Friday, June 01, 2018

NERVOUS ANYONE? “I ask European Commission President Jean-Claude Juncker to immediately deny the comments attributed to him, because if they are true they would be unacceptable,” tweeted Parliament President Antonio Tajani, from Italy.

Oof! What happened? Juncker, who earlier this week was quick to rebuke Commissioner Günther Oettinger for his call for Italians to get real, made his own intervention into Italy’s affairs. He said during a Q&A (first picked up by the Guardian) that “Italians have to take care of the poor regions of Italy. That means more work; less corruption; seriousness.” The Commission didn’t deny Juncker made the comments (though it did trot out the age-old “out of context” statement). And to rub salt into the wound, the Sun’s Brussels correspondent, Nick Gutteridge, reckons EU officials deleted the footage of the Q&A before subsequently republishing it. Watch the video with Juncker’s comments here.

Reality check: The world’s on fire, but Europe’s top brass are arguing in the kitchen over who’s going to chop the onions. It must be done, no one really wants the job, the Italians should do it, but they refuse to do the assistant cook’s job. (More on Italy below.)

DRIVING THE DAY

TRUMP’S TRADE WAR IS ON: Donald Trump on Thursday slapped new duties on steel and aluminum imports from the EU (as well as Canada and Mexico), firing the first shot in what could be a full-blown trade war. The move will see the EU subject to Trump’s 25 percent tax on steel imports and a 10 percent tax on aluminium.

EU retribution: Here’s a hint about how the European Commission wants its response to be perceived: The EU is planning to not only sue the U.S., but also China at the World Trade Organization, the latter over its intellectual property practices, Commission officials told Playbook. Both cases should “ideally be launched together,” the College of Commissioners agreed earlier this week, according to the officials.

In a nutshell: The EU wants to be seen as the last guardian of a multilateral, rules-based (non-bullying) trade order.

Tough words from Canada: Trump’s move didn’t come as a surprise to the EU, but it left Canada and Mexico poleaxed. “Canada considers it frankly absurd that we would in any way be considered to be a national security threat to the United States,” Foreign Minister Chrystia Freeland said. Canada’s Prime Minister Justin Trudeau, in a strongly worded denunciation of Trump’s decision, pledged “dollar for dollar” retaliation.

In a tweet, Trudeau said “Americans remain our partners, friends, and allies. This is not about the American people. We have to believe that at some point their common sense will prevail. But we see no sign of that in this action today by the US administration.” As our own David M. Herszenhorn points out, Trudeau’s statement distinguishing between the American people and the U.S. “administration” echoes the way the West often distinguishes between Russian people and Moscow.

EU reaction: “Today is a bad day for world trade,” said the EU’s Trade Commissioner Cecilia Malmström. Jean-Claude Juncker called the move “protectionism, pure and simple,” in his first reaction. The Commission president was delivering a speech in Brussels when U.S. Trade Secretary Wilbur Ross, in Paris, announced the tariffs, and was equipped with an extra sheet of notes to be used just in case. Et voilà, the EU’s threefold reaction: “The U.S. now leaves us with no choice but to proceed with a WTO dispute settlement case and with the imposition of additional duties on a number of imports from the U.S. We will defend the Union’s interests, in full compliance with international trade law.”

Juncker later that evening told German TV reporters: “It makes me angry, worried and annoyed that we have been talking to the Americans for months. Mrs. Malmström, the trade commissioner, has had 15 or 16 meetings with the U.S. secretary of commerce. But they don’t listen. They think they can talk Europeans down and make them small. That is not going to happen. This is not the way to deal with allies — Americans and Europeans are allies after all. And when we are treated this way, we must react adequately, proportionally, sensibly and intelligently.”

Next steps: Juncker said the EU would react “within hours,” but take that in a figurative way: EU countries will once again have to OK the list of counter (or “rebalancing”) measures, and under WTO rules, for the safeguard duties on steel and aluminum to mirror America’s, the EU needs to wait until it can prove they are having an impact on the European market.

Not all quiet on the western front: The move to impose the tariffs “capped a whipsaw week that reflected not just the deep divisions among Trump’s top economic advisers but the changeable attitudes of the irascible and unpredictable president himself,” our U.S. colleagues report.

GOOD FRIDAY MORNING. What a week, again! In case a global trade war breaking loose wasn’t enough for you, this week has also seen the Commission firing off one budget proposal after another, with the agriculture program landing today (more on that below). In other news: Denmark banned the burqa,; a “murdered” Russian journalist turned up alive and said faking his death was the only way to avoid the real deal; Donald Trump consulted with well-known prison reform expert Kim Kardashian, and went back and forth on whether he’ll meet the other Kim.

(Deep breath.) Still hungry for more?

The European Parliament green-lit the much debated reforms for the rules governing inner-European labor mobility — one of Emmanuel Macron’s visible successes on the EU stage; Germany is (still) debating migration policies and a scandal over the handling of refugee applications by the country’s asylum agency. Oh, and Italy still has no government. (Or actually, it has managed to have three of them in quick succession: Prime Minster Paolo Gentiloni’s caretaker government; the one led by his successor, still officially the PM-designate Carlo Cottarelli; and the one headed by the populists who’d love to govern, they say, and are ready to do, they say.) But that is going to change today — or at least that’s the plan.

CHE BELLA FIGURA

HERE WE GO: “The 5Star Movement and the League have reached an agreement on a political government headed by Giuseppe Conte as prime minister,” the two party leaders, Luigi Di Maio and Matteo Salvini, said in a joint statement late Thursday. Yes, that same law professor with a CV of questionable provenance, who is due to be sworn in today at 4 p.m. by President Sergio Mattarella, after he signed off on Conte’s proposed Cabinet late Thursday.

The team: Paolo Savona, whose selection for the finance portfolio combusted the first attempt at a 5Stars-League coalition, will be given another post as European affairs minister, perhaps in a message to other capitals that Italy’s new government isn’t interested in good relationships. The finance minister would be Giovanni Tria, an economics professor who in recent opinion pieces has denounced Germany’s trade surplus as an indicator of the failure of the euro.

HOW TO LEAVE THE EUROZONE, IN ITALY’S NEW GOVERNMENT’S WORDS: The League rushed to erase signs (both physical in their headquarters and digital on their website) that it was ever in favor of exiting the eurozone. But our own Jacopo Barrigazzi writes in to flag the following …

Exhibit A: “There’s no need for a referendum,” Salvini said in a video recorded in July 2016, explaining his strategy on Italy leaving the common currency — because who would risk asking the people? “What I can say is that if the League will go to government we leave [the eurozone], but these are things that you have to do quickly.” Video here.

For the 5Star Movement, it’s equally hard to deny what they’ve been preaching. A few days ago at a rally, Di Maio said that he met Savona “only a month, less, fifteen days ago.” However, in a video recorded in September 2016, Savona says that “I have had a long conversion with Di Maio” and that they agreed on #Italexit. “We have to leave the euro,” Savona quoted Di Maio as saying.

Exhibit (or Plan) B: Savona is one of the authors of a magnus opus dubbed “Plan B for Italy,” which lays out a game plan for leaving the euro. (As of this morning it was still available online, but just in case it mysteriously disappears, we’ve got you covered with screenshots.) In 80 slides, the missive (which *must* be sound from an economic point of view — I mean, who’s prepared to argue with charts of such clarity?) proposes keeping any Italexit a secret for as long as possible from other governments, international institutions and, of course, citizens, to avoid bank runs and market speculation.

The playbook: Announce you’re leaving on a Friday evening and be out by Monday. “Straight after [the eurozone exit announcement], national banks and financial markets must be closed” and capital controls introduced, one of the slides says. Italy’s debt, which we reckon everyone will agree wasn’t piled up by Chancellor Angela Merkel or any Commission president, would be honored under the plan — “to the extent possible.”

Good night, Italy, and the very best of luck.

Goes without saying, but we’ll say it anyway: The cost of the two parties’ respective electoral promises — most notably, the League’s flat tax and the 5Stars’ guaranteed income — would amount to between €109 billion and €126 billion, or 6 to 7 percent of GDP, economist and Bruegel fellow Silvia Merler said in an interview for Pierre Briançon’s Global Policy Lab newsletter. “That’s a lot … And next to that, the funding of the measures is fuzzy at best. The magnitude of the increase in the deficit implied by the combined measures will likely violate all EU and domestic fiscal rules and put debt on an unsustainable trajectory.”

MISCELLANEA

RAJOY TO BE OUT OF A JOB TODAY: Mariano Rajoy’s time as Spain’s prime minister appears to be over after the opposition Socialists secured parliamentary backing for ousting the conservative leader. Lawmakers from the Basque Nationalist Party (PNV) announced they would back Socialist leader Pedro Sánchez’s motion of no confidence in Rajoy in a vote to be held today. With the PNV’s support, and that of the far-left Podemos and Catalan pro-independence parties (which is all but guaranteed), Rajoy will be forced out and replaced by Sánchez today, Diego Torres reports from Madrid.

Speaking of Sánchez: Stephen Brown and Diego interviewed him just two weeks ago.

50 SHADES OF GREEN: The European Commission will today announce its proposal to reform the mammoth Common Agricultural Policy. But stakeholders ranging from MEPs to environmental NGOs aren’t happy, Simon Marks and Emmet Livingstone report.

BREXIT PLAN C: The U.K.’s Brexit Secretary David Davis has a new plan to to solve the Irish border impasse, according to the Sun. Under the plan, Northern Ireland would have joint EU/U.K. status and there would be a 10-mile “buffer zone” around the border to aid local traders and farmers, among other measures. That’s all well and good, but the proposed solution still gives Northern Ireland a different status to the rest of the U.K., something the DUP, which props up Theresa May’s government, has already ruled out.

SLOVENIA ELECTION PREVIEW: Valerie Hopkins reports that Janez Janša, the front-runner ahead of Slovenia’s general election this Sunday, is using Viktor Orbán’s political playbook and even getting help from the Hungarian PM on the campaign trail.

NO MORE MILEAGE FRAUD: MEPs adopted a legislative initiative report on how to stop the odometer fraud plaguing the used car market. With 90 percent of the votes cast in favor, rapporteur Ismail Ertug was over the moon.

INSULTS AD LIB: The EU’s general court set new (low) standards on how badly MEPs can behave without being punished. Judges annulled a penalty imposed on Polish far-right MEP Janusz Korwin-Mikke by the European Parliament over a series of comments on migrants (in the words of that representative of the people, “human garbage”) and women (who he said shouldn’t earn as much as men “because they are weaker, they are smaller [and] they are less intelligent”).

If that’s what work looks like … Korwin-Mikke, the court decided, was only “exercising his parliamentary functions” without disturbing proceedings, and he didn’t “pose a serious threat to society, such as incitement to violence or racial hatred,” the ruling says. Gabriela Galindo has more.