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European Council Meeting to discuss UK-EU reform deal – SocGen

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 18, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    Research Team at Societe Generale, suggests that the agenda of this meeting covers three areas – discussion of the proposed “New Settlement for the United Kingdom within the European Union”, a review of the EU’s handling of the migration crisis and the endorsement of a recommendation on the economic policy of the euro area.

    Key Quotes

    “Centre-stage will be the first of these three. The discussion on the UK’s demands will represent the culmination of the negotiations that the UK initiated soon after the Conservative party won the general election in May last year. The UK sought reforms in four areas: Economic Governance, Competitiveness, Sovereignty and Immigration.

    Donald Tusk, the President of the Council, laid out the terms of a draft deal in his 2 February letter to the EU heads of state. On Economic Governance, the draft acknowledges the rights of EU countries not in the euro area but Tusk goes on to say that this “cannot constitute a veto nor delay urgent decisions.” On Sovereignty, countries representing 55% of the votes in the Council can raise objections to draft legislation that affects the principle of subsidiarity with the expectation that the legislation would be amended or discontinued if not satisfied. This is the so-called “red card”

    These two are not without difficulties but the most problematic of the three is immigration. Here Cameron did not even propose limits on the flow of immigration because he knew it would immediately be rejected as contrary to the “four freedoms” of the EU: freedom of movement of labour, capital, goods and services. So he proposed a four-year exclusion of migrants from in-work benefits. The idea is to reduce the attractiveness of the UK to migrants, the so-called “pull factor”.

    So the draft deal is far from what would be needed to satisfy UK eurosceptics to vote to stay in the EU yet is still prone to significant challenge by the other EU countries at this Council meeting. We cannot therefore assume that a deal along these lines will be struck at the meeting.

    If agreement can be reached it might require even more watering down of the UK’s demands. If, however, the meeting were to end without agreement then Mr Tusk could call a special summit in early March to tie up any loose ends. For Mr Cameron to achieve his aim of holding the Brexit referendum on his preferred date of 23 June, the deal must be agreed by the first week of March.”
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