Europe Looks Left
But also — M5S, Orbán, Inflation, Meta, ITA, EVs
Hi! Today is 9 July, and here is your EU news summary for the week. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and LinkedIn.
The Briefing
Busy week for the Old Continent. In Paris, the results of the snap legislative elections defy all polls, with the left alliance coming in first place. In Brussels, a new political group becomes the third political force in the European Parliament. In London, the Labour Party comes into power with the intention of strengthening the UK-EU ties (but how far are both sides willing to go?).
TO THE LEFT • Big surprise in France with the announcement of the results of the snap legislative elections on July 7. Without any electoral alliance being able to claim an absolute majority, it is the New Popular Front (NFP, left and far-left) that came first, followed by the presidential majority and the far-right National Rally (RN).
The NFP intends to implement a program that includes the repeal of the pension reform, a 13% increase in the minimum wage, a freeze on energy prices and a sharp increase in taxation.
The political fragmentation of the National Assembly — where no group has more than a third of the seats — casts uncertainty over how the results will translate into the ability to influence policy-making. Will there be a ruling coalition — something that France is not familiar with? If yes, what will it look like?
SEEN FROM BRUSSELS • The French parliamentary negotiations will be watched closely in Brussels, where major items are currently being negotiated.
After the EU-27 reached an agreement at the end of June on the quartet at the head of the European institutions, 26 commissioners remain to be appointed and political priorities to be defined. The summer agenda in Paris as well as in Brussels leaves little time to sip Lambrusco in Positano.
In the immediate future, European institutions will have to work with a divided France whose President’s legitimacy in the European Council is weakened. The current situation — the government currently only takes care of day-to-day business (“affaires courantes”) before a new one is formed — does not allow France to engage in (or put forward) major projects at the European level.
BUDGET • It is also difficult to say which ministers (and on what program) will carry France's voice in the Council of the EU. Among the important deadlines, there is the excessive deficit procedure that should be opened against France in July.
Regardless of the excessive deficit procedure, the French government must present its draft budget plan to the European Commission by September 20. This draft budget must take into account the recommendations already addressed to France in the context of the European Semester in May. Negotiations on France’s yearly budget in the National Assembly will certainly be intense.
In 2018, the European Commission rejected Italy's draft budget for 2019. The government of Giuseppe Conte — resulting from the coalition between Matteo Salvini's League and Luigi di Maio's Five Star Movement — was forced to revise it within three weeks.
PATRIOTS • At the European Parliament, major political reorganizations are also underway. The Identity and Democracy (ID) group, to which the RN belongs, is collapsing in favor of a new alliance announced by Viktor Orbán: the Patriots of Europe.
A week ago, the alliance included Fidesz (Hungary), the Freedom Party (Austrian) and the Action of Dissatisfied Citizens (Czech Republic). Since then, 11 movements have joined it, notably the RN (France), the Christian Democratic People's Party (Hungary), and The League (Italy), Vox (Spain), Vlaams Belang (Belgium), Chega (Portugal), Voice of Reason (Greece), Party for Freedom (Netherlands), Oath and Motorists (Czech Republic), the Danish People's Party, and Latvia First.
Jordan Bardella (RN) will be the group’s president — the French delegation is the biggest — and Kinga Gál (Fidesz) will be the group’s first vice-president.
On paper, the group of European Patriots would be very similar to the ID group — with a new name, and Orbán in it. It remains to be seen whether it truly brings something new.
The new group is now the third political force in the European Parliament, ahead of Renew Europe and the ECR. This is bad news for both groups:
The pro-European majority between the Social Democrats (S&D, center-left), the European People's Party (EPP, center-right) and the liberals will hold, but the alliance’s legitimacy would be increasingly called into question.
The ECR, hitherto expected to become an essential group in the EU’s political landscape, is not having the time of its life. Giorgia Meloni was excluded from many negotiations on the "top jobs" within the European institutions, and is now seeing a rival group overtake her. Additionally, Vox left the ECR to join the Patriots of Europe.
LABOUR • Let’s cross the Channel: in the UK, the victory of the Labour Party in the General elections could improve relations between Brussels and London.
"With Labour, Britain will stay outside of the EU”, Labour's manifesto for the elections reads.
Keir Starmer's line on Brexit is clear: the UK will not join the common market or the customs union, and will not seek to rejoin the EU.
In September 2023, Starmer said he wanted to renegotiate the post-Brexit free trade agreement between the EU and the UK (the Trade and Cooperation Agreement, TCA). But he retracted as the EU’s reaction to his statements was negative — on the European side, only a limited revision is envisaged: Europeans do not want to reopen these complex negotiations.
In terms of trade, Labour intends to focus on technical additions to the TCA: agreements on veterinary standards, professional qualifications, and mobility. The priorities are clear.
LEFT ON READ • In Brussels, the willingness to engage in negotiations on these issues is not as strong, which could undermine Labour's ambitions:
Asymmetric relations: In 2023, the UK accounted for only 10.1% of the EU's trade in goods. Conversely, the bloc accounted for more than half of UK trade (reaching the highest level since 2008!). Paradoxically, Brexit has made the UK more dependent on the EU in terms of trade: this is mainly due to a decline in the UK's trade with the rest of the world (the country has notably suffered from a disintegration from EU supply chains).
Lack of trust: "Fundamentally, the EU still sees the UK as an unreliable partner", explains Joël Reland from the think tank UK in a Changing Europe (UKICE). "British politicians also acquired a reputation during the Brexit negotiations for a poor grasp of detail and unwillingness to accept trade-offs."
But with freshly elected individuals on both sides of the Channel, now might be a good occasion to start engaging again.
SECURITY • Security is an area that could lend itself to a more straightforward entente.
The new British Foreign Secretary, David Lammy, told the Guardian he was considering a joint statement on security issues, both in the strict sense (defense) and on energy and climate.
Lammy has gone on a European tour in Germany, Poland and Sweden.
The next meeting of the European Political Community — an informal body aimed at strengthening cohesion, cooperation and dialogue among all countries on the European continent — will also take place in the UK on July 18.
In Case You Missed It
M5S • The Italian Movimento 5 Stelle (M5S), or Five Star Movement, led by Giuseppe Conte, joined the Left Group (which includes, among others, The Unbowed France, Podemos, and Die Linke) in the European Parliament.
The party will have observer status for 6 months to "confirm political convergence" — M5S is known for its hard-to-grasp political stance. The party has been unaffiliated for several years.
ORBAN • Hungarian Prime Minister Viktor Orbán made a surprise visit to Kyiv (2 July) followed by a trip to Moscow (5 July) to meet with Vladimir Putin. Hungary took over the rotating presidency of the EU Council on 1 July.
During his visit to Kyiv, Viktor Orbán emphasized the issue of the rights of Hungarian minorities in Ukraine and proposed a ceasefire to accelerate peace negotiations.
The trip to Moscow — which Hungary kept secret until the last moment — caused deep unease at the European level. President Orbán is Russia's closest ally in Europe. Hungary has repeatedly hindered EU support to Ukraine.
"The EU rotating presidency has no mandate to engage with Russia on behalf of the EU", said European Council President Charles Michel. EU foreign policy chief Josep Borrell also stated that by visiting Moscow, "the Hungarian Prime Minister is not representing the EU in any form".
INFLATION • The European Central Bank held its annual forum in Sintra, Portugal from 1-3 July 1-3.
The annual inflation rate in the euro area fell to 2.5% in June 2024 (2.6% in May 2024). Christine Lagarde anticipates a return to 2% inflation in the second half of 2025, a "remarkable" outcome after the recent inflation peaks.
But Lagarde and Philip Lane, the ECB's chief economist, said the Eurozone shouldn't declare victory too soon. Inflation in services remains high at 4.1% in June.
This makes another rate cut in July unlikely. Unlike the Fed, the ECB decided to cut interest rates in early June (to 3.75%).
META • The Commission is taking aim at Meta's "pay or consent" model developed in 2023. DG Competition sent the company preliminary findings, a first step that should lead to the opening of a formal investigation.
This "pay-or-consent" model is Meta's proposed response to comply with the DMA, which requires user consent to combine personal data exploited by gatekeepers like Meta.
"Pay or consent" leaves users of Facebook and Instagram services with a binary choice: (i) a monthly paid subscription without ads or (ii) free access to these social networks with targeted ads.
According to the Commission, Meta's proposed option would not comply with the DMA because it does not allow users to freely exercise their consent and offers them a downgraded service if they refuse to share their personal data.
ITA • The Commission has authorized (with conditions) the acquisition of joint control of ITA Airways by German airline Lufthansa and the Italian Ministry of Economy.
Lufthansa is entering ITA Airways' capital with a 41% stake for an investment of 325 million euros. The remaining shares can be subsequently acquired by Lufthansa from the Italian government.
The Italian government was looking for a buyer for ITA Airways, which became the Italian national airline after Alitalia's bankruptcy in 2021. The case had become a political issue between the Italian government and the European Commission.
EVs • As announced, the European Commission has imposed countervailing duties targeting Chinese electric vehicles. These tariffs are the culmination of a nine-month investigation into subsidies granted by China to automakers.
Tariffs range from 17.4% for BYD to 37.6% for SAIC. For automakers who did not cooperate with the investigation, the rate is 37.6%. These duties are in addition to the 10% in effect for electric vehicle imports into Europe.
Germany, Sweden or Hungary were opposed to the decision, fearing trade retaliation measures but also because tariffs hit vehicles produced by companies such as BMW as part of joint ventures with a Chinese partner.
What We’ve Been Reading
The CER has two readables: Aslak Berg, Ian Bond, Zach Meyers and Luigi Scazzieri explore possible directions for a new agenda for UK-EU relations; in another brief, Aslak Berg asks if Britain should pursue dynamic alignment with the EU.
For the ECIPE, Andrea Dugo and Fredrik Erixon outline a European economic strategy focused on innovation, reform of capital markets and lighter regulation.
This edition was prepared by the What’s up EU team, including Maxence de La Rochère, Mark Soler, Lidia Bilali and Marwan Ben Moussa. See you next week!