Europe Sheds Its Brexit Baggage and Aims for a Bold Relaunch

  • EU eyes market-opening talks with Australia, New Zealand
  • European Commission chief set to give State of Union speech

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What a difference a year makes for the European Union.

Jean-Claude Juncker, president of the European Commission, will deliver the annual State of the Union speech this week in a more upbeat mood than a year ago, when the 28-nation bloc was buffeted by the U.K.’s decision to leave and anti-EU parties appeared to be on the march.

In a sign of the EU’s renewed confidence, Juncker will push for free-trade pacts with Australia and New Zealand at a time when the U.S. is turning inward, along with a bloc-wide system for screening foreign takeovers and deeper euro-area banking integration. To underline the range of projects being planned without Britain, Juncker may not even refer to Brexit at all, according to two officials familiar with his thinking who asked not to be named discussing the speech.

“There’s a big sigh of relief,” said Michael Tscherny, a former EU official who now advises companies on European policy at GPlus Europe in Brussels. “The populist tide appears to have been stemmed and Brexit doesn’t seem to be a big threat. But plenty of challenges, including the specter of trade wars, remain.”

Juncker’s moment in the sun comes as British Premier Theresa May struggles for leverage in the divorce talks, German Chancellor Angela Merkel looks set for a fourth term and Emmanuel Macron’s victory in France crowned ballot wins by pro-EU forces. As a result, the bloc senses an opportunity to snuff out centrifugal forces that have eased since they propelled the Brexit vote and rattled Europe’s mainstream political parties.

Free-Trade Talks

The bloc’s leaders say 60 years of European integration provide the template for tackling current challenges that range from refugee flows and terrorist threats to high unemployment and sluggish investment.

In his Sept. 13 speech to the European Parliament in Strasbourg, France, Juncker will ask EU governments to give his commission, the EU’s executive arm, the authority to begin free-trade negotiations with Australia and New Zealand. His plan comes on the heels of a provisional EU accord with Japan and a week before a hard-fought European deal with Canada enters into force.

The outreach to Australia and New Zealand will offer a fresh reminder of the EU’s global market-opening clout, further distance Europe from U.S. President Donald Trump’s protectionist tilt and raise awkward questions for May. While forging ahead with Brexit, she plans to cut and paste the EU’s trade deals and will be unable to strike her own commercial pacts until after the U.K. quits the bloc in March 2019.

“It’s the decision of the United Kingdom to leave -- a mistake for the United Kingdom -- but democracy is democracy,” EU Parliament President Antonio Tajani told a Sept. 6 conference in Brussels.

Franco-German Ties

Also on Juncker’s to-do list is a proposal for an EU framework to screen foreign investments in Europe when concerns arise about unfair competition. A divisive issue among EU governments that could take years to negotiate, Juncker is pushing it as a political reward for Macron after he defeated far-right challenger Marine Le Pen in France’s presidential election and his upstart centrist party secured a majority in a subsequent parliamentary ballot.

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While championing open markets, Macron has echoed traditional French calls for Europe to bolster its defenses against unfair trade and to ensure EU-based manufacturers have a level playing field globally.

Macron’s victory may lead to deeper French ties with Germany, which is gearing up for a Sept. 24 parliamentary election, and give impetus to EU initiatives that also include stalled attempts to create a deeper banking union. Merkel’s government has balked at such proposals as a common deposit-insurance system for the euro area, saying weaker economies first need to do more to stem financial risks.

“France and Germany are ready to take a lead in the relaunch of the European project,” Herman Van Rompuy, who chaired EU summits as the bloc’s first president for five years until late 2014, said on Sept. 6. “When they find a new balance between responsibility and solidarity, it can be a template for many, many others.”

The economic picture is helping the politics: the worst of the financial crisis is over, the euro-area economy is set to grow at the fastest annual pace in a decade, the common currency is flirting with a near three-year high against the dollar and the European Central Bank is weighing the winding down of its stimulus program.

Globally, with Trump challenging the trans-Atlantic order and North Korean leader Kim Jong Un testing nuclear bombs, the EU is presenting itself as a bastion of stability.

To be sure, the EU has its fair share of lingering risks. The southern flank -- Italy and Spain included -- features weak governments and banks, Macron must deliver on a domestic economic overhaul that Germany is demanding and Poland has provoked unprecedented concerns about democratic backsliding in the bloc and a rift with western neighbors.

But these realities aren’t spoiling a more optimistic mood in EU circles.

“Some are even talking about a renaissance of Europe,” said Janis Emmanouilidis, director of studies at the European Policy Centre in Brussels. “We need to be careful not to cheer too early and too loud.”

— With assistance by Viktoria Dendrinou

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