From Brexit to the Balkans, EU Leaders Struggle for Progress

(Bloomberg) -- European Union leaders gather in Brussels on Thursday to tackle a growing number of challenges with the economic and political stakes rising.

From refugee routes and trans-Atlantic ties to Brexit and banks, the two-day summit is a reminder that even after the decade-long debt crisis, the EU is still engaged in firefighting on multiple fronts and its ability to stick together is under scrutiny.

These are the main topics of the meeting, which is due to start at 3 p.m.

Refugees

Migration is back atop the EU agenda not because of another big influx -- the numbers are way down from 2015 -- but because of political aftershocks from the last crisis. Those reverberations are centered on Italy and Germany.

In Rome, a new populist government is turning away boatloads of mainly African refugees. In Berlin, Chancellor Angela Merkel is facing an ultimatum from her own interior minister to persuade frontline states like Italy to take back migrants they’ve registered if those people try to move north to richer countries like Germany.

“Migration may well turn into a question of the EU’s destiny,” Merkel said in a speech to lower-house lawmakers in Berlin on Thursday, while playing down the chance of a comprehensive deal at the summit.

No deal could mean more checks on internal borders in a blow to Europe’s passport-free travel area, one of the EU’s crowning achievements along with the euro.

From Brexit to the Balkans, EU Leaders Struggle for Progress

EU governments have been deadlocked for two years over a proposed revamp of European asylum rules that would spread out refugees when a gateway country is overwhelmed. Nations such as Hungary have refused to accept their share, while southern countries oppose separate provisions to extend the period they are responsible for dealing with individuals they’ve registered.

With expectations low of a breakthrough on the fundamental disagreement, leaders will focus on the idea of setting up “regional disembarkation platforms” outside the bloc to screen would-be arrivals.

Trans-Atlantic Tensions

For a sign of how much Europe’s relations with the U.S. have soured under Donald Trump, just take a look at the summit invitation letter. With the West’s trade and security order under threat, and the U.S. abandoning global deals to fight climate change and curb Iran’s nuclear ambitions, EU President Donald Tusk wrote that “trans-Atlantic relations are under immense pressure due to the policies of President Trump” and that “while hoping for the best, we must be ready to prepare our union for worst-case scenarios.”

A week after the EU retaliated against the U.S. over its metal-import levies, the leaders plan to maintain their hard line on Trump’s protectionism. According to a draft summit statement, they’ll take the following steps:

  • dismiss his argument that the duties on foreign steel and aluminum are justified on national-security grounds
  • stress a need to uphold the global commercial order amid “growing tensions”
  • push for improvements in the way the World Trade Organization operates

Hanging over this discussion will be Trump’s threat to impose U.S. tariffs on cars and auto parts later this year -- that would mark a significant escalation in the trade dispute since automotive shipments dwarf the commerce in metals.

The Euro

The leaders of all EU countries except Britain on Friday morning will approve steps to shore up the euro area by beefing up the region’s bailout fund, giving it greater powers over future rescue programs and letting it serve as a backstop for the entity responsible for winding down failed banks.

From Brexit to the Balkans, EU Leaders Struggle for Progress

But, contrary to original plans, the government heads will stop far short of agreeing on a common deposit insurance scheme -- long seen as the missing piece of the euro-area’s banking framework -- and instead call on their finance ministers to draw up a “roadmap” for negotiations on the matter. Furthermore, as a result of sharp disagreements among countries on a possible euro-area budget, the leaders will likely avoid a reference to such a fiscal tool, which has picked up support from Germany and France.

Brexit

This was supposed to be the big crunch EU summit for settling many Brexit issues. But with negotiations proceeding at a snail’s pace amid persistent differences over touchy matters such as the future Irish border, nothing of the sort will happen.

Instead, Prime Minister Theresa May will provide a short update of her government’s thinking on Thursday evening and her 27 EU counterparts will broach the subject among themselves the next morning. With the U.K. scheduled to withdraw from the EU in March 2019, they’ll warn about the risks of the talks collapsing and tell Britain to get a move on.

The Balkans

A sign of the EU’s continuing appeal to those outside the bloc will emerge when the leaders dangle the prospect of membership for the Republic of Macedonia and Albania. The Brussels summit may mention June 2019 as the possible date for the start of accession negotiations with both Balkan countries.

For the Republic of Macedonia, the carrot may have important domestic political implications. Prime Minister Zoran Zaev is facing domestic opposition to renaming his country under an agreement reached with Greece, which has a region also called Macedonia. Changing the country’s name to the Republic of North Macedonia would end a decades-long dispute between the neighbors, though President Gjorge Ivanov has rejected the plan.

Late-Night Talks

The leaders’ lengthy to-do list won’t prevent them from kicking off the summit, as usual, with an exchange with the European Parliament president and then holding a session with NATO chief Jens Stoltenberg. Migration will be the main topic at dinner on Thursday and the debate may well run into the early hours.

©2018 Bloomberg L.P.