A lot has been written about what Mario Draghi's arrival in Italy means for Italy. But little has been said about what he could mean for Europe. I think Draghi could be a game changer for EU; he could even turn its toxic North-South dynamic on its head. Thread 1/
Why? The @EU_Commission is currently reviewing (quietly) member states reform plans. These are basis upon which EU capitals hope to begin receiving their allocation, in transfers & loans, from the €750 billion Recovery Fund, starting later this year 2/
Remember the numbers are unprecedented. Italy is eligible for ~€188bn (roughly €65.5bn in grants; €123bn in loans). Spain a €144bn, roughly €59bn in grants & €85bn in loans etc etc. The amounts for all member states are unprecedented 3/
Yet despite this, & fact Fr & Ger pushed hard for this deal, officials in Bxl are scathing about proposals advanced by.. Paris & Berlin. I oversimplify: but basically, Macron is distracted by Covid; Merkel, elections in Sept. Sweeping reforms are the last thing on their minds 4/
This puts Commission in its usual bind. If Bxl doesn’t raise the reform bar with Chancellery & @Elysee, it will have no credibility to push southern Europe to do same. But it also can’t impose reforms on countries that aren’t willing to do them, especially not the big 2 5/
Queue Draghi, who is likely to prove the exemplar: slashing red tape, addressing structural admin & judicial bottlenecks that have prevented Italy properly absorbing EU funds; tax & labour market reform, & a focus on levels & efficacy of investment 6/
Of course, none of this will be easy. The politics in parliament are treacherous, there's lingering divisions within his new Govt, big concerns over how long it will last & reforms will be pol charged & take on powerful interest groups 7/
But Draghi commands huge public support (60% & rising; Italy’s most popular pol figure by far) & a huge parliamentary majority. He also has a deep level of knowledge & expertise, & likely wouldn't have taken the job unless he had some assurances he could get his agenda through 8/
Perhaps most importantly: the example Draghi sets will create space & precedent for the Commission to go back to Berlin & Paris & demand they do more. It will reduce risk Bxl is scapegoated for not properly enforcing Dec deal (€ for reform); it may encourage Macron to do more 9/
The Recovery Fund needs to succeed in a few test countries, esp Italy but also France, to increase legitimacy of fiscal transfers within EU - either as a permanent feature or in event of future crisis. Even if Draghi makes this slightly more likely, this would be a big win 10/
But this isn't all. Draghi could also positively impact discussion on reform of EU’s outdated fiscal rules. Immediately re-applying the old rules after Covid - 3/60% deficit/debt limits & movement to those thresholds obvs makes no sense in light of unprecedented borrowing.. 11/
the pandemic has necessitated. The result would be (again) unprecedented austerity that even northern Europe recognizes would be counterproductive. So rules will probs remain suspended this/next year as EU capitals negotiate what to do about them 12/
However, as we all know, the 3/60% & idea of debt reduction are hardwired into EU’s treaties & won’t change. But the secondary legislation that implements the treaty could be up for grabs. This is where the “Draghi effect” could have an impact 13/
Seeing reforms in Italy cd encourage more hawkish Northern states to back a set of rules that are slightly less obsessed with austerity & more focussed on growth (a “golden rule“) that carves out fiscal space for high quality public spending on green & digital transitions 14/
Bottom line: Draghi is unlikely to be the subordinate previous Italian PM's have been to their masters in Berlin, Paris, the Hague, Brussels & even DC. Draghi is a different beast 15/
If he delivers Recovery Fund reforms & spending in Italy that are seen as a success, Draghi could fundamentally change the econ conversation in Europe, & even its architecture/institutions & prospects over medium term
The snail-like first 10 days of French vaccine roll-out means Fr is still behind other countries – only 1.44% of the 66mn population vaccinated as of last night. As of today, France would still not yet appear on this FT chart. BUT that will soon change 1/ ig.ft.com/coronavirus-va…
The French vaccine programme has exploded into life in the last four or five days, with an average of well over 100,000 jabs a day. As a result France is now jabbing faster (pro rata) than Germany or Italy 2/
It has vaccinated a total of 963,139 people (139,572 yesterday alone) and will today hit – 8 days early - its initial, modest target of 1,000,000 by the end of January. This is only four days longer than the UK took to reach its “first million jabs.” 3/
However, I personally don’t buy the idea that the great key to the Macronist world view (if such a thing exists) is his one-time mentor, the Eurosceptic former Socialist minister, Jean-Pierre Chevènement 2/6
Chevènement was and is a fierce French nationalist. Macron’s view of “sovereignty” may be fluid at times but it is mostly defined in a European context: the need for a European strategic sovereignty – economic, political & military. I think this would be repugnant to Chevènement
The risks that arise from Merkel's departure this year aren't really linked to her succession, but rather the vacuum she leaves behind in Europe. For Brexit/UK watchers, this is an important transitional year for the EU - & one worth paying attention to
Thread 1/
The outcome of Ger elections in Sept is highly likely to be a Black/Green coalition. Positive for Ger & EU. All the contenders to replace Merkel are also mainstream, some just more conservative than others. See @NazMasraff & @COdendahl very good analysis & threads for more 2/
Yet despite this constructive outcome, in short & medium term, Merkel’s departure will leave a large gap in EU no leader can credibly fill. @EmmanuelMacron will try, but without Merkel or strong partnership in Berlin, his more disruptive, abrasive style won't succeed 3/
1) Delivering on EU's landmark Recovery Fund & preventing a damaging, precedent setting split among EU27, that could have delayed/derailed EU's recovery next year & arguably strengthened authoritarianism, especially in Poland, at a time it is waning
2) Delivering a Brexit deal with enough cosmetic flexibility for Johnson to sell his deal today, avoiding a messy, unnecessary, costly no deal, while securing Berlin's objective of keeping UK within EU's regulatory orbit via strong LPF & retaliatory provisions
Based on outlook of British politics, I'm sceptical the deal will serve as a platform for closer economic ties - arguably even over longer term
Instead, today's “zero/zero“ deal could prove to be the “high point“ - from which both sides are forced to subtract. A few reasons 2/
First, there will be pressure on Tory Govt's (under @BorisJohnson or @RishiSunak) for symbolic/substantive acts of “divergence“. This will bring friction. Second, the Tories (& certainly BJ) will continue to seek domestic political advantage in “taking on Brussels“ 3/
On Brexit negs: EU side is pretty adamant that on 🐠, 25/6 (incl Pelagic) is final offer. But Brits haven't killed it; Frost is talking to Boris on this today
Def not all doom & gloom. Some good progress has been made on LPF non-regression chapters, social, env & tax 1/
While COM keen to wrap up a deal today/tmrw, EU capitals are tad more relaxed - their view: get substance right; we'll accommodate process/legal constraints after
So maybe tonight/tmrw we get a “general understanding“ it's moving in right direction; deal in Xmas/NY window 2/
Member states are, however, on standby to meet tomorrow in case there's a deal today.. 3/