FT / Brussels Blog

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Another big Brussels week on migration is upon us. The flow of migrant boats to Greek islands has almost stopped, but Brussels is only in the foothills of the political trek to make the Turkey deal stick and the EU asylum system work properly. The European Commission will try to chivvy the pace on Wednesday with three contentious initiatives on visas, borders and asylum rules.

1. An overhaul of the Dublin asylum system

This revamp of the EU’s asylum rules is well-flagged but still hot politics. A Commission discussion paper last month raised two main reform options – and we understand the final proposal will be a blend of the two. So the first EU country an asylum seeker enters would still handle their claim (a crucial Dublin principle for immigration-wary northern states and the UK). But if a frontline state receives 150 per cent more claims than its set asylum capacity, a quota system automatically kicks in to distribute migrants around Europe (which is more to the liking of Greece and Italy). It is a halfway house that leaves plenty for EU states to fight about. There is perhaps even some fodder for Brexit campaigners (the question of whether Britain can stay in Dublin but remain exempt from automatic burden sharing will not be answered in the proposal).

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Labour's Ken Livingstone is swarmed by reporters after a BBC appearance on Thursday.

Even by the savage standards of British political combat, the scenes that played out in central London yesterday were extraordinary. John Mann, a longstanding Labour MP, tracked down former London mayor and left-wing Labour stalwart Ken Livingstone to accuse him of being a “disgusting racist” and “Nazi apologist”, a confrontation captured by cameras from, among others, Channel 4 news and the BBC’s political correspondent Vicki Young. Just an hour later, Mr Livingstone was suspended from Labour, a party which he joined nearly 50 years ago.

The scrap was just the latest in a bitter internecine war over senior party members making remarks which many consider overtly anti-Semitic. The Mann-Livingstone feud was sparked by the previous day’s suspension of yet another Labour MP, Naz Shah,after two-year-old social media posts surfaced where Ms Shah endorsed a “Solution for the Israel-Palestine Conflict” that would “relocate” Jews from Israel to the US, touting a minimal “transportation cost”. Mr Livingstone went on BBC radio yesterday morning to defend Ms Shah, arguing she was the victim of the “Israeli lobby” and that her comments were “over the top” but not anti-Semitic. “Let’s remember when Hitler won his election in 1932 his policy then was that Jews should be moved to Israel,” Mr Livingstone continued. “He was supporting Zionism before he went mad and ended up killing six million Jews.” Mr Mann angrily shouted that those remarks amounted to “rewriting history”.

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Enda Kenny, Irish prime minister, campaigning ahead of February's general election.

For most of the last two months, Enda Kenny appeared to be on the verge of becoming the latest political casualty of the eurozone crisis. After leading Ireland through a brutal three-year bailout, Mr Kenny saw his Fine Gael party drop more than 10 percentage points in February’s general election, meaning his coalition with the Labour party no longer had enough seats to return to government. A grand coalition with historic rival Fianna Fáil seemed out of the question, and it would be hard to survive as Fine Gael leader if the country was forced into another elections.

But now Mr Kenny is on the verge of returning as Taoiseach (Irish for prime minister) after all, striking an uneasy peace with Fianna Fáil that would allow him to head a minority government with some independent allies. If he succeeds, it would be a first in the bailout era: Portugal’s prime minister lost his job in elections last year, and Greece has seen two different prime ministers ushered out of office after two successive bailouts. Spain’s Mariano Rajoy, the only other bailout premier to face the voters, is headed back to new elections after failing to cobble together a coalition.

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Dijsselbloem, in orange tie, with his Finnish, Belgian and Spanish counterparts last week

Jeroen Dijsselbloem, the Dutch finance minister who chairs meetings of his 18 eurozone counterparts, had threatened to bring his eurogroup back to Brussels tomorrow for this year’s first unscheduled meeting on Greece – but only if bailout negotiators agreed on a new set of austerity measures with Athens beforehand. Last night, Mr Dijsselbloem announced that more time was needed to reach a deal, raising the risk that Greece’s bailout standoff could once again be headed for a period of bitter brinkmanship.

Many signs of a repeat of last year’s Grexit drama are present: irreconcilable differences between Athens and its bailout creditors; a looming July debt payment owed to the European Central Bank; angry denunciations by embattled Greek prime minister Alexis Tsipras. The risk of a rerun was underlined by reports last night that Mr Tsipras was due to call Donald Tusk, the European Council president, this morning and demand a special summit of eurozone leaders to hash out a way forward.

It’s unlikely eurozone heads of government will want to take up the Greek crisis right now, with a drop-dead deadline still months away and the prospect of another eurogroup meeting looming as early as next week. But differences between the major players in the Greek drama remain deep, and a deal among mid-level negotiators remain stuck on two primary issues:

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King Felipe, left, meets with Mariano Rajoy during coalition negotiations earlier this year

It’s been four months since Spanish voters went to the polls and delivered a result so inconclusive that most political observers – including incumbent prime minister Mariano Rajoy himself – have been predicting another round of elections almost since the results were first counted. Unless King Felipe can pull a rabbit out of the hat today when he meets the heads of the four largest parties for a final time, Spaniards are likely to head to the polls again on June 26 to have another try.

Would another election change anything? Recent opinion polls show that Mr Rajoy’s centre-right Popular party may gain a little more than the 28.7 per cent it won in December, and the second-place Socialists would lose a bit on their 22 per cent take. But the numbers have held pretty steady throughout the four-month drama. Which would suggest that the parties should hunker down and find a coalition that works rather than risk a repeat. But several hurdles have prevented any agreement, particularly within the Socialists and the far-left Podemos insurgent party.

The Socialists have resisted Mr Rajoy’s repeated entreaties to form a grand coalition, and one only need to look at what happened to the centre-left Pasok party in Greece to understand why: joining in a grand coalition in Athens led by the centre-right allowed far-left Syriza to claim the mantle of the left from Pasok, and the Spanish Socialists are deathly afraid of Podemos repeating the feat in Madrid. But Podemos has been equally resistant, blowing up the only long-shot coalition attempt that was seriously tried during the talks – a Socialist-led government with Podemos and the upstart centrist Ciudadanos party joining in – when its membership voted overwhelmingly to reject it earlier this month.

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Merkel, right, with Turkish premier Ahmet Davutoglu at a refugee camp in Gaziantep

Part of the job description of any political leader is to do your best to make it look like you get along with people who you actually can’t stand. But when does that willingness to grin and bear it boomerang and make a leader look weak for not standing up for his or her principles?

German Chancellor Angela Merkel’s lightning visit to the Turko-Syrian border on Saturday, where she roundly praised Turkey’s willingness to take in millions of Syrian refugees, was just the latest example of the effort she is prepared to make to sustain the EU’s fragile deal with Ankara on returning asylum seekers from Greece. Her problem is that, try as she might, Turkey’s president, Recep Tayyip Erdogan, is going out of his way to make it as hard as possible to be nice to him.

The heart of the problem is Mr Erdogan’s hair trigger when it comes to feeling insulted, slighted or provoked. From the beginning, Ms Merkel has had to deal with manifold criticisms from human rights groups about the refugee plan and doubts over Turkey’s status as a safe country to send people back to from Greece. But repeated rows pitting Mr Erdogan’s tendency to take legal or diplomatic action against critics versus the EU’s fundamental principle of free expression are threatening to overshadow the refugee crisis itself.

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Barack Obama arrived last night in the British capital, where he is expected to give his full-throated support for the UK to remain in the EU – an intervention that is as highly anticipated as it is fraught with political danger. There is no set-piece speech the White House has engineered; instead, the US president has offered up an op-ed in today’s Daily Telegraph, and administration officials say he will speak “as a friend” if he is asked about the issue during his two-day stay. Which is something of a foregone conclusion, particularly with a Downing Street press conference set for this afternoon.

Wolfgang Schäuble’s destiny is to be a man who keeps having to listen to people talking about things he doesn’t want to hear about.

Germany’s finance minister, together with his counterparts from around Europe, will gather in Amsterdam on Friday to discuss, among other things, the future of the Banking Union — the major policy push undertaken by the euro area over the last few years to centralIze how it oversees its banks.

But like a band with growing musical differences, ministers can’t agree on what the next steps of the project should be, with Mr Schäuble playing the role of the blues purist who wants the group to move away from grand concepts and get back to basics.

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There has been no shortage of reasons for outrage over last month’s refugee return deal between the EU and Turkey that, for now, has slowed the influx of migrants into Greece to a trickle. The UN believes the expulsion of migrants arriving in Greece may be illegal under international law. Human Rights Watch yesterday found the deportations “riddled with abuse”. Others have been more upset about the sweeteners given to Ankara in exchange for its cooperation in the crackdown, including €6bn in new aid and the unfreezing of negotiations over Turkish membership in the EU – which nearly upended Cypriot reunification talks and has given Brexiteers a new tool to scare UK voters.

But there may not be an issue as politically sensitive as the EU concession to provide Turkish nationals visa-free travel in Europe as early as June. Yesterday Dimitris Avramopoulos, the EU’s migration commissioner, said Brussels will issue a progress report on May 4 outlining how far Ankara has gone in meeting 72 benchmarks required before the short-term visits can be allowed. “No visa liberalisation can be offered if all benchmarks are not met,” he intoned at a midday news conference.

There is increasing nervousness in several EU capitals, including Paris and Rome, that Turkey may actually clear those hurdles – or, if they’re close, the European Commission will give Ankara a pass and force national governments to decide what to do about the visa deal. That would be awkward for domestic politics in several EU countries; critics are already complaining that a refugee crisis that has caused an anti-immigrant backlash in some quarters because of the high number of Muslims arriving in Europe will have to be solved with a Turkey deal that will allow even more Muslims to travel to Europe. Some governments have begun looking at measures that would allow them to hedge their promise to Ankara, including safeguard clauses, extra conditions or watered down terms. But Ahmed Davutoglu this week made it clear: if there’s no visa-free travel deal, “no one can expect Turkey to adhere to its commitments.”

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Draghi, left, and Schäuble, bottom right, at the IMF spring meetings in Washington last week

The European Central Bank holds its monthly monetary policy meeting tomorrow amid one of the most overheated political environments for Mario Draghi and his fellow governors since the height of the eurozone crisis. And despite the German government’s long-stated insistence that central banks should jealously guard their independence and not be pressured by elected officials into making decisions that are politically expedient, the most pointed criticism is coming from Berlin.

The most surprising broadside came nearly two weeks ago from Wolfgang Schäuble, the German finance minister, who publicly claimed to have told Mr Draghi that his loose money policy was to blame for about 50 per cent of the votes received by the ascendant anti-immigrant Alternative for Germany party in last month’s regional elections. Mr Schäuble also called on the US, UK and the eurozone to band together in pressuring their central banks to “carefully but slowly exit” their economic stimulus policies. Hardly the model of respecting central bank independence.

Mr Schäuble’s remarks appear to have opened the floodgates. Hans-Peter Friedrich, a former interior minister in Chancellor Angela Merkel’s government and a member of the Bavarian sister party of her governing Christian Democrats, told the mass-market Bild tabloid at the weekend that Mr Draghi’s replacement “must be German” and respect the Bundesbank’s tradition of “monetary stability”. Axel Weber, the former Bundesbank chief who nearly beat Mr Draghi out for the top ECB job in 2011 before resigning, told the Wall Street Journal this week that more monetary easing would be counterproductive.

Meeting room in the Dutch maritime museum where finance ministers will gather on Friday

Coming to terms with painful truths can take a long time, and the EU’s struggle to acknowledge an original sin built into its banking regulations is a case in point.

It’s a problem that dates back decades, and that finance ministers are going to tentatively grapple with at an informal meeting in Amsterdam this week. It centres on the regulatory treatment of sovereign debt, and we’ve got our hands on the options paper prepared for ministers by the Dutch presidency and posted it here.

While the subject may sound arcane, it’s extremely politically charged. The latest ructions over how to treat bank holdings in government debt are fanning the already hot flames of discord between Rome and Berlin, with Brussels as ever squeezed uncomfortably in the middle.

So what’s the problem? The EU has highly detailed legislation covering different aspects of banks’ activities, in order to ensure that institutions have enough financial reserves to cope with the risks that they are taking with their investments.

The rules cover everything from mortgage lending to complex trading in derivatives, but they have one glaring loophole, namely that many of the normal requirements, such as capital rules and exposure limits, don’t apply to banks’ purchases of European governments’ own debt.

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The list of big American tech companies being investigated by Margrethe Vestager, the EU’s competition chief, for either antitrust violations or sweetheart tax deals already reads like a “who’s who” of Silicon Valley: Google, Amazon, Apple. Her proclivity for going after US companies, particularly in her tax investigations (American non-tech groups like McDonald’s and Starbucks have also been targeted), has already raised eyebrows in Washington, where Treasury officials and members of Congress have accused her of an anti-American bias.

Ms Vestager has denied singling out US firms, and if she is at all chastened by the American criticism, she’s not showing it: as early as tomorrow, she is expected to roll out a second antitrust case against Google, this time accusing the California company of abusing its dominant position in smartphone operating systems to foist its suite of apps on unsuspecting consumers.

In a speech yesterday, the former Danish economy minister compared Google’s practices to the mother of all EU-US tech antitrust cases, the 1990s-era battle with Microsoft. The comparison is apt for two reasons. First is for the reason Ms Vestager intended: during the time when computing was dominated by PCs, desktops running Microsoft’s ubiquitous Windows operating systems would come “bundled” with a wide range of other Microsoft software, most importantly its Explorer internet browser. Such bundling gradually destroyed browser inventor (and onetime market leader) Netscape, since nobody needed its Navigator browser if your PC came with Explorer.

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Pope Francis meets with refugees on the Greek island of Lesbos during a visit on Saturday

Which European country has received the most asylum seekers on a per capita basis so far this year? Germany? No. Sweden? No. Hungary? No. After this weekend, it is actually the Vatican. Aided by a low official population of 450, the Vatican shot to the top of the leaderboard when it comes to housing refugees after Pope Francis returned from his trip to Lesbos with 12 Syrians in tow.

The gesture was token and humanitarian rather than political — or so the Vatican’s spinners insisted. But it provided an ugly juxtaposition for German Chancellor Angela Merkel, who spent the weekend fending off criticism at home after giving the go ahead for a criminal investigation into a comedian who made jokes at the expense of Turkish president Recep Tayyip Erdoğan.

The footage of a pope embracing asylum seekers who fled war only to face months of detention in Greece and then a legally questionable return across the Aegean provided the grimmest reminder yet of the moral price that the EU has paid for the Merkel-led deal with Turkey.

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Will Sunday's referendum help or hurt Beppe Grillo, right, leader of the FIve Star Movement?

Referendums in Europe are often a blunt weapon against the establishment. Italians will be voting in one on Sunday and, of course, it could end badly for Matteo Renzi, the country’s restless centre-left premier. But more likely the result will buck the trend. Indeed this referendum may actually turn the tables and leave the anti-establishment Five Star Movement licking its wounds.

The issue is slightly obscure – oil and gas drilling rights – and the politics is far from straightforward. As the FT’s James Politi explains, Italians will vote on whether to stop renewing offshore licenses for facilities within 12 miles of the coast. The latest polls show the pro-ban environmentalists will win handsomely. But the critical question is whether they will come near the 50 per cent turnout threshold. That is where the real politics comes in.

Mr Renzi is firmly on the side of indifference. He says the referendum is a waste of time and has urged voters to not to bother. In an interview today with La Repubblica he calls it “a hoax”. This all conveniently helps him hedge his position and avoid looking too friendly with Big Oil and Italy’s energy giant Eni. More importantly, it also puts Italy’s leading populist party, the Five Star Movement, to the test.

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When the European Commission first opened up proceedings to examine whether Poland had violated European norms, it said they would wait until constitutional scholars at the Council of Europe examined the situation first. Well, it’s been a month since the Council slammed the new government in Warsaw – and Frans Timmermans, the Commission vice-president in charge of rule-of-law issues hasn’t done anything yet. The European Parliament yesterday did its best to make sure he doesn’t forget.

MEPs yesterday voted 513 to 142 in favour of a motion censuring Poland’s right-wing, conservative Law and Justice (PiS) government and ordering it to reverse changes to the country’s top court that have left it paralysed. As procedural slaps on the wrist go, it was relatively strong. And while it is legally little more than a strongly-written letter, it also called on the Commission to push ahead with its unprecedented probe into Warsaw’s “threat to constitutional democracy” – which technically could result in sanctions.

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Alexis Tsipras, the Greek prime minister, in between meetings at his office last week

When Wikileaks published a transcript last week of a private teleconference between top International Monetary Fund officials discussing Greece’s bailout, the thing that got Athens the most worked up was a prediction made on the call by the IMF’s European chief Poul Thomsen: he forecast there would be no decision on the programme’s way forward until Greece ran out of money in July. Yesterday, bailout negotiators left Athens after yet another fruitless week of talks. And while they vowed to resume negotiations during the IMF’s spring meetings in Washington, which start on Friday, the differences between the main players remain so wide that Mr Thomsen’s prediction may not be too far off the mark.

For those who only follow the Greek crisis episodically, the fact that the eurozone is facing yet another make-or-break bailout deadline may seem baffling. Wasn’t the Grexit car wreck avoided last July after a series of all-night summits ended with a €86bn rescue deal? Yes and no. The July deal gave Greece €13bn of the €86bn almost immediately, after Athens agreed to quickly pass an overhaul of its value-added tax system and make cuts to pension benefits. But much of the heavy lifting was put off until the new bailout’s first quarterly review – including, critically, a decision by the IMF on whether to participate in the bailout at all.

Casual followers may read the words “first quarterly review” and assume that such a review would be completed at the end of the first quarter. Which, in the case of the new Greek programme, would have meant October. But it has become an unfortunate custom that “quarterly” reviews of Greek bailouts can actually stretch over several quarters – the fifth quarterly review of the second Greek bailout went on for nearly a year. The current “quarterly” review has now gone on for about six months after the first quarter ended.

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Italian banks appear to be in trouble. Again. With €360bn in non-performing loans – by far the largest pile in the eurozone, and behind only Greece and Cyprus as a percentage of all outstanding loans – the market has been selling off Italy’s financial sector since the start of the year to where it’s now down about a third of its value since January. But their troubles have become acute again because of the struggles of one mid-sized bank, Banca Popolare di Vicenza, to raise the €1.8bn in capital the European Central Bank has demanded.

The share sale by Vicenza is being underwritten by UniCredit, Italy’s only systemically important bank, but last week UniCredit sought government assistance out of fear Vicenza’s shares wouldn’t be bought by nervous investors – and UniCredit itself would be left holding the bag. That, in turn, raised questions about UniCredit’s own balance sheet, where it already lags behind many of its peers in terms of financial health.

The Italian government isn’t in a place to help, however. First of all, it doesn’t have any money to throw at the problem; its national debt is already nearly 140 per cent of economic output, the highest in the eurozone outside of Greece, and there’s not a billion or two around to spare. Secondly, and perhaps more importantly, if Rome did intervene, it would have to follow the EU’s new post-crisis banking rules, which require the government to force losses on private investors before any public money can be used to rescue a bank.

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Margrethe Vestager, the Commission's competition chief, and her mobile phone

It often seems that the European Commission’s only real game plan regarding Brexit is to hope that there won’t be any unfortunate spats involving the UK right in the middle of campaign season. That won’t be possible, and there is every sign an imminent decision over whether to allow consolidation among British mobile phone network operators could turn into a political football.

Margrethe Vestager, the EU antitrust chief, has been known to argue that cutting the number of players from four to three in any one market saps competition and, in the case of telecommunications, allows companies to increase phone bills. Her hard-line stance on a 4-to-3 Danish telecoms merger last year suggests she’s also looking to block the £10.5bn purchase by CK Hutchison’s Three of Telefónica’s O2. Or at the very least, she will impose stinging concessions.

In less combustible times, the politics would be more navigable. Ofcom, the UK regulator, has already announced it is hostile to the deal. Just this morning, Britain’s competition and markets authority weighed in, writing to Ms Vestager that the merger a “significant impediment to effective competition” in the UK’s mobile phone market. Ms Vestager could quite easily argue that she represents the sort of “more competitive Europe” that David Cameron, the British prime minister, says he wants. She could argue she is simply protecting the little guy from big corporates who will put his phone bills up.

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  © REMKO DE WAAL/AFP/Getty Images

Back in 2005, it was Jean-Claude Juncker who caught the mood after Dutch and French voters spurned a draft EU constitution. “Europe is not in crisis: it is in deep crisis,” he declared. He has gone from Luxembourgish premier to European Commission president since then – and the Dutch are back to saying No. This time team Juncker relayed that the president was just “sad” about the rejection of the Ukraine trade deal. And for europhiles that pretty much sums it up.

This has been a long journey. Referendums on European issues, from the 1970s on, largely acted as a rite of passage: membership, enlargement, monetary union. They then morphed into more wide ranging political guarantees for eurosceptic voters (in Denmark, Britain or France) wary of where pro-European politicians may lead them. Some would call them a reality check.

More recently they have grown to be not just domestic political matters, but negotiating tools or instruments of coercion abroad. This is the weaponisation of referendums and a few EU leaders have been accused of the tactic: Greece’s Alexis Tsipras over bailout terms, Britain’s David Cameron to win a better deal, and Hungary’s Viktor Orban over migration quotas.

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David Cameron has had a frustrating week. Since the Panama Papers revealed the offshore dealings of his late father, the British prime minister has vainly tried to stop questions over his family potentially benefiting from tax avoidance. He first politely parried and demanded privacy, then changed tack, clarified his position, challenged his critics to provide evidence, then clarified three times more. Today we know a great deal about what Mr Cameron does not own. But it still isn’t over.

Through this mini-ordeal, Mr Cameron enjoyed one advantage. He can point to a record of championing transparency and fighting offshore corporate dodges. But now even this defensive shield is looking a little shaky.

The FT’s Jim Brunsden has dug deep into a bygone Brussels legislative battle over corporate secrecy and uncovered Mr Cameron’s intriguing personal role. He indeed pressed hard to expose beneficial owners of shell companies. But there was a caveat. In an EU law to tackle money laundering and end harmful secrecy, he wanted special treatment for trusts, discrete legal vehicles Brits have used for centuries to manage estates and pass assets down generations. That now looks a little awkward.