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Friday, May 30, 2014

Belated Ascension Day for Juncker?

Since Tuesday's European Council, at which Angela Merkel pointedly played down Jean-Claude Juncker's prospects of becoming the next European Commission President, she has come under a phenomenal amount of pressure domestically from a wide ranging coalition spanning senior members of her own party, her coalition partner the SPD, the opposition Green party, Germany's most popular tabloid Bild Zeitung and Jürgen Habermas.

This pressure was most likely responsible for her change of tone earlier this afternoon when she said that:
"I am conducting all the discussions in the spirit that Jean-Claude Juncker should be the President of the European Commission."
Even if this is not tantamount to saying "Juncker will be the next Commission President", it is still a clear departure from her position on Tuesday when she said that:
“The agenda [of the next European Commission] can be handled by [Juncker], but also by many others...At the end, there will be a fairly broad tableau of names on the table.”
The SPD has been quick to respond, with the party's General Secretary Yasmin Fahimi claiming that:
"It is good that the public pressure on Merkel forced her to correct her stance. Anything else would have been cheating the voters."
So is it a done deal? No - a lot can still happen before the next Commission President is announced; despite the lofty talk about 'EU democracy', Juncker's eventual ascension or otherwise will still come down to cynical horse-trading between member states - if there is a wider national advantage (such as securing a key Commission portfolio) to be had by supporting an alternative candidate, some member states may jump at the chance. 

However, it cannot be denied that Juncker's prospects look healthier than they did this morning, leaving Cameron in a vulnerable position. We do not know exactly how many other member states share his reservations about Juncker but the risk is that some could now peel away, thereby massively reducing the chances of forming a blocking minority. 

The question for the UK is now whether to accept the damage that a Juncker led Commission would entail and seek other policy and personnel concessions or to invest significant political capital in blocking his accession. Given how big this issue has become both in of itself but also as a proxy for the battle of visions in Europe, Cameron must get something very substantial.

Anything short of the single market portfolio for the next UK Commissioner probably wouldn't cut it. 

Schäuble comes out strong for #EUReform

The latest intervention by one of Europe's most important politicians shows that, in the wake of the shock European elections result over the weekend, Europe’s leaders are waking up to smell the coffee.

Writing a guest piece for Die Welt, Germany's Finance Minister Wolfgang Schäuble argues:
What are the lessons of the European elections? Surely not a mindless pursuit of 'More Europe'. We need a more intelligent union.
He continues:
The question 'More or less Europe' - as one alternative or the other- has been posed falsely. On one hand we need a stronger Europe, particularly for the big and overarching questions, that no [one] state can solve alone. And, on the other, we also need a greater willingness to consistently apply the subsidiarity principle.
Setting out what he thinks Europe should be for, Schäuble says:
An intelligently integrated Europe, can in the end, even mean 'less Europe' - if after a critical appraisal, tasks and responsibilities are unbundled and clearly assigned. The EU could concentrate its tasks to the Single Market; trade; financial markets and currency; climate; environment and energy; as well as foreign- and security- policy. In the areas, therefore, where long-term success can only be negotiated on the European level.
He again laid out his view on treaty change, arguing that in order to strengthen the eurozone, it is "unavoidable in the medium term."

However, on the EU's 'democratic deficit', it is less clear exactly what Schäuble has in mind. He argues that:
A cleverly integrated Europe would then, look something like a "multi-level democracy" - a complementary, interlocking system of democracies with a different range and scope of competences: a National-European double democracy. Then the citizens of our national democracies and European democracy would be level.
Fine, but it is the exact balance between the two that is so politically controversial - and it remains unclear how German policymakers intend to square the inbuilt tension between national democracy and European integration, particularly in the eurozone where this tension is greatest.

Thursday, May 29, 2014

Have Cypriot deposits finally hit bottom?

Last year, we covered the Cypriot crisis extensively, and the steep decline in Cypriot deposits in particular. As we reported back then, the problem was likely to continue for some time, and did.

But now, just over twelve months on (data from end of April), Cypriot deposits may have hit bottom after increasing by €266m in April - the first increase since December 2012.

  • As the graphs above show (click to enlarge), the increase was driven by money flowing in from monetary financial institutions (MFIs) from the Rest of the World (i.e. outside the eurozone), but mostly in euro currency.
  • Given the well-established links between Russia and Cyprus, it is possible that some Russians could have begun moving small amounts of money back into Cyprus amid the threat of economic and financial sanctions on Russia. Of course, this is speculative, since the data is not detailed enough to see conclusively, while the continuing existence of capital controls would make moving large amounts almost impossible.
  • Domestic deposits continued their slow creep downwards. As the economy continues to struggle, this is likely to continue as wages fall and people eat into their deposits.
  • The headline figures remain bad. Total deposits are 34% below the level in December 2012. Given that much of this has fled the country and/or been written off, it is unlikely to return anywhere close to that level anytime soon.

Battle for next Commission President is a proxy for a wider debate between two competing visions of Europe

Our Director Mats Persson writes on his Telegraph blog:
"Something is rotten in Europe” was the German newspaper Die Welt’s damming take on the European elections, which last week saw record numbers vote for anti-establishment parties of various shades. The lesson is simple: offer voters a binary choice between “more Europe” and “no Europe”, and eventually they will choose the latter. The answer must be sweeping reform.

Many in the European Parliament are bent on not learning this lesson – and have claimed the "democratic" right to appoint the next head of the EU’s executive arm, the European Commission. Many EU leaders disagree, rightly arguing that this isn’t what the EU treaties say at all. This has triggered a maddening stand-off, perplexing Brussels observers and voters alike. But this is a hugely important proxy battle between two competing visions: one of an EU-lite, centred around the single market with national parliaments as the ultimate democratic check. Or “ever closer union” with Brussels and the EP at the centre of a supra-national democracy.

Having MEPs appoint the Commission's president will do nothing to boost democratic accountability in the EU. Europe lacks a common political space (a demos) – none of the main UK political parties have backed the main EP candidates. Neither do MEPs have more legitimacy than democratically elected national leaders. Consider, for example, that across the EU average turnout in national elections is around the 70 per cent mark – compared to 43 per cent in last week’s European elections.

To add fuel to the fire, MEPs have nominated the very personification of Europe’s old orthodoxy – the arch-federalist Jean-Claude Juncker. PM of Luxembourg for 18 years, he once said of the controversial Lisbon Treaty that “of course there will be transfers of sovereignty. But would I be intelligent to draw the attention of public opinion to this fact?”

David Cameron is now scrambling to block Juncker and he may just succeed – Germany’s Angela Merkel, who tends to decide such things, could graciously move him to another EU top job (an improvement at least). So, if not Juncker, then who? Well, the race is wide open.

The centre-right will have the first go by virtue of “winning” the European elections.

The potential runners and riders include IMF Managing Director and former French finance minister Christine Lagarde – a frenchwoman with an Anglo-Saxon twist, she appeals to many Brits, but would sit awkwardly with François Hollande’s Socialist government.

Irish Taoiseach Enda Kenny would be naturally close to the UK, but if seen as a Cameron puppet in the EU, it might well backfire.

“The EU without Britain is like fish without chips,” said former Finnish prime minister Jyrki Katainen, another candidate who may go down well in London but may lack the necessary gravitas.

Opting for Polish prime minister Donald Tusk would be complicated: though sympathetic on free trade and an atlanticist, he has gone cold on Cameron in the wake of the Prime Minister’s remarks about EU migration.

Alternatively, a candidate from the Baltic states – such as Lithuanian president Dalia Grybauskite – could be parachuted in at the last minute as a compromise.

Ironically, from Cameron’s point of view, one of the three front-runners on the centre-left – which could yet end up being selected depending on who gets other EU top jobs – might be preferable.

Danish prime minister Helle Thorning-Schmidt ticks many boxes: a Scandinavian social democrat sympathetic to free trade, the concerns of non-euro states and, amid domestic pressure, potentially an ally in re-writing EU rules on migrants’ access to benefits.

Former Italian prime minister Enrico Letta is a federalist (like most Italian politicians) but has talked of treaty changes providing “a more flexible Europe in the interest of the UK.”

Former Head of the World trade Organisation Pascal Lamy is a rare breed – a French Socialist with a penchant for free trade.

Or, this being Europe, it could be someone completely different. What’s clear is that whoever comes out on top will be an indicator of Cameron’s chances of achieving sweeping change ahead of a potential 2017 referendum. The stakes are huge.

Wednesday, May 28, 2014

Who will win the race for the most anti-EU MEPs: Farage or Le Pen?

***Update 18:30*** 

We flagged up earlier that Beppe Grillo was in talks with Nigel Farage and it looks like they have gone well:
This could be a very interesting development - stay tuned!

***Original Post***

The dust is beginning to settle after the European elections, and aside from the drama over the appointment of the European Commission President, the other big developing story is the exact composition of the groups within the new European Parliament.

As we predicted in our pre-elections briefing, despite many commentators predicting the its demise, the ECR group survived, albeit in a diminished state. However, there is a chance it could still end up making up its loses by attracting fresh recruits such as the Belgian N-VA, the Finns party, and, more controversially, the AfD or the Danish People's Party. There has been speculation that Law and Justice could move to the EPP but we consider this unlikely.

Therefore, the big question is: how will the record number of seats for a whole range of anti-EU and protest parties translate into EP groups? (regular readers will know you need at least 25 MEPs from at least 7 different member states). Assuming there will be no formal alliance between the two, the question is whether there will be two 'anti-EU' groups - a 'moderate' group headed by UKIP and Nigel Farage and a 'far right one' headed by Front National and Marine Le Pen, and if so, which one will be larger. Farage and Le Pen virtually have the requisite number of MEPs on their own but it remains to be seen whether they can get 6 other national factions on board.

As we illustrate below (click to enlarge), theoretically, the numbers are there for both but it depends heavily on how exactly the parties end up lining up. UKIP's EFD group are potentially more attractive to new members, but they are also more vulnerable to losing MEPs both to the ECR and to Le Pen's new European Alliance for Freedom (EAF) group, with Lega Nord having already jumped ship.

Click image to enlarge
Le Pen has just given a press conference in Brussels, but nothing new emerged. For the moment, her alliance includes five countries and 38 MEPs - what she described as an "extremely solid basis". Therefore, two more countries (and parties) are needed to wrap up a group, but Le Pen, Wilders & co. were all extremely tight-lipped when asked what these parties could be.

While the neo-fascist MEPs will remain beyond the pale for everyone, the question is will Farage and Le Pen want to link up with parties like Janusz Korwin-Mikke's Congress of the New Right? This could be the missing piece of the jigsaw for both Farage and Le Pen but given that Korwin-Mikke has said that it is "not possible to rape a woman" and that "there is no proof Hitler knew about the Holocaust" the question is whether the domestic reputational costs of such an association would outweigh the benefits. An intriguing possibility would be a Farage-Grillo alliance (the two met today) but ultimately we think this is unlikely.

One potential - and highly ironic - scenario would be if neither group attracts enough national factions in order to satisfy EP rules thereby missing out both on lucrative taxpayer subsidies as well as a highly visible platform from which to undermine the EU from within. In the longer term, could this yet lead to a rapprochement between Le Pen and Farage?

Tuesday, May 27, 2014

Martin Callanan for EU Commissioner?

Commissioner Callanan?
The most high profile UK casualty of last week’s European Elections, other than Nick Clegg obviously, was Martin Callanan, the leader of the Conservatives’ European Conservative and Reformist Group (ECR) in the European Parliament. He lost the sole Conservative seat in the North-East of England. This has caused people in Conservative circles, including the influential Conservative Home website, to float the idea that he would be the ideal candidate for the UK’s European Commissioner. Is this true and if so could it happen?

The decision of who will be the next UK Commissioner is ultimately in the gift of David Cameron who has let drop a few hints already. Firstly, we had a job description leaked in a
Number 10 memo that said they were looking for a “political heavyweight who speaks another language”. But there were other considerations. Avoiding a by-election, being a ‘eurosceptic’ but not offending Nick Clegg, and above all someone who could communicate the EU reform and referendum policy to the public and Conservative party alike.Some candidates have some of these qualities. The widely tipped Andrew Lansley has cabinet experience and is a big “big beast” in the Conservative Party but does not tick all the boxes, although in Lansley’s case his Cambridgeshire seat is considered safe from UKIP in a by-election, which would be an additional plus.

Callanan is new to the shortlist and is probably not a bookies' favourite. But he is a popular figure in the Conservative party, particularly among its grass roots, and well known in Brussels where leading the ECR group has given him the knowledge of building alliances and the power-broking needed for the job. In this role he has been through EU budget battles, fisheries reform, negotiating the car CO2 package as well as ensuring the ECR group's survival. Meanwhile, and crucially in many Conservatives' eyes, he has not “gone native”. Added to that, Callanan’s background in the North-East is a perfect counterfoil to Nigel Farage’s appeal to disgruntled former Conservative voters outside London. We do not know if he wants the job but he could well be suited for the tricky role of balancing an economic portfolio, pushing a Conservative reform agenda and credibly selling this in the UK.

So does Callanan tick all the boxes? Well he is not yet a household name in the UK, but running a European Parliament group is valued more highly elsewhere in Europe than in the UK – after all, Martin Schulz, the Socialist EP group leader was a serious candidate for the top job of EU Commission President prior to the elections.

Would Nick agree? Since the election result was a disaster for Nick Clegg it might be safe to assume that his ability to block a candidate is reduced, potentially removing one more obstacle.

Will he get it? Most likely not. As the press has already been reporting (including the FT), the post will probably go to Lansley.

"Something is rotten in Europe" - European elections reaction round-up

As the dust settles following the European elections, we are now beginning to see some interesting analysis and commentary from across the EU. Here is our round-up.

Despite the relative success of the established parties in Germany, many commentators have picked up on the EU-wide picture with FAZ's economics editor Holger Steltzner writing that the rise of anti-EU and protest parties across Europe should serve as a “dramatic warning” and that 
“The EU can no any longer be a one-way street, but should give back [powers] to the member states or local authorities.”
Die Welt's front page leader, written by Alan Poesner argues that:
"Something is rotten in Europe. And the reaction of politicians from the large European party-blocs makes it clear where the problem lies. 'Given the strength of the populists we have to work even closer together' is what you hear from both sides. This means: the establishment is locking ranks and closing its ears."  
In Bild, Jan Schäfer argues that:
"In the future, extremists from both sides will grip Europe like a set of pliers! The result: more nationalism, more little-statism and less free trade. That is bad for exports, for jobs. It is the opposite of what Europe needs right now."
Spain's leading daily El País leader argues that:
“In reality, it will be difficult to get out of the dynamics of a grand coalition, irrespective of whether the latter is the most convenient [option] from the political point of view, which demands a display of alternatives. But there is little doubt [a grand coalition is the most convenient option] from the perspective of the necessary stability of the continent.”  
In Italian daily Corriere della Sera, Aldo Cazzullo argues that:  
“The 2014 [European Parliament] elections will be remembered as the historic defeat of a political system. The eclipse of traditional parties. The rejection of the European establishment… The European vote confirms a trend that extends itself well beyond the continent: the sign of our times is the revolt against the elites, the institutions, the traditional forms of representation. And Europe is perceived as the bedrock and the guarantor of those elites people are rebelling against.”
In France, Nicolas Barré argues in Los Echos that
“With regard to Europe, the message from voters and those who abstained is rather a great distress towards political projects that seem empty to them – as [these projects] offer a choice between going backwards, which is always something difficult to enthuse about, and moving forward, but without knowing very well to where. Since the status quo is not an option either, for being so unsatisfactory, one can understand that a large number of voters have stayed away from ballot boxes or have voted 'against'."  
Dutch daily De Volkskrant features a comment piece by Alexis Brezet, the opinion pages editor of French daily Le Figaro in which he argues that:
"the European idea, as developed since the Treaty of Maastricht, is the main victim of the elections. If you add the non-voters to the voters who have supported a europhobic or eurosceptic party, it's only one third of EU citizens which supports the European project. Apparently Europe, which is being shaped without the people and sometimes against the people, doesn't appeal any longer...If Europe wants to win back the hearts of Europeans, simple reparations won't suffice: a fundamental reform is needed." 
A leader in Belgian daily De Tijd argues that:
"the eurosceptics will in-avoidably weigh on decision making in their own countries and in Europe... Cameron will now refuse to make any concessions to Brussels... discussions about British EU membership and its modalities will become very difficult. France is an even bigger problem. The core eurozone country has struggled for a long time already, economically... Now that a quarter of the French have voted for Marine Le Pen... it will become even more difficult for Hollande to implement necessary reforms and savings."
In Poland meanwhile, most commentators are focusing on the national implications of the vote - where Civic Platform beat Law and Justice by a very narrow margin - and have not really commented on the broader European picture.

No doubt much more will be written about these elections in the coming days and weeks, but it's clear that many already consider them to be a potential watershed moment for the 'European project'.

Heads begin to roll in aftermath of European election shock

As might be expected after some shocking showings in the European Parliament (EP) elections, the heads have begun to roll – and rightly so, some would say.

The most high profile resignation so far is that of the Spanish opposition Socialist leader Alfredo Pérez Rubalcaba (pictured) who stepped down yesterday after his party’s vote share dropped to 23% from 39% in the previous EP election. His decision is not exactly a surprise as many have been scratching their heads over the opposition’s lack of penetration despite numerous opportunities including (but not limited to) the Spanish economic malaise, austerity and Partido Popular’s top level corruption scandal. Where the party goes from here remains to be seen but with the rise of regional (particularly Catalan) parties and the new Podemos movement (see our profile here) the party needs to reassert itself as the primary opposition.

Similarly, a poor showing by the Romanian opposition party saw its leader Crin Antonescu resign along with all the party’s executive bureau. Interestingly, the party has also voted to switch from the liberal ALDE grouping in the EP to the centre-right EPP.

Meanwhile, in Ireland, Labour leader Eamon Gilmore jumped before he was pushed after his party secured barely 7% of the vote – likely paying the price for being the junior coalition partner during a difficult period of government (similar to Lib Dems in the UK or PASOK in Greece). This paves the way for a cabinet reshuffle, but again his replacement is also still unclear.

Other scalps include Igor Lukšič, President of the Slovenian Social Democrats, who has bitten the bullet and stepped down, as well as the leader of the Hungarian Socialists, Tibor Szanyi, who offered his resignation (subsequently accepted) after his party was comfortably beaten by the neo-fascist Jobbik.

There could still be more to follow as the dust settles. But more importantly than those who have lost their heads is for those that just clung on to theirs to get the message and begin pushing for some serious reform across Europe and offering a clear alternative to those who still do not.

Meet Podemos, the great newcomer of the European elections

The European Parliament elections have dealt a blow to Spain's traditional two-party system. Together, Prime Minister Mariano Rajoy's Partido Popular (PP) and the opposition Socialist Party (PSOE) won 49% of votes. In 2009, their combined score was 80.9%. No wonder Socialist leader Alfredo Pérez Rubalcaba has decided to step down following his party's poor showing.

But the big story coming out of Spanish ballot boxes is the success of Podemos (We Can), a new left-wing, anti-austerity movement that came from nowhere to become Spain's fourth largest party and win five seats in the new European Parliament.

And 'nowhere' really means 'nowhere' in this case. Podemos was officially registered as a political party in March 2014 - which makes its performance extraordinary. Its leader, 35-year-old Pablo Iglesias (see picture), is a Political Science professor but also a bit of a TV star in Spain. Interestingly, his parents called him Pablo so their son could bear the same name as Pablo Iglesias, the founder of the Spanish Socialist Party.

Factoids apart, we have been flicking through Podemos's European elections manifesto. The following bits give a good feel for what Podemos stands for in a number of policy areas:
  • "Citizens' audit of public and private debt to find out what parts of it can be considered as illegitimate...and declare that those won't be paid back."
  • "Creation of democratic and parliamentary control mechanisms for the European Central Bank...Creation of a European public credit rating agency."
  • "Regain public control over strategic sectors of the economy: telecommunications, energy, food, transport, health, pharmaceutical and education."
  • "Budgetary support for and increased development of public R&D centres, in order to favour the return of Spanish researchers and scientists from abroad."
  • "Right to a basic income for each and every citizen, for the mere fact of being citizens" - which sounds a lot like the 'citizenship wage' advocated by the Five-Star Movement in Italy.
  • "A moratorium on mortgage arrears for the first houses of families with difficulties in paying their loans back."
  • "Increase the EU's social budget, and establish a levy on capital movements within its boundaries" - which basically means saying adiós to free movement of capital. Podemos also calls for a "bigger levy" on movements of capital from the EU to third countries.
  • "Establishment of trade agreements among small producers in Southern European countries. Development of specific cooperation mechanisms among Southern European countries." On the other hand, Podemos wants to "abandon" negotiations over the EU-US free trade agreement (TTIP), and calls for a "substantial revision" of the existing EU-Latin America free trade deals.
  • "A derogation from the Lisbon Treaty so that public services are exempted from the competition principle." 
  • "Stop the use of Memoranda of Understanding" - which set out the conditions attached to EU-IMF bailout loans to struggling eurozone countries.
Call it left-wing, anti-establishment, anti-austerity (but clearly not anti-EU), the rise of Podemos is significant because - similar to what the Five-Star Movement has done in Italy - it can give Spaniards a channel through which they can voice their dissatisfaction with the political establishment (and the current eurozone economic policies), something which has been lacking at the peak of the eurozone crisis.

In an interview with today's El Mundo, Pablo Iglesias has refused to reveal whether he and his movement will stand in next year's Spanish general election. For now, though, it seems Beppe Grillo may just have found someone to work with in the new European Parliament.

Monday, May 26, 2014

Anti-system MEPs surge in the European Parliament: how will EU leaders respond?

Open Europe has today responded to the preliminary 2014 European Parliament elections results. Please note that these figures are based on a combination of final results and some projections so could still be subject to change. However, we do not consider any substantial swings likely.

Here are the key points:
  • Share of anti-EU and anti-establishment vote is slightly higher than expected with such parties collectively on course to win 229 out of 751 seats in the new European Parliament (30.5%), up from 164 out of 766 seats in the current parliament (21.4%).
  • European Parliament politics are set to become more unpredictable though the anti-EU and anti-establishment block remains incoherent and the two main groups will continue to dominate.
  • The share of MEPs dedicated to free market policies drops, from 32% to 28.1%.
  • Compared to 2009, overall turnout stayed flat despite more powers for MEPs in the Lisbon Treaty and the EU becoming a high-profile issue in the wake of the Eurozone crisis.
  • Several anti-incumbent parties in the EP for the first time, ranging from Feminist Initiative in Sweden to Spain’s new leftist movement Podemos, founded as late as March 2014.

 The rise of anti-EU and protest parties on the left and right will make European politics more unpredictable but, paradoxically, it could also strengthen the resolve of the three mainstream groups to continue to vote for more Europe in the European Parliament, in order to freeze out the anti-EU contingent (click on the pictures to enlarge).

The temptation in Brussels and national capitals will be to view this as the peak of anti-EU sentiment as the eurozone crisis calms down and the economy improves. This would be a huge gamble. The make-up and reasons for the rise of these parties are complex, but it’s clear that the best way to cut off their oxygen is to show that the EU can reform itself and respond to voters. These elections are a clear warning: offer voters a polarised choice between more Europe and no Europe and sooner or later they will choose the latter.

David Cameron now faces a seriously tricky week. He has two main challenges. First, he will try to muster enough allies to block Jean-Claude Juncker, the front-runner for European Commission President, although it’s not looking overly promising. Second, he faces the dilemma of aligning himself with more nationalist parties to secure his party’s standing in the EP, which comes with the risk of alienating his natural allies on the centre-right who will be crucial in his bid to achieve EU reform.

EU leaders will meet tomorrow evening to discuss what to do next and how to negotiate with the new parliament. It might not be pretty.

Sunday, May 25, 2014

#EP2014 - early impressions

The exit polls are now starting to roll in and there are already some interesting stories emerging.

Turnout looks on course to be similar to 2009. The estimate for 2014 is 43.11% versus 43% in 2009. In Germany, turnout has increased from 43% to 48%. In France, the early signs are that turnout is around 43%, slightly up from 41%. There is however somewhat of an east-west divide, with Poland's turnout down, 22.7% from 24.5%, Czech at around 20% and far lower than the 28% in 2009. Similarly, in Slovakia, turnout is an abysmal 13%. Italy's vote is also down a lot. UK turnout is estimated at 36%, up from 34%.

Regarding the race for Commission President, the centre-right EPP group looks to be the likely winner. In a worrying move for David Cameron, several senior German politicians, including close Merkel ally David McAllister and SPD Vice-Chancellor have gone on record tonight saying that the European Parliament's Spitzenkandidaten should get the job. Next week will be very tricky for Cameron.


In terms of the anti-EU/eurosceptic vote, Marine Le Pen's Front National looks set to achieve a clear victory with around 25%, even beating most expectations.  Francois Hollande's Socialists look set to slump to 14%.


In Denmark, the anti-EU Danish People's Party are in first place, also with around 25%.


In Greece, anti-austerity SYRIZA look set for victory with  26-30%, while the neo-Nazi Golden Dawn are on 8-10%.


In Finland, we only have advanced voting data, but this shows the (True) Finns only getting 12.8 compared to the over 20% they were polling in the run-up. The Centre Party and national Coalition Party are tied on around 22%,


In Germany, Angela Merkel's CDU have topped the poll with 36%, while the SPD have done better than expected with 27%%. The anti-euro AfD look on course for six MEPs and, due to the Court ruling to drop the 5% threshold in Germany, the far-right NPD have also won a seat.


In Sweden, the big winners are the Green Party, gaining 17.1%. The Social Dmeocrats are the biggest party while centre-right Moderaterna looks set to take a royal beating, only mustering 13%. The anti-immigration Sweden Democrats are on 7% and, in a massive upset, the Feminist Initiative also scored 7%.


In Poland, as expected, the ruling Civic Platform just edged ahead of Law and Justice with both parties getting over 30%. The centre-left SLD were a long way back in third on 9.6 just ahead of the anti-EU Congress of the New Right on 7.2% (whose leader said he wants to blow up the European Parliament).

Lots to chew on already then - we should have a fuller picture by 9/10pm. Stay tuned and follow us @OpenEurope.

Friday, May 23, 2014

Belgium's general election: Will we see another 541 days without a government?

This Sunday, on the same day as the European Parliament elections, Belgium will hold a general election, electing both new federal and regional assemblies to govern 11 million people. The key question is how strong the Flemish nationalist N-VA, which is already the biggest political party, will perform this time around.


The N-VA, a "eurorealist"  formation, wants to reform the country, a mini-EU/Eurozone composed of Flemish and Francophones, into a confederation (although it favours splitting it up in the very long term). It became the biggest party in 2010, but was ultimately excluded from a federal government because it appeared impossible to wrap up a coalition deal with Francophone parties, resulting in 541 days without a federal government.

A coalition of six parties led by Francophone socialist Elio Di Rupo eventually emerged. One big issue was that the coalition did not enjoy support among the majority of Flemish MPs in the federal Parliament. European Council President Herman Van Rompuy, who has been Belgian PM himself, once warned that if such a government would ever be formed, this would be “dangerous for the existence of the state”. His party, the Flemish Christian-Democrats, have now pledged not to enter such a coalition again.  This Sunday, it will become clear how voters have judged this.  For more background on the complexities, we refer you to this comment piece by our resident Belgian expert. 

Post-election scenarios

Scenario 1: Business as usual (most likely)

Opinion polls are notoriously unreliable in Belgium, but suggest that, in the Flemish districts, the N-VA will improve on their 2010 showing, while the three traditional parties will remain broadly at the same level. If they again fail to command a majority of Flemish seats but, nevertheless, prefer to avoid complicated talks with the N-VA, the Flemish Christian-Democrats will need to break their promise, something which they may do if one of them becomes PM and the incumbent Elio Di Rupo is offered a job in the European Commission, for example. Di Rupo's Socialist Party is expected to suffer considerable losses, but would easily remain the biggest party in the Francophone part of the country.

Scenario 2: A federal government which includes the N-VA

Bart De Wever, the N-VA's leader, has himself indicated he's willing to enter a federal government and not make new demands to decentralise powers, if centre-right policies are implemented. The N-VA hopes this pressure may drive the Francophone socialists to return to their historic demands for more decentralisation (in his maiden speech to the Belgian Parliament in 1988, PM Di Rupo himself proclaimed that "there are no Belgians", while demanding "a confederal Belgium").

Such a federal government without Francophone socialists (who have been in power since 1988) but with Francophone liberals and Christian-Democrats is an unlikely scenario, also because this time around it would probably not command a majority of the Francophone seats in Parliament. However, if the N-VA does better than expected, this scenario could materialise.

Scenario 3: Prolonged stalemate 

Last but not least, there is the scenario of another one and a half years of stalemate, prolonged to an indefinite period without a federal government, which could result in negotiations on an eventual divorce. We rate this as very unlikely.

As you can see, it's complicated.

Dutch reformers hold ground as Wilders falters

We've already blogged about the Dutch #EP2014 exit poll but we thought we'd also break down the projected result according to the classifications we used in our recent briefing which forecast the composition of the new parliament. Rather than using the arbitrary and artificial EP political groups (which tell you little about what the parties actually believe), we classified the parties in three blocs - status quo/more integration, critical reformers, and the malcontents' block (see here for a detailed explanation of these classifications).

Here is how the projected Dutch result looks:

While we predicted that overall, there is a risk that the malcontents' bloc and the status quo/more integration parties could crowd out the critical reformers, the Netherlands could slightly buck this trend with the critical reformist parties - Dutch PM Mark Rutte's VVD party and the ChristianUnion - increasing their vote share.

This is encouraging although sadly it looks unlikely to be replicated across the EU given that Dutch politics is particularly fertile for reform minded parties.

What does Wilders' defeat in Dutch euro elections mean?

For various reasons that we don’t quite understand, most of the UK press has deemed it illegal to report on the exit polls from yesterday’s European elections in the Netherlands - with the exception of the Telegraph and the Guardian. The Netherlands is the only country to conduct exit polls ahead of Sunday night (10pm GMT roughly) when the results from all 28 EU countries are announced.

Geert Wilders’ Freedom Party (PVV) took a clear a beating. If the exit polls stand, the party will have dropped from 17% in 2009 to 12.2% this time around, translating into a loss of 1 seat (the PVV had 5 seats in the last parliament but one MEP defected). This is no doubt an unexpectedly bad result for Wilders.

Source: Ipsos

Wilders’ defeat has given rise to a hilarious conspiracy theory in Brussels that the UK media isn't reporting on the Dutch elections since the result doesn't conform to its alleged anti-EU bias. Apart from the fact that the BBC and others genuinely worry about breaking the law (even though it’s a ridiculous law) this is also a wrong reading of the results.

Wilders screwed up. His controversial comments about Moroccan immigrants caused him real damage. Three of his four sitting MEPs even refused to campaign as a result. But to see this as a victory for the EU status quo in the Netherlands is pretty heroic.

- The strongly Eurosceptic Socialist party gained an extra 3% of the vote, translating into 1 extra seat, which sees it overtake the established centre-left PvdA. Together with the PVV, these strongly EU-critical parties are set to win 22.2% of the vote.

- While it's difficult to know what to read into this result, the parties that we've dubbed “critical reformers” have done relatively well. Prime Minister Mark Rutte's VVD party maintained a respectable share at 12.3%, despite leading an unpopular government, while the Christian Union/SGP increased its share by a percentage point. 

- The two biggest victors are the D66 liberals and the CDA, which are vying for first place on just over 15% of the vote. These parties are clearly pro-EU - and D66 is doing a lot of good work in the EP - however, please do resist the temptation to see this as an endorsement for more EU integration. Firstly, the D66, the great winner of this election, called on a freeze for transfer of powers just before the election, prompting Foreign Minister Frans Timmermans to post on his facebook page "D66 is suddenly also 'very euro critical'". Meanwhile, the CDA vote of 15% is down nearly 5% on its 2009 vote. It would be just as plausible to see the D66 and CDA vote as anti-incumbent vote against the PvdA-VVD coalition government.

- Lastly, turnout in the Netherlands remained stable, but at an incredibly low 37%. With Europe so much more in the headlines over the last few years and the Lisbon Treaty giving MEPs more powers, why in the world hasn't turnout gone up dramatically if it's true that more EP powers and greater awareness will lead to greater voter engagement?

These results certainly present a mixed picture. Wilders' failure to translate his polling into votes is notable but whether this pattern will be repeated elsewhere (in France, for example) remains to be seen - and probably has much to do how badly his campaign went.

Hey Herr Schulz - what happened to your pan-European values?

UPDATE 12:50

Just to make clear, as Bojan Pancevski of the Sunday Times points out, it’s not that Schulz is playing the German card per se that we’re critical of – clearly Germany is within its right to pursue its interests like everyone else. It’s that Schulz has built his entire career and campaign on the notion that the nationalist interest is a dated (and indeed dangerous) concept.


This is really odd - and painfully revealing.

In today's Bild - Germany's and Europe's biggest tabloid, which is up there with UK tabloids on the hit list of  Brussels spokespeople (Bild once urged the Greeks to sell their islands) - the Socialist's Spitzenkandidaten Martin Schulz has taken out an advert that comes conspicuosly close to pandering to nationalist instincts.

The ad reads:
Only if you vote for Martin Schulz and the SPD can a German become the President of the EU Commission.
The thing is, Schulz has built his career on bashing those who come even close to playing the 'nationalist' card in Europe - targets have included David Cameron and indeed Angela Merkel herself - claiming he hopes “national identities [will] melt away" and that the “The Nation State has reached its limit.” In today's Le Figaro he said he campaigns against "nationalism adorned with all virtues." And in a recent interview with Der Spiegel, Herr Schulz claimed that "nationality plays no role for me."

By all means, don't your let 'pan-European democratic values' stand in the way of scoring some desperate, last-minute points in a tabloid...

Thursday, May 22, 2014

EU migration closes gap on non-EU migration into UK

The ONS has this morning published another set of updated migration figures. As always they make interesting reading with respect to EU migration - many eyes are on the figures for Romanians and Bulgarians in particular.

As the graph above shows, net immigration from the EU increased from 82,000 in 2012 to 124,000 in 2013. While non-EU immigration still accounts for a larger share of the total, the gap has narrowed significantly recently. This jump in EU migration has not been driven by an increase in one particular group, inflows from EU 15, EU 8 and Bulgaria and Romania have all increased.

Looking a bit deeper, it’s clear that these different groups of migrants have very different reasons for moving to the UK. As the ONS graph above highlights, the number of non-EU migrants moving to the UK for work has fallen steadily while those from the EU, and EU 15 in particular, have increased quickly. Furthermore, as the graph below highlights, work related reasons dominate EU migration but non-EU migration is now mostly driven by studying or family migration.

Perhaps the most interesting figure from all of this data though is the sharp rise in the number of Bulgarians and Romanians applying for national insurance numbers in the year up to March 2014 – which jumped by 7,000 and 29,000 respectively.  This is over the past year, not in a single quarter, so broadly fits with the previously released figures (which we analysed here) which showed that 29,000 workers from these countries had moved to the UK in the past year. So there's a gap between people from these countries who got a NIN on the one hand and who are working on the other. However, this doesn't necessarily mean that the 7,000 who make up the difference are on benefits (as the periods don't necessarily overlap).

In any case, as the ONS itself points out, the overall impact of removing transitional controls will not be clear for some time, will full data for 2014 not out till mid-2015. Still, Ukip and others are likely to run with these figures.

Sarko drops a bomb: At least half of EU powers should return to member states

Three days ahead of the European Parliament elections in France, former French President Nicolas Sarkozy has written a bombshell piece on Europe for French weekly Le Point and German daily Die Welt - calling for "at least half" of current EU powers to be handed back to member states.

Here are the key bits:
We need to look at today's European Union with lucidity. It can't work at 28 as it did at six, nine, or even twelve [member states]. I sincerely believe that there will be no alternative to a drastic reduction of the extent of [the EU's] competences. The situation today borders on the ridiculous and condemns us to powerlessness. 

Europe has ended up creating an administrative labyrinth, with the Commission and its departments, which indeed need to keep themselves busy. The result: hundreds of directives about the most various and often the most pointless issues. 
Today, we need to scrap at least half of [the EU's] current competences - which will have to be taken on by member states tomorrow. We need to regroup Europe's competences into less than ten basic priority policy areas: industry, agriculture, competition, trade negotiations, energy, research...

It would be unfair to use the Commission and its President as convenient scapegoats for our difficulties...That said, the [European] Commission should no longer have legislative competences because there’s a European Parliament, and it is only for it to legislate. 
On the eurozone vs EU-28 issue, Sarko writes:
Let's have the frankness to say that the myth of one Europe fell to pieces after the adoption of the euro by 18 of 28 [EU] countries. There's not one Europe anymore, but two. Furthermore, these two Europes today need to revise their strategies in different directions. More integration for the 18 [member states] that share their monetary sovereignty. 

At the same time, we need to stop believing the myth of equality of rights and responsibilities among all member states.
That means Sarkozy envisages a eurozone where bigger countries (especially France and Germany, ça va sans dire) have greater decision-making powers.

Finally, on immigration:
It is evident that we need to immediately suspend Schengen I [the EU's passport-free travel area] and replace it with a Schengen II, which member states could only join after they have previously adopted the same immigration policy.
On this blog, we've argued several times (see here and here) that the rise of Front National has pushed part of France's UMP, the main centre-right party, towards a more critical stance on the 'Europe' issue. It should be clear by now that David Cameron could find allies in France who could back his plan for an EU that does less, but does it better. 

However, the French presidential election is still three years away and, as we have said before, Cameron's biggest potential weakness is his 2017 deadline, which means some of his natural allies will not be in power to help him.

Wednesday, May 21, 2014

Does Russia’s gas deal with China change things for the EU?

News just out is that Russia and China have finally signed a gas deal, the negotiations of which have been going-on for a decade. (As the picture above, taken from a Gazprom investor presentation showed, this is something Gazprom has been targeting).

This is a pretty surprising turnaround given that every news outlet was reporting overnight that Russian President Vladimir Putin had failed in his attempts to finalise the deal in his current trip to China which ends tonight.

The key points of the deal are follows:
  • The contract will be over 30 years and is unofficially estimated to be worth $400bn (19% of Russian GDP).
  • It will see Gazprom supply up to 38 billion cubic meters (bcm) of gas to China per year from 2018. Once further pipelines are complete, this could be expanded to 61 bcm per year. As a comparison, over the past four years Gazprom has exported an average of 157 bcm per year to Europe (including Turkey).
  • No official price has been revealed but the biggest sticking point has been that China believed Russia’s price demands were too high. It will be interesting to see if Russia gave in on this point.
  • This deal has proved increasingly important for Russia as it looks to shift it’s away from relying on European demand for its energy exports.
What does this deal mean for the EU?
  • In the short term, not too much. The economic links between Russia and Europe will continue to be significant and they will continue to be reliant on each other when it comes to energy (the former to sell the latter to buy).
  • The deal will not be in place until 2018 and even then will only see Russia selling a fraction of its gas exports to China every year, exports to the EU could still well be two to four times the size.
  • For these reasons, it is unlikely to change the potential impact which EU sanctions would have on Russia. Although of course Russia remains relatively unconcerned by such threats when it knows of the huge divides within the EU on the issue.
  • All that said, it is symbolically important and could have longer term impacts. It highlights Russia’s desire to move away from links with Europe. Combine this with Europe’s desire to increase energy security and the relations between the two sides could become increasingly cold and distant. Although, some countries due to geographical proximity (Bulgaria/Hungary) or due to long standing economic links (Germany) will surely continue to have good relationships with Russia.
  • It also raises questions over future tie ups between Russia and China. Areas such as payments systems, broader financial markets, transportation and machinery have all been touted as sectors for potential cooperation between the two countries. Again while a long term issue, such ties up may concern the West since Russia and China are currently reliant on their exports in many of these areas. Both the EU and US will need to figure a clearer policy for how to deal with such changes, with the EU in particular in need of updating its policy towards its eastern neighbourhood.

Dutch PM Rutte talking a lot of sense

Dutch Prime Minister Mark Rutte talks a lot of sense in this interview with Dutch news site Nu.nl - and sets the scene for the inevitable bust-up with the European Parliament over the appointment of the next European Commission President. Rutte says:
The European Council has never committed itself to these candidates [the Spitzenkandidaten appointed by the various political families]. The whole election has been invented by European political groups.

The European Parliament does not nominate [the European Commission President], the Council does. The Parliament can then say 'yes' or 'no'. That will probably lead to fierce discussions between the Council and the Parliament, but we are not afraid of that.
Bring on the MEPs, then...

The Dutch Prime Minister used the same interview to reiterate how the next European Commission needs to get its priorities straight:
Why can't our architects still not work in Italy or France? [...] The [EU's] Services Directive is far from ideal [...] In the meantime, the EU is keeping itself busy with female quotas. Europe is even dealing with forest strategy and rules for websites. The EU shouldn't be touching this.
Making the case for an EU that focuses on facilitating trade and jobs, rather than meddling in all sorts of areas, in a concrete manner is key. Something we would like to hear more of, especially from UK Prime Minister David Cameron and British (and European) politicians.

Tuesday, May 20, 2014

What happens next after the European elections? Get ready for a royal punch-up...

With the European elections taking place on Thursday through to Sunday this week, it is worth considering what happens next. The proposed Spitzenkandidaten or European Parliamentary families’ candidates for European Commission President is set to make the post-election horse-trading and politicking more fraught than usual. As we warn into today’s Times this could have huge implications for the future of the EU and David Cameron’s reform agenda.And it will be nothing short of a royal punch-up.

The EU treaties are ambiguous about exactly how the next Commission President should be selected, but the Lisbon Treaty states that EU leaders must for the first time take “into account” the result of the European elections when proposing the new European Commission President. Ultimately, EU leaders retain the power to reach a compromise candidate among themselves, but the EP’s veto over the appointment could lead to a stand-off between governments and MEPs.

Here is a quick timeline to keep in mind – in effect there will be a three round selection process:

ROUND 1 – 22-25 May 2014: election days

27 May: Martin Schulz (currently European Parliament President and the Socialists’ Spitzenkandidaten), Jean-Claude Juncker, the centre-right EPP candidate, meet the other candidates over breakfast to discuss outcome of elections – presumably to put pressure on national leaders who will meet for dinner later the same day to appoint one of the MEPs' chosen men.

ROUND 2 – 27 May: EU leaders meet for dinner to discuss outcome of the elections – they will no doubt discuss whether to opt for a Spitzenkandidat or propose another candidate. Whether an alternative candidate would come from either the centre-left or centre-right will likely to depend on the outcome of the elections. However, it is unlikely EU leaders will be able to publicly select their candidate before the distribution of the political groups is known (see below).

June: formation of European Parliament political groups – this could be important because the post-election jockeying will determine the political groups’ distribution in the new parliament. If the result between the centre-right EPP and centre-left S&D is tight, as it is looking, picking up a few MEPs here and there from other groups could be vital in becoming the largest group.

The focus will also be on whether Marine Le Pen and Geert Wilders manage to put together a new far-right grouping and what the post-election scramble might mean for other groups such as UKIP’s EFD and even the Conservatives’ ECR group. To get the formal status of a political group it must consist of at least 25 MEPs, elected in at least one-quarter of the Member States (i.e. at least 7).

ROUND 2a – 26-27 June: EU leaders meet at European Council meeting. When the European Council has made its proposal for the Commission President, a period of negotiations with the Parliament on his/her political priorities and programme could take place.

1-3 July: EP constitutive session: MEPs officially take up their seats in the Parliament. Election of EP President (not to be confused with the Commission President), vice-presidents and quaestors

7-10 July: official EP political group meetings

ROUND 3 – 14-17 July: session of the Parliament – election of Commission President by a majority of MEPs. Should EU leaders’ candidate be rejected, the European Council, acting by a qualified majority, has one month to propose a new candidate.

Once the Commission President has been elected, the Council, in agreement with the Commission President-elect, adopts the list of commissioners designated (i.e. proposed Commissioners from each member state are assigned a portfolio).

September: hearings of designated European Commissioners. The Commissioners-designate appear before the parliamentary committee(s) relevant to their prospective fields of responsibility. MEPs do not have the power to reject individual Commissioners but, in the past, these hearings have led to candidate commissioners withdrawing or having their portfolio changed.

October (tbc): Vote on the full European Commission. The new European Commission must be approved en masse by a majority of MEPs.

So, given that both parts have an effective veto - echoing the Italian parliamentary system (that great constitutional model for getting stuff done) - this stand-off can last for a long time.

Regardless, it won't be pretty. 

Monday, May 19, 2014

Spanish banks' bad loans look set to weigh on the economy for some time

The Bank of Spain released its latest data on the level of bad loans held by Spanish banks today. For the first time since January 2013, the value of bad loans has dropped - falling from €195.2bn in Feb to €192.8bn in March. However, it has stayed roughly constant as a percentage of total loans (13.4%).

Symbolically, even a small drop in the headline value of bad loans may be seen as important, especially given that previous declines were down to the transfer of assets to the Spanish bad bank (SAREB), rather than any change in circumstances of the loans. If this is discounted, the value of bad loans has simply continued to rise.

That said, as the graph highlights, these loans remain at very high levels and well above the loss provisions held by banks. This continues to tell us that:
  • Spanish banks will continue to deleverage for some time to come. This puts a dampener on any hopes that they will show any rapid increase in willingness to lend and take on more risk to help fuel any form of Spanish recovery. This thereby increases the risk that any recovery will be ‘creditless’, and therefore more likely to be limited and temporary.
  • This data is quite timely, as it also highlights the obstacles which the ECB is going up against in these countries when it comes to encouraging banks to begin lending again, particularly to small and medium-sized enterprises (SMEs). With their balance sheets still weighed down by these loans, it seems likely that banks will continue to be reticent to take on significant new lending, even if the ECB does offer them cheaper long-term loans.
  • Given that many of these loans still relate to the real estate and construction sector, they will continue to weigh on prices in these markets. This suggests prices could fall further (although this will vary significantly based on location and regional markets), while the political hot topic of evictions could return to the fore again in the future.

Friday, May 16, 2014

Labour finally wake up to the fact there is a European election next week

Do Ed Balls and Ed Miliband see eye-to-eye on the EU?
Anyone following Labour's election campaign up until now would be forgiven for thinking the party was fighting a general election as opposed to a European one - any references to Europe were hard to come by. However, Shadow Chancellor Ed Balls has emerged with a hard-hitting piece in yesterday's Evening Standard in which he argues that:
"Europe needs to work better to respond to public concerns, deliver better value for money for taxpayers and secure rising prosperity."
"First, we need the EU to be better focused on creating jobs and growth. An EU Commissioner focused on growth, and an independent audit of the impact of any new piece of EU legislation on growth, would be key to helping re-focusing the Union on this key task. And we need to drive forward the completion of the single market in digital, energy and services."
"Second, our reforms will help ensure that EU citizens seeking work here contribute to our economy and society. So we will extend the period of time that people from new member states have to wait before being able to come to the UK to look for work. We will work to stop the payment of benefits to those not resident in this country, consult on changing the rules on deporting someone who receives a custodial sentence shortly after arriving in the UK, and have called on the government to double the time that an EU migrant has to wait before being able to claim the basic Job Seekers Allowance."
 "And third, any agenda for change in Europe must also address people's concerns about how power is exercised at a European level. So we have called for national parliaments to have a greater role in EU decision making by being able to 'red-card' any new EU legislation before it comes into force; for serious reform of the EU Commission."
This commitment to reform is very welcome, even if this is merely a re-statement of existing Labour EU policy. It's worth noting that these reforms are not a million miles away from David Cameron's own priorities for EU reform - especially the further restrictions on EU migrants' access to benefits and the red card for national parliaments. Yet more evidence - as we've pointed out before - that tone and rhetoric aside, there is a surprising degree of consensus among the main parties when it comes to the substance of EU reform. 

As the New Statesman's George Eaton pointed out recently, there is a lot of frustration within Labour over how to deal with the EU question:
"Other shadow cabinet members complain of the party's failure to promote its commitment to reform the EU, which they regarded as a quid pro quo for Miliband's refusal to guarantee an in/out referendum under a Labour government."
It appears that Ed Balls is among the Labour heavy hitters keen to address this disparity.

Thursday, May 15, 2014

The Farage Paradox: UKIP on the rise but so is public support for EU membership

Poll watchers in the last few years would have seen many polls showing a majority of Brits would vote 'out' in a referendum of the UK's membership of the EU. In the last few months this trend has been slowly reversing, and a new Ipsos-MORI poll out today shows that if a referendum were held right now, 54% would vote to stay in - the highest support for the EU for a few years - and 37% would vote to leave.

Why is this the case? The most obvious factor is the improving economic situation in both the UK and (most of) the eurozone. Another factor could be that as the EU debate has become more prominent, it has forced people to consider the issue and come down on one side or the other - it is notable that only 10% say they don't know how they would vote.

Likewise, the concerted focus on EU reform primarily by the Conservatives but also to a lesser extent by Labour and the Lib Dems may have reassured voters that the EU may be moving in the right direction. This has also involved much sharper and clearer communication by David Cameron of what kind of EU reforms he will prioritise, as well as high profile interventions by EU politicians calling on the UK to stay in and emphasising the UK's importance to the EU.

The irony is that the upswing in support is happening at exactly the same time that UKIP is riding high in the national polls and could well come first in next week's European elections, and UKIP leader Nigel Farage was widely seen as having beaten Nick Clegg in the EU debates. These figures lend credence to the theory put out by some including British Future's Sunder Katwala that while Farage is effective at maximising the UKIP vote, his message and rhetoric, including the overwhelmingly negative focus on immigration, is actually a turn-off for potential supporters of a UK exit (Douglas Carswell has also made this point).

Wednesday, May 14, 2014

The gates are open but so far no flood

Official data from Office of National Statistics published this morning shows that the number of workers from Bulgaria and Romania have dropped from 144,000 to 140,000 since transitional controls were lifted for workers from the two countries on 1 January 2014. As we said all along, not quite the opening of the floodgates that some had predicted.

Nevertheless, this still represents an increase of 29,000 workers from Bulgaria and Romania year-on-year. And the quarterly numbers do not present a full picture on which to judge any longer-term change or pattern.

More broadly, the data shows that, while coming from a low base, EU employment has driven quite a lot of the recent increase in employment. In total, the number of  employed in the UK has increased by 741,000 year-on-year. Migrants from the Central and Eastern European 'EU 8' countries only account for 2.3% of total UK employment but, over the past year, workers from these countries have accounted for 15.5% of the increase in UK employment (see graph below).

It remains to be seen whether these figures will have any effect on the political debate about migration in the UK, particulalry from the EU. Annual migration (rather than employment) figures released later this month (potentially on European election day) are expected to show that EU migrants from the EU will outnumber migrants from non-EU countries for the first time - which has the potential to be politically explosive.

The European Parliament - a failed experiment in pan-European democracy?

In a new report published this morning we assess the track record of the European parliament and conclude that it has failed as an institution on a number of fronts. Although many individual MEPs work hard and conscientiously for their constituents, the European Parliament as a whole has failed to gain popular democratic legitimacy. Still, given that the EP now has a lot of power to decide law that impacts on people's every day life - from working hours to browsing the web - there's a lot of reason to vote in the European elections.

Here are the key findings:
  • Turnout has fallen despite an increase in MEPs’ powers: While the use of ‘co-decision’, under which MEPs have equal status with national ministers in passing EU legislation, has more than doubled during the last two decades – from 27% to 62% – turnout in European elections has fallen from 57% to 43%. Yes, yes, correlation not causation (as the old twitter cliché goes) but point is: if the EP was effective in closing the democratic deficit, we would see exactly the opposite trend. 
  • There is no correlation between voter turnout and knowledge of the European Parliament or interest in EU affairs: A common explanation for low turnout in European elections is a lack of public knowledge of EU politics and the EU institutions yet this is not borne out by our research. For example, in Romania 81% and Slovakia 79% of people say they are aware of the European Parliament but only 28% and 20% turned out to vote in 2009.

Likewise, low turnout cannot be explained by a lack of interest - in the Netherlands, 61% say they were interested in European affairs – the highest in the EU – yet the turnout of voters at 36% is one of the lowest.

  • The main party groups in the European Parliament agree with each other three quarters of the time: It probably won't come as a surprise to anyone who watched any of the 'debates' between Martin Schulz and Jean-Claude Juncker that, despite representing national parties of different political traditions, the centre-right European People’s Party (EPP) and centre-left Socialist and Democrat (S&D) party families voted the same way 74% of the time in the 2009-14 parliament. Meanwhile, the average majority in co-decision votes in the 2009-14 parliamentary term is over 75% – the highest it has ever been. In effect, this denies the voters the very same choice the EP is meant to boost. 
  • In 2012, the European Parliament spent €85 million on fostering a common European political identity through the party groups in the European Parliament and their affiliated pan-European parties and political foundations outside the parliament. This is only part of a budget that has been spiralling out of control - up from €1.4bn in 2008 to around €1.75bn in 2014.

So those are some of the key problems - what about the solutions? While there is no quick easy fix to what is a complex and multi-faceted problem, the single most effective remedy would be to return democratic accountability closer to voters by boosting the role of national parliaments in the EU decision making process and not repeating the mistake of giving more powers to the European Parliament.

This would involve national parliaments being able to group together to block proposed EU laws and amend or repeal existing rules (see here for more details on this). In parallel, the European Parliament should be stripped of its right to increase the EU budget as it is national parliaments that are responsible for raising the revenue. In addition, MEPs should not be able to veto EU trade agreements agreed by national parliaments.

Meanwhile, the €85 million spent on fostering a common European political identity through the party families in the parliament and their affiliated pan-European political parties and foundations should be cut. The 2009 reforms to MEPs’ allowances should be completed by requiring all allowances, such as the general expenditure allowance (worth €51,588 a year) which is vulnerable to misuse, to be conditional on the production of receipts.