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Summary

  • Juncker confirmed as EC President.
  • Summit tomorrow to try to reach agreement on foreign affairs commissioner.
  • UK cabinet reshuffle strengthens the hands of the EU sketpics.

The pieces are gradually falling into place for a new European Commission. Juncker was confirmed today as the European Commission President. There is a summit tomorrow where the Commissioner for Foreign Affairs is hoped to be named (to replace the UK's Ashton).

Italy's Federica Mogherini was thought to have been the front runner. However, the Baltics and Poland appeared to lead the successful opposition primarily over a difference on confronting Russia.

After Germany, Italy has the largest economic ties with Russia. Unicredit (OTCPK:UNCFF), for example, is the second largest foreign bank in Russia by revenue. Italy's state-controlled Eni is an important partner in the Russian pipeline project that will bypass Ukraine. Just last week, Russia's state-controlled Rosneft (OTC:RNFTF) took a large stake in Pirelli (OTCPK:PPAMF), the Italian tire company. The state was sufficiently large for the president of Rosneft to get a seat on Pirelli's board, even though he (Sechin) is on the US sanction list.

The successful blocking of Italy's commissioner is an important reason why the UK ought to stay in the EU. It is not as isolated as it may appear or as it sometimes acts. Poland and the Baltics share with the UK greater antipathy toward Russia and a distaste for the bureaucratic thrust of Brussels.

With 11 Russians added to the EU sanction list over the past weekend, it brings the total to 75. Merkel appears to have persuaded her own foreign ministry of the need to confront Russia. France, whose sale of amphibious ships to Russia (and delivery later this year) disqualifies it in some respects.

While Italian officials have emphasized that the new sanctions were unanimous, Italy, which now holds the rotating EU presidency, reportedly is frustrating a push to move to phase 3 of sanctions. These are considerably broader than what has been seen until now. On the other hand, Sweden's Bildt is seen by some as too tough on Russia. Ironically, contacts report that Bulgaria's Georgieva may be a compromise candidate, though Bulgaria is perceived to be among the most pro-Russian EU members. Separately, note that Bulgaria will hold parliamentary elections September 28-October 12.

Another interesting battle is shaping up for the EU President (to replace Van Rompuy). Merkel appears to have changed tact. Initially, she argued against making concessions to the center-left. However, she signaled yesterday she can accept the center-left Danish Prime Minister Helle Thorning-Schmidt. She is also reported supported by the UK. The rub is France. It does not want a the EU president to come from outside of EMU.

In preparation for next year's general election, UK Prime Minister Cameron is reshuffled the cabinet. In this context, what is important is that Lord Hill, previously the political secretary to John Major and more recently the head of the House of Lords and former Education Minister was named as the UK's EU Commissioner. There will be second guessing of this choice. Hill had previously indicated (including on the Conservative Home website) that he was not interested in the post. Cameron wants the UK to have a top economic post, but it is not clear that Hill has the gravitas.

However, after Cameron lost his attempt to block Juncker there might be some effort to give it a concession. That said, Cameron is not making it easy, even if he was right that the EU parliament had effectively encroached on the power and authority of the Council of Ministers to name the EU President. By naming presidential candidates, the EU parliament delivered the heads of state a fait accompli.

Cameron named Philip Hammond, an EU skeptic, to replace Hague as the Foreign Secretary. Hammond indicated (last year) he would vote to leave the EU if the referendum were held under current conditions. In an effort to play to a domestic audience, and try to steal some thunder from the UKIP, which is polling ahead of the Lib Dems, Cameron is risking further alienating his EU partners. At the same time, Hammond represents the ascendancy of people who have worked closely with the Chancellor of the Exchequer Osborne, who is thought to be a likely future Prime Minister candidate.

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Source: The EU Summit And The Changing Landscape