PREVIEW: EU June Summit
Arrivals scheduled at 12:30BST/06:30CDT on Thursday and 07:00BST/01:00CDT on Friday
- EU Summit is to be dominated by the migration issue
- Brexit talks at the Summit to show little development
Leaders are expected to discuss the internal and external dimensions of the migrations policy. German Chancellor Merkel has been facing a domestic battle over migration with CSU coalition partners, which want ot pursue a more hard line approach to immigration. The CSU has given Chancellor Merkel a two-week grace period (due to expire at the start of July) to strike a deal with EU partners to redistribute EU registered migrants in the bloc, to put less pressure on German borders. The subject has threatened the stability of the CDU/CSU coalition, and investors fear that without the support of the CSU, Merkel’s CDU would no longer have a parliamentary majority. While some CSU leaders have expressed scepticism that a deal can be reached with the EU, leader Seehofer has said a coalition breakup is unlikely; however, Chancellor Merkel said on Thursday the migrant policy may be a make or break for the EU. Note: The CSU/CDU fear that the far right AfD could make headway in Bavarian state elections in October if CSU/CDU pursue a soft approach with regards to immigration, and unity between the CDU/CSU will be required to stem the AfD’s rise (it has been gaining in recent polls). At the same time, the new Italian government is calling for more immigration burden-sharing; Deputy PM and far-right League leader Salvini has pushed back on immigration, turning away migrant ships, and his aggressive approach may risk conflict with the Germans, according to some analysts. A favourable outcome may be difficult to achieve after last weekend’s emergency Summit, where EU partners debated migration in a “frank and open” manner, though no concrete consequences or conclusions were agreed.
The agenda pencilled in only two hours of Brexit talks on Friday. The Irish border issue continues to be an obstacle that stunts any development. The European Council in an EU 27 format (excluding UK) is to review the state of play of Brexit negotiations and come to a conclusion on progress made. EU Leaders said on Tuesday that the door has been left open to the UK to change their “red line” in Brexit negotiations; according to the draft Summit conclusions. No breakthroughs are expected before the Summit, which will pile on more pressure on UK and EC negotiators. According to a UK statement, UK PM May said the UK will provide more detail on their vision for the future UK-EU relations in a white paper after the June Summit.
US AUTO TARIFFS
US President Trump has threatened to apply 20% tariffs on imports of EU autos to the US if the EU did not ‘break down and remove’ its own tariffs on US autos. Reports suggest leaders will discuss a response at the Summit. The EU has previously intimated that it will apply counter-measures on US trade manoeuvres.
The French-German proposal for a Eurozone budget is not a new stand-alone budget but part of a multi-annual budget for the EU. One part of the budget is to be devoted to investment (related to structural improvement of the economy) while the second would be a macroeconomic stabilisation function. It may be worthwhile to focus on how large the budget will be. French President Macron sees the budget to be hundreds of billions of euros, while German Chancellor Merkel sees it to be in the “low double-digit” billions. ING notes that there is “still a long way to go but a small budget line in the EU’s multi-annual fiscal framework as a kind of “money for reforms” or conditional cross-border investment fund looks feasible”.