MacroScope

EU carve-up

By Mike Peacock
July 16, 2014

Elected president of the European Commission Juncker is congratulated by European Parliament President Schulz after his election in Strasbourg

EU leaders meet for a summit at which they were supposed to decide who gets which European Commissioner posts – one for each member state – in what will be a huge carve-up, so huge in fact that it may well be that only a very few jobs are decided tonight.

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 but putting forward a low-profile politician as his point person in Brussels has not that made that any more likely.

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 minister of Italy is the frontrunner for the latter.

Conservative Spanish Economy Minister Luis de Guindos is seen as favourite to become the permanent head of the Eurogroup caucus 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. The likelihood is that it will be some weeks yet before all the appointments are settled.

The summit will also discuss the latest in Ukraine. The EU agreed last week to add 11 new names to its list of people hit with asset freezes and asset bans, but that was a highly incremental move which in no way suggests it is any closer to imposing the wider trade sanctions that would really hurt. Nonetheless, with capital outflows of $75 billion in the first half of the year and a flatlining economy, Russia is already hurting.

The White House hauled in EU ambassadors earlier in the week to tell them that unless their leaders agreed tougher measures against Russia at today’s summit, Washington would be prepared to go it alone. U.S. Vice President Joe Biden told Ukraine President Petro Poroshenko the United States was working with European allies on further sanctions against Russia but with Germany and others reluctant to go further, action may be limited to another extension of asset freezes and visa bans to more Ukrainian rebels and Russians deemed responsible for destabilising eastern Ukraine.

The Middle East remains a hot bed of turmoil.

Israel resumed its air strikes in the Gaza Strip after holding its fire in deference to an Egyptian-proposed ceasefire that failed to stop Hamas militants’ rocket attacks. Attacks in the Gaza Strip killed at least seven Palestinians in the early hours of Wednesday, Gaza health officials said, and destroyed the house of Mahmoud Zahar – who is believed to be in hiding elsewhere – in the first apparent targeting of a top Hamas political leader.

Libyan militia fighters have tightened their grip of Tripoli’s airport, which has been transformed into a battlefield by two days of fighting that has cut the  capital off from the outside world.

Iraqi forces appear to have withdrawn from the militant-held northern Iraqi city of Tikrit after a new push to retake the city met heavy resistance. The attempt to retake Saddam Hussein’s home town, which fell on June 12 to Sunni insurgents led by the militant Islamic State group, began 2-1/2 weeks ago.

Bulgaria’s central bank has begun talks with the European Banking Authority about conducting a review of its banking supervision, following runs on two lenders in June. Bulgaria’s president has announced Sofia’s intention to join the EU’s umbrella bank regulation mechanism to be run by the European Central Bank but there is still no agreement on a deal between the ruling coalition and opposition about the terms of a rescue package after a run on deposits at Corporate Commercial Bank.

Ireland’s finance department will publish its plan for the future of the National Asset Management Agency. The “bad bank” was seen as a major liability to Dublin’s finances until a leap in investor sentiment. The government has already said it will try to offload at least 80 percent of its assets by the end of 2016, four years ahead of what was originally planned.

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