EU aims to agree ‘staged approach’ to ease Syria sanctions

Good morning. Big businesses and capitals are heaping pressure on Brussels to pare back its sustainability agenda, amid fierce debate about how Donald Trump’s deregulation drive in the US will make the EU even less competitive.

Today, I unpack plans to ease sanctions on Syria which EU foreign ministers will debate this afternoon, and Romania’s finance minister tells our Balkan correspondent that Bucharest will struggle to both raise defence spending and hit EU budget benchmarks.

Big ease

EU foreign ministers meet today to debate a six-step process to ease sanctions on Syria, as Austria and Italy call for a “prompt and substantial” lifting of measures which they argue is crucial for the country’s postwar recovery — and Brussels’ reputation as a “credible global actor”.

Context: The EU imposed sanctions on vast swaths of Syria’s economy under former dictator Bashar al-Assad. Forces led by Islamist group Hayat Tahrir al-Sham (HTS) toppled him in December. HTS is designated as a terror group by the EU and the UN due to its former links to al-Qaeda, which it split from in 2016.

A six-phase “road map” prepared by the EU’s foreign service advocates a “staged approach” to lifting sanctions on the country “to incentivise peaceful transition and reconstruction”. An arms embargo, sanctions on equipment used for internal repression and measures targeting Assad regime officials would be exempt, the document states.

Political agreement on the plan, dubbed “broad suspension — minus X”, could be reached at today’s meeting, according to the EU foreign service’s proposal. Specific details and legal processes would be decided by technical committees and formally agreed by capitals before June.

In a letter to EU chief diplomat Kaja Kallas, who will chair today’s meeting, Austria’s foreign minister Alexander Schallenberg and his Italian colleague Antonio Tajani wrote that they “strongly advocate for a comprehensive easing of the EU sanctions regime towards Syria”, arguing that it would facilitate “access to humanitarian aid and stimulate foreign investment”.

Vienna and Rome’s enthusiasm comes as some capitals remain cautious towards HTS and argue for tempered sanctions-easing as leverage against the country’s nascent post-Assad governance structures.

“There are strong political signals that sanctions will be lifted, but at the same time there’s a lot of uncertainties [about HTS],” said one EU official involved in the negotiations. “The sequencing and speed are for member states to decide.”

“Syria stands at the crossroads,” said Schallenberg, who also serves as Austria’s interim chancellor. “We are not naive: If the new leadership in Damascus fails to meet its obligations, the measures will be reinstated.”

Chart du jour: Rome vs Milan

“This is the final battle between Roman [politics] and Milanese finance,” said one official of Italy’s state-backed banking consolidation drive.

Guns vs butter

Donald Trump’s calls to ramp up Nato defence spending have caught many European allies at a time of high debts and deficits, leaving militaries to compete for scarce financial resources.

That competition is especially intense in Romania, which runs the EU’s highest budget gap, its finance minister tells Marton Dunai.

Context: Romania has been able to keep relatively low levels of debt and tight financial conditions — until recently. Under the previous ruling coalition, the deficit has ballooned to the widest in Europe at more than 8 per cent of GDP, just as the continent faces its toughest security challenge in more than a generation amid accusations of Russian meddling.

With plans to adopt the euro, Romania has to maintain a budget deficit of less than 3 per cent of its economic output and limit its debt to less than 60 per cent. But by continuing to overshoot the benchmarks, it can’t leave the bloc’s so-called excessive deficit procedure, much less meet the strict criteria to join the single currency.

The new governing coalition that took office in December, headed again by incumbent Prime Minister Marcel Ciolacu of the Social Democrats, has no choice but austerity.

But while finance minister Barna Tánczos plans significant spending cuts, he told the FT they wouldn’t affect the military, adding that Bucharest plans to follow defence hawks such as Poland and the Baltics to higher spending levels as best as it can.

“Romania has been and will remain a reliable Nato partner,” Tánczos said, adding that Romania would maintain the Nato defence spending target of 2 per cent of GDP this year despite budgetary pressures.

“We don’t only look at the operation of the defence system. Like Poland and others, we can create a robust background for defence investments,” Tánczos said.

Tánczos said he would raise taxes by about €1.5bn this year, and cut spending by €26bn in the €350bn economy. The cuts will mostly affect public sector wages, pensions, tax breaks and pet political projects.

What to watch today

1. EU foreign ministers meet.

2. EU agriculture and fisheries ministers meet.

3. European Commission president Ursula von der Leyen meets Luxembourg’s Prime Minister Luc Frieden in Luxembourg.

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