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April 28, 2016

What took them so long?

Relations between the Spanish government and the Catalan regional government appear to be thawing. After nearly two years without an official meeting, last week Mariano Rajoy received Catalan premier Carles Puigdemont who presented him a long list of demands. Today, their respective deputies will meet to discuss the Catalan government's requests on social and fiscal policy, and the mutual invasion of competences. Some progress appears to have been made since on reducing the recourse to mutual challenges before Spain's constitutional court, as the Catalan PP leader Xavier García Albiol told the press a joint committee of the Spanish and Catalan governments which also hadn't operated for years had reached agreement on a number of issues to avoid constitutional court challenges, including the transformation of the Catalan finance institute into a bank, a Catalan child protection service, or a Catalan project to reduce red tape. On the other hand, just last weekend the central government raised another three constitutional challenges, on taxing empty homes, on local government, and an equality law, based on the argument that they encroach central government competences. 

Why now? The timing of these meetings is rather odd, with the government in a caretaker capacity. La Información guesses that the PP government wants to signal its readiness for a dialogue at a time when the other major political news in Spain is the failure of the opposition to agree on a government. On the Catalan side, the fiscal position of the regional government is precarious, and its finance counsellor Oriol Junqueras had earlier arranged a hasty meeting with Luis de Guindos to discuss the situation. So, the Catalan government has an interest in the normalisation of relations. But Junqueras, who doubles as Puigdemont's deputy, is not optimistic that progress will be made at his meeting with Rajoy's deputy Soraya Sáenz de Santamaría today.

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April 28, 2016

An Irish government possibly next week

Fine Gael and Fianna Fáil are edging closer to a deal allowing a minority government after all. The Irish Times reports that Fianna Fáil may be willing to commit to allowing Fine Gael to introduce three budgets as part of a deal, together with a mid-term review in 2018. The negotiating teams are putting the final touches to an agreement to allow for a new government to be confirmed next week. Fine Gael accepted that water charges might be abolished by the ad-hoc commission after nine months. Both parties agreed on seeking payment from people who did not pay their charges, and that there will be no refunds in case the charges are finally abolished.

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April 28, 2016

Who could be the next president in France?

Dominique Moisi has an excellent analysis of the backdrop against which the race for the next French presidential election will kick off. After Nicolas Sarkozy, a man who was simply “too much”, Francois Hollande was the one that was just “not enough.” The result was that needed reforms simply did not happen. There was also a vacuum at EU level. There has not been a French match to Germany since François Mitterand, and the resulting disequilibrium is stifling Europe. The political system in France is also dominated by two developments, the quasi annihilation of the French Socialists, and the rise of Front National. A dramatic division has emerged between reformists and radicals who want to change the system either from within or from the outside - both on the extreme left and the extreme right. 

If sanity prevails Marine Le Pen will not get elected next year, though she is likely to get into the second round. The question is who the sanest opponent is, to win against her. Among the choices, the most popular are the oldest and the youngest prospective candidates, Alan Juppé and Emmanuel Macron. Together the pair would constitute a formidable cross-generational, cross-party team that might finally be able to implement much-needed reforms, Moisi concludes. As for Europe, it will certainly not be due to the lack of ambition and good will for the two of them to make a mark. In an interview in Die Zeit, Macron called for a new historic compromise between Germany and France.

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April 28, 2016

We are not sure that the OECD report is helpful for Remain

The hopes of the Remain campaign in the UK rest on two assumptions. The first is that the Leave campaign will ultimately self-destruct. And the second is that people will ultimately be too scared to vote Leave. It is possible that this strategy can work. The Leave campaign had a really bad few days recently, and if Michael Gove keeps on talking about Albania as a role model for the UK, then that might well settle it. But this is still early days in the campaign. We remain cautious about the outcome, and distrustful of opinion polls.

The biggest weakness of the Remain campaign is an over-reliance on economic arguments, which in themselves are not all that conclusive. While we strongly favour Remain ourselves - for political reasons - we find it very hard to see a case for EU membership that is based purely on economic arguments. All long-term economic projections we have seen, including yesterday's from the OECD, tacitly assume that the structure of the economy would not change on Brexit - which is unreasonable and dishonest. Today's economic structure is itself a consequence of EU market integration. If Britain were to leave, the economy would seek new specialisations in the long run. The best economic arguments - if you have to make them - relate to the short-term. Sudden regime shifts are costly. These costs could be mitigated if you can negotiate long transition periods. But it is uncertain that this is possible as this would require the assent of all EU member states.

The OECD yesterday came out with this forecast of cumulative output losses due to Brexit:

 in % of baseline GDP 2030
Optimistic scenario -2.72
Central scenario -5.14
Pessimistic scenario -7.70

These numbers are almost comical. We are not sure that the Remain is doing itself a favour by enlisting international organisations like the OECD. The ability of global economic institutions to make accurate forecast of the future is far from impressive. Their reputation has suffered since the financial crisis. And people will question their motives, as some already did.

The FT quoted a Vote Leave spokesperson as saying this about the OECD:

"The OECD is in the pay of the EU. José Ángel Gurría is part of a global bureaucracy that feathers its nest with vast expenses claims paid for by taxpayers. OECD officials themselves avoid paying tax in most countries — he is in no place to lecture us about taxes."

This is not accurate either, but then no less accurate than the OECD's ludicrous long-term forecast.

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  • What will happen if the UK parliament votes No?
  • Barnier's no-thanks works much better than a yes-please
  • August 20, 2018
  • ... and a subtle shift in EU policies towards both Russia and Turkey
  • Nothing to celebrate about the end of the bailout programme
  • Support for Brexit holding up
  • July 09, 2018
  • German panic about Target2
  • AfD level with SPD
  • How the EU could fail
  • June 01, 2018
  • Will France and Germany stick together in their response to US trade tariffs?
  • From a eurozone budget to a slush fund
  • April 25, 2018
  • Macron's pitch to Trump
  • Montoro in Schleswig-Holstein
  • The old world and the new
  • March 19, 2018
  • Waiting for Germany
  • Russia’s friends
  • Can the Commons force an extension of the Art 50 period?
  • February 12, 2018
  • What the euro debate is really about
  • How Brexit can still falter
  • January 08, 2018
  • Getting real on Brexit
  • Macron in China
  • December 04, 2017
  • Can Brexit still be stopped?
  • Could Poland open up the Posted Workers Directive again?
  • Has the Bank of England solved the productivity puzzle?
  • October 30, 2017
  • Italy's electoral reform seems to backfire already
  • Bregretometer hits another peak
  • September 29, 2017
  • Is the CDU about to rebel against Merkel?
  • What about defence?
  • What happened to the French mainstream parties?
  • August 29, 2017
  • The deep significance of Labour's Brexit U-turn
  • The day after the SPD loses
  • July 31, 2017
  • Russia sanctions bill becomes US law
  • Spain's Guardia Civil in the eye of the Catalan storm
  • A grand bargain between France and Germany
  • July 03, 2017
  • Can Greece exit its programme without a credit line?
  • The softening Brexit
  • Macron's state of the nation address
  • June 05, 2017
  • What happens to Brexit if Labour wins?
  • What Russia wants
  • May 08, 2017
  • A message of hope
  • Barnier's not so easily agreed Brexit principles
  • The rebirth of the paranoid conspiracy theory
  • April 10, 2017
  • Nein, nein, nein, und nein
  • Sounds like a bad Brexit story, but ain’t
  • On how not to exit the euro
  • March 16, 2017
  • A Polish horror story
  • On the return of industrial policy
  • The limits of the multi-speed Europe
  • February 20, 2017
  • SPD ahead of CDU/CSU
  • Fillon bounces back
  • The Brexit timetable
  • January 27, 2017
  • The Brexit Bill in full
  • Fillon says he would withdraw if charged
  • January 05, 2017
  • French Socialist primaries - old wine in new bottles
  • Le Pen's hard ecu
  • Will Tusk get a second mandate?
  • Themes of 2017
  • December 12, 2016
  • Renzi without Renzi
  • Shall we compensate the losers of globalisation?
  • The need for a partnership with China
  • November 22, 2016
  • Towards a transitional deal
  • Estonia's new PM
  • Merkel's depressing plan for a fourth term
  • Why Italy cannot stay in the eurozone
  • November 04, 2016
  • An important decision, not a critical one
  • Europe and Catalonia at the centre of Rajoy's new cabinet
  • Turkey threatens to end refugee deal
  • Everyone against Sarkozy
  • October 17, 2016
  • Ceta is dead for now
  • L’après-Hollande, c'est Hollande
  • SPD against Russia sanctions
  • Nissan to join customs union and other fanciful tales
  • September 30, 2016
  • High drama in the PSOE
  • What happened to Montebourg?
  • Why a hard Brexit is not inevitable
  • September 14, 2016
  • Tusk's confusing message
  • Kenny says European Council won't allow single market access
  • Barroso ups the ante
  • Italy has its Obama-on-Brexit moment
  • August 30, 2016
  • Brexit facts on the ground
  • Burkinis and Republican primaries
  • The SPD and TTIP
  • August 15, 2016
  • Sarkozy to declare his candidacy
  • Do intra-eurozone current account deficits matter?
  • On the failures of modern macroeconomics
  • July 18, 2016
  • What now in Turkey?
  • French politics after Nice
  • How to address the Scottish question?
  • What Brexit means
  • July 07, 2016
  • Article 50 without recourse to parliament
  • Juncker's U-turn on the Canada agreement
  • Left gives up on opposition to El Khomri law
  • June 27, 2016
  • ... 'twere well it were done quickly
  • June 16, 2016
  • Dutch eurosceptics join Leave campaign
  • The 'resign' movement
  • France getting nervous about demonstrations
  • More on the insurrection against Renzi
  • Expect no new cuts in Spain
  • June 08, 2016
  • Getting real on debt relief
  • The re-alignment of the Italian right
  • A critique of Germany's Turkey policy
  • May 31, 2016
  • Grand Coalition below 50%
  • Strikes to continue in France
  • Which crisis will blow up first?
  • Verhofstadt loses patience with the pro-Europeans
  • May 22, 2016
  • Waiting in Austria
  • Greek court puts Turkey deal on hold
  • Sovereignty and rule of law in Poland
  • The age of the disgruntled
  • May 16, 2016
  • Is the Erdogan deal on the brink of collapse?
  • Towards the end of sexism in French politics
  • The case against TTIP
  • May 09, 2016
  • High noon over debt relief
  • A French plan for a core Europe
  • Polish opposition takes to the streets
  • May 06, 2016
  • Visegrad countries say No to the Commission
  • Is Werner Faymann on his way out?
  • Reforming the stability pact
  • May 03, 2016
  • TTIP now an election issue, meaning no deal
  • No hopes for a deal before eurogroup meeting
  • Turkey miraculously fulfils conditions for visa-free travel
  • 5,000 amendments for the El Khomri bill
  • The disaster of grand coalitions
  • April 29, 2016
  • Is Brussels now interfering in the Brexit debate?
  • Italy's centre right realigns once again
  • First eurogroup, then summit
  • French labour reform protests turn violent
  • April 28, 2016
  • What took them so long?
  • An Irish government possibly next week
  • Who could be the next president in France?
  • We are not sure that the OECD report is helpful for Remain