The polls are tightening, markets are jittery, and Downing Street is so alarmed it is relyingon Gordon Brown to save the Remain campaign. It may be time to start talking about the day after Brexit, and whether there is a way to engineer a soft-landing.

The “what happens next” issue is tackled today by Donald Tusk, the European Council president, in a typically punchy interview with Bild Zeitung.

“The leave campaign contains a very clear message: ‘Let us leave, nothing will change, everything will stay as before’. Well, it will not. Not only economic implications will be negative for the UK, but first and foremost geopolitical. Do you know why these consequences are so dangerous? Because in the long-term they are completely unpredictable. As a historian, I am afraid this could in fact be the start of the process of destruction of not only the EU but also of the Western political civilisation.”

He later says divorce will be “sad” but manageable within 2 years. But he notes a parallel trade deal – setting the future EU-UK relationship – will be far tougher, and take at least another 5 years after the divorce, if it can be agreed at all. Long as it seems, this 7-year drift is actually optimistic version of the “decade of uncertainty” that David Cameron and Whitehall have described.

If markets react badly to a Brexit vote, there will be huge pressure to find a quick EU fix for a smooth transition (what Wolfgang Münchau calls letting the Brits go in peace). But even under such market duress the political options look poor. Read more

Jim Brunsden

History is full of great projects left half finished – the Sagrada Família cathedral in Barcelona, the Beach Boys’ Smile album, the last Tintin book … could the euro area’s banking union join them?

Forged at the height of the debt crisis as a way to restore trust in the financial sector, the banking union remains very much a work in progress, and it’s increasingly unclear whether its architects are all working off the same plans.

While the European Central Bank is firmly installed as the currency bloc’s banking supervisor (something examined in-depth in this new study by Bruegel,) and new rules on handling financial crises are on the statute books, discussions are becoming bogged down over the banking union’s third pillar – a centralized scheme for guaranteeing bank deposits. That plan, known as EDIS, is loathed in Berlin while strongly supported by the ECB and governments in southern Europe.

The row between national capitals over EDIS is only part of a larger, and extremely complex negotiation – one that is hampering efforts by Jeroen Dijsselbloem, the Dutch finance minister, to sign off his country’s EU’s presidency by getting a deal on a banking union workplan. The split is likely to be a topic of discussion among policymakers at today’s Brussels Economic ForumRead more

Welcome to Wednesday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

Voters are growing disenchanted with the EU – and Britain is far from being an outlier. That is the bottom line of Pew’s latest survey, which offers one of the best guides to opinion across the continent. For EU supporters it makes for sobering reading. We’ve picked out four charts.

 

Within the general decline in positive views of the EU over the past decade, one country stands out: France. While French views of the EU have see-sawed over the past few years, there was an extraordinary 17 point drop in respondents having a positive view of the EU this year. Only Greece – not included on our chart – has a more negative view (71 per cent have a unfavourable view of the union).

What explains the slide in support? Any gains that came from economic rebound seem to have been wiped out this year by the migration crisis.

Views of how the EU has handled the situation range from poor (Netherlands and Germany) to catastrophic (Sweden and Greece). Read more

Jim Brunsden

For many of us, the idea of Germany getting tough on its own carmakers is about as likely as a French minister admitting he prefers Australian wine, or Viktor Orbán offering free hugs to asylum seekers.

But over the past few months, German regulators have been making a good show of doing exactly that. Chastened by the discovery in the US that Volkswagen had been cheating in emissions tests, officials have leapt into overdrive, probing manufacturers including Daimler’s Mercedes-Benz, General Motors’ Opel, as well as Fiat.

In Germany’s latest move, the country’s transport ministry is calling on the EU to tighten its ban on emissions test cheating – a far cry from its efforts last year to water down EU plans for more realistic environmental testing of cars. Ministers will discuss the German requests today in Luxembourg, as part of a debate on the dieselgate scandal.

So what exactly is going on? Read more

Welcome to Friday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

A select group of foreign media were ushered to the Matignon palace on Wednesday evening for a reassurance session with Manuel Valls, the French prime minister battling union opposition after ramming a jobs bill through parliament without a vote.

The goal? Try and fix the fast deteriorating image of France abroad after a week of messy protests. Do not draw the cliched conclusion that France is a chaotic and unreformable country, he pleaded, even if the country’s largest union – headed by thegrumpy-looking, mustachioed Philippe Martinez – threatens to disrupt transport and fuel supplies during the Euro 2016 football championship. “Tell your readers: ‘Come by plane. Come by car. Come by train’,” Mr Valls urged.

It was also an attempt by the 53-year old to quash mounting suspicion in Brussels and Berlin — perhaps rising as fast as the Seine levels after a week of unusually heavy rains — that the much-awaited jobs reform may not be one after all. “The CGT knows my determination,” Mr Valls insisted. “I won’t change a thing.” What Mr Valls really meant was that he would refuse to touch article 2 of the reform, a key provision stipulating that companies’ deals with their unions and employees on overtime would supersede sectoral collective bargaining.

There were personal political motives too: to reclaim his place as reformer and taboo breaker of the French left, which the iconoclastic, younger and more popular Emmanuel Macron now seems to occupy. Since being appointed by François Hollande in 2014, Mr Valls has had to be loyal and defend whatever the deeply unpopular president initiated — including the controversial and failed attempt to change the constitution to strip Frenchterrorists of their citizenship. As a result, Mr Valls’ popular backing has sunk to levels almost as low as the president’s abysmal approval ratings.

 Read more

Jim Brunsden

In countless zombie movies there is the classic moment where a member of the dwindling band of survivors is cornered and desperately opens fire on the oncoming tide of walking dead. Despite firing off round after round, to the despair of our hero, the enemies keep approaching until the fateful click of his empty gun that tells him the game is up.

It’s a predicament not unlike that of German Finance Minister Wolfgang Schäuble as he fights a rearguard action to ward off Brussels plans for a common eurozone scheme to guarantee bank deposits.

The idea, known as EDIS, is loathed in Berlin on the grounds that it could force Germany to help cover the costs of bank failures elsewhere in Europe. At the same time, perhaps unsurprisingly, it is lauded in Southern Europe as a guarantee that capitals will be helped to cope with financial crises.

So far, Mr Schäuble has thrown all kinds of obstacles at the proposal, which was unveiled by the European Commission late last year. He has insisted on a tough programme to close loopholes in existing regulations which he says must be fulfilled before EDIS is even considered. He has also questioned the very legal foundations of the plan – saying parts of it have budgetary implications for nations that go beyond what is allowed under the EU treaties.

Despite all this, discussions on the text have rumbled on for months in the EU’s Council of Ministers.

Now, however, Germany is seeking to hit Brussels where it really hurts: with its own rules of procedure.

In a joint paper with Finland, obtained by the FT, Germany seeks to hoist the European Commission up by its institutional petard, accusing it of failing to respect “requirements under primary law and the Better Regulation principles” by not carrying out a full “impact assessment” before presenting the EDIS plan in November.

It’s the Brussels equivalent of trying to take down Al Capone for tax evasion. But hey, it worked.

 Read more

Welcome to Thursday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

A political saga that is reaching Hollywood levels of incremental sequels and rehashed storylines lumbered on yesterday when the European Commission made good on its threat to officially accuse Poland’s conservative government of endangering the rule of law.

In a feat of diplomatic gymnastics, Brussels published a “negative opinion” of the government’s paralysis of Poland’s highest court, which has left the country in constitutional crisis. But it stopped short of calling for a resulting punishment, stressing that “dialogue” would still continue.

Warsaw is keen on dialogue: dialogue can last a long time, and is cheap. It is under little threat at home from a weak opposition, and paying lip service to strongly worded letters from the EU is a small price to pay for a reform human rights groups say infringes Poles’ democratic rights.

Diplomatic chatter suits Brussels, too. Having threatened Warsaw with punishment only for the Poles to call its bluff, Brussels is left looking distinctly powerless and needs a way out. In the end, Poland’s governing Law and Justice party may agree that a quiet climbdown and compromise is the smartest outcome. But they hold the cards. Read more

Welcome to Wednesday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

Alongside Boris Johnson’s Brexit metamorphosis, it must be the transformation of the referendum campaign. For close to a quarter-century, Britain’s control-obsessed Treasury was the EU’s most eurosceptic finance ministry. Yet in recent months it became the go-to armoury for Remain campaigners, churning out ever more harrowing economic warnings on the consequences of Brexit. Whitehall’s broody power centre saw the light – or at least the costs of leaving.

Should Britain vote to stay in the EU, eternal optimists in Brussels – and there are a few left – might take this as a positive sign. In theory, the vote should “settle this European question in British politics” – just as David Cameron promised. The europhile Treasury could lead a mini-renaissance in British EU influence. The UK’s ambitious 2017 EU presidency could press for trade deals and deepening the single market. A multi-tier EU would give Britain the reassurance it craves; London’s defensive crouch on EU policy could end. The Economist’s Bagehot outlines just such an initiative.

Many will find it hard to believe. Read more

Welcome to Tuesday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

Here comes the digital cavalry. The European Commission will this week weigh-in on the side of business prodigies like Airbnb and Uber, warning European authorities to stop stifling the “sharing economy” with blatantly protectionist rules. It is only guidance. It may well be ignored. But it is a start.

Whereas free-wheeling Silicon Valley tends to see EU regulators as a nuisance or business risk, some companies actively want Brussels to intervene. That is especially true for businesses upending traditional models for selling transport or accommodation. Airbnb and Uber are trying to harness whatever pro-market forces they can to end incumbent-friendly, competition-killing rules from Paris to Barcelona.

By that measure, the Commission guidance is positive for the sector. Outright bans or quantitative restrictions on services are cast as unnecessary and harmful. So, for instance, it is seen as a bad thing to fine Berliners up to €100,000 for renting out their homes on Airbnb. The decision of a Milan court to ban the “unfair competition” posed by Uber probably falls into that category too. Equally hard to justify: a Madrid court ruling asking telecoms operators to disable access to Uber. Read more

Welcome to Friday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

Britain’s administration is now in hibernation. The civil service has entered Purdah – a term derived from the Persian word for curtain and the practice of shielding a woman from prying eyes. In practice in Brussels the pre-referendum asceticism means British diplomats must doggedly stick to their pre-agreed positions, show no flexibility or original thinking and avoid socialising with foreigners. Some EU types may joke: has anything changed?

The polls are looking slightly better for the Remain side. But it is close and European leaders aren’t taking chances. As we report today, Plan B is being worked up: how should the EU respond to Brexit?

The topic has been raised at high levels in Hanover, Rome, and Brussels (all slightly different configurations). Discussions were expected on the sidelines of the G7 too (the communique has depicted Brexit as “a serious risk to growth”). A small group of leaders’ sherpas also met on Monday at the European Commission. And this wouldn’t be a crisis unless the Commission’s anti-populist Martin Selmayr had a Plan B locked in his safe – right next to the Grexit one that was never used. Read more

Welcome to Thursday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

What halted the main wave of Europe’s epoch-making migration crisis? Was it the fences of the western Balkans route? Or a transformative deal with Turkey? That is more than just an academic question as Europe wrestles with how to deal with Ankara, and the other policy dilemmas that stem from a world on the move.

This chart, inspired by some conversations with officials in Brussels, attempts to differentiate the two:

The first two lines show the political chain reaction triggered by the Austrians and others imposing quotas on their borders and effectively closing off the western Balkans route migration route. Read more

Duncan Robinson

Welcome to Wednesday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.
After months of agonising, the European Commission’s investigation into internet platforms is set to arrive with a bit of a whimper.

Fears of an all-encompassing inquisition into internet platforms – with commission officials bursting into the offices of Facebook and Google like a Monty Python sketch – have not come to pass.

Monty Python

"Nobody expects the European Commission."

 Read more

Welcome to Monday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

By Mehreen Khan Read more

Welcome to Monday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

Austria’s presidential vote on Sunday was billed as a political landmark for Europe: the first election of a far-right populist head of state since the second world war. Then thevote count started. The Freedom party’s Norbert Hofer may still end up in the Hofburg palace, elected for a party founded in the 1950s by a former SS general. But the result ison a knife edge and the Green party’s Alexander Van der Bellen could easily prevail. It’s down to postal votes. Vienna hosted two victory parties last night: a surreal end to a surreal campaign.

Regardless of the outcome, Mr Hofer’s rise is a reminder of some political chill winds in Europe. Other European far-right politicians have not yet come as close to power as the Freedom party. But if Mr Hofer succeeds, it would be possible to trace an arc of illiberal politics through Poland, Hungary (and to some extent) Slovakia and Austria that stretches from the Baltic sea to the gateway of the Balkans.

To varying degrees some of their ruling politicians share a nationalist, anti-immigrant, anti-Islam, anti-EU message. And, for all the grumbling, there isn’t much the EU can do about it. The main question is where populists, the far-right or anti-establishment parties will make their mark next, be it in France, Holland or some day in GermanyRead more

Duncan Robinson

Although the Commission has yet to propose the bulk of its digital single market reforms, in the Council the teams are already lined up.

On the one side are those member states who will welcome the proposals, which are aimed at boosting crossborder trade online. Read more

Jim Brunsden

By Mehreen Khan in London

The International Monetary Fund’s latest recommendations on Greek debt relief have leaked.

Yesterday, ahead of the latest meeting of eurozone finance ministers on May 24, the IMF repeated it would take part in Greece’s €86bn bailout only if its European partners could prove “the numbers add up”.

A key part of this calculation is for the fund to be fully assured that Greece’s debt mountain is finally placed on a sustainable downward trajectory. Read more

Welcome to Friday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

 Read more

Welcome to Thursday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

Gold prices down, sterling sharply up, bookies chalking Brexit at the longest odds since the campaign began (around 3/1). Has the Remain side in Britain’s EU referendum campaign made a decisive breakthrough?

Money is certainly moving against Brexit. A mini-trend of moderately better polls for the pro-EU side was buttressed on Wednesday by an ICM phone survey putting Leave 18 points behind. Referendum campaigns can break sharply as the public begin to seriously engage. Remain campaigners will be hoping this is that moment. Indeed after firing-off their big guns – the US president, macabre Treasury reports, Bank of England recession warnings – they may also be thinking: what took so long?

If a lead is sustained, two factors potentially play a role. ICM picked up a swing to Remain among Conservative voters, with around 60 per cent backing David Cameron’s position. They are still open to changing their minds, but for now the increasingly vicious Tory infighting seems to be encouraging a bit more loyalty to their prime minister. The second is that Remain are faring well on the economic argument – and that is where Mr Cameron thinks he will clinch the vote.

Now for the caveats. The Ipsos MORI poll on Wednesday could be an outlier. And even if it isn’t, why believe it? Pollsters called the last UK and Israeli elections dead wrong. Even pollsters are wary of polls these days. A debate over phone (better for Remain) versus online surveys (better for Leave) rages on in Britain. And in any event predicting behaviour in this vote is hard because there is no good quantifiable precedent. Read more

Jim Brunsden

Britain: 2016

Should an extraterrestrial land on Earth tomorrow and decide to base his decision on where to live solely on economic forecasts provided by the European Commission, there’s a fair chance they’d pick the UK.

In country-specific recommendations published yesterday for almost all EU countries, Britain comes out looking pretty good, with a “dynamic” economy, “strong” household balance sheets and a banking sector whose resilience “continues to improve.” Even the risks to the economic outlook are presented as being contained, or mitigated by the government’s “wide-ranging” reform agenda.

All well and good. The only perplexing thing is, how does this fit with the altogether less peppy assessment that the EU Commission made this time last year? What could be happening to change their view? Read more

Welcome to Wednesday’s edition of our daily Brussels Briefing. To receive it every morning in your email in-box, sign up here.

Jean-Claude Juncker promised to lead a political European Commission and boy did he deliver. Compared to some politburo-like lifeless debates of the past, his college of commissioners have made a fair few touch-and-go decisions and late-turns (one mini-proposal on visas this month was commissioned and written within 12 hours of the meeting).

Today’s college clash over EU budget rules could be the most contentious yet. The issue is whether to start a process to fine Spain and Portugal for breaching their remedial deficit targets — a sanction never used since the creation of the single currency. What is at stake though is the Commission’s credibility as guardian of the EU’s fiscal regime. How far can it bend the rules?

There is little dispute over the economics. The vast majority of commissioners agree both countries took insufficient action to fix excessive deficits, a judgement that triggers a sanctions proposal. The question is when to announce it, and whether to signal that the fines, once set, may be tiny or indeed zero. Read more