By John Bruton, former Irish Prime Minister (Taoiseach)
WILL UK BE ABLE TO NEGOTIATE MORE EASILY WITH EUROPE IF IT BINS THE WITHDRAWAL TREATY?
The new UK Foreign Secretary , Dominic Raab, has claimed on Radio 4 that the UK would find it “easier” to negotiate  a good long term deal with Brussels , if it had first crashed out of the EU , than if it ratified the Withdrawal Treaty.
Doing this would mean binning the entire content the Withdrawal Treaty, not just the backstop.
Settlements painstakingly reached in the Withdrawal Treaty  on transitional matters, like the rights of existing cross border workers, the recognition of existing professional qualifications, social security, mutual financial obligations, enforcement of contracts and judicial decisions, and a transition period up to the end of 2020, would all go into the waste bin.
If , after that, the UK then decided it wanted to negotiate a new Agreement with the EU, these issues would have negotiated all over again from scratch.
That extra workload would be on top of the negotiation of the future EU/UK Agreement, which, given the range of subjects to be covered and the intricacies of arrangements being replaced, would probably be the most complex trade negotiation ever undertaken in human history.
Binning the Withdrawal Treaty now, would delay the finalisation a future Agreement by several additional years because of this extra workload.
And that is just on the legal side of things.
The psychological damage to UK/ EU relations caused by a willful choice of “no deal” by the UK would have to be repaired. A prudent Foreign Secretary would consider these matters more carefully than Mr Raab appears to have done so far.
It is, of course, true that that the backstop in the existing Withdrawal Agreement constrains the UK’s negotiating options for a future Trade Deal, because it requires the UK to take account of its obligations under the Belfast Agreement as well.
THE ORIGINS OF THE CONTRADICTION… THE RED LINES OF 2016
But that backstop is only there because Mrs May, in late 2016, drew three red lines for the  UK’s future relationship with the EU….
no customs Union,
no Single Market and
no ECJ jurisdiction….while still remaining a party to the Belfast (Good Friday) Agreement.
As was pointed out at the time, these three red lines conflicted with the Belfast Agreement, into which the UK freely entered in 1998, with the approval of the Parliament.
The Belfast Agreement was the basis of which Ireland changed its constitution. No minor matter.
The three red lines, by their very nature, require the UK to “take control” of its borders. That means controls at the border, and the only land border the UK has with the EU is in Ireland .
BORDER CONTROLS WERE INHERENT IN ”TAKING BACK CONTROL”
Border controls were always the essence of Brexit.
Yet the man who led the Brexit campaign in 2016, Boris Johnson, is now saying the opposite, he is saying that the UK will not impose any border controls in Ireland, and that any controls there might be will be someone’s else’s fault.
In fact, under WTO rules, the UK itself will almost certainly have to have border controls of its own once it leaves the EU.
Meanwhile EU law, the EU customs code, requires any EU state, if has a border with any state that is not in the EU Customs Union and Single Market, has to have border controls . The UK knows this well, because its officials helped draw up the EU Customs code. They are familiar with every comma and full stop in it, and know all the customs obligations a no deal Brexit will impose on Ireland.
PRIME MINISTER JOHNSON SAYS HE RESPECTS THE BELFAST AGREEMENT……BUT HOW?
Last week in Belfast, Prime Minister Johnson said that he respects the “letter and the spirit “ of the Belfast Agreement.
The Belfast Agreement calls for close cross border cooperation on issues like the environment, health, agriculture, electricity, education and tourism. It stands to reason that this sort of cooperation will be made much more difficult, if the Northern Ireland and Ireland are no longer part of the same market for goods and services. The UK red lines will also lead to diverging professional qualifications, diverging quality standards for goods and services, and diverging standards of consumer protection, between North and South, and between the UK and Ireland.
Even without physical border controls, that divergence, by its nature, pulls the two parts of Ireland further apart from one another, and pulls Britain and Ireland apart too. It thus upsets the subtle balance between Unionist and Nationalist identities in Northern Ireland, that the Belfast agreement created.
Unfortunately Brexit, of its nature, contradicts the spirit of the Belfast Agreement, to which Boris Johnson says he is fully committed.
BACKSTOP WAS A BRIDGE BETWEEN TWO CONTRADICTORY COMMITMENTS MADE BY THE UK
The backstop was an attempt to build a bridge between these two radically contradictory British positions, Brexit and the Belfast Agreement.
It was not trap set to tie Britain to the EU, but rather an attempt to help the UK reconcile the two contradictory positions it itself had taken up, the one it took in 1998, and the one it took in 2016.
At first, the backstop was to apply to Northern Ireland alone, but it was the UK that requested that it be extended to island of Britain as well.
The fact that it was the UK that asked for this extension of the backstop to Britain, belies the idea that the backstop was some sort of Brussels conspiracy to keep Britain in the EU orbit, a theory promoted in pro Brexit circles.
The UK Parliament has now thrice rejected the Withdrawal Agreement and, with it, the Irish backstop. But the underlying conflict between Brexit and the Belfast Agreement, remains unresolved. The new UK government has no solid proposals of its own for reconciling the basic contradiction. Instead the UK wants to fix responsibility for its own dilemma on Dublin and Brussels.
Against this background, Dominic Raab is wrong to think that it would be easier for the UK to make a future Trade Agreement with Brussels, after it had walked away from the EU, without paying its bills, and without sorting out the details of the divorce it had initiated.
NO DEAL IS POOR BASIS FOR FUTURE NEGOTIATION…
A crash out Brexit is bound to create ill will and could not possibly make the negotiation of a future Agreement easier.
Indeed a moment’s reflection would tell Mr Raab that it would not be in the EU’s interest to give better terms to a country, that had willfully crashed out, than to one which had stood by commitments made by its Prime Minister. To do so would set a dangerous precedent for the EU.
Mr Raab might also remember that any future EU deal with the UK will have to be approved by every EU Parliament, including by Dail Eireann, and by the European Parliament.
A No Deal Brexit now will not finalise anything on 1 November. It will just be the start of years of painful non productive negotiation. This negotiation will be unavoidable because geographically the UK is in the continent of Europe, rather than any other continent that it might prefer to be in. The UK will have to live with the EU and vice versa, because of geography.
A no Deal Brexit on 1 November will poison and prolong what will, in any event, be an essential, but incredibly difficult, negotiation between the UK and the EU on their future relationships.
Compliments of John Bruton

The international community has agreed on a road map for resolving the tax challenges arising from the digitalisation of the economy, and committed to continue working toward a consensus-based long-term solution by the end of 2020, the OECD announced.
The 129 members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) adopted a Programme of Work laying out a process for reaching a new global agreement for taxing multinational enterprises.
The document, which calls for intensifying international discussions around two main pillars, was approved during the May 28-29 plenary meeting of the Inclusive Framework, which brought together 289 delegates from 99 member countries and jurisdictions and 10 observer Organisations. It will be presented by OECD Secretary-General Angel Gurría to G20 Finance Ministers for endorsement during their 8-9 June ministerial meeting in Fukuoka, Japan.
Drawing on analysis from a Policy Note published in January 2019 and informed by a public consultation held in March 2019, the Programme of Work will explore the technical issues to be resolved through the two main pillars. The first pillar will explore potential solutions for determining where tax should be paid and on what basis (“nexus”), as well as what portion of profits could or should be taxed in the jurisdictions where clients or users are located (“profit allocation”).
The second pillar will explore the design of a system to ensure that multinational enterprises – in the digital economy and beyond – pay a minimum level of tax. This pillar would provide countries with a new tool to protect their tax base from profit shifting to low/no-tax jurisdictions, and is intended to address remaining issues identified by the OECD/G20 BEPS initiative.
In 2015 the OECD estimated revenue losses from BEPS of up to USD 240 billion, equivalent to 10% of global corporate tax revenues, and created the Inclusive Forum to co-ordinate international measures to fight BEPS and improve the international tax rules.
“Important progress has been made through the adoption of this new Programme of Work, but there is still a tremendous amount of work to do as we seek to reach, by the end of 2020, a unified long-term solution to the tax challenges posed by digitalisation of the economy,” Mr Gurría said. “Today’s broad agreement on the technical roadmap must be followed by a strong political support toward a solution that maintains, reinforces and improves the international tax system. The health of all our economies depends on it.”
The Inclusive Framework agreed that the technical work must be complemented by an impact assessment of how the proposals will affect government revenue, growth and investment. While countries have organised a series of working groups to address the technical issues, they also recognise that political agreement on a comprehensive and unified solution should be reached as soon as possible, ideally before year-end, to ensure adequate time for completion of the work during 2020.
For more information on the OECD/G20 BEPS Project, see: www.oecd.org/tax/beps/
Compliments of the OECD

By Emanuel Kopp, Daniel Leigh, and Suchanan Tambunlertchai | IMF
US business investment has been on the rise. Since the passage of the Tax Cuts and Jobs Act at the end of 2017, US businesses have bought more machinery, developed software, and created new intellectual property.
Some believe that the key to this growth in business investment has been the Act’s cut to the corporate tax rate from 35 percent to 21 percent, which lowered the cost of capital. Lower capital costs could, at least theoretically, encourage business owners to increase investment.
But our recent study suggests a simpler reason: business investment has been rising because domestic demand and sales have been rising. We also find that rising market power—the ability of companies to charge prices above production costs—has dulled the impact of corporate tax cuts on business investment decisions.
Investment drivers
Growth in sales and optimism about future sales prospects are central forces influencing companies to invest more.
For example, if a business owner expects that she’ll continue to have strong sales in the next quarter, she is more likely to increase investment in her business and boost production.
According to our study—released in the lead up to our recent economic assessment of the United States—virtually all of the growth in business investment since 2017 can be explained by private sector expectations of the future demand for products.
To measure expectations of future product demand, we used private-sector forecasts of US growth in domestic consumption and net exports—that is, the non-investment part of output.
As future sales prospects played a key role in influencing business owners to invest more, what drove consumers to spend more?
The factors that boosted demand in 2018 included households’ higher disposable income due to the tax law’s cut in personal taxes, as well as higher government spending due to the Bipartisan Budget Act of 2018. Other factors, such as reductions in the cost of capital from the lower business tax provisions, appear to explain little of the rise in investment.
Rising corporate market power
Then, what could explain this relatively muted response of investment to a reduction in the effective corporate tax rate?
Our analysis suggests that the sensitivity of investment to tax changes may have declined over the past 30 years because of the rise in the market power of big companies, which, other studies suggest, has occurred across the economy—from airlines to pharmaceuticals to high-tech companies.
As companies gain market power and their respective industries become more concentrated, their profits are increasingly in the form of monopoly rents—well above the normal profits that prevail when there is more competition.
In such an environment, a cut to the corporate income tax rate should increase post-tax monopoly profits but induce a smaller behavioral response in companies’ production and investment decisions.
Therefore, as the chart shows, a tax cut today could be expected to have a smaller impact than in past decades due to the changing nature of the US corporate landscape.
Investment decisions
Enterprise-level data for 2018 also support the notion that rising market power is lessening firms’ sensitivity to tax changes. For listed companies across a range of different US industries,
their increase in investment in 2018 was smaller for firms that had higher markups (the difference between prices and marginal costs) before the tax cuts.
Other factors that have further subdued investment growth since 2017 include, we find, economic policy uncertainty, which has occurred in the context of escalating trade-related tensions between the United States and other countries.
The bottom line is this: strong demand since the passage of the Tax Cuts and Jobs Act has been the principal driver behind corporate investment decisions—not the reduction in the cost of capital coming from the corporate tax cuts themselves.
Moreover, the rise in corporate market power in recent decades appears to have muted the effectiveness of corporate tax cuts as a means for boosting business investment.
Finally, policymakers can support further growth in business investment by reducing economic policy uncertainty, including by resolving trade-related tensions.
Compliments of the International Monetary Fund

European Parliament’s newly constituted Brexit Steering Group chaired by Guy Verhofstadt met with EU negotiator on 24 July following the change of Prime Minister in the UK.

It reiterates the EP’s position in the following statement:
“The Brexit Steering Group (BSG) wishes Mr Johnson, the new UK Prime Minister, well and looks forward to working closely and constructively with him and his Government. It will find the BSG, and the European Parliament, to be an open and effective partner in the Brexit process.
The BSG recalls that the entry into force of all agreements with the UK both before and after its withdrawal from the European Union will require the European Parliament’s consent.
The BSG remains very strongly of the view that, in the event that the UK decides not to revoke Article 50 and stay in the European Union, an orderly exit of the UK from the European Union is in the overwhelming interests of both parties.
An orderly exit is only possible if citizens’ rights, the financial settlement and the backstop, that in all circumstances ensures no hardening of the border on the Island of Ireland, safeguards the Good Friday Agreement and protects the integrity of the Single Market, are guaranteed.
The Withdrawal Agreement agreed between the EU and the UK Government provides these guarantees. The BSG reaffirmed its commitment to the Withdrawal Agreement. It noted that the UK Government, pursuant to European Council Decision (EU) 2019/584, has agreed that the Agreement cannot be reopened.
The BSG is open, however, to consider changes to the Political Declaration, in particular if such changes provided for much greater detail and a more ambitious future EU-UK partnership such that deployment of the Irish backstop would not be necessary.”
Regarding a no-deal Brexit
“The BSG notes that recent statements, not least those made during the Conservative Party leadership campaign, have greatly increased the risk of a disorderly exit of the UK. It points out that a no-deal exit would be economically very damaging, even if such damage would not be inflicted equally on both parties.
It commends the preparedness and contingency measures taken by the EU Institutions and 27 Member States in preparation for a no-deal exit, but stresses that such an exit will not be mitigated by any form of arrangements or mini deals between the EU and the UK. The BSG recalls that there is no transition period without a withdrawal agreement. It reiterates the European Parliament’s determination to ensure that, in a no-deal scenario, there would be no disruption for EU citizens in the UK or for UK citizens in the EU, whose rights should be fully safeguarded.”
Next steps
The BSG will continue to monitor the situation and, working in close liaison with the Parliament’s Conference of Presidents and the EU’s Chief Negotiator, is ready to meet at short notice should this be necessary.
Compliments of the European Parliament

A new Eurobarometer survey released today shows a strong increase in citizens’ positive perception of the European Union across the board – from the economy to the state of democracy. These are the best results since the June 2014 Eurobarometer survey conducted before the Juncker Commission took office.
This latest Standard Eurobarometer survey was conducted after the European elections, between 7 June and 1 July 2019 in all 28 EU countries and five candidate countries. Amongst the main findings are a record-high support for the euro and climate change turning into the second top concern at EU level, after immigration.
 
1. Trust and optimism about the future at their highest since 2014
Trust in the EU is at its highest level since 2014 and remains higher than trust in national governments or parliaments. Trust in the EU has increased in 20 Member States, with the highest scores in Lithuania (72%), Denmark (68%) and Estonia (60%). In addition, over half of the respondents “tend to trust” the EU in Luxembourg (59%), Finland (58%), Portugal (57%), Malta and Sweden (both 56%), Bulgaria and Hungary (both 55%), Ireland, Poland, the Netherlands and Cyprus (all 54%), Romania and Austria (both 52%) and Latvia and Belgium (both 51%).
Since the last Standard Eurobarometer survey in autumn 2018, the proportion of respondents who have a positive image of the EU (45%) has increased in 23 EU Member States, most strikingly in Cyprus (47%, +11), Hungary (52%, +9) Greece (33%, +8), Romania (60%, +8) and Portugal (60%, +7). A two-percentage point increase has been registered since autumn 2018 (+10 since spring 2014), reaching its highest level ever for the past 10 years. 37% (+1, compared to autumn 2018) of respondents have a neutral image of the EU, while less than a fifth have a negative image (17%, -3) –is the lowest score in 10 years.
A majority of Europeans are optimistic about the future of the EU(61%, +3 percentage points), while only 34% (-3) are pessimistic. Optimism is highest in Ireland (85%), Denmark (79%), Lithuania (76%) and Poland (74%). At the other end of the scale, optimism is less pronounced in the United Kingdom (47% vs 46%) and in France (50% vs 45%).
55% of Europeans say they are satisfied with the way democracy works in the EU, the highest score since autumn 2004 (+5 percentage points since autumn 2018; +11 since spring 2014) while the number of those “not satisfied” has decreased by five percentage points, to 36%.
A majority of Europeans agree that “their voice counts in the EU”.The EU-28 average reaches 56% (+7 percentage points since autumn 2018; +11 since spring 2018; +14 since spring 2014), with the highest scores being observed in Sweden (86%), Denmark (81%) and Netherlands (76%).
 
2. Record high support for the euro 
Support for the Economic and Monetary Union and for the euro reaches a new record high,with more than three-quarters of respondents (76%, +1 percentage point; +9 since spring 2014) in the Euro area in favour of the EU’s single currency.In the EU as a whole, support for the euro is stable at 62%.
Positive opinions on the situation of the national economies prevail (with 49% judging the situation as being good and 47% judging it as being bad). The majority of respondents in 17 Member States (16 in autumn 2018) state that the national economic situation is good. Luxembourg (94%), Denmark (91%) and the Netherlands (90%) are the countries with the highest scores. The lowest percentage of positive opinions is observed in Greece (7%), Croatia and Bulgaria (both 20%), Italy (22%), Spain (26%) and France (29%).
 
3.EU citizenship and free movement seen as main EU achievements
In all 28 Member States, more than half of respondents feel that they are citizens of the EU. Across the EU as a whole, 73% feel this way (+2 percentage points since autumn 2018), and at a national level the scores range from 93% in Luxembourg, 88% in Germany, 87% in Spain to 57% in both Greece and Italy and 52% in Bulgaria.
A large majority of EU citizens support “the free movement of EU citizens who can live, work, study and do business anywhere in the EU” (81%, -2 percentage points since autumn 2018), and in every EU Member State more than two-thirds of respondents share this view, from Lithuania (94%) to Italy and the UK (both 68%).
 
4. Top concerns at EU and national level: climate change and environment on the rise
Immigration remains the main concern at EU level, with 34% of mentions, despite a strong decrease (-6 percentage points since autumn 2018). Climate change, which was ranked fifth in autumn 2018, is now the second most important concern after a strong increase(+6 since autumn 2018). Three concerns obtain identical scores: the economic situation (18%, unchanged), the state of Member States’ public finances (18%, -1) and terrorism (18%, -2), followed by the environment – main concern for 13% of the respondents, registering a four-percentage point increase.
Unemployment, which is nowin seventh position at EU level (12%), remains the main concern at national level (21%, -2 percentage points), together with rising prices/inflation/cost of living (21%, unchanged) and health and social security (21%, +1). The environment, climate and energy issues follow very closely after a strong increase (20%, +6). Immigration, with 17% of mentions (-4 percentage points since autumn 2018, and -19 since autumn 2015), falls out of the top three concerns at national level for the first time since spring 2014. The economic situation is in sixth place (16%, +1).
Background
The “Spring 2019 – Standard Eurobarometer” (EB 91) was conducted through face-to-face interviews between7 June and 1 July 2019 across the 28 EU Member States and in the candidate countries[1]. 27,464 interviews were conducted in the EU28 Member States between 7 and 25 June 2019.
For More Information
Standard Eurobarometer 91http://ec.europa.eu/commfrontoffice/publicopinion/index.cfm/survey/getsurveydetail/instruments/standard/surveyky/2253
[1] The 28 European Union (EU) Member States, five candidate countries (North Macedonia, Turkey, Montenegro, Serbia and Albania) and the Turkish Cypriot Community in the part of the country that is not controlled by the government of the Republic of Cyprus.
Compliments of the European Commission

The European Union and the United States, represented respectively by Stavros Lambrinidis, EU Ambassador to the United States and Jani Raappana, Deputy Head of Mission, for the Finnish Presidency of the Council of the EU, and Robert Lighthizer, U.S. Trade Representative, signed today in Washington D.C. an agreement reviewing the functioning of an existing quota to import hormone-free beef into the EU.
This is another deliverable of the cooperation fostered by the Joint Statement issued by Presidents Juncker and Trump in July 2018 establishing a positive EU-U.S. bilateral trade agenda.
In 2009, the EU and the U.S. concluded a Memorandum of Understanding (MoU), revised in 2014, which provides a solution to a longstanding dispute in the World Trade Organization (WTO) regarding the use of certain growth-promoting hormones in beef production. Under the agreement, a 45,000 tonnes quota of non-hormone treated beef was open by the EU to qualifying suppliers, which included the United States.
The agreement signed today is fully in line with WTO rules and establishes that that 35,000 tonnes of this quota will now be allocated to the U.S., phased over a 7-year period, with the remaining amount left available for all other exporters.
The overall volume of the quota opened in 2009 remains unchanged, just like the quality and safety of beef imported into the EU, which will remain in compliance with the high European standards.
The agreement was negotiated on a basis of a mandate from EU Member States and approved by them in the Council on 15 July 2019. The Council will now recommend the agreement to the European Parliament for formal approval, so that it can enter into force in the near future.
For more information
The EU and the U.S. reach an agreement on imports of hormone-free beef
Compliments of the European Commission

Slow growth, high uncertainty and rising levels of inequality should prompt policy makers to take urgent action to achieve stronger, sustainable and more inclusive growth, according to the OECD’s annual Going for Growth report.
Going for Growth 2019 points out that the weakening of growth comes at a time when globalisation, digitalisation, population ageing and environmental degradation are key forces shaping economic developments. To better manage these megatrends, governments must carefully select, prepare, prioritise and implement country-specific structural reforms that boost long-term growth, improve competitiveness and productivity, create jobs and ensure a cleaner environment and equal opportunities for all.
This year’s edition presents the top structural reform priorities in 46 OECD and non-OECD economies, alongside assessment of progress countries have made on key reforms in the past years. It points to a disappointing pace of reforms in 2017-2018, finding little sign of an imminent pick-up from the already modest pace of reform observed in the previous two years.
“As growth is slowing down, and new technologies are rapidly transforming our economies, it is urgent to pursue reform efforts to boost inclusive and sustainable growth,” said OECD Secretary-General Angel Gurría, launching the report in the run-up to the 17-18 July meeting of G7 finance ministers in Chantilly, France. “Going for Growth points policymakers where to focus their efforts to boost growth, enhance the equality of opportunities and inclusiveness and improve environmental sustainability. Our key recommendation extends beyond the G7, to all OECD and key non-member economies: the time for reform is now, for better lives today and for future generations!”
French Minister of Economy and Finance Bruno Le Maire, host of this year’s G7 finance ministers meeting, added: “Ensuring strong, inclusive and sustainable growth is a challenge for all G7 countries. In France, we take this very seriously, as evidenced by the labour market, education and tax reforms adopted by our government in recent years to improve competitiveness and transform the economy in the face of ecological and digital transitions. On behalf of the Government, I am pleased that OECD’s Going for Growth recognises our efforts. And we will continue to pursue reforms and invest in innovation, which is the key to tomorrow’s growth.”
Going for Growth 2019 points out that reform priorities to boost inclusive growth differ across countries. A common feature is that many of them can make the opportunities for succeeding in life more equal across workers and firms.
Education is the most common reform priority across countries and it is crucial to make sure current and future generations find quality employment and lead more productive careers. Addressing the pertinent issue of labour market segmentation and improving the conditions for labour market inclusion of women, migrants, minorities and older workers are also crucial so everyone can benefit from growth.
Shifting taxation from income to property would boost growth, particularly in advanced economies. Better public sector efficiency, rule of law and adequate, accessible infrastructure provision are equally important to save resources, access markets and create conditions for businesses to invest in innovation, in particular – but not only – in emerging-market economies.
Finally, reforms to boost competition in markets for goods and services are often difficult. But opening up markets to entry, competition and foreign trade and investment is essential for innovation, the diffusion of digital technologies and ultimately productivity growth and social inclusion. Such reforms remain among the most frequent Going for Growth priorities.
Among the highlights in this year’s report is an increased focus on reforms to make growth environmentally sustainable. Recognising the major challenges that still exist for addressing pollution, climate change and environmental sustainability, the report suggests countries make better use of environmental taxation, phase out agricultural subsidies and environmentally harmful tax breaks, and take additional steps to reduce emissions from transport, including more investment in better and low-emission public transport.
The main conclusions, as well as individual country notes on G20 countries, are accessible at: http://www.oecd.org/economy/going-for-growth/. You are invited to include this link in stories on the launch.
Compliments of the OECD

Greece has now entered a period of economic growth that puts it among the top performers in the eurozone. It must now persevere with efforts to address crisis legacies and pursue needed reforms to ensure continued success, says the IMF in its recent assessment of the country’s economy.
As the IMF concludes its latest assessment on the state of the Greek economy, IMF Country Focus sat down with Peter Dohlman, IMF mission chief for Greece, to discuss the report’s findings, key recommendations, and the IMF’s relationship with Greece.
What is the current status of Greece’s relationship with the IMF?
Greece no longer has a borrowing arrangement with the IMF. Instead, our relationship with Greece is centered on two formal consultations each year covering core macroeconomic and financial sector issues. As you know, we hold annual Article IV consultations with all our members, where they undergo “economic health checks,” and in the case of Greece, this took place last July. In addition, Greece is covered by what is known as Post-Program Monitoring, where we hold a second annual discussion with countries that have large outstanding loans from the IMF. Greece currently owes about SDR7.7 billion (€9.4 billion) to the IMF, making it the third largest borrower after Argentina and Ukraine.
How has the economy performed of late, and what is your assessment of future performance?
There are a lot of positive developments to point to. We expect growth to accelerate to nearly 2½ percent this year from around 2 percent in 2018. This puts Greece in the upper tier of the eurozone growth table. Unemployment is coming down, though is still unacceptably high, especially for young people. The government is meeting its ambitious fiscal targets agreed with European member states, though not without some cost to growth. Market access has been re-established with two successful government bond issuances this year.
We also see normalization in other areas. For example, customers are now free to move their cash to any bank in Greece, and the banks themselves have almost fully repaid emergency liquidity assistance provided by the European Central Bank. Over the medium term, we expect growth to gradually moderate as the economy reaches full employment.
What are some of the vulnerabilities and risks facing Greece’s economy?
Despite its hard-earned economic stability, Greece remains a country confronted by elevated vulnerabilities and weak payment discipline. This is reflected, for example, in the very high nonperforming loan ratios in the banks and elevated levels of private- and public-sector debt and arrears.
On the domestic side, there are risks from election year pressures on policies—such as to increase wages—as well as possible fatigue after years of cost cutting and reform efforts. The necessary adjustment away from the unsustainable policies that led to the crisis has imposed a heavy cost, despite efforts to protect the most vulnerable through targeted support—such as the guaranteed minimum income scheme. We also see fiscal risks from various court cases now underway that are challenging key government policies. Recent labor market policy decisions, notably the sharp hike in the minimum wage and renewed collective bargaining arrangements, help boost incomes but also increase costs and reduce firms’ abilities to respond to changing market conditions, which in turn pose risks to employment and competitiveness.
On the external side, we see risks from a potential tightening of global financial conditions or a further slowdown in growth in the EU or emerging markets.
How can Greece address these challenges and keep the economy on track?
In our report, we focus on three policy areas.
First, we are recommending policies to enhance labor market flexibility and boost productivity and competitiveness. This means that Greece should find ways to help employers more easily adjust to changing market conditions and maintain customers through addressing the rigidities in labor markets, but also through policies to help reduce nonwage costs for firms—such as lowering the tax burden and financing costs. Relatedly, product market reforms aimed at improving product choice, quality, and competition continue to lag in Greece. A renewed reform push in this area would also help support higher employment and growth.
Second, Greece can do more to support growth and social inclusion by improving the fiscal policy mix. For example, through the planned broadening of the personal income tax next year and stronger tax compliance, Greece can lower tax rates and still boost revenues to increase investment and targeted social spending. Further efforts are needed to upgrade and modernize the system of social protection, which would also facilitate ongoing efforts to improve competitiveness. In addition, we are recommending that the government prepare a contingency plan in the event large fiscal risks materialize.
Third, we are urging the government to do more to fix banks, which remain crippled by past-due loans. This will help households and businesses to once again be able to borrow at reasonable interest rates. Together, these policies can spur more growth and strengthen the resilience of the Greek economy to future shocks.
We will pick up on these issues again during the 2019 Article IV mission, scheduled to take place this summer.
Read the report HERE
Compliments of the International Monetary Fund

Migration represents challenges and opportunities for Europe. Learn how the EU deals with refugee movements and asylum.

The unprecedented arrival of refugees and irregular migrants in the EU, which peaked in 2015, required an EU response on a number of levels. Firstly, policies to handle regular and irregular immigration, and secondly, common EU-wide rules on asylum. The migrant influx also resulted in a need for additional measures and reforms to ensure border security as well as a fairer distribution of asylum seekers among EU countries.

The migration issue
In recent years, Europe has had to respond to the most severe migratory challenge since World War II. In 2015, 1.25 million first-time asylum applicants were registered in the EU; by 2018, this figure had dropped to 581,000 applicants. In 2018, 116,647 people reached Europe by sea, compared to more than one million in 2015. In 2018, the total number of illegal border-crossings into the EU dropped to 150,114, its lowest level in five years and 92% below the peak of the migratory crisis in 2015.
While migration flows have subsided, the crisis has exposed shortcomings in the European asylum system. Parliament has sought to combat this by reforming EU asylum rules as well as strengthening EU border controls.
Read our articles about the migrant crisis in Europe and EU measures to manage migration.

 
European immigration policy
The immigration policy at European level deals both with legal and irregular immigration.  Regarding regular immigration, the EU decides on conditions for legal entry and residence. Member states keep the right to rule on admission volumes for people coming from non-EU countries to seek work.
The European Union tackles also irregular immigration, especially through a return policy that respects fundamental rights. With regards to integration, there is no harmonisation of national legislations. However, the EU can play a supporting role, especially financially.
The European Parliament is actively involved, in the adoption of new laws on irregular and regular immigration. It is a full co-legislator together with the Council representing member states on these matters since the entry into force of the Lisbon Treaty in 2009.
For greater details please read the fact sheet on the EU’s immigration policy.

European Asylum policy
Since 1999, the EU has been working to create a Common European Asylum System (CEAS). For the common system to work, it must have:
consistent rules for granting refugee status across all member states
a mechanism for determining which member state is responsible for considering an asylum application
standards on reception conditions
partnerships and cooperation with non-EU countries
With the Lisbon Treaty the European Parliament decides on an equal footing with the Council of the EU on asylum-related legislation.
Check out our fact sheet on the EU asylum policy for more information.
Compliments of the European Parliament

Sabine Weyand, EU’s new Director-General for Trade, gives an update on EU-US trade and shares her insights on why the EU has been so busy striking new trade agreements in our latest EU Now podcast. 
Find the podcast HERE