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September 22, 2017


Renaissance woman

It’s speech day today. British politicians always think that they have to "go to Europe" to deliver important speeches on the UK’s relationship with the EU. Theresa May will be in Florence this morning to give a long-awaited and well-leaked speech, in which she will offer the contours of a financial settlement, and of a deal for EU citizens, as the FT reports this morning. The main items were leaked to the British press last night, but it is probably still worth listening to the speech itself because it may contain unleaked surprises, and simply to judge its tone. 

May will apparently not produce a financial settlement number, which is just as well since the settlement costs cannot be reduced to a single number in any case. What matters is that she takes the path we have advocated since after the referendum: use a transition to smooth out the financial burden, and to get ready for a trade agreement. May will make it clear in a her speech that no EU country should have to pay more into the current EU budget than envisaged, which means that the transition will last for at least one year and nine months. There are also reports that she will want to cap it at two years, which leaves only a very small time window for the length of the actual transition. This is in accordance with the EU’s own views. 

She is also expected to offer more clarity about the deal for EU citizens, in particular the legal enforcement. The agreement will be enshrined in the Article 50 treaty, which means that UK courts will be bound by it. The UK parliament will therefore not be able to amend it. Furthermore, the UK seems ready to take into account future case law of the ECJ in relation to EU citizens.

There are still many technical issues to be dealt with in this respect, especially in respect of the procedure, but we expect this issue will now be settled. 

The Guardian emphasises that May will today ask EU leaders to be imaginative and creative, which is quite funny in our view, because the one thing we can forecast with precision is that the EU will be neither, at least not in respect of Brexit. Our sense is that the British press vastly exaggerates the room for manoeuvre on the final deal when it reports that part of the cabinet want a Swiss-style agreement, while other parts want the Canada agreement. What this debate ignores is that the Swiss-style deal is simply not an offer. Having rejected the EEA model in her Article 50 letter, May is now headed for a third-country free-trade agreement. This will almost certainly be a different agreement from the one between the EU and Canada. It may contain deeper provisions, especially on services. But the UK will not be a member of the single market, or in any way associated with it.

Ironically, the position on this issue by some of the soft-Brexiteers inside the May cabinet is more incoherent than that of the hard Brexiteers. In another article, the FT notes that the cabinet is divided on the future relationship with the UK. Some ministers believe that the UK should have closer relations with the EU - except for freedom of movement. This is completely unrealistic. If the UK wants to access the European single market for aviation, it will need to grant freedom of movement. Once you accept the need for immigration control along the lines the home office recently proposed, there will be no generalised single market access agreement.

Sebastian Payne notes in the Financial Times that the transition agreement does not get rid of the cliff edge. It is still there, it is only removed further into the distance (and closer to the next election, we would add). Gaining an extra two years is to be welcomed because it gives time to negotiate a trade agreement, and to prepare new customs, border security, and immigration, regimes. But that work still needs to be done. 

Our other stories

we also have stories on the latest German polls and the large number of undecideds; on the fracas within the National Front; of a glimpse of progress on Catalonia; on what's behind the Portuguese miracle; on the fall of eurozone inflation; and on how to make the euro great again - the Franco-German version.

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