19 February 2016

22.59:  The campaign kicks off in earnest

So there you have it. The deal is done, and the campaign can now kick off in earnest. You can see the arguments that Cameron is starting to develop around economic prosperity, security and on paying into social welfare systems before taking something out, in the “not something for nothing,” line. We’re signing off our liveblog for tonight, but we will be back in the morning with more.  We are shortly publishing our response to the deal on our blog, so watch out for that.

Here’s a teaser:

The European Council Conclusions have also now been officially published.

But for now, goodnight!

22.47: The final text of the deal

Leaked by Alex Barker of The Financial Times. We will release our own analysis once we’ve had time to unpick it. I’ve also uploaded the documents in the PDF reader at the bottom of this blog, replacing the  draft we had before.

22.00: “Special status” for UK in EU Cameron says

Prime Minister David Cameron’s press conference is due to start shortly, along with a parallel press conference by European Council President Donald Tusk and European Commission President Jean Claude Juncker.

Cameron’s press conference has begun:

He says he has “delivered the best of both worlds,” with his renegotiation and can now recommend a Remain vote.

On safeguards for non-Eurozone states he says:

  • The pound has been protected;
  • And the rules for this have been set out in a legally binding agreement;
  • A unilateral safeguard can be activated if Britain feels it’s being discriminated against in the EU by the Eurozone.

On reforms on migrants benefits he said:

And on competitiveness:

And sovereignty, Cameron says the UK’s opt-out on ever closer union will be incorporated into the Treaties.

And the campaign has officially started, with Cameron making a plea to Remain in the EU, based on the security and economic argument.

Cameron confirms Michael Gove will be joining the Leave camp, and that he will soon be announcing the referendum date.

Cameron makes clear that a vote for Leave is a vote for Leave. There will be no “better deal” on the table after  voting no.

  • There’s only one way to leave, he says, citing Article 50.
  • Staying in the EU does not mean reform ends there, he said.

The idea that a vote to leave the EU would lead to a whole new renegotiation, is an idea, frankly, for the birds.

David Cameron, 19 February 2016

21.24:  Tusk confirms deal, and the first leaks are out

The Danish PM says:

And Manfred Weber, Chair of the EPP group in the European Parliament tweets:

21.03: The deal is done

According to Lithianian President

And it may be better than expected for Brits on the euro/non-euro issue. Though, at this point this is just speculation, and we will have to wait to see the text.

20.24: At last – the elusive ‘English Dinner’ begins

But it’s not very English, the Maltese Prime Minister Joseph Muscat points out….

The Estonian Prime Minister says the dinner was worth the wait.

And Tusk’s efforts must have worked, because we are hearing that the text has had all square brackets are removed, which means Tusk thinks it can be agreed.

Meanwhile, Czech PM Sobotka is tweeting that the Visegrad Four  -Czech Republic, Slovakia, Poland and Hungary – have been “very helpful” in reaching a compromise.

 18.36: New draft due?

The Maltese Prime Minister has told Sky News’ Political Editor that a new draft is due in the next few minutes and that it is a good compromise text.

We await….

AFP has more:

EU officials have drafted proposals to meet British Prime Minister David Cameron’s reform demands that could be “grounds for a deal” at a Brussels summit, Malta’s prime minister said Friday. Joseph Muscat said the 28 European Union leaders are set to consider the proposals shortly on the second day of the marathon meeting where Cameron has faced resistance to his demands.

“There is a draft that will be tabled in a few minutes’ time. The main points of the draft are a compromise so everyone has to have given a little something,” Muscat told reporters at the summit.”But I think it is definitely the grounds for a deal hopefully,” he added.

“From what we know from the information that we are privy to, we are relatively happy with the final draft and we are ready, all things being equal, to support.”

Update 19.47: Still no deal, but we are getting close now, apparently.

What are the details? Politico’s Tara Palmeri reports on the benefits curbs:

All EU countries — not just Britain — will have the option to pay migrants from other EU countries child benefits based on the standard of living in the country where the children live, under a deal being drawn up at a summit on Friday, two top EU diplomats said. The indexation of child benefits will be immediate for newcomers but will be phased in for EU migrants already settled, the diplomat said.

Cameron can expect Ireland’s support.

Meanwhile Sky News’ Jon Craig is reporting that Cameron will hold a Cabinet meeting tomorrow morning, when he will lift the gag on Ministers that want to Leave.

18.06: Gove to join Brexit camp

After much soul searching, Michael Gove, the Justice Secretary, has apparently decided to join the Leave camp. If confirmed, it will be a big boost for the Brexit side – lending it intellectual gravitas and crediblity, and a loss for Cameron and Osborne, who were hoping that Gove would stick with them due to their close personal and professional relationship, despite his strong eurosceptic views.

Gove won’t necessarily give the Leave camp a boost in the polls, however, as he’s not massively popular in the public eye. Boris Johnson would be far better at attracting swing voters to the out-camp than Gove. Having said that, as a very thoughtful man, Gove, could certainly make an excellent case for Brexit in a debate. The question then how if, and how publicly, he plans to campaign.

17.15: Hollande leaves Summit for hour long radio interview

Yes, you read that correctly.  French President Hollande has now left the EUCO building to go to an interview with France Inter Radio. He’s live here now, and will apparently take callers’ questions from 19.15 Brussels time. Timing is questionable, but hey, I guess the man has an election to win next year (if he is even nominated as the socialist candidate, that is.)

Key parts:

It’s quite clear that the UK and France have an entirely different vision for the future of the EU, with Germany somewhere in the middle.

Sidenote on the English breakfast, lunch, tea, dinner saga – always the pragmatist, Merkel’s gone out for chips. (And she’s stuck to the ‘English’ theme in doing so.)

17.05: Greece backs down on veto

Brussels journalists are tweeting that the purported Greek veto of the deal in exchange for concessions on Schengen have been resolved. No surprise there. Like the President of Lithuanian aptly-said, “everyone will have their drama and then it will be resolved.” The outstanding issues on benefits curbs and Eurozone governance are genuinely difficult, but it was never likely that Greece would scupper the deal. Alexis tried to flex his muscles, and was no doubt made to step back into line.

16.53: Ireland seeks exemption from UK’s benefit curbs

The Brussels’ correspondent for the Irish Times tweets the story.

16.30: Cabinet meeting cancelled

David Cameron has  tweeted that he’s cancelled a planned cabinet meeting as talks will continue this evening, and could potentially run through to Sunday. If there is no deal at this Summit, an emergency EUCO has been called for early March to discuss the migrant crisis, so it could be pushed back till though, though there is little appetite among EU leaders to drag this out.

14.40:  Best EUCO rant to Robert Fico of Slovakia

In other news, we think that Slovakian PM, Robert Fico, wins the prize for the best leaders rant (so far). No more all-nighters, he says. When Slovakia takes over the rotating presidency of the EU, the practice will be banned, he adds.

He also had some choice words for the Greek Prime Minister:

More importantly, Fico’s also called the EU’s refugee quotas “laughable,” a view that several (actually most) other EU leaders would support, whether in public or private.

We’ve also had a few updates on the migrants welfare issue:

13.44: Talks still going on: but will leaders eat breakfast, brunch, lunch or linner?

The meetings are still continuing in Brussels, where the working “English breakfast” on the UK deal has been pushed back several times: it’s bypassed “brunch,” “Spanish lunch,” “London linner” and now it’s looking like tea. Anyway, the point is that genuine concerns still remain.

European Council President Donald Tusk (who was apparently a football hooligan in Gdansk a lifetime ago as revealed by Bruno Waterfield of The Times today), is playing hardball, “eyeballing the EU leaders,” keeping them hostage, and not allowing them to eat (linner, lunch or tea), “until they agree that they can agree.” Of course, it’s not the first time Tusk has pulled this move: at the heights of the Greek debt-crisis last year, when Grexit looked almost unavoidable,  Tusk famously told Merkel and Tsipras, “Sorry, there is no way you’re leaving this room,” forcing them hammer out an agreement to keep Greece in the euro.

So no food until there’s a draft agreed. The latest is that they will eat at 16.00.

12.40: Tsipras wants commitments or he’ll veto UK in EU deal

James Mates, ITV’s Political Editor, has tweeted that Greek Prime Minister Alexis Tsipras is apparently threatening to veto the UK’s EU deal, unless Greece can get assurances that it’s Northern border won’t be closed. AFP soon reported the same, quoting a government source. Remember, Greece is close to being kicked out of Schengen – and what would a crunch European Council Summit be without a few threats and horse-trading, after all?

Two points if this is true:

  • Tsipras is bitter about how accommodating the EU has been to the UK comparatively to his ‘renegotiation’ on the Greek economic situation last year.
  • It’s the first time the two main issues on the agenda at this Summit (the UK and the migration crisis) have been linked.

Meanwhile, another comment worth nothing, comes from the always-straight talking President of Lithuania, Dalia Grybauskaitė (who, apropos nothing, has a black-belt in Karate and is also known as the “Steel Magnolia”.)

11.30: Austria: the new bad boy of the EU on migrant crisis

Lest we forget, the migrant crisis is also on the agenda this summit. On that front Austrian Chancellor, Werner Faymann, is treading the path forged by Viktor Orbán as the new bad boy of the EU. So what’s the deal? With the lack of any comprehensive ‘European solution,’ Austria has vowed to press ahead with a move to limit the number of migrants who can claim asylum in the country to 80 a day, despite the EU warning that it would be illegal.

EU Commission President Jean Claude Juncker said, “National solutions are not to be recommended,” and we hear from the Brussels rumour-mill that certain members of Juncker’s Cabinet were frosty to the Austrian delegation yesterday, refusing to shake their hands. The EU’s Migration Commissioner Dimitris Avramopoulos has also sent a letter of complaint to the Austrian Interior Minister, Johanna Mikl-Leitner.

AFP has seen a copy of the letter, in which Avramopoulos writes, “Such a policy would be plainly incompatible with Austria’s obligations under European and international law,” citing the European Convention on Human Rights, the Geneva Convention and the Charter of Fundamental Rights of the European Union. He continues, “Austria has a legal obligation to accept any asylum application that is made on its territory or at its border…I would urge you to reconsider the unilateral measures which you are proposing.” Faymann responded defiantly, saying, “Legal opinions will be answered by lawyers. Politically, we will stick to it”. He’s been briefing the press that he’s not alone either, that there has been “a lot of understanding” from other EU leaders.

Apparently Germany is not amongst them. German Interior Thomas de Maizière has just been speaking in Berlin, saying that Germany will “continue to fight for a European solution” to the migrant crisis, and that, “If some countries should try to address the shared problem unilaterally, and in addition, off the back of Germany’s efforts, it would be unacceptable. We will not allow it in the long-term without consequences.”

Child benefit reforms to apply EU wide?

Although he’s got enough on his plate, Faymann made some comments today on ‘The British Question.’ Interestingly, he suggested (as has Merkel) that the changes proposed to child-benefit would apply EU wide. This has also been suggested by a spokesperson for the Polish Prime Minister.  (See yesterday’s entry on this blog at 14.02 from OE’s Pawel Swidlicki for background on this issue.)

He also expressed fears about Brits hampering Eurozone integration, but was more conciliatory than the French.

11.00: Strong support from Estonia for UK-EU agreement

Heading into the Summit this morning Estonian Prime Minister Taavi Rõivas made a strong appeal to help David Cameron secure a deal. He said, “I know we must all look out for our national interests,” but that if Britain left the EU then, “we will all be left with nothing.”

The Prime Minister later told us on Twitter that Estonia’s colour on our EU Reform Heat Map could be “safely changed” to dark green (I.E. fully on board) as Estonia “firmly supports” the UK-EU deal. We initially had Estonia down as “sympathetic,” (light green)  so this takes it up another notch. (See map below.)

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10.33: EU migrants access to welfare

An update on where we stand on the other contentious issue in the UK’s reform package: reforming access to EU migrants’ benefits.

  • Reports suggest a key sticking point is around the length of time that the emergency brake on EU migrants’ access to in-work benefits can apply for.
  • Cameron is reported to have upped his demands so that it would apply for seven years with the potential for two renewals of three years each – a total of 13 years.
  • This was opposed by the ‘Visegrad 4’ group of EU member states – Poland, Slovakia, Hungary and the Czech Republic – who only wanted the brake to apply for an initial three years with two renewals of one year each.
  • Denmark is reported to have also requested its own emergency brake.
  • Another sticking point is around the payment of child benefit to children residing in other EU member states, which Cameron is insisting should apply to all claiming such benefit, not just new applicants.

Below, also from our Heat Map, a reminder on how this ‘basket’ of reforms is seen across the EU.

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9.45: France, Belgium, Luxembourg dig in heels on Eurozone safeguards and ‘ever closer union’

Among the divisions that remain, one of the main sticking points is in the ‘economic governance,’ basket of reforms, where the UK essentially is trying to secure  safeguards to protect the non-Eurozone countries in the EU from Eurozone caucusing. Eurozone countries (notably France) don’t want to give the Brits something which they are afraid could constitute to a veto, or special treatment for the UK’s financial sector.  French President Hollande has been making his views known heading into talks this morning:

As we noted yesterday, this opposition is not surprising. The only thing that is surprising is that it comes so late in the game. Here’s what we said about the French position on the UK’s reform agenda in our EU Reform Heat Map (assessing where each EU MS stands on the renegotiation), which we published in November last year.

Where does France Stand on the UK’s EU Reform Agenda?

French President François Hollande and Economy Minister Emmanuel Macron have repeatedly evoked the need for “differentiated integration” within the EU – with the Eurozone pushing ahead with closer integration, while safeguarding the rights of countries outside the single currency. However, France remains wary that David Cameron is ultimately looking for some sort of ‘veto via the back door’, or a special carve-out for the UK’s financial services sector – meaning that everything will depend on the details of the mechanism that will be put on the table. While the French government has voiced support for cutting EU red tape, it is far from obvious that it would back UK demands to go beyond what is already being done – especially when it comes to further services liberalisation. The backlash triggered by Macron’s plans to open up a number of regulated professions (notaries, lawyers, bailiffs, etc.) gives a good idea of the domestic resistance to this kind of reforms. Similarly, France’s support for TTIP – the EU-US free trade deal – is not unconditional. In addition, Paris is unlikely to be a cheerleader for the ‘red card’ for national parliaments and may also be reluctant to agree to UK proposals to restrict EU migrants’ access to benefits – especially if it sees the plansas undermining the principle of free movement.

France remains wary that David Cameron is ultimately looking for some sort of ‘veto via the back door’, or a special carve-out for the UK’s financial services sector – meaning that everything will depend on the details of the mechanism that will be put on the table.

Open Europe, EU Reform Heat Map, November 2015

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Meanwhile, Belgium and Luxembourg are digging in their heels over ‘ever closer union,’ which we flagged up as an obstacle in our Heat Map.

On Belgium, we said:

Belgium may well be among the least helpful countries for David Cameron’s renegotiation. Belgian Prime Minister Charles Michel has voiced support for the ‘soft’ items on the UK’s EU reform agenda – deepening the single market, less EU red tape, and more free trade deals with third countries. However, he has also been categorical in rejecting the idea of a ‘red card’ for national parliaments and has said that EU free movement is “inviolable”. Years have gone by, but Belgium – a founding member of the EU – remains genuinely convinced that ‘ever closer union’ is essential and should be the ultimate goal of European integration. Therefore, it instinctively receives with scepticism any proposal that it sees as going in the opposite direction. That said,the silver lining for David Cameron is the presence in the Belgian coalition government of the moderate nationalist New Flemish Alliance (N-VA) party of Finance Minister Johan Van Overtveldt – which is a fellow member of the European Conservatives and Reformists (ECR) Group at the European Parliament and is more sympathetic to the UK’s EU reform demands.

And on Luxembourg:

Luxembourg’s Prime Minister Xavier Bettel does not particularly like the idea of having an EU with toomany different levels of integration. He is also sceptical of granting the UK any special treatment as a resultof the renegotiation. Therefore, Luxembourg is unlikely to be enthusiastic about UK demands for an opt-out from ‘ever closer union’ – as well as stronger safeguards for non-Eurozone countries.

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9.30: EUCO Day two: negotiations tougher than expected

Good morning. We’re back for the second day of the EU leaders summit with no deal yet on the UK’s renegotiation. Talks dragged late into the night with European Council President Donald Tusk saying after 2AM that there had been “some progress, but a lot still remains to be done.” Bilateral meetings continued through the night while the leaders will resume talks today at 1.30pm CET.

We’ll keep you updated on comments from the EU leaders (we’ll live translate comments on Twitter) as well as interesting comment pieces from the European press, background reading and our snap analysis. Stay tuned.

18 February 2016

21.50: No deal in Brussels yet – concerns remain on both sides

We’ve been hearing various bits leak from Brussels over the past few hours, but the top line is that that the deal is still not done, and the sherpas are due to meet early tomorrow morning to continue, and leaders will pick up over breakfast. We still think a deal is likely, but concerns remain on both sides. Cameron allegedly told his EU counterparts to help him secure “a package that is credible with the British people, and the UK’s relationship with the EY “has been allowed to fester for too long” and that there was now a chance “to settle this issue for a generation.” He said that this is:

[This is] an opportunity to move to a fundamentally different approach to our relationship with the EU — what some might call a sort of live and let live.

David Cameron, European Council Summit, 18 February 2016

Reports also suggest that Cameron has upped his demands on the EU migrants welfare issue.

We’re signing off for now, but we’ll be back in the morning with analysis on the latest from Brussels. Good night!

18.20: European Parliament’s Schulz flexes his muscles

European Parliament President, Martin Schulz, has been working hard to make sure that the European Parliament has its say on the “British question.” The latest draft of the leaked deal (see PDF reader at the bottom of this page) has five references to the European Parliament, whereas there were none in earlier version. Schulz will also join the working breakfast on the British deal tomorrow morning, as Donald Tusk confirmed in his invitation letter to EU leaders (snippet below.)

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Schulz also couldn’t help but take a jab at the City of London on his way into the Summit:

And he’s followed up with a series of tweets:

At his press conference he reminded reporters that the EU is not a multi-currency union, and that in theory,  under the treaties the other non-euro MS are obliged to join the euro, apart from the UK and Denmark.

The UK has been pushing hard to include, the “multi-currency” union phrase into the deal. Martin Schulz and the European Parliament won’t be involved in that part of the deal, but other EU leaders (ie heads of France and Belgium), do share his view.

There’s been a lot of noise around whether or not the European Parliament will scupper the deal if it is finalised today. OE’s Raoul Ruparel examines the question:

Could the European Parliament reject parts of the deal?

The short answer is that the risk is not zero.

This discussion applies to the parts of the deal that require further EU legislation after the referendum – these are the proposals for an ‘emergency brake’ on migrants’ access to welfare and changes to child benefit rules. Under the draft deal tabled by Tusk, the ‘emergency brake’ would be set up by amending Regulation (EC) No 492/2011. Under the deal, the European Commission would table the proposed amendments after the referendum, provided that the UK votes to remain in the EU.

The Commission’s proposal would then be subject to ‘co-decision’, meaning that it would need to be adopted by a qualified majority in the Council of Ministers and by a majority in the European Parliament. As such, there is a theoretical risk that the Parliament could reject it.

However, this is why the UK government has spent a significant amount of time and effort lobbying MEPs to convince them to back the negotiations. So far, the signs have been mixed. German MEP Manfred Weber, the leader of the centre-right European People’s Party (EPP) group, sounded fairly optimistic when he said that the necessary legislation could go through in one to three months. Soon after Tusk’s proposal was published, however, Italian MEP Gianni Pittella – who leads the centre-left Socialist and Democrats (S&D) group – warned that Cameron’s plan to “lessen the rights of foreign workers” was “unacceptable.”

There is a lot of politiking going on by Schulz: perhaps he feels that Cameron didn’t engage enough with him during his whirlwind EU ‘charm offensive.’ He needs to show the power that be that the EP will still have a say, even though its unlikely that MEPs will ultimately shoot down parts of the deal.

For a more in-depth read on the European Parliament’s role in this process, see our blog, “Can the European Parliament scupper David Cameron’s renegotiation deal?”

17.15: Background: What would Brexit mean?

The doors are closed and the talks are now underway. Whilst we wait for EU leaders to conclude for this evening, we leave you with some background reading on Brexit. Last year OE published a comprehensive study on the economic challenges, consequences and opportunities of Brexit. We concluded that UK GDP could be 2.2% lower in 2030 if Britain leaves the EU and fails to strike a deal with the EU, or reverts into protectionism. In a best case scenario, under which the UK manages to enter into liberal trade arrangements with the EU and the rest of the world, whilst pursuing large-scale deregulation at home, Britain could be better off by 1.6% of GDP in 2030. However, a far more realistic range is between a 0.8% permanent loss to GDP in 2030 and a 0.6% permanent gain in GDP in 2030, in scenarios where Britain mixes policy approaches. This is a must-read on Brexit, and the full report can be found here:

Another relevant snippet is the highlights video from the Brexit session of our EU Wargames.  Lord Lamont, former Chancellor of the Exchequer, ‘played’ the role of the UK seeking to strike a post-Brexit deal with the R-EU in a simulated exercise.


17.00: Ireland and Italy helpful

Both Matteo Renzi and Enda Kenny, PMs of Italy and Ireland, struck helpful notes on their doorsteps. Italy has shown a clear interest in discussing structural, fundamental reform of the EU and sees the UK as a key ally – especially considering that other Eurozone countries, for instance France, are unwilling to have this kind of conversation.

Similarly, it is in Ireland’s interest to ensure that a deal is struck between the UK and the EU. One of the key findings of our EU Wargames, where we simulated post-Brexit negotiations, is how worried Ireland is about a potential Brexit. As we point out in our report:

Of all the individual member states, Ireland has the most to lose from a Brexit. Open Europe research has found that Ireland could see a permanent loss to GDP of between 3.1% and 1.1% if there were a Brexit. There could also be further complications for Northern Ireland, for example around the creation of a customs border and uncertainty about the free movement of people. As a result, Ireland was keen for a post-Brexit deal to be sealed with the UK as quickly as possible and potentially for a special arrangement to take into account the special nature of the Anglo-Irish relationship. While other countries expressed a desire for “solidarity” with Ireland, how far this would go was unclear.

16.00: Juncker confirms there are still issues to work out

This shouldn’t be a surprise to anyone following our blog, but European Commission President Jean Claude Juncker confirms that there’s still some way to go before a deal is finalised.

He also made a lament on the lack of EU solidarity, it’s not just the Brits, he says:

15.20: The migrant crisis the more important issue for some

Werner Faymann the Austrian Chancellor didn’t engage much with the British question on his doorstep: he had an axe to grind on the migrant crisis. Austria recently introduced a cap on the number of refugees it would allow into the country (37,500 in 2016), so Faymann was batting back criticism from the European Commission for having done so.

He was was due to host a mini-summit on the sidelines of today’s Council meeting alongside ten other EU member states and Turkey. That meeting has been cancelled due to yesterdays attacks in Ankara. Faymann has pledged to reconvene the so-called ‘coalition of the willing’ to talk concrete steps on the migrant crisis with Turkey as “soon as possible.”

Meanwhile, irony has been lost on the Greek Prime Minister Alexis Tsipras, who made these remarks, which is saying something in light of recent Greece-Eurozone negotiations. But perhaps he’s feeling bitter as he sees the EU being far more accommodating of the UK’s demands than they ever were (and are) of Syriza’s demands.

15.10: “Agreement is necessary” but no “veto” for UK – and not too many concessions says  French President

French President François Holland has just arrived, key parts from his doorstep: he wants a deal, but is obviously still not keen for the UK to have a “veto” on Eurozone affairs.

He also made interesting remarks on the risk of a domino-effect if too many concession are make to the UK (Front National may be foremost on his mind.)

And it’s not only France that is concerned about a “veto” for Britain, other founding members of the single currency are too.

15.00: “Free movement and non-discrimination are fundamental principles of the EU”, says Luxembourg’s PM

Xavier Bettel, Prime Minister of Luxembourg, is speaking to the press. Some highlights from the bit of his doorstep remarks he made in French.

14.55: We want to help Cameron get a deal to convince UK voters to stay in EU, says Czech PM

Czech Prime Minister Bohuslav Sobotka appeared to strike a conciliatory tone during his doorstep declarations.

The Czech Republic is, along with Poland, Slovakia and Hungary, a member of the so-called ‘Visegrad 4′ group of countries. These countries are set to play a key role, notably when it comes to discussing changes to rules on EU migrants’ access to benefits.

14.43: It is “in Germany’s interest” that UK remains in the EU, says Merkel

German Chancellor Angela Merkel has arrived at the summit. Here’s what she had to say about UK-EU negotiations.

14.33: “We want a good agreement but not at any price”, says Polish PM

Polish Prime Minister Beata Szydlo has arrived. She is one of the key players at this EU summit. She didn’t give too much away during her doorstep remarks.

14.22: “We can get to a deal but we’re not there yet”, says Dutch PM

Leaders continue to arrive at the EU summit. Here is what Dutch Prime Minister Mark Rutte, whose country also holds the rotating EU Presidency, had to say (including on the UK’s system of in-work benefits).

Finnish Prime Minister Juha Sipilä has also arrived in the meantime, but he walked into the building without saying a word to journalists.

14.02: Pawel Swidlicki: “Dispute over export of child benefit has acquired totemic significance”

Some thoughts from our analyst Pawel Swidlicki, specifically on the issue of child benefits paid overseas,

“In the grand scheme of things, the ‘export’ of child benefit for non-resident children is a minor issue when compared against issues of ensuring fairness between euro and non-euro states. As of March last year, there were 19,579 ongoing child benefit awards in respect of 32,408 children living in another EEA member state, costing the UK an estimated £30m. As such, it would be ironic if this proved to be a decisive factor in pushing the UK out of the EU.”

“From the UK’s perspective, this issue demonstrates the extent to which EU membership restricts the government’s scope to pursue domestic policy even in areas – such as welfare – which are supposed to be a national competence. From the perspective of other member states, especially those in Central and Eastern Europe, this is about the principle of equal treatment on a par with Western Europe. There are fears that any restrictions could be applied more widely – for example, there are estimated to be 41,359 non-resident Polish children qualifying for German child benefit – and also that it could set a precedent for differential treatment in other areas. For this reason, this dispute actually goes to the heart of key tensions within the EU.” 

13.55: “We can’t accept discrimination against workers”, says leader of centre-left MEPs

Italian MEP Gianni Pittella, leader of the centre-left S&D grouping in the European Parliament, told Italian state broadcaster RAI yesterday that “we can’t accept any kind of discrimination against workers in the EU”.

Our Raoul Ruparel explained on the Open Europe blog what role the European Parliament would play in the implementation of the UK-EU deal. Well worth a read, in case you missed it.

Incidentally, Pittella also said that “the UK is only benefiting from EU membership at the moment. One doesn’t understand why it wants to leave”.

13.32: Cameron in 140 characters

The gist of David Cameron’s doorstep remarks also features on his Twitter account.

13.19: Cameron arrives, says substance more important than speed

UK Prime Minister David Cameron has arrived. Very short doorstep statement from him too.

13.12: “Negotiations will go into Saturday if needed”, says Schulz

European Parliament President Martin Schulz told Sky News that negotiations could drag on into the weekend, if needed.

13.07: Square brackets matter

An interesting tweet from Bruno Waterfield, Brussels correspondent for The Times.

Square brackets in the draft are a sign that an issue is particularly contentious, so their removal means progress.

See our update from 12.15pm explaining why this specific section of the UK-EU deal is important.

12.54: “This is a make or break summit”, says European Council President Tusk

European Council President Donald Tusk has arrived at the summit. He gave a very short doorstep statement, saying:

12.15: Our initial take on the latest draft of the UK-EU deal

As promised, here are a few initial thoughts on the latest draft of the UK-EU deal. Overall, there are a few tweaks and a number of questions remain open for the political discussion today and tomorrow.

  • In the section concerning the relations between Eurozone and non-Eurozone countries, a sentence has been added stating that “the single [EU] rulebook is to be applied by all credit institutions and other financial institutions in order to ensure the level-playing field within the internal market.” The change is clearly aimed at assuaging French concerns that the deal could allow for preferential treatment of British-based financial institutions. The UK’s national financial supervisors would still be allowed to adopt “specific” provisions. Note that the previous draft spoke of “different” provisions;
  • In the same section, the paragraph stating that the national authorities of non-Eurozone countries are the sole responsible for the supervision and resolution of their financial institutions has now been put in square brackets – a sign that disagreements among member states remain;
  • The wording on how exactly the ‘emergency brake’ on EU migrants’ access to in-work benefits would be triggered has become more vague. However, two points are worth making. First, one of two references to the ‘implementing act’ by which the Council of Ministers would authorise the use of the brake had already been removed in the previous version of the draft – meaning that the second reference has simply been taken out to ensure the consistency of the text. Second, we believe it is a bit of a stretch to claim that such a change leaves the door open to an involvement of the European Parliament when it comes to triggering the brake – not least because the Parliament is not mentioned in the relevant section.
  • The reference to EU countries – namely the UK, Ireland and Sweden – that decided not to make use of transitional controls on workers coming from Central and Eastern EU member states after the 2004 enlargement has not been scrapped. It has been moved to a different paragraph and made a bit more vague. The text now refers to “situations of inflow of workers from other member states of an exceptional magnitude over an extended period of time, including as a result of past policies following previous EU enlargements.” Furthermore, the relevant European Commission declaration accompanying the deal now explicitly notes that the UK “has not made full use of the transitional periods on free movement of workers” coming from new EU member states. Whether this means other countries will be able to also use the emergency brake is unclear – this will likely be part of the discussion at today’s meetings.
  • Finally, and importantly from the UK’s point of view, the latest draft says that EU member states, “acting in their capacity as members of the Council [of Ministers]” will do “all within their power” to ensure the “rapid adoption” of EU legislation needed to set up the ‘emergency brake’. Highlighting that member states will make a strong push to ensure the necessary legislation is passed through the European Parliament (see here for our blog on this issue).

11.50: France more defiant than Germany on reaching deal

It’s not really a revelation for EU policy wonks, but France has not been entirely helpful to the UK (compare to Germany’s reaction below) in recent days. French Prime Minister Manuel Valls told parliament yesterday that “we believe and hope” that a deal can be struck at this EU summit, “because the UK’s departure would be a shock, whose consequences for Europe are hard to imagine.” However, he added, “Europe must remain a space of solidarity among [member] states. One cannot choose à la carte depending on what suits us.”

Open Europe’s Vincenzo Scarpetta shares his thoughts:

France has recently been reported as putting up resistance particularly to the section of the proposed UK-EU deal concerning the relations between Eurozone and non-Eurozone countries. Generally speaking, that is hardly a surprise. We noted that it could be a major sticking point for Paris already in our ‘EU Reform heat-map’ which we published last November.

If anything, it is somewhat surprising that the issue has come under the spotlight so late in the renegotiation. Indeed, the common denominator of negotiations at the EU level is that everyone wants/has to look like a winner the day after a deal is wrapped up. This may help explain why French President François Hollande has insisted so much over the past couple of weeks that the UK and other euro ‘outs’ cannot get a veto on future Eurozone integration – something the UK has never really asked for.

11.35: Unwillingness of some states to discuss fundamental EU reform has limited scope of renegotiation

We yesterday put out a new report on the challenges facing UK negotiators inside and outside the EU, based on the findings of our EU Wargames, where we simulated EU reform and Brexit negotiations with top politicians from the UK and the EU. The idea was to get as close to the reality of the negotiations in the both scenarios. One of the key lessons we took away, seems to be playing out in reality now. As we write in our report:

“A growing question is why the deal has seemingly focused on the minutiae. The wargame may provide further lessons here. Ultimately, the EU has shown a lack of willingness to have a discussion about fundamental, structural reform. When the UK embarked on this process, there was a view that the Eurozone would also be undergoing serious structural changes. While that still seems possible and even likely, the discussion has been delayed until after the French and German elections in 2017. Ironically, after months and even years of the UK trying to talk of EU reform and linking its own concerns to the broader challenges facing the EU, other member states are actively pushing towards a narrow UK-only deal.”

If you want to get an idea of what Cameron’s talks with other EU leaders might be like, you should watch the highlights videos from our EU Wargames Reform scenario. Former Foreign Secretary, Sir Malcolm Rifkind, ‘played’ the UK and pitched the UK’s EU reform demands to key EU players. Here’s how they reacted.

11.15: Background: Social benefits & EU migrants debate in Germany

Social benefits for EU migrants are also a contentious issue in Germany, though primarily in the context of unemployment benefit and child benefit. Germany’s child benefit is relatively generous (up to £39.73 per week), as compared to £20.55 for the eldest child with £13.55 for subsequent children in the UK. Moreover, Germany’s Bundessozialgerichts (the highest social court in the land) ruled in December 2015, that while unemployed EU migrants can indeed be excluded from unemployment benefits (Hartz IV), after 6 months they are entitled to basic social security benefit, which is just as high as Hartz IV unemployment benefit.

The key difference is that basic social security is financed by the municipalities, and does not come from the Federal coffers. The result of the judgment is that unemployed EU migrants have to ‘survive’ for six months in Germany, and then get full benefits. There has been huge uproar in Germany on 1) how this is to be financed, and 2) concerns about it being abused.

So on this issue, Cameron will have a sympathetic hearing from the Germans, although the context of the German debate is slightly different. The Central and Eastern EU countries are said to be concerned that any concessions given to Cameron in this field, such as the emergency brake, could also be triggered by German  – Austria and Denmark have also hinted they might be so inclined. Interestingly, Polish Radio is reporting today that France is also interested in indexing child benefit. This is why looks like the deal is evolving as a UK-specific opt-out, rather than establishing EU-wide principles.

For more on our thoughts about the evolution of the deal, see our response published when the first draft leaked a few days ago. OE Co-Director Stephen Booth wrote then:

A leaked draft of the latest UK-EU deal suggests France and Germany are fighting UK demands on banking regulation and the status of non-Euro states in the EU, while other states don’t want the UK benefit curbs to apply more widely. In effect, the deal narrows the scope for EU-wide reform in favour of British exceptionalism.

Stephen Booth, 11 February 2016

11.00: Merkel’s plea to keep Britain in the EU

While we wait for the doorsteps of the EU leaders in Brussels (we’ll follow and translate interest bits on Twitter), it’s worth highlighting German Chancellor Angela Merkel’s plea for Britain to remain in the EU in the Bundestag yesterday. She told MPs that that Cameron’s  reform demands are “justified,” and that they are the interest of the EU as a whole. She took special care to mention the two most contentious parts of the package: in-work welfare reforms for EU migrants and the question on non-Eurozone and Eurozone states.

On the first, Merkel said national welfare this was a field for “national parliaments to legislate,” and not Brussels.  “It goes without saying that each member state must be able to protect its social system from abuses,” she said. In order to quell any fears from other EU member states, she claimed that the principles of free movement and non-discrimination – were sacred, and had not been undermined in the UK’s draft deal.

On the second, the Chancellor said that she agreed with Cameron that non-Eurozone countries need to have safeguards, but any deal with the UK would not get in the way of further Eurozone integration.

I am convinced it is in our national interest for Great Britain to remain an active member in a strong and successful European Union.

Angela Merkel addressing the Bundestag,  17 February 2016

10.40: Leaked new draft: deal watered down?

Alex Barker of The Financial Times leaked a new draft of the proposed deal this morning. We’ll publish our initial thoughts on it shortly, but the impression is that Cameron will have some hard work ahead on the two most contentious issues: the relationship between the Eurozone and non-Eurozone states; and limiting access to benefits for EU migrants.

10.30: Deal D-Day?

Welcome to Open Europe’s live blog covering the first day of the European Council Summit, where the UK will be hoping to conclude its renegotiated deal with the EU.  There are two items on the agenda at this Summit: ‘the British question,’ and the migration crisis.

A planned trip by Turkish Prime Minister, Ahmet Davutoğlu, to Brussels – where he was due to meet leaders of eleven EU countries in a “coalition of the willing” to discuss concrete measures to tackle the migrant crisis – has been cancelled in the wake of yesterday’s terror attacks in Ankara. So Turkey slips down the agenda, and all eyes on Prime Minister David Cameron then.

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