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July 05, 2016

May vs Leadsom

There were two important developments in the ongoing Brexit debates that we should note. Andrea Leadsom, the energy junior minister, is now emerging as another potential challenger to Theresa May, and has even overtaken her in a poll of Conservative supporters. Leadsom is the most conservative of the candidates. With a background in finance, she used to be pro-EU many years ago, but later turned into one of the strongest eurosceptics in the Tory party. Yesterday she managed to get the support of Boris Johnson. Her presentation to Conservative MPs last night did not go down too well, we hear. Many found her lacking in experience. Unlike May and Michael Gove, she is not a minister of cabinet rank. The hurdle for her is that she needs to emerge as one of the remaining contenders in the pre-selection process by Tory MPs before the vote is put to the membership. That's a fight between her and Michael Gove.

There are two issues in her campaign that make her potentially interesting to Conservatives, other than her strong Leave credentials. The first is that, unlike May, she proposes giving an unconditional guarantee to EU nationals who currently live in the UK that they could stay in the UK whatever happens. May instead would use the EU nationals as a bargaining chip to extract symmetrical treatment of British citizens in the EU. And Leadsom pledged to invoke Art 50 immediately, though we hear that she apparently pulled back from that promise in the House of Commons yesterday.

The second development taking place yesterday was Chancellor George Osborne's promise to cut corporation tax to 15% in order to discourage companies from leaving the UK, and presumably to prepare the UK for its new offshore business model. Frankfurter Allgemeine approves of those measures, noting that the threats of tax increases in case of a Brexit are now turning into tax cuts. 

Gideon Rachman notes that, once the new government realises that the EU will play hardball, the current hopes for a good deal could give way to bitterness and anger. If the UK suddenly found itself outside the single market, facing tariffs, the government would need to adopt some rather radical strategies - those of an offshore island. This is where the low company taxes come in. This, in turn, would be considered an unfriendly act in Brussels, and the cycle of antagonism between the EU and the UK would escalate.

And, finally, we note a comment by Paul Krugman who, like us, doubts the exaggerated economic claims of those who had argued for Remain. He says he is not in favour of leaving either, but there has been a lowering of intellectual standards in the debate. He acknowledges the economic risks, but notes that if GDP stalls because people wait to make investment, they would presumably make the investment later, once the uncertainty goes. He makes a comparison to trade negotiations. Here, too, people might want to wait until the negotiations are concluded. So, why are those same economists not condemning trade deals in the way the condemned Brexit?

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July 05, 2016

The Greek election reform gamble

Now that the Greek election reform proposal is public, there seems to be little chance that it will be adopted. It is the first reform that is fully in line with what Syriza promised on the campaign trail: a switch to a proportional representation (PR) system, scrapping the 50 seat bonus, reducing the voting age from 18 to 17, and maintaining the 3% threshold. It allows the second party to form a government together with allies. The system would make it harder to form single party governments, and easier to have multi-party coalitions, something the left was always better at than the right. 

In parliament the bill already has many opponents: New Democracy, as without the bonus seats it could be prevented from forming an autonomous government. To Potami is against a PR system, while the Communist Party is for the switch to PR but against the threshold. Pasok has the most ambivalent position, as they proposed a move to PR when in government, but now also came out saying they won’t back it. If all these parties vote against the proposal there is no way that Alexis Tsipras can get the supermajority of 200 deputies he needs i order that the new system takes immediate effect. If the draft law gets a simple majority, it cannot apply until after the next elections, writes Macropolis. Then if New Democracy wins under the old election system, as the polls suggest they would, then the new government will undo the electoral reform or at least bring back the bonus seats.

But, even if the bill won't happen now, could it still help Syriza? After all, this reform is popular with the grassroots even though an electoral reform might be the last thing on their mind right now. It is also a matter of timing. The bill is likely to come to a vote in the Autumn, in a time when people's indignation about the bailout programme will reach a new height with the labour reform negotiations going on, argues Greek Reporter.

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July 05, 2016

On Article 50

Andrew Duff knows more about European constitutional law than anyone we have come across. He has written an in-depth guide to Article 50, and how its various sections are likely to be interpreted legally. For anyone involved in this debate, his guide is worth reading in full. We give a brief summary here.

The first, and probably most important aspect right now, relates to section 1, which stipulates that a country makes the decision to withdraw from the EU in accordance "with its own constitutional requirements". The referendum was based on a law that made no reference to a subsequent approval by the parliament. Duff says that the ECJ may well conclude that the conditions for the triggering of Art 50 have thus already been met. One of the legal arguments he would expect the ECJ to use is that, if parliament is sovereign, then why did it pass the buck to the people in a referendum? The outcome of the referendum was clear: participation was high, and there were no allegations of electoral fraud.

Art 50(2) relates to the exit agreement, or rather the two separate agreements that are often conflated. One is the set of transitional arrangements, which are technical, such as what happens to the Brits in Brussels. The other relates to the future relationship, which is not subject to Art 50 TEU, but will fall under Art 216 or 217 TFEU. 

Regarding Art 50(3), which stipulates the two-year guillotine, Duff makes the point that it is possible for the UK to revoke the Art.50 process either through an election, or another referendum, which he considers unlikely. The treaty article is silent on the matter. 

Article 50(5) essentially says: out means out. If a member states wants to rejoin, this can then only happen on the basis of Art 49, which means a full accession procedure - presumably with no opt-outs.

Duff urges the new government to invoke Art 50 quickly, for otherwise there would be a risk that Brexit spreads to other states.

We agree with Duff that early notification would be desirable, but we fear it might not happen, especially if there are no informal talks between the new government and Tusk and other EU leaders. A long delay would prolong the economic uncertainty in the UK and the political uncertainty in the rest of Europe. So, both sides have an interest in concluding this matter quickly. There is a danger, however, that politics interferes. This could be the French elections, or unrealistic expectations on the UK's part.

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July 05, 2016

Valls threatens to stop applying EU directive on foreign workers

Now that the future of the EU is up for grabs, François Hollande and Manuel Valls start flagging up the issues they would like to see changed from Brussels. Manuel Valls said that France may stop applying an EU directive which allows employers to pay 'posted' temporary foreign workers less than local labour. This directive was adopted in 1996 and recently came under fire. Valls says that France is trying to convince everyone that changes are necessary to fight social dumping. But if the others cannot be convinced, France will not implement this directive, L'Opinion quotes him saying. This is quite a confrontational stance. It is not clear whether there is more to this than just political staging. But even as a gesture this is a sign that Brexit brings out all the misgivings member states may have. 

If every country started to question the authority of the EU in those areas where it finds regulations unsuitable for its own purposes, we will all end up like the UK. The EU simply cannot function on the basis of such generalised cost-benefit analysis.

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July 05, 2016

On the EU's bleak geopolitical position

Jan Techau offers a rather sad analysis of the EU's new Global Strategy, whose launch was overshadowed by the Brexit vote. It was adopted by the European Council, but this was perfunctory only and nobody really paid real attention to it. Techau makes this into a telling illustration of the current state of the EU. The heads of governments could not care less about a document they do not feel bounded by. Techau is full of praise for a document that sets out the EU's foreign policy priorities in the next decade. He notes that its authors "have understood the brutal seriousness of Europe’s bleak geopolitical situation." As for the document itself, it strikes a balance between a recognition of the EU's reduced ambition and its acceptance of what the authors call "principled pragmatism," a notion accompanied by a number of policy proposals. Techau's conclusion is that the document will ultimately not have much impact on member states' behaviour.

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  • July 15, 2016
  • Celebrations in an age of terror
  • Shadows of a deal
  • Poland blames Germany for Brexit
  • What's behind Gabriel's impending boycott of TTIP
  • July 11, 2016
  • Towards Brexit outside the EEA
  • On the EU's deteriorating relationship with Russia
  • July 08, 2016
  • Party logic requires both Tory candidates to deliver Brexit
  • Watch out for signs of discord within Germany about how to confront Russia
  • The secret plans of Yanis Varoufakis
  • July 06, 2016
  • The second Brexit shock
  • Brain drain and the right to vote
  • The plan that never saw the light
  • What will happen to Northern Ireland?