How does the EU solve a problem like the Ukraine?

Update 13:45 - According to Antonio Delgado, Spanish Public Radio's EU correspondent, "diplomatic sources" have indicated that the UK, the Netherlands, Italy, Spain and Bulgaria are all "not keen" on sanctions, although the Italian Foreign Ministry issued a statement claiming that “In the event of the continuation of violence, we don’t rule out resorting to exceptional restrictive measures”.

Commission President Jose Manuel Barroso on the other hand is optimistic:

Following developments in #Ukraine w/ shock & utter dismay. We expect targeted measures agreed by our #EU MS urgently http://t.co/nsy4JsSKhA
— José Manuel Barroso (@BarrosoEU) February 19, 2014

*****Original Post*****

The escalation in violence in Kiev yesterday and overnight poses a huge challenge to the EU. What, exactly, can it do here to prevent continuing civil disorder on its doorstep?

As ever when it comes to EU foreign policy, the first hurdle is to actually secure an agreement among 28 member states which is difficult in itself. As we've said on a number of occasions, Catherine Ashton's European External Action Service cannot magically replace 28 foreign policy positions - this has been proved time and again over Israel/Palestine, Libya, Syria etc. When it comes to the Ukraine, these differences have been apparent in how to deal with Russia in the first place, how hard it was to push for the EU-Ukraine trade agreement, then over how to deal with the anti-government protests, and now it looks likely they will appear in whether to impose sanctions. Here is a round-up of where the key EU countries stand on potential sanctions:

UK - Europe Minister David Lidington has condemned the violence and urged "all parties to return to the path of compromise and genuine negotiation" - no explicit reference to sanctions.

Poland - As the biggest supporter of Ukraine's eventual integration into the EU, Poland has consistently taken a hard stance on the issue. Speaking in the Polish parliament this morning, Prime Minister Donald Tusk called for targeted sanctions against those individuals "responsible for the Ukraine's misfortune". However, he conceded these tended to have limited effectiveness, but argued they sent a "moral" signal. He also slammed Russian pressure and warned that a civil war was possible. In a rare outbreak of political unity, the sanctions were also backed by the opposition Law and Justice party.

Germany - The German government (and the SPD in particular) has traditionally been very cautious when dealing with Russia so as not to alienate Moscow unnecessarily. For this reason they had opposed sanctions - supported by many in the European Parliament - but Foreign Minister Frank-Walter Steinmeier yesterday noted that personal sanctions will now "surely be considered". Chancellor Merkel will discuss the situation with President Hollande later today.

France - French President Francois Hollande said that he “agreed with [Polish PM] Tusk on the need for swift European sanctions, targeted at the main responsible for these acts.”

Italy – It is unclear whether Rome's position will change following the recent developments and/or the appointment of Renzi's new cabinet but the existing position was to oppose sanctions, with Foreign Minister Emma Bonino arguing a couple of weeks ago that "it has always been easy to announce [sanctions], but it has never been easy to apply them in a coordinated fashion. To me, this doesn't seem the way to go.”

Sweden - Another strong supporter of Ukraine's EU ambitions and of the anti-government protectors, Swedish Foreign Minister Carl Bild is as expected shouting the loudest, accusing Ukraine's President Yanukovych of "having blood on his hands".

Of course agreeing on a course of action is one thing - implementing it is another and the EU simply struggles to back up its rhetoric with 'hard power' due to the nature of the EU itself. The key will be how Putin responds if the situation continues to get out of hand - how will the EU respond if Moscow intervenes more directly? As the 2008 Georgian crisis showed - when the EU initially tried to present a common front - the Russians are very adept at exploiting any divisions and they still wield substantial leverage due to the reliance of many EU members on their energy resources.

Notwithstanding the need for a political solution to Ukraine's internal problems, there is surely a wider need for the EU and Russia to come to a sensible compromise over Ukraine's future - as the map below shows, geopolitically, the Ukraine is trapped between two large political and economic blocs (the map shows the respective customs union and potential members), and any closer political and economic integration of the Ukraine into the EU triggers Russia's age-old fears about 'encirclement'.

Europe responds to the Swiss referendum - and it ain't pretty

We suspect the reverberations from the decision in the Swiss referendum to cap the number of EU migrants might be felt for some time (we look at what the long term implications could be for the UK here). The Swiss case is interesting because unlike the debate on migrants from Central and Eastern Europe in the UK, Germany and the Netherlands, it primarily affects citizens of the wealthier member states, primarily Germany, France and Italy. Here are some immediate reactions from around Europe.

The tone from the Berlin has been quite tough with Steffan Seibert, Merkel's spokesperson commenting that:

"The government takes note of the result and respects it but it is also the case, in our view, that it throws up considerable problems... It's in our interest to keep EU-Swiss relations as close as possible."

Foreign Minister Frank-Walter Steinmeier (SPD) added that "I believe that with this result Switzerland has harmed itself". He also dusted off the classic line so beloved of his predecessor in the post:

"there can be no cherry-picking when it comes to the EU" 

The new FDP leader Christian Linder echoed this sentiment arguing that "The Swiss are taking from the European buffet only that what they want" (which is kind of the point of a buffet). Interestingly however he added that he was "open-minded" about having more referenda in Germany.

Meanwhile Alternative für Deutschland leader Bernd Lucke didn't explicitly argue for capping EU migration although he struck a different tone compared with the established German parties, arguing that:

"Irrespective of the result of the Swiss referendum we can also achieve in Germany an immigration law which is based on qualifications and he ability to integrate while preventing benefits migration... If necessary we could have such referendums [in Germany]."

The least diplomatic response came from Ralf Stegner, leader of the SPD faction in Schleswig-Holstein who took to twitter to describe the Swiss as "crazy".

Die spinnen, die Schweizer!
— Ralf Stegner (@Ralf_Stegner) February 9, 2014

The response in France has also been quite tough with Foreign Minister Laurent Fabius arguing that:

“This is bad news for Europe and the Swiss, because Switzerland will be penalised from withdrawing into itself... There’s a so-called ‘guillotine clause’ establishing that if one of the elements [of the Swiss-EU bilateral deal] is put into question – in this case, the free movement of workers – everything falls down. Therefore, this means we’ll have to renegotiate […] This means we’re going to reconsider our relations with Switzerland.”

Former French PM Fillon (UMP) was commented that:

“It would be totally incomprehensible if Switzerland put a barrier to the access of cross-border workers… On the other hand, that [Switzerland] wants to reduce the overall number of foreigners on its territory is a perfectly natural demand.”

Italy's Foreign Minister Emma Bonino said that:

“The impact [of the Swiss referendum] is undoubtedly very worrying, with regard to both Italy and the other agreements with the EU.” 

Matteo Salvini, the leader of Lega Nord, said:

“Hurrah for Switzerland’s democratic referendum. We’ll propose one in Italy, too.”

However, his fellow party member Roberto Cota – the governor of Piedmont – voiced concern over the future of cross-border workers from his region, claiming that:

“Respect is needed, because we’re talking about honest and regular workers. Together with [Roberto] Maroni [the governor of Lombardy, another senior Lega Nord member] we’ll request a meeting with [Italian Prime Minister Enrico] Letta on this issue as soon as possible.”

UK Foreign Secretary William Hague was quite restrained, commenting that he did not want to prejudge the results of the negotiations, adding that:

"We will be mindful of the position of 40,000 British nationals who work in Switzerland".

Irish foreign minister Eamon Gilmore warned that “We are seeing signs of the rise of the far-right in Europe” while the Luxembourgian foreign minister Jean Asselborn has been the most outspoken, claiming that the vote has put the Swiss in “good company” with people such as Marine Le Pen, the leader of the French Front National.

There have also been some strong responses coming out of Brussels with EU Commission spokeswoman Pia Ahrenkilde-Hansen commenting that:

"The message is clear today: free movement of people is a sacred right for the EU... This will clearly have implications for the rest of the agreements [with Switzerland]."

EU Justice Commissioner Viviane Reding, never knowingly understated, argued that "the single market is not a Swiss cheese. You cannot have a single market with holes in it" which is a silly statement given that the Swiss trading relationship actually is a bit like a Swiss cheese, with patchy market access in services, for example.

The response from MEPs is also interesting as they might have a say in the negotiations (although this is a bit of a grey area). While EP President Martin Schulz was relatively restrained, other senior MEPs were quick to stick the boot in.

Disappointing Swiss referendum will lead to disadvantages for CH in new negotiations with EU. #abst14 #CHvote
— Hannes Swoboda (@Hannes_Swoboda) February 9, 2014

So a lot of posturing. These negotiations will be very, very interesting...

All hail Angela Merkel – No 10 goes all out for the Chancellor

Painting in the Royal Gallery - the Duke of Wellington with Field Marshal Blucher at the Battle of Waterloo - harking back to an earlier age of Anglo-German cooperation.

Angela Merkel will visit London on 27th February, in what will be, no doubt, a much hyped affair. Though the details are yet to be confirmed, in addition to meeting David Cameron and the Queen, Merkel could also “be given the rare privilege” – as the Telegraph’s Chris Hope put it – of addressing both Houses of Parliament at the Royal Gallery, perhaps in an attempt to rekindle the spirit of the early 19th Century when Anglo-German cooperation was the norm (see painting).

 

The last head of government to address the Royal Gallery was apparently Nicolas Sarkozy – then French President – in 2008. We suspect that for Merkel this is more a case of “business as usual” rather than “privilege” but in any case, it’s significant.

There’s no doubt that the Tory leadership hopes for encouraging signs from the Chancellor, following Francois Hollande’s predictable comments last week that EU treaty change “is not a priority” (which nonetheless generated headlines). Far worse for Cameron et al was that the German Foreign Minister Frank-Walter Steinmeier proved such hard work when he was here on Monday – holding a rather awkward press conference alongside William Hague, which included some tempered language on Treaty change (which even came close to contradicting the German Coalition agreement).

As we’ve noted before, the German Grand Coalition isn’t a deal-breaker for Cameron’s plans but it does mean a lot more work. In contrast to the Steinmeier visit, which was barely publicised (most lobby journalists - the parliamentary correspondents who often set the agenda in UK press - were unaware of the meeting instead basing their write-ups on the news wires, which arguably triggered even worse headlines for Hague / Cameron), the Government will go all out for Merkel.

As we’ve argued since the start, Merkel holds the key to a new settlement in Europe, so No 10 is right to step it up. However, at the same time, it must be wary of not being seen as desperate – Merkel is by far the most important leader in Europe, and the big Europe questions are decided by the Kanzleramt and even the Finanzministerium, not the Auswärtiges Amt. Nevertheless, the strategy cannot entirely rest on Merkel, also keeping in mind that this is her last term, with her potentially getting weaker closer to the end.

Merkel’s visit will mark the start of a fresh attempt by No 10 to court EU leaders (read: explain to Europe what in the world Britain actually wants to achieve apart from creating emergency headlines to appease backbenchers). It won’t be a day too early. 

German Foreign Minister welcomes discussion on EU Treaty Change

German Foreign Minister, Frank-Walter Steinmeier, is visiting his counterpart, William Hague, in London today. Although the visit doesn't seem to have received much media coverage, we've just been at the press conference, and Herr Steinmeier had some interesting things to say. Unsurprisingly, Steinmeier said he wanted the UK in the EU.

Further Eurozone integration

Steinmeier said that the UK could play a pivotal role in making the EU more effective and competitive, but he also said that it was important not to "backtrack on European integration", but it was not clear if he was referring to Eurozone integration – which the UK actually isn’t against. Hague opened the press conference, saying that both government agreed to work together to ensure a "fairer system" to all Member States in the EU.

Repatriation of Powers 

Steinmeier also made clear that the EU should govern on the "big questions" - that it should rule where it is most effective. In this context, then, he said that there should be a further discussion on which competences would be best regulated on the national level. It was unfortunate that we didn't get a chance to ask Herr Steinmeier to comment on CDU's draft European Parliament election manifesto, which Handelsblatt reported on today as explicitly saying:

“A repatriation of competences to the national level should be possible.” 

Treaty change

The German government – particularly the CDU/CSU wing continue to insist on Treaty Change in some form to provide more central control in the eurozone over spending. At the same time, Cameron wants a Treaty Change to institutionalise flexible integration including the possibility to pursue “less Europe”. The idea is to combine the two in a new grand bargain. Remember, last week French President Francois Hollande restated that Paris didn’t see Treaty Change as a “priority” for fear of a referendum (which would be politically hard to avoid due to the German-style Treaty Change, not the British one). This created headlines in the UK.

Steinmeier said that discussions over Treaty Change are far more nuanced than a polarised vision of Britain on one side asking for the all the Treaties to be opened up, and France on the other, resisting any such discussion – which is exactly what we’ve said. In fact, Steinmeier said he "welcomes a debate" and is "not against discussing an adaptation of the Treaties." He added that there’s a debate raging in Germany at the moment over how to put Eurozone integration on a constitutionally and politically sound footing.

However, he also said that Germany and Britain aren’t completely aligned over Treaty Change, and, somewhat uncomfortably for Hague et al, argued that any major revision to the Treaties along the lines of what the UK is calling for, should perhaps be deferred until the eurozone stabilises further.  "It's not just to do with the UK and Germany that some things are stalling," said Steinmeier.

When asked the crucial question whether he believed that Treaty Change would coincide with David Cameron's 2017 timeline, Steinmeier said it "was too complicated a prognosis" to be able to give a straight answer.

Free movement 

Steinmeier said that the Bundestag has set up a working group to present solutions on how square sensible rules on access to benefits with free movement. He said that the debate in Germany on free movement – while it was definitely was an intense debate - was in "sensible boundaries", a nod to the UK press and its handling of Romania and Bulgaria.

Fact check: Has Germany's Foreign Minister really "isolated" Cameron on EU migration?

Update 1:20pm: The FT has told us that it was the German Perm Rep in Brussels that sent the FT the quote, in reply to the question: "I'm trying to understand what the German position is on this matter and I'd be keen to know whether Berlin shares the UK view of curbing free movement of European Union workers." If that's the case then the German Perm Rep should obviously share some responsibility for recycling the quote and not being clear about the source or context of it. That said, we still think it's an odd basis for such a major splash and, as we argue below, conflates the issues involved since Cameron has not actually advocated a cap on current EU migration.

The FT's front page claims David Cameron "faces EU isolation on anti-immigration stance". Exhibit A in the paper's case is a quote from Germany's SPD Foreign Minister Frank-Walter Steinmeier:

“Germany has benefited tremendously from this and surely more than others. Now many young people from southern Europe are coming to us, to learn and study. That benefits us and also helps the states from which they come. Whoever questions that damages Europe and damages Germany.”

However, a little digging in the German press reveals that there's something fishy about Steinmeier's apparent criticism of Cameron.

Firstly, his comments were first reported on 2 January by German daily Sueddeutsche Zeitung, so this is not a new quote. Secondly, and much more importantly, his comments were not in response to anything proposed by the UK at all. In fact, he was responding to proposals from his CSU coalition partner. The original story made no mention of Cameron or the UK. So, unless Steinmeier repeated the quote to the reporters, the FT effectively extrapolated from a quote that was given specifically in the context of German Coalition politics.

It so happens that the CSU's ideas on EU migration quite closely resemble much of what the UK Government would like to do to tighten rules on access to benefits. Nevertheless, Steinmeier appears to be quoted completely out of context. This was a domestic German dispute about tackling the abuse of EU free movement (the German coalition fought fiercely about this at the turn of the year).

Even disregarding this (which is pretty difficult), the article is unclear on what issue Cameron is isolated over. It mentions outright "curbs" on EU migrants. We agree talk of this is unfortunate and that there's very little appetite for this across Europe. Fortunately, curbs are neither an official Tory or Coalition policy. The article also makes a specific reference to beefed-up transitional controls on migration from future EU accession countries, based on new economic criteria (potentially a GDP per capita threshold) before their citizens are eligible for full free movement rights. We don't know how much support there is for this proposal.

And finally, it also cites rules on access to benefits, for which there is support in Germany and elsewhere (though the extent is still unclear).

Now, we may agree or disagree with Cameron's stated policy on EU migration, and as we've argued before, No 10 could have handled this situation a lot better.

But using a quote taken completely out of context as the key basis for a major splash does nothing to boost the quality of the wider political debate about the EU and immigration.

A few surprises as the new German cabinet takes form

Over the weekend, following the 'yes' vote among the SPD membership, the composition of the new German cabinet was announced – almost 3 months after the election.

Despite, the outcome being broadly known there were a couple of surprises. Below we analyse the key points and personalities.

Jörg Asmussen (left) leaves the ECB board to join the Labour Ministry
This is probably the biggest surprise and could have some knock-on effects. Asmussen has stressed that he has stepped down from the ECB Executive Board to become Deputy Labour Minister (definitely a step down) for purely personal reasons. However, speculation will certainly arise over whether playing the bridge between the ECB and the Bundesbank had taken its toll on him.

The immediate front runner for the post is Sabine Lautenschläger (right), vice-president of the Bundesbank, although her nomination is not guaranteed since it has to be approved by all ECB members and get a (non-binding) endorsement from the European Parliament. If she does take up the post it could create headaches for ECB President Mario Draghi with the Bundesbank well known for its hawkish approach and its (sometimes open) disdain for the current loose ECB monetary policy. It could also be the case that the CDU/CSU only consented to the SPD's Andrea Nahles - who had adopted an aggressively leftist position on the eurozone and German economy during the campaign - becoming the Social and Employment Minister on the condition that Asmussen would be there to push continued structural reforms.

First female defence minister – a successor emerging?
Another surprise was the appointment of Ursula von der Leyen as Defence Minister - the first time the post has been held by a woman. This remains a high profile and tricky position in Germany, with a significant international element. Von der Leyen has already been tipped as a potential successor to Merkel and this post could be the making, or breaking, of her. Either way, it shows Merkel accepts the need to cultivate potential successors, something she has previously avoided by side-lining the careers of those who have sought to take up the mantel. Von der Leyen is an outspoken supporter of European integration so it will be interesting to see if she pushes for more EU resource sharing and/or competence pooling in this area.

SPD Chairman grasps a double edged sword?
In addition to his role as Merkel's deputy, the SPD's Chairman Sigmar Gabriel will head up the newly created post of Economy and Energy Minister – hence his new “Superminister” moniker. This is clearly a high profile role, with Gabriel now in charge of the Energiewende – Germany’s shift away from nuclear and fossil fuels to renewable energy. It provides a great platform for him to launch a campaign for the Chancellery in 2017. That said, the move could also backfire. There are already rumblings in Germany about the cost of energy, a problem which will also increase with the shift to renewable energy. Furthermore, implementing the shift will present numerous problems and Gabriel could become the fall guy for any failures. As for the economy brief, the Finance Ministry has a strong hold over many economic matters and Gabriel could find his hands full with the energy brief.

Rebuilding the Franco-German axis?
As expected the SPD’s Frank-Walter Steinmeier returns as Foreign Minister, who we have noted before has a Francophile streak and has previously shown a willingness to disagree with Merkel. While his impact could be limited due to the Foreign Ministry being side-lined on EU and eurozone issues – now the domain of Merkel and Schäuble – Steinmeier could still work to rebuild the partnership with French President Francois Hollande.

Other notable points include the appointment of Peter Altmaier to head the Chancellery (i.e. become Chief of Staff to Merkel). He has a keen interest and knowledge of the EU, but as previous head of the German arm of the European Federalists, he could provide a further challenge to UK Prime Minister David Cameron’s push for EU reform. The outspoken Hans-Peter Friedrich has been moved from the Interior Ministry to Agriculture, a less high profile post after he took significant flak for his handling of the NSA spying issue. Viewed from London this is a regret as Friedrich took a hard line on the need to reform EU free movement rules to prevent abuse by so-called 'welfare tourism'.

Overall, the CDU holds five ministries, the CSU three and the SPD six. Much has been made in the negotiations about Merkel giving up too much power, but we’d be careful of underestimating her. Given her strong position it’s unlikely she would have given up more than is necessary, and she has maintained hold over the key ministries and the key points of the agenda. There has been some tinkering on the edges of labour policies and spending priorities, but the approach of cutting the deficit and bringing down debt remains vital. Her procedural step by step approach also remains.

One thing that is clear is that the SPD is heavily invested and supportive of this coalition and there can be no chance of them shirking their responsibility. Whether this will prove positive for them at the next election remains to be seen.