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Mission Impossible?

When it comes to the EU, I am skeptical of headlines like this: EU leaders struggle with 'mission impossible' at deadlocked recovery summit.

The leaders are at odds over how to carve up a vast recovery fund designed to help haul Europe out of its deepest recession since World War Two, and what strings to attach for countries it would benefit.

Diplomats said the leaders may abandon the summit and try again for an agreement next month, but as they negotiated into the early hours of Monday a deal still looked possible.

Dutch Prime Minister Mark Rutte’s position reflects political realities in his country, where voters resent that the Netherlands is, proportionately, among the largest net contributors to the EU budget.

He and his conservative VVD party face a strong challenge from far-right eurosceptic parties in elections next March.

An attempt to reach a compromise failed on Sunday. A deal envisaging 400 billion euros in grants - down from a proposed 500 billion euros - was rejected by the north, which said it saw 350 billion euros as the maximum.

Italian Prime Minister Giuseppe Conte accused the Netherlands and its allies — Austria, Sweden, Denmark and Finland — of “blackmail”.

The Issue 

Italy wants free money, the bulk of which would come from the wealthier nations.

The Problem with Deals

The EU is known for last minute deals. In fact, there is seldom if ever a deal except at the last moment. 

This happens because all 27 nations have to agree to make changes of any substance.

What Different Time? 

  1. Lagarde's Unusual Opinion
  2. Brexit 
  3. More than the Usual Splintering

Lagarde's Unusual Opinion

European Central Bank (ECB) President Christine Lagarde said it would be better for the leaders to agree an “ambitious” aid package than to have a quick deal at any cost.

Lagarde’s comments suggested she was relaxed about the possibility of an adverse reaction on financial markets if the summit fails, especially as the ECB has a 1 trillion euro-plus war chest to buy up government debt.

The EU never agrees to a "quick deal". Bickering over this summit has been going on for months. The summit was supposed to finalize it.

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However, the fact that the ECB would rather wait for something that may never happen increases the likelihood of no deal.

The idea that a 1 trillion euro bond buying effort will fix anything is of course ludicrous. But it does provide a relief valve that the EU is still OK.

Brexit

Brexit is a minor concern here and not really related except psychologically. 

The world did not end when "no deal" was the result of two years of negotiations. 

More Than the Usual Splintering

Even as Germany and France drift together in ways, Italy has drifter further apart from overall EU goals. So have Poland  Hungary. Austria, Sweden, Denmark and Finland over various issues. 

In this case is it is the haves vs the have nots, but there are different splits over things like immigration and working out a Brexit WTO deal with the UK.

It is harder and harder to get all 27 nations to agree even though Chancellor Merkel, on her way out the door is more wilkling than usual to make a compromise. 

No Surprises Either Way

I will not be surprised by a deal, but it will not be the deal Lagarde hopes for. 

Instead, assuming there is a deal, it will be based on smoke, mirrors, and promises that morph into outright lies.

For how the EU operates on smoke and lies, please see my report on how the EU's Climate Change Effort is Comically Exaggerated.

Mish