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|McAlinden Research Partners | DIBS||
Daily Intelligence Briefing for June 30th
After years of policy ascendance, austerity in Europe has reached its high-water mark. The upshot is that the EU’s political institutions are sinking deeper roots but fiscal policies will increasingly diverge at the national level, at least for the foreseeable future.
While the EU has been quietly loosening the rules for more than a year, last week’s EU summit embraced greater fiscal flexibility as official policy: so long as a country is generally pushing ahead with economic reforms, within certain limits it will be given more time to get its government finances in order. That’s a huge victory for Italy’s popular new prime minister, who called the shift a “turning point” for Europe. It can also give more breathing room for France’s deeply unpopular president, who has yet to make good on his promise to turn the economy around after 2 years in office.
But the shift is a setback for Germany’s Merkel, whose voice has been dominant for the last several years and is now facing new internal challenges as well. And it threatens to further isolate the UK, whose government spectacularly failed to block the nomination of the EU’s new president.
At the same summit, the EU signed an association agreement with Ukraine and gave Russia until Monday night to engage more forcefully in the peace process or face another round of tougher sanctions. However, there is some EU déjà vu at work: Germany’s Merkel is leading the push for more sanctions while Italy’s prime minister is calling for a softer approach. It might not just be austerity that is at a high water mark.
Today’s Issue Cluster: EU
- The EU officially starts dialing down austerity as the default policy … Germany outflanked by Italy and France
- The EU’s new president will be the first to reflect the outcome of the EU parliamentary elections … and the first to lack unanimity from the member states … UK and Hungary outflanked by everyone else
- Merkel’s dominance is being challenged in the EU, inside Germany, and within the government
- Poland is enjoying the most influence since the 1500s … policymaking via the “Weimar” triangle with Germany and France
- Along with Georgia and Moldova, Ukraine signs an association agreement with the EU and would like to become a full member
- The UK’s government promises a referendum on EU membership if it is re-elected next year … Scotland might be leaving the UK after its referendum this year
- France’s government is going against the tide to assert more state control in the economy … now in competition with Siemens
- The EU gives Russia until the end of the day to support Ukraine’s ceasefire more fulsomely …. eastern separatists join forces to form the confederation of “New Russia” and ask for Russia’s intervention
Best of the Rest
Bees – US retailers are starting to limit sales of pesticides that are linked to colony collapse disorder … nearly a fourth of US bees were lost last winter
Power – Hong Kong’s coal plants need to be replaced … either more energy from China or more LNG
MERS – Saudi Arabia thinks it came from Somali camels shipped to a port near Mecca … pilgrims are now arriving for Ramadan
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