Peter Spiegel

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The reformers: economy minister Emmanuel Macron, left, with prime minister Manuel Valls

Le Monde called it François Hollande’s “last-chance plan”. Struggling with an unemployment rate that stubbornly remains above 10 per cent, and saddled with a promise not to seek re-election in 2017 unless joblessness falls, the French president on Monday unveiled a €2bn scheme aimed at reversing an “economic emergency” facing his country.

The measures themselves are mostly targeted at the young: a €2,000 subsidy for each young worker hired by small companies; creating 500,000 vocational training schemes; and a programme to boost apprenticeships. The price-tag may be high, but taken together the initiatives appear less ambitious than the so-called “Loi Macron”, an economic reform plan passed a year ago under the aegis of Mr Hollande’s youthful economic minister. That plan has failed to produce any signs that unemployment is dropping, raising questions over whether the new programme will provide much help.

As with the Loi Macron, Mr Hollande’s new plan seemed to please nobody. Reformers like Mr Macron and Manuel Valls, the prime minister, are viewed with suspicion from within the ruling Socialists because of their “liberal” views. But the measures backed by the two men never seem to go far enough to please business interests, either.

The French business daily Les Echos has a useful summary of reactions from business and labour leaders, with Medef, the main French employers’ association, offering a rather tepid endorsement by calling it a step “in the right direction.” The head Medef’s sister organisation for small and medium-sized businesses was similarly lukewarm, saying he was doubtful it would have any long-term effects. Predictably, the Républicains, as party boss Nicolas Sarkozy has re-branded the French centre-right, were withering in their criticism. The conservative Le Figaro quotes party spokesman William Larrivé calling the plan “an insult” to France’s unemployedRead more

Christian Oliver

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Iran's foreign minister Javad Zarif, right, with EU diplomatic chief Federica Mogherini

With “implementation day” for the Iranian nuclear deal passing this weekend, the EU is wasting no time in staking its claim in what could become a high-stakes, cut-throat transatlantic commercial competition over modernising Iran’s oil industry. Miguel Arias Cañete, the EU’s energy commissioner, yesterday attempted to seize the initiative by announcing Brussels would send a “technical assessment mission” to Tehran next month, adding he looked forward to establishing a “high-level energy dialogue” sometime thereafter.

Although much of the diplomatic attention has focused on Tehran and Washington for more than a year, Europe’s diplomats fought a long and often thankless battle to help secure the deal. There has always been an intense debate about whether Tehran would be grateful towards the EU as a result. Would the Iranians finally take a softer line on European investment in the energy sector? Or would they wait? Would they keep Iran’s prime assets for US investors, holding out for the real prize: the reopening of the American embassy in Tehran?

One of the EU’s priorities is to push to improve the terms of upstream contracts, which were a major disincentive to investment for the European oil majors in the early 2000s. Companies such as BP, Royal Dutch Shell, Total, Repsol and Statoil all sought to gain a foothold in Iran in the early part of the millennium, but found the obstacles were commercial as well as political. Read more

Peter Spiegel

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A bus of Syrian immigrants was sent to the chancellery in Berlin by Bavarian officials

The knives have been out for Angela Merkel almost since the outset of the refugee crisis. But the rebellion from within the German chancellor’s own ranks appeared to have subsided ahead of the Christmas holidays. Gone were pointed asides by Wolfgang Schäuble, who in November warned of an “avalanche” of refugees because of “careless” government actions. Many read that as an unofficial signal that the powerful finance minister – who has long coveted the chancellery – was prepared to step in should Ms Merkel fall.

But in recent days, the German press has been filled with renewed accounts of plotting within the centre-right coalition – her own Christian Democratic Union and its more conservative Bavarian sister party, the Christian Social Union. The scheming was linked to anger surrounding the New Year’s Eve attacks by men of “north African and Arab” appearance on scores of women in Cologne. Ms Merkel even cancelled her annual trip to Davos to handle the political troubles at home, though Berlin later denied the cancellation had anything to do with Cologne.

The conservative Frankfurter Allgemeine Zeitung has reported that a confidence vote is likely to come before the end of the month, a measure backed by “several dozen deputies” within the CDU/CSU. Süddeutsche Zeitung notes that even the CDU general secretary, Peter Tauber, has got in on the act, demanding the deportation of 1,000 refugees denied asylum every day. Süddeutsche argues that the rather unchristian stance from Christian Democrats is just another reflection of pressures within the party, where voices are rising to shut the borders and set caps on the number of refugees accepted – a policy explicitly backed by Horst Seehofer, the seemingly mutinous head of the CSU. Read more

Peter Spiegel

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Greek finance minister Euclid Tsakalotos (left) and eurogroup chief Jeroen Dijsselbloem

Eurozone finance ministers gather in Brussels today for their first eurogroup meeting of the year, and Greece is at the top of the agenda. Not too long ago, that very fact would have sent financial markets into paroxysms. But 2016 isn’t 2015, and thus far Athens’ new €86bn bailout programme has been chugging along comparatively smoothly. But could that change? Eurozone officials have always viewed the first quarter of this year as a crunch point when three elements must come together: completing the new programme’s first review; hashing out a deal on debt relief; and convincing the International Monetary Fund to join in for a third rescue.

At today’s eurogroup meeting, ministers will focus on the first of those tasks, and much of the discussion will be where it was during the far-more-contentious negotiations six months ago: pension reform. Under the new bailout, Athens must find €1.8bn in annual savings, and they’re not quite there yet.

In a memo the Syriza-led government has circulated in Brussels, officials note last year’s agreement talks of €1.8bn in “savings” not “cuts”, and they are proposing to close the gap by increasing employer payments into the system rather than slashing benefits. The European Commission appears willing to work with that, but the IMF remains sceptical – increased payments will raise labour costs and hit competitiveness. There are also concerns that Syriza is protecting middle-class pensioners, giving them incentives to retire early, rather than just the working poor.

Still, people briefed on the talks say Brussels believes it’s a blueprint they can work with. One senior EU official called the proposal “very ambitious”, particularly its consolidation of Greece’s mish-mash of pension funds into a master fund for all.

But a more difficult problem may be lying around the corner. One key pillar of the programme is Athens’ promise to get to a primary surplus – revenues minus spending when interest on debt isn’t counted – of 3.5 per cent of economic output by 2018. As it stands, Greece is about 1 per cent short of that goal, and measures to get to the 2018 target must be included in the 2016 budget. That will take a lot of heavy lifting. Read more

Jim Brunsden

After receiving two pointed letters from Warsaw, Timmermans seeks a meeting with minister

For days, EU officials had been signaling they would only issue a strongly-worded démarche to Warsaw for its new laws that critics argue undermine democratic norms. But on Wednesday, the European Commission took the unexpected step of moving forward with a formal “rule-of-law procedure” to determine whether the two new laws – one dismissing the management of state TV and radio broadcasters, the other limiting the powers of the constitutional court – pose a “systemic threat” to European norms.

Frans Timmermans, the commission vice-president in charge of rule-of-law issues, announced the decision after Wednesday’s meeting of the 28 commissioners. But he also formally notified Warsaw in a letter that we got our hands on and posted here.

Mr Timmermans letter comes in response to two missives from Warsaw that were far more pointed – including a particularly invective-filled one sent by justice minister Zbigniew Ziorbro on Monday – effectively telling the Dutchman to butt out of Poland’s internal affairs.

EU officials insist that the decision to move forward with the review were unrelated to the impolitic letters. Instead, they say, commissioners felt the procedure would lend some structure to their dialogue with Warsaw; otherwise, it would have remained unclear how either side would proceed. Read more

Peter Spiegel

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Flag-waving protesters demonstrate against Poland's new media law in Warsaw last week

“I regarded your letter as an attempt to exert pressure upon the democratically elected parliament and government of the sovereign Republic of Poland.” Not a phrase you’d normally expect in official governmental communications between two ministerial-level politicians in the EU. But it was part of an invective-filled response to Frans Timmermans, the European Commission’s first vice-president, from Polish justice minister Zbigniew Ziobro sent Monday night ahead of today’s highly-anticipated European Commission debate on two new laws that many critics believe undermine rule of law in Warsaw.

Despite the tendentious tone of the letter in response to questions on legal changes that will make it difficult for the country’s constitutional court to overturn legislation – and a similarly direct letter from senior diplomat Aleksander Stepkowski in response to concerns about a new Polish media law – officials tell us that Brussels is likely to keep its powder dry at today’s meeting, at least for now. Read more

Peter Spiegel

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It wasn’t so much what she said, it was how she said it. On Monday, Margrethe Vestager, the European Commission’s feared competition chief, announced her latest in a series of cases cracking down on sweetheart tax deals offered to multinationals by ordering Belgium to claw back €700m in illegal tax breaks to at least 35 companies.

The decision itself had been flagged up a month ago by Belgium’s finance minister, Johan Van Overtveldt, so it wasn’t really a surprise. But in announcing the decision, Ms Vestager went out of her way to highlight a common trait of those able to avoid taxes through the Belgian scheme (about €500m of the €700m). “Most of the companies benefiting are European; it is also European companies that avoided the majority of the taxes under the scheme, which they now have to pay,” she said at a midday news conference.

The statement stood out because it comes after American officials have privately raised concerns over the fact that three of the four initial cases in her corporate tax crackdown targeted US companies: Apple, Amazon and Starbucks. Last month, she expanded the list to include McDonald’s. The private grumbling became public in September when Robert Stack, the US Treasury’s man in charge of international tax policy, broke cover to complain about how the investigation would affect American corporate tax revenues, and Ms Vestager acknowledged that she had flagged up European companies in the Belgian scheme to emphasise her services’ impartiality. Read more

Jim Brunsden

The revelations that Volkswagen was rigging emissions tests have left a trail of destruction in their wake: a once proud European champion has seen its reputation dragged through the mud, millions of owners of “clean diesel” cars have found out they were hoodwinked and – most importantly for Brussels – the EU’s current system for policing auto manufacturers has been exposed as deeply flawed.

EU officials and politicians now regularly lament that it was the US’s powerful Environmental Protection Agency, rather than any European authority, that revealed the company’s use of illegal defeat devices to cheat in emissions tests – even though the practice was going on right under everyone’s noses on both sides of the Atlantic.

Although most of the power to test and certify vehicles falls to national regulators, the European Commission has come in for its share of the blame in failing to better enforce rules in this area. As we reported last week, it is preparing plans for overhauling the EU’s moribund car approval system. But will they go far enough?

A draft of the measures, obtained by Brussels Blog and posted here, makes it clear that the commission views the VW scandal as a game changer. Prior to the revelations, the commission was planning a limited overhaul of EU requirements; much more far reaching options are now on the table. Read more

Peter Spiegel

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Mr Mas congratulates Mr Puigdemont after Sunday night's election in Barcelona

It’s been three weeks since Spain’s inconclusive national elections left the country in an uncharacteristic political stalemate. As one of the last remaining EU countries dominated by two centrist parties – and a two-party system where leaders have some of the strongest tools anywhere to impose strict discipline on backbenchers – it has normally been clear on election day whether the centre-right Popular party or centre-left Socialists had a majority in the 350 congress of deputies. But for the first time since it returned to democracy, neither of the country’s two largest parties secured more than 30 per cent of the vote in the December 20 contest, and the second-place Socialists (who polled 22 per cent) have repeatedly refused to join a grand coalition with the Popular party (28.7 per cent) of Prime Minister Mariano Rajoy.

That might all change this week because of some fast-moving developments in Catalonia which, until now, looked headed towards a re-run of regional elections in March. First, Catalonian independence leader Artur Mas, whose Junts pel Si coalition won the regional elections in September, unexpectedly stepped down as leader on Saturday, a week after the far-left pro-independence CUP party vowed not to join in a coalition with Mr Mas to govern the region. Mr Mas’ resignation cleared the way for his less controversial ally Carles Puigdemont to take over Junts pel Si, and on Sunday Mr Puigdemont was voted leader of Catalonia in a special session of the regional parliament.

That decision could set off two more unprecedented moves that are likely to dominate Spanish political debate this week: the Socialists may now think again about joining Mr Rajoy – if not in a grand coalition at least in support of a Rajoy-led minority government – as a way to create an anti-independence united front in Madrid. And the Catalonian government is likely to move more quickly towards creating all the trappings of independence, including a central bank and tax authority. Last night, Mr Rajoy warned darkly that he had “given instructions” to prevent any illegal act from going into law in Catalonia. “I am going to defend democracy in all of Spain,” he said. Read more

Duncan Robinson

The Polish government has sent a punchy defence of its media reforms to Brussels, accusing the EU of getting its facts wrong and warning of the “undesirable effects” any crackdown on Warsaw will bring.

The letter to the European Commission’s first vice president Frans Timmermans, which can be read in full here, lays out Poland’s defence of its decision to sack senior management at state media outlets. Read more

Peter Spiegel

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Even at the time the EU signed its “joint action plan” with Turkey at a high-profile summit in November aimed at stemming the flow of refugees into Europe, Turkish leaders were cautious. “Nobody can guarantee anything,” Ahmet Davutoglu, the Turkish prime minister, said even before the ink on the deal was dry. “I wish I could say the number will decline but I cannot because we do not know what will happen in Syria.” Read more

Peter Spiegel

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David Cameron, the British prime minister, went before his parliament on Tuesday to report on last month’s EU summit, where leaders for the first time debated his request for a renegotiated relationship with Brussels ahead of an in-out referendum at home. During the appearance, he dropped a bit of a bombshell: his ministers will be allowed to campaign for Brexit even if his government recommends staying inside the EU. “It’s never been my intention to strong-arm people into a position they don’t believe in,” he told the House of Commons.

That sets up the prospect of Mr Cameron, widely expected to campaign for membership once he reaches a renegotiation deal at February’s EU summit, on the opposite side of such government luminaries as Iain Duncan Smith, the work and pensions secretary who was once Tory leader himself.

Our Brexit watcher in the FT’s Brussels bureau, Alex Barker, says that while the decision raised eyebrows even within his own party – and may lead many in Brussels to wonder what happened to the sacred British convention of a cabinet’s collective responsibility – there may not have been much else Mr Cameron could have done. Here’s Alex’s take on how Mr Cameron is tackling what may be his hardest Brexit task yet, managing his own party:

For some in Brussels, allowing British cabinet ministers to campaign against their government on such an existential question as EU membership will be bemusing, to say the least. Michael Heseltine, the europhile former cabinet minister, once said Cameron would be a “global laughing stock” if he lifted collective responsibility for the cabinet. Ken Clarke, another of the Tory party’s rare pro-Europeans, said it was a sign of the extraordinary challenge Mr Cameron faces in avoiding “splitting the part” as the referendum campaign revs up.

 Read more

Peter Spiegel

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It was exactly five years ago that Viktor Orban, then Hungary’s recently-elected prime minister, rushed a new media law though his super-majority in parliament to create a powerful press monitoring authority controlled by party appointees. The law set off months of claims and counterclaims between Brussels and Budapest, and helped cement Mr Orban’s status as the EU’s problem-child-in-chief.
Now Poland’s newly-elected Law and Justice party seems to be taking a page out of the Orban playbook by pushing a media law of its own that would sack management of the country’s public TV and radio broadcasters in an effort to end criticism of the government. Read more

Christian Oliver

Why don’t they want Belgian chocolates? Or Italian spaghetti?

Europe’s frustration is mounting over its slow, difficult trade negotiations with Japan. The 15th round of talks is coming in February next year, and Europe is hungry for signs that it is worth carrying on.

In October, Japan joined the US and 10 other nations in sealing the Trans-Pacific Partnership, which covers 40 per cent of the global economy. But there is little sign of that momentum carrying over into a quick deal with Europe.

Mauro Petriccione, Brussels’ chief negotiator with Japan, warned on Thursday that enthusiasm for an accord with the world’s third biggest economy could wane if the deal is not finalised next year.

“If we don’t make it in 2016, we’ll have to explain why, and we cannot exclude a resurgence of the scepticism towards the possibility of a new Japan-EU [free trade agreement] that we had before we started,” he told reporters. “It took us a long time to persuade sceptics that it was worth trying this. If they see that we don’t succeed in 2016, they will start asking themselves questions again.” Read more

Britain's David Cameron addresses the press on his way into the EU summit on Thursday evening

David Cameron is in a hole. His flagship policy to curb EU migration – a four-year ban on benefits for migrant workers – looks doomed. When it was announced more than a year ago, Cameron was told it violated a fundamental EU principle of non-discrimination. If the EU stands for anything, it is ensuring EU workers don’t pay a higher effective tax rate on the basis of their passport.

This was flagged up by British officials at the time. Cameron nevertheless ploughed on. While Downing Street were drafting the Conservative party election manifesto, aides suggested leaving out the four-year idea. He ploughed on. When Mr Cameron preparing a letter to other EU leaders on his reform demands, he was told by Whitehall and Brussels the four-year ban was all but impossible and should be dropped. He ploughed on.

The final reckoning may come this evening. Cameron makes a make-or-break pitch for the idea. Having spent far too long trying to understand how the problem will be fixed, it may also be my last opportunity to inflict a benefit reform listicle on Brussels Blog readers.

So while there is still time: behold the nine ways Cameron’s four-year benefits saga may end.

 Read more

Duncan Robinson

Davutoglu, left, and Tusk embrace after last month's EU-Turkey summit in Brussels

During the height of the Donbass crisis, Ukrainian diplomats repeatedly managed to get President Petro Poroshenko into EU summit meetings even when he wasn’t explicitly invited – something that drove Herman Van Rompuy, then the European Council president, to distraction.

Are Turkish diplomats now trying to repeat the Ukrainian model?

Ahmet Davutoglu, the Turkish prime minister, is now scheduled to be in Brussels on Thursday – the same day the final two-day EU summit of the year kicks off – as part of a mini-summit of EU leaders hosted by Austrian Chancellor Werner Faymann.

The gathering, which is to be held at the Austrian embassy, will include leaders of several countries who back an upcoming “resettlement” proposal by the European Commission, which would push EU countries to take anywhere from 200,000 to 500,000 Syrian asylum seekers currently in Turkey.

Thus far, the attendees include Jean-Claude Juncker, the commission president, along with German Chancellor Angela Merkel and the leaders of Sweden, Greece, Finland, Luxembourg, Belgium and the Netherlands. And now Davutoglu as well.

Donald Tusk, Van Rompuy’s successor as summit chairman, has made it clear that Davutoglu will not attend the summit itself, particularly since the Turkish prime minister was already feted at a summit of his very own just two weeks ago. Tusk’s displeasure is shared by several other countries who don’t think it is proper for other foreign leaders to gatecrash the EU party. Read more

Jim Brunsden

Since he took office a year ago as the EU’s financial services commissioner, Jonathan Hill has become renowned for his low key, calm approach – except when it comes to how he feels about car hire companies.

The details remain sketchy, but the demons of some previous holiday trauma seem to haunt this otherwise affable politician. Last week, he used the medium of Twitter to call on people to “Let us know your worst holiday car hire experience.”

A hearing he held last year with a committee of the UK House of Lords (of which he is also a member) become dominated by the issue of insuring rented cars, as peers took turns to let off steam about their encounters with unscrupulous rust bucket purveyors.

What, you may ask, has this got to do with Hill’s remit as the grandly titled European commissioner for financial stability, financial services and capital markets union?

The answer is: quite a lot, and this became clearer when the Commission published a policy paper on tackling the day-to-day financial irritants that people encounter when crossing borders, be it a lack of transparency on the fees you are charged when you transfer money abroad, an inability to take your health insurance policy with you when you move to another country or, yes, frustrations with ludicrously high insurance premiums on hire cars. Read more

Jim Brunsden

Luxembourg's Pierre Gramegna, chair of Tuesday's meeting, calls the session to order

With the festive season comes all kinds of traditions in Brussels: mulled wine, Saint Nicholas, and another deadline for nations to strike a deal on a financial transactions tax.

But while last year ministers found themselves empty handed when a December deadline for an agreement rolled around, this year it’s different. Sort of.

As Bruxellois bought their sapins de noel (Christmas trees) on the pavement outside the EU summit building, inside another Sapin (Michel), the French finance minister who has been one of the tax’s biggest champions, was full of holiday cheer.

During a meeting of EU finance ministers, Sapin (the minister) hailed a breakthrough moment in the nearly three-year slog for an FTT, which would issue a levy on all stock and a derivative trades in the ten EU countries who are part of the scheme.

Could this Christmas miracle really be true? Could there really be a deal?

In practice, it’s more like half of a deal. Pierre Moscovici, the EU commissioner in charge of tax issues, found a convoluted combination of tenses to sum it up: “We have now the main parameters of what this FTT should be, and hopefully will be.” Read more

Peter Spiegel

Refugees crossing Greece's border with Macedonia wait to enter a camp earlier this week

The EU’s debate over how to deal with the ongoing refugee crisis has been so full of jargon and euphemisms that in can be nearly impossible for anyone outside the Brussels bubble to know what, exactly, leaders are actually discussing.

Such is the case with a draft communiqué for next week’s EU summit, circulated to national capitals on Monday. The document (which Brussels Blog got its hands on and has posted here) includes seven measures leaders would agree, if the draft is adopted. But all seven may be impossible to understand to those not following every twist and turn in the debate.

As a public service, Brussels Blog hereby offers a translation from eurocrat-ese into English of the migration section of the draft communiqué.

 Read more

Christian Oliver

Johan Van Overtveldt, Belgium's finance minister, has vowed to fight Vestager

Margrethe Vestager, the EU’s competition chief, is regularly in the headlines for her corporate tax battles with big US companies: Google, Amazon, Apple and now McDonald’s. But don’t overlook her investigation into Belgium’s tax perks scheme for multinationals. A verdict appears to be imminent, and the repercussions will be felt well beyond the country of 11m.

Earlier this week, Johan Van Overtveldt, finance minister, told the De Standaard daily that Belgium was “highly likely” to have to claw back €700m from companies that have benefited from Belgium’s special tax incentives package.

Van Overtveldt is promising to resist Vestager’s tax justice campaign, but she isn’t a commissioner to change her mind too quickly. Read more