on its own would arguably have a better chance to strike a deal on 'reciprocity' with US funds, a more generous arrangement than that which currently exists under regulations such as the AIFM Directive or UCITS. Additionally the UK would not bear the burden of having risky eurozone banks getting in on the deal. In recent negotiations with Singapore the US gained a better deal than the EU on financial services, partly because while Singapore was happy with UK banks it was wary of giving access to all eurozone banks (a big untold story in all of this).

If the idea is that an 'independent' UK can automatically join some gigantic Transatlantic free trade zone, in place of its current EU membership, there will be plenty of hurdles and a good deal is by no means guaranteed. Added to that there's also the small matter of negotiating an equivalent free trade deal with the EU....