New EU takes shape

July 15, 2014


The new EU aristocracy will be put in place this week with the European Parliament to confirm Jean-Claude Juncker as the next European Commission President today and then EU leaders gathering for a summit on Wednesday at which they will work out who gets the other top jobs in Brussels.

Although Juncker, who will make a statement to the parliament today which may shed some light on his policy priorities, is supposed to decide the 27 commissioner posts – one for each country – in reality this will be an almighty horse-trading operation.

Current best guesses – though they are just guesses – are that despite a willingness among some to play nice with the Brits, Prime Minister David Cameron may lose out again having voted against Juncker at a June summit. He is seeking one of the big economic portfolios; internal market, trade or competition.

Because Juncker, the former Luxembourg premier, is from the centre-right and western Europe, the leaders may look for socialists or women from northern, eastern or southern Europeans for the other two key posts of European Council President and foreign policy chief.

Denmark’s Helle Thorning-Schmidt keeps getting mentioned in dispatches for the former though her country is not in the euro zone while the foreign ministers of Italy and Poland are frontrunners for the latter.

Conservative Spanish Economy Minister Luis de Guindos is seen as favourite to become the permanent head of the Eurogroup of euro zone finance ministers. But it only requires one piece of this house of cards to be pulled for the whole edifice to collapse. So no one really knows where it will end up.

Cameron started pushing through a surprisingly wide reshuffle of his Cabinet last night, given the room to do so by Foreign Secretary William Hague’s decision to step down. Defence Secretary Phillip Hammond is tipped to take over.

Others who are out include veteran Ken Clarke and Environment Secretary Owen Paterson. Liam Fox, a former defence minister, is expected to return to the frontline.

The departure of the pro-European Clarke will be read by some as a further nod to eurosceptics in the Conservative Party. But then Hague and Paterson were both cool about the European project.

The truth is it would be hard for Cameron to find a pro-European to promote even if he wanted to but this reshuffle if anything marks a hardening towards the EU. Hammond said last year he would vote for Britain to leave the bloc unless substantial reforms were secured.

Cameron will finalise his new team today. Like Juncker, he is expected to try and promote more women and may also announce his candidate for a European Commission job in Juncker’s team. The opposition Labour party, clinging to a slim lead in the opinion polls, has repeatedly criticised Cameron for what it says is his “women problem”.

Bank of England Governor Mark Carney and members of the Financial Stability Committee appear in front of parliament’s Treasury Committee. Last month, the body imposed its first limits on how much most people can borrow to buy a home – exercising so-called macroprudential tools — in a bid to stem increasing levels of debt and rapidly rising house prices.

The consensus was that it had flexed its muscles very gently and that more broadly, these sort of measures can work in conjunction with monetary policy but not as a substitute.
Britain looks increasingly nailed on to be the first major economy to tighten policy, maybe later this year.

The British Retail Consortium reported overnight that retail sales growth slowed in June to one of its weakest rates in three years, possibly in response to fears of higher interest rates. Inflation data for June are due later with the key rate forecast to edge up to 1.6 percent, still below the Bank’s 2 percent target.

The biggest figure for the markets is likely to be Germany’s ZEW sentiment index.

A major speech by Iran’s Supreme Leader has limited the ability of the Iranian delegation at high-level nuclear talks to make concessions with six world powers and this could scupper the chances for reaching an accord to end sanctions, according to diplomats.

In a public address filled with technical detail, Ayatollah Ali Khamenei said last week Iran needed to significantly increase its uranium enrichment capacity, clashing with the powers’ push for it to be reduced to minimise the risk of nuclear bombmaking, as a July 20 deadline for a deal nears.

An Egyptian-proposed deal that would halt the week-old Gaza shelling war was welcomed by Israel on Tuesday but Hamas Islamists said they had not been consulted by Cairo and its armed wing vowed its attacks would “increase in ferocity and intensity”.

Russia’s Vladimir Putin will press other BRICS emerging market nations – meeting at a summit in Brazil today — to agree measures to prevent “sanction attacks” by the United States to “harass” countries opposing its policies.

Ukraine accused Russian army officers on Monday of fighting alongside separatists in the east of the country and said Moscow was once more building up its troops on the joint border.

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