Following a lengthy debate, it appears that the EU has reached common ground and agreed on a new migration deal. The significance of the deal will not only ensure that economic migrants are dealt with more promptly categorised differently from refugees. The deal could bear even more significance following Italian elections that empowered a new populist government which questions the EU.
Despite EU migration falling significantly from its height 2-3 years ago there has been growing tension between some of the 27 nations. Currently the majority of refugees and migrant wash up on Italian shores to claim asylum. This factor combined with the new ‘Eurosceptic’ sentiment had placed immense pressure on the EU, especially following the UK EU referendum and eventual departure from the union.
In typical fashion, the latest EU migrant agreement comes across as ambiguous. Essentially any rescued migrant on EU territory would be taken to ‘’control centres’’ the location of the centres as yet remain unknown. However, it is understood that they will be spread across the bloc. Countries will still have to agree to accept the presence of a centre, but it does have appeared to pacified nations that were feeling overwhelmed by the floods of migrants.
Once housed at the control centres quicker processing would take place distinguishing economic migrants from refugees. Relocation measures to countries would not be compulsory, a term which was well received by central European nations.
The union also plans to offer assistance to boost externals borders in countries such as Morocco, Libya, Niger Algeria, Egypt and Turkey. EU nations also agreed to ensure all possible measures are taken to ensure measure to ensure migrants are unable to cross internal borders within Europe.
The recent agreement will provide much-needed respite for Angela Merkel, who in recent months had seen her recently formed the coalition government in a fragile state. Merkel and the EU will undoubtedly be pleased that they have placated the Italian prime minister Giuseppe Conte who stated that his nation no longer ‘felt alone’ on immigration.
The French President also claimed the meeting as a victory stating that it was an important step towards delivered a solution and demonstrated cooperation between the 27 EU nations.
Merkel’s coalition partner the Christian Social Union also reacted positively to the news saying that the agreements signalled ‘something has moved in the right direction’.
The positive outlook was well received by markets and Euro exchange rates have enjoyed a strong rally, in particular against the Dollar and Pound amongst other currencies. Condemning the GBP/EUR to well below the 1.13 point.
Despite the many words of encouragement from top EU nations many involved have undermined this week’s agreement. Despite applause from Italy, the nation has no immediate plans to create control centres. A position shared by Austria France and Germany.
Currently, migrants that arrive in an EU nation must be processed by that very nation. Italy is pushing for this rule to be torn up as it due to its proximate location to North Africa it receives a disproportionate number of migrants. However, Emmanuel Macron believes the rule should remain.
Therefore, the pact may not be as cut and dry as many, including financial markets had interpreted.
The European Union has been more prudent in its reaction to the EU migrant deal with Donald Tusk the European Council president stating that:
“It was far too early to talk about success”.
These comments from both Donald Tusk and other nations have caused EU countries to defend the progress and significance of the deal.
Developments of the deal boosted Euro exchange rates, which had found themselves dead on their feet. The single currency enjoyed notable gains against the Dollar following the news rallying by 0.7% on Friday. Erasing the losses seen on Thursday which were attributed to political uncertainty relating to the migration pact.
Euro bulls will be happy to see some sustainable gains for the single currency. The agreement will allow Angela Merkel to pacify her coalition partners in the CSU party offering more political stability to the leading European nation.
The news of the pact saw a collapse in GBP/EUR exchange rates with the pair touching a 1.1254, this represented a three month low seeing the pair break through the important support at 1.13. The Pound has since scrabbled back to 1.1305 before closing trading in the US session.
EUR/USD remains well placed to trade higher and if able to break certain support levels at 1.1720 could see a rally further and test the 1.118. Whilst we will have to see if this becomes a general trend and return of Euro strength recent data will not have hindered the pair.
GBP/EUR will remain vulnerable this week and almost certainly susceptible to falling below the support level of 1.13. The halt to Euro follows rumours that the European Central Bank could be looking at buying more longer-term bonds when reinvesting the €2.5 trillion QE program. Currently, the pair finds itself sitting between two technical levels and could break either way.