Last week, President Charles Michel called a special meeting of the European Council, That is, a meeting of the EU country leaders.
However, the summit was postponed until this week. This was due to Michel possibly being exposed to the COVID virus, causing him to self-isolate.
Having tested negative for a second time this week, the president has ended his quarantine, and leaders are now ready to begin discussions.
The agenda includes a few mundane, technical things.
But, what could have a bigger impact on the markets, is the special event of the session: foreign policy in particular regarding Turkey and China.
EU Single Market Discussion
Let’s get the housekeeping out of the way first.
The first item on the agenda is likely to not generate much controversy. Nor will it have an immediate impact on the markets. And that is the technical discussion on the implementation of the recovery package.
We are expecting the leaders to reaffirm their commitment to re-establishing the single market as soon as possible (i.e lifting COVID restrictions between countries.)
The other issue is “accelerating the digital transition”. In practical terms, this means that there will likely be technocratic proposals on how to spend the massive aid package on “forward technology”.
Or, as outlined by European Commission President von der Leyen, more money and powers going to EU-wide institutions.
The Big Event
The Consilium’s extraordinary meeting had been initially billed to deal with coronavirus measures. However, the event that has fast overtaken that in the media is the ongoing issue with Turkey.
This isn’t the first time that the “situation in the Eastern Mediterranean” has been raised at the Council. However, this time, we expect some kind of agreement on what to do about it.
Naturally, this could raise tensions with Turkey, impact the lira, and increase general risk-off sentiment over related uncertainty.
In addition, there is the ever-present issue of both immigration and petroleum supply.
Germany has been working against the clock to get the Nord Stream pipeline in operation, and it is not yet functional. Europe still relies on petroleum shipped through Ukraine and Turkey.
Turkey has, in the past, threatened to open its borders to allow millions of refugees currently living in its territory to migrate to Europe.
The migratory crisis in the middle of the last decade put an enormous political strain on Europe. And this would be even worse in a pandemic.
Turkey has not specifically raised that as a possibility. However, as yet, Europe hasn’t collectively done anything about their aspirations in the Mediterranean.
President Michel has stated that “all measures are on the table”.
But the EU is struggling with internal political differences that have led many analysts to suspect this meeting will end without anything more than stern words directed at Turkey. And, perhaps, promises of sanctions that might not materialize.
Ahead of the meeting, Cyprus voted against the stanchions of Belarus to pressure the bloc into imposing sanctions on Turkey. Germany, however, prefers a more conciliatory tone towards Ankara.
So far, they are yet to reach an agreement.