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Progress on the Greek Bailout (4/7)

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katerinasokou.2016By Katerina Sokou, Washington DC
 
“White smoke” indicating agreement from the Malta Eurogroup Meeting of Eurozone Finance Ministers on the Greek bailout program negotiations  brought some smiles to the government faces  in Athens, together with the hope that the ongoing review can be completed and bailout funds disbursed after months of wrangling with and among its creditors. The Greek government hailed the decision to allow technical teams from the EU and, significantly from the IMF, to return to Athens to reach a staff-level agreement, even while warning that the agreement “will sadden the Greek people.” In exchange for the bailout, Greece has agreed to more taxes and pension cuts over and above the measures already taken.
 
The measures agreed to were politically difficult for the government, as it had previously categorically ruled them out. They include extra pension cuts of 1% of GDP and tax measures of the same amount, to be implemented in 2019 and 2020, respectively.   This agreement is expected to pave the way for the completion of the review and a so-called “global deal” to bring the IMF back into the program. In exchange,  the Europeans agreed to  take extra measures to make the Greek debt sustainable. Only then can about €6bn in rescue cash be released to avoid a summer default when a series of debt repayments come due.  
 
A new crisis this summer is still possible if there are new complications and the review is not concluded in a timely manner. Dragging negotiations have raised market fears of a replay of the crisis of 2015, when Greece defaulted on a payment to the IMF and held a referendum that rejected a bailout deal proposed by its creditors. At the last minute, the Greek Prime Minister Alexis Tsipras balked at the prospect of Grexit from the euro and decided to agree to an even tougher bailout. This time around,  the big issue is how to bring the IMF back into the bailout, as Germany, the Netherlands and Finland insist on IMF participation if the  program continues. 
 
The IMF welcomed the progress made in Malta and noted that it can now send its mission back to Athens to conclude the technical review, a positive sign since as the Financial Times noted: “keeping the IMF happy is a key condition to ensure its financial involvement in the three-year rescue.”
 
As a condition for providing  financing, the IMF is also asking for more debt relief measures, to be agreed to within the context of the current review. This is politically difficult for Greece’s European creditors, notably Germany, which heads into elections this fall.  Hence the IMF made sure to stress in its announcement that the staff-level agreement would “need to be followed by discussions with euro area countries to ensure satisfactory assurances on a credible strategy to restore debt sustainability, before a program is presented to the IMF Executive Board.”
 
Greek officials are now hopeful that an agreement can be reached by the IMF Spring Meetings later this month, including some specification of the extra debt relief measures demanded by the IMF.  In a last effort to reach a breakthrough, Prime Minister Tsipras held a series of calls with German Chancellor Angela Merkel and IMF head Christine Lagarde. Three Greek ministers also visited Washington to ask for a U.S. intervention that would put pressure on the IMF to take a clear stance on the issue. Recently, the Minister of Digital Economy Nikos Pappas said in an interview at the Atlantic Council that the Greek economy is “ready to grow.” But on the ground, the effects of the lengthy negotiations are already hurting the economy. A Bank of Greece official has told the Financial Times that its growth projections for 2017 will be revised down, to 1.5% from 2.5% last December, due to the severe uncertainty over the conclusion of the review.
 
Despite capital controls, the delay has caused renewed deposit outflows from the banking sector. Crippled with high non-performing loans and lack of access to market finance, Greek banks depend on the conclusion of the review for confidence to return. This is also expected to open the door for Greece to be included in the ECB’s quantitative easing program, as Greek banks increasingly depend on the ECB’s expensive Emergency Liquidity Assistance to finance their operations. Under those conditions, it is hard for banks to provide financing to the real economy. The longer the review stalls, the more it hurts growth prospects. On a recent trip to Athens, the owner of a nail salon in Vrilissia, a middle-class suburb of Athens, was closing up shop. As he put it, “all I did all day was pay bills.” Faced with ever-increasing tax rates and social security contributions, a total of 100,000 individual professionals are also projected have gone out of business in Greece over the last year—either relocating to other countries or joining the ranks of the unemployed.
 
The more cornered it feels, the more unpredictable the Greek government may become. The government is thought to hold a €10 billion cash buffer in case the review drags on. However, this is barely enough to meet all its debt repayments due by July, while it is keeping it from an economy that already runs virtually on “thin air.” Greece faces a €1.8 billion bond payment on April 20 and ministries & public utilities have reportedly received instructions to hold back any unnecessary payments until further notice. 
 
Katerina Sokou is Washington Correspondent for Kathimerini Newspaper in Greece.
 
 
 
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Chancellor Angela Merkel’s Challenger (2/17)

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By Konstantin Veit, Washington DC

On January 29, the German Social Democratic Party (SPD) nominated the former President of the European Parliament Martin Schulz to be the party’s leader for German legislative elections in September. Since then, the political landscape in Germany has shifted considerably and Chancellor Angela Merkel fourth term no longer seems inevitable.

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Unexpected Elections in Northern Ireland in the Shadow of Brexit (2/10)

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By Konstantin Veit, Washington, DC

United Kingdom’s smallest constituent unit, Northern Ireland, has scheduled Legislative Assembly elections for March 2. How did that come about?

For a decade, the devolved government of Northern Ireland was formed by the nationalist Sinn Féin party and the pro-British Democratic Unionist Party (DUP). The country’s snap elections follow the resignation of then deputy first minister Martin McGuinness (Sinn Féin) in early January.

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U.S.-German Relations: Trump’s Trade Advisor Takes Aim at Germany (2/2)

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By Konstantin Veit, Washington, DC

Earlier this week Peter Navarro, Donald Trump’s top trade adviser and head of the new National Trade Council in an email interview with the Financial Times, accused Germany of using a “grossly undervalued” euro to “exploit” its EU and U.S. trading partners. Furthermore, Navarro told the FT that Germany was a main obstacle to a future Transatlantic Trade and Investment Partnership, the potentially transformative U.S.-EU trade agreement being negotiated by the Obama administration and which is now off the table.

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“Democratic Backsliding” in Poland and Hungary (8/4)

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By Claire Swinko, Washington

Poland, an EU member country with a rich post-Soviet era history of upholding democratic values, has come under fire in recent months for its “democratic backsliding”— the so-called reversion toward authoritarianism based on non-democratic values and lack of respect for the rule of law and basic fundamental freedoms. 

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EU Announces “Open Skies” Arbitration Action Against U.S. Over Norwegian Airlines (7/29)

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By Brian Beary, Washington
 
Europe’s patience finally ran out. After waiting more than two years for U.S. authorities to give a fly permit to an Irish-based subsidiary of low-cost Norwegian airlines, the EU Commission has told Washington that it will launch arbitration proceedings against it for breaching the 2007 EU-U.S. Open Skies agreement. “I find it regrettable that this is the outcome,” EU Transport Commissioner Violeta Bulc wrote in a letter to U.S. Transportation Secretary Anthony Foxx. Bulc said that formal notification that the agreement’s arbitration clause was being invoked would be made “in the coming weeks.”
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The Message from France (7/22)

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By Michael D. Mosettig

For two top officials of a beleaguered French government, their mission to Washington had multiple purposes: to reassert their country's central role in the war against the ISIS and Al Qaeda terrorist networks and to reassure opinion leaders that the European Union can rebound from the shock of Brexit.

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Why Italy’s Municipal Elections Matter (6/20)

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By Alexander Privitera, Executive Director of The European Institute

The success of the populist “Five Star Movement” in the local elections in Italy should not be exaggerated. However, it would be a mistake for Prime Minister Matteo Renzi or Europeans to ignore the warning shot that came from the vote on Sunday. This was the first electoral test on the bumpy road to the crucial referendum on constitutional changes in the fall. If Italians reject Renzi’s institutional reforms he can pack up and leave. The vote on Sunday has started to clarify a few important questions:

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Swiss Voters Reject Proposal for Guaranteed Income for All (6/9)

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By Claire Swinko, European Affairs

Earlier this week Swiss voters overwhelmingly (77%) rejected a referendum initiative to provide a universal basic income to its citizens regardless of employment status. While the measure called for a constitutional amendment that would introduce a UBI and guarantee “a humane existence and participation in public life for the whole population”, nearly all major political parties and the government opposed both the idea of a referendum and its substance. However, proponents gained the requisite 100,000 signatures in accordance with Swiss law, suggesting a basic monthly income of 2,500 Swiss francs to adults who have legally lived in the country for a minimum of five years, and 640 Swiss francs to children under 18 years of age. Opponents claimed the proposal, if enacted, would cost 25 billion Swiss francs per year and even the measure’s proponents conceded that it could consume about a third of the country’s GDP.

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Hopeful Words on Ukrainian Economy from Ousted Finance Minister (4/21)

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By Ben Antenore, European Affairs

Only hours before speaking publicly in Washington D.C. about the progress made in reforming Ukraine’s economy since she took office as Minister of Finance two and a half years ago, Natalie Jaresko learned she was out of a job. For many in the West, Natalie Jaresko’s departure from government is troubling. She was one of the last reformers standing in President Poroshenko’s cabinet after the well-publicized resignations of Economics Minister Aivaras Abromavičius and Deputy Prosecutor General Vitaliy Kasko earlier in the year. Her replacement is former McKinsey consultant Oleksandr Danilyuk who, according to Anders Aslund of the Atlantic Council, has a history of blocking Jaresko’s reforms.

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Wales and the British EU Debate (4/13)

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By Lucas Leblanc, Intern at the European Parliament Liaison Office in Washington DC.

What does a recent three-month immersion at Wales’ National Assembly, the democratically-elected body founded to represent and govern Wales in 1998, teach a graduate in international relations from a U.S. university? To appreciate rugby, without a doubt, but also to better understand how the current debate on Britain’s membership in the EU relates to the country’s recent constitutional evolution, one in which Wales, Scotland, Northern Ireland, and the city of London gained greater levels of elected self-government in a process known as devolution.

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Dutch Voters Reject EU-Ukraine Association Agreement (4/8)

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By Bill Marmon, Managing Editor European Affairs

Although the voter turnout was low and the result not binding, the resounding (61 percent to 38 percent) rejection by Dutch voters this week of the trade and cooperation agreement between Ukraine and the European Union was an embarrassment to supporters of European solidarity.

The referendum, organized by Euroskeptics, is non-binding since the Dutch parliament has already approved the Association Agreement with Ukraine—the same agreement that sparked the Maidan violence and government upheaval in Ukraine two years ago when the former prime minister refused to sign the agreement. But since the turnout this week of 32.2 percent was just above the 30 percent required for validity, it is likely that the Dutch parliament will reconsider the issue.

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Irish Celebrate the Birth of their Republic, and Quarrel about the Political Future (4/1)

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By Ben Antenore, European Affairs
 
As Irish citizens commemorate the centenary of the Easter Rising against Great Britain, the current Republic is struggling as a governing coalition still does not exist after the general elections of February.
 
One hundred years ago on April 24, 1916, the Easter Rising occurred when 1,200 rebels seized some of the main administrative buildings in central Dublin. One of these buildings, the General Post Office, became the rebel headquarters. That same afternoon, Patrick Pearse, one of the leaders of the rebellion, proclaimed the birth of the Irish Republic and the formation of a provisional independent government.
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Polish and Czech Leaders Converge in D.C. (3/31)

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By Michael D. Mosettig, former Foreign Editor of PBS News Hour
 
It seemed a far cry from the heady days after the 1989 collapse of communism in Central Europe, when the leaders of the Polish and Czechoslovakian peaceful revolutions--Lech Walesa and Vaclav Havel-- received rapturous welcomes in Congress and elsewhere in Washington.
 
Now, 27 years later, Poland's current head of state and the prime minister of the Czech Republic have come to the Washington in the wings of a global nuclear security summit.  They used their trips also to speak to respectful crowds at think tanks, while much of the U.S. capital's attention has been focused on a Mideast in flames and a rising China and Asia.
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An Appreciation: Jean-Luc Robert (1963-2016), First Counselor European Parliament Liaison Office (EPLO) to U.S. Congress (3/25)

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By Brian Beary, Contributing Editor European Affairs

jean luc.robert1“Jean-Luc was not only a friend but a terrific colleague,” said Institute President Joelle Attinger, speaking of Jean-Luc Robert, who died recently. “He fully believed in the European Project, and even more so, in the pivotal role that the Parliament plays in bridging the democratic deficit between the European electorate and the EU's institutions. To that end, he paid political ideology little mind. What mattered to Jean-Luc was getting the best of the Parliament before policymakers in Washington so the latter could better appreciate the caliber of the EU's legislative branch and gain fuller understanding of how and why it was approaching policy issues in the manner it was.”

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A Dispatch from the Brexit Frontline (3/18)

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By Geoffrey Lewis, Resident of Duddenhoe End in Essex, UK

Duddenhoe End village hall was crowded and noisy with chatter on Friday evening. The local Conservatives were gathered to debate Europe - in or out. This is a Tory family matter and a family row. Neither Labour nor Lib Dems seem split on the question, although they have plenty of other things to worry about. Everyone in the hall was wearing the casual uniform of the Home Counties: check shirts, blazers or tweed jackets, and they were raring to go. There were tables in two rows laid for supper. This was free with wine, all the gift of the lady organizers, and so a full house was guaranteed.

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EU Companies Race for Deals in Post-Sanction Iran (3/9)

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By Ben Antenore, European Affairs

As international sanctions are lifted in the wake of the nuclear deal, European companies are rushing to have first access to the lucrative, almost 80-million-person strong Iranian economy. Because of U.S. imposed sanctions unrelated to the nuclear deal, dating back to 1979, U.S. companies are mostly on the sidelines.

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Former Polish President Aleksander Kwasniewski’s View on Ukraine (3/4)

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By Jacqueline Grapin, Chairman of the Board & Founder of The European Institute
 
At the conference on EU’s Eastern neighborhood policy organized by the Jean Monnet Foundation at the University of Lausanne on February 25, Aleksander Kwasniewski, who served as the President of Poland from 1995 to 2005, spoke openly about the situation in Ukraine. His testimony is particularly interesting because few people have his long experience and deep knowledge of how the Russian regime and Ukraine interact. While he believes that Crimea’s status is now frozen for decades, the outcome of the situation in Ukraine remains to be seen.
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Can the Schengen Agreement Survive the EU Refugee Crisis? (2/18)

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By Ben Antenore, European Affairs Editorial Assistant

 As the EU has been tested by the refugee crisis and the threat of terrorist attack so has one of its proudest policies – the Schengen Agreement. 
 
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German Government Proposes, Controversially, to Limit Use of Cash Payments (2/11)

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By Ben Antenore, European Affairs Editorial Assistant

Last week, the German Finance Ministry proposed limiting cash payments in Germany to €5,000. The objective is to combat money laundering and better monitor the financing of terrorism. Throughout Europe, particularly in Scandinavia, there has been a move towards the elimination of cash as a method of payment. In Italy, the government of Prime Minister Mario Monti limited cash payments to €1,000 in an effort to stop tax evasion in 2011. Italy loses €100 billion in unpaid taxes every year. Since then, however, Prime Minister Matteo Renzi’s government has raised limits to €2,999.99.

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