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July 11, 2016

Towards Brexit outside the EEA

The domestic political events in the UK are mercifully outside our reservation, so we don't need to discuss the appalling comments by one of the two Tory candidates for the party leadership - and, by extension, the job of PM. It looks to us that Theresa May, the interior minister, will win this contest. This means that Brexit will happen ahead of the elections scheduled for 2020, for the simple reason that this is the only scenario around which she can unite her party. 

There is one scenario that might give hope to those who are betting on a second referendum, or some other miracle to undo the vote. This could happen if Andrea Leadsom becomes PM, Jeremy Corbyn remains Labour leader, and moderates from both parties leave and join the LibDems in a new political party to be called the Democrats, a pro-EU party. But even if all these conditions become true, this scenario is also unlikely to produce a pro-EU majority, at least not within the short timeframe necessary to stop Brexit. In this case, I would expect Leadsom to call a no-confidence vote, which she would probably lose. This would trigger new elections, which she would win by a landslide - as Ukip would damage Labour, while the new party would not have had enough time to set itself up. Britain's first-past-the-post electoral system does not favour new parties, not even pro-establishment parties. Despite the Tories' deep divisions over Europe for the last 30 years, the Brexit vote has actually united the party around a common position. There is debate about what kind of relationship the UK should have with the EU post-Brexit, and of course a debate about who should be PM. But the party now does not want a return to the EU. Given the state of Labour, and the weakness of the Libdems, we think the Tories will be calling the shots. 

Also note Angela Merkel's comments in a ZDF interview, in which she said - in response to whether Brexit might not happen in the end - that she was dealing in political realities, and that in this reality Brexit is happening. She expects the new PM to trigger Article 50 once elected. And she added that Britain will not be able to cherry-pick.

We note that pro-EU sentiment picked up in Germany after the vote - or rather that sentiment towards the AfD, the anti-EU party, has fallen. The AfD is now polling at 10-12.5% - though we think this is not related to Brexit but to the inner warfare among the party's central figures. The AfD is in a very similar position to the British Labour Party.

In the Netherlands the latest Ipsos poll puts Geert Wilders' Freedom Party PVV at 28%, narrowly in the lead, but the Ipsos poll had similar numbers in the past - so there is no trend. The most recent Peil poll has the party at 35% with an 11-point lead. Again, we do not think that we can make inferences from Brexit, even though this Guardian article tries to do precisely that. The intent is clear to demonstrate Britain's isolation by misconstruing statistical evidence. 

Most of the British commentary over the weekend related to the Tory and Labour Party leadership contests. We will leave this aside for today, focusing on two comments directly connected to Brexit itself.

Wolfgang Munchau argues in the FT that the idea of an EEA-minus is absurd. It reminds him of John Major's ridiculous idea of a hard ecu. Munchau favours a straight-EEA deal, which would respect the result of the referendum formally, though not in spirit. If the new British prime minister, however, decides that she wants freedom over immigration policy, then she will invariably have to give up on the EEA, and negotiate an FTA instead. There is nothing wrong with that. Munchau thinks Britain's negotiating position is far from weak, given the impact of Brexit on the eurozone (see our lead story today), and given the eurozone's and especially Germany's large trade surplus with the UK. And he notes that the latest MiFid/MiFir rules have an opening for single market access by third countries with equivalent regulatory regimes. 

And finally, Margaret MacMillan offers a grand historical sweep about the interconnectedness between the UK and continental Europe. This will not change, she says. She looks at the following scenario: On Brexit, Scotland will declare independence, and over time, Wales might leave as well if they are unhappy to be dominated by the English. 

"History never repeats itself but a future, smaller Britain might look uncomfortably like the England of the 15th and 16th centuries, with trouble at home and an uneasy relationship with the continent, at once needing trade with it yet fearing its influence. And that doesn’t even begin to think about what might be developing on the other side of the Channel. Europe could well also splinter along national lines and institutions long taken for granted, such as the European Union or Nato, disappear from the scenes. Whatever happens these will affect Britain, because there is no escaping the reality that the ties that bind these islands to the rest of Europe are many and longstanding, and will continue to exist."

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July 11, 2016

On the EU's deteriorating relationship with Russia

The Nato summit in Warsaw highlighted one of the many existential threats the EU is facing at the moment: relations with Russia are deteriorating fast. The Russians regard the choice of Warsaw as a provocation. We are selecting two interesting comments, both from Carnegie, on this standoff. Alexander Baunov argues the real problem is not overt Russian aggression against a Nato member, like Latvia or Poland, but the possibility of a technical incident between Nato and Russian ships or planes in the Baltic or Black Seas. In a more detailed analysis of Russian policy and the its implications for Nato, Eugene Rumer agrees that Russia will not test Nato's Article 5 guarantee directly. Russia will instead continue to rely on its hybrid warfare methods to undermine Nato member states' confidence in the alliance. Western policymakers should have no illusions that the recent decision to deploy four battalions of 1,000 soldiers each in four east European countries will have a stabilising effect. The decision will trigger a disproportionate Russian response. Only a political solution will ultimately solve the problem. This is his conclusion:

"Absent major changes in Russia’s (or NATO’s) outlook, this adversarial relationship will remain a key feature of the Euro-Atlantic security order for the foreseeable future. Eventually, it will take a political, not a military, solution to resolve this standoff."

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  • From a currency to a people
  • September 25, 2018
  • Be careful what you wish for - second referendum edition
  • July 10, 2017
  • EU in self-destruction mode
  • The EU's fault lines
  • Fake News and Fake views
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • 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
  • June 21, 2017
  • Why has the SPD deflated?
  • Berlusconi’s strategy
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • July 09, 2018
  • German panic about Target2
  • AfD level with SPD
  • How the EU could fail
  • June 01, 2017
  • On how to fix the eurozone
  • What happens if there is no Article 50 agreement?
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • May 28, 2018
  • A no-confidence motion that could backfire
  • The political repercussions of a historic referendum in Ireland
  • Why the lack of an international role for the euro matters
  • May 11, 2017
  • Germany rejects IMF’s policy recommendations before they are issued
  • Why Labour is losing
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • April 15, 2019
  • Finland's far right changes the game
  • Brexit party drawing almost even with the Tories
  • April 16, 2018
  • Italy's and Germany's pained response to the Syria attacks
  • On the end of the eurozone's economic honeymoon
  • Why Bulgaria should stay out of the euro
  • Where shall we meet after Brexit?
  • April 20, 2017
  • Don’t bet on Trump turning globalist
  • A note on UK election polls
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • January 31, 2019
  • EU will play hardball until February 14, and stick to backstop beyond
  • French left and right moves ahead of EP elections
  • Tighten the belts as the economy prepares for landing
  • February 27, 2018
  • Irish transport prepares for Brexit scenarios
  • One last Dutch referendum
  • Is the CDU a conservative party?
  • March 27, 2017
  • Governing formation troubles - Northern Ireland edition
  • Did Trump present Merkel with a bill for Nato?
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • November 19, 2018
  • May’s pushback is kicking in
  • January 08, 2018
  • Getting real on Brexit
  • Macron in China
  • March 02, 2017
  • Juncker's scenarios for Europe
  • EU minimum wages are rising
  • No, the Lords didn’t stop Brexit
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • June 12, 2019
  • What Spain wants from the EU
  • What to focus on in the Brexit procedure, and what not
  • August 28, 2018
  • Urban politics and national crisis - the Irish case
  • How anti-semitism became one of the main issues in British politics
  • November 15, 2017
  • A Christmas bonus for poor Greeks
  • Dim prospects of negotiated de-escalation on Catalonia
  • Macron's favourite to succeed Juncker - first round
  • On sovereignty
  • Gli Azzurri
  • February 03, 2017
  • The Schulz effect is getting huge
  • The post-Brexit boom goes on and on and on
  • A correction on Catalonia
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • February 18, 2019
  • How the splits on the left and the right will affect Brexit
  • June 04, 2018
  • German discourse out of control
  • Wait for European disunity on US tariffs
  • September 18, 2017
  • Why Germany cannot lead Europe, let alone the free world
  • Will Macron help to build up Mélenchon?
  • Boris' Coup
  • 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
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • May 14, 2019
  • Trump gives Orbán his blessing
  • Outcome of Belgium's parliament election on Sunday totally open
  • Has Trump really got the economics of trade all wrong?
  • October 01, 2018
  • After the referendum, more turmoil in Macedonia
  • What will happen if the UK parliament votes No?
  • Barnier's no-thanks works much better than a yes-please
  • February 19, 2018
  • SPD divided over grand coalition
  • Wauquiez - the French Trump?
  • Why Brexit will be extremely hard to reverse
  • July 10, 2017
  • EU in self-destruction mode
  • The EU's fault lines
  • Fake News and Fake views
  • December 01, 2016
  • Will Italian expats swing the referendum result?
  • Why we keep on misreading the polls
  • Si vis pactum, para bellum
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • April 24, 2019
  • May's final and biggest gamble
  • Will the EP be Brexit's great parliamentary beneficiary?
  • Can Loiseau fight the far right given her past?
  • October 22, 2018
  • A week of intense political tension in the UK
  • Poland's local elections reveal deeply-split country
  • April 20, 2018
  • Macron at home
  • EU has rejected all UK proposals on Northern Irish border
  • Could there be a Five Star-Forza Italia government?
  • October 19, 2017
  • Germany is softening up over Brexit
  • The French budget and the wealthy
  • Will Borut Pahor win re-election as Slovenian president?
  • April 20, 2017
  • Don’t bet on Trump turning globalist
  • A note on UK election polls
  • October 21, 2016
  • Wallonia says No for the third time
  • Do you remember that Dutch referendum on Ukraine?
  • How narratives are destroying the EU
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • March 05, 2019
  • The most promising Brexit strategy we have heard yet
  • October 22, 2018
  • A week of intense political tension in the UK
  • Poland's local elections reveal deeply-split country
  • June 11, 2018
  • The end of the G7 - good riddance
  • Macron needs allies for his European agenda
  • Who is going to be the next director-general of the Italian treasury?
  • January 30, 2018
  • Will Puigdemont be Catalan premier today?
  • Some thoughts about the German car industry
  • A short note on Italian coalition maths
  • September 22, 2017
  • The last German polls
  • May 15, 2017
  • SPD and CDU disagree on how to respond to Macron
  • Was Rajoy blackmailed?
  • The rise of the re-leavers
  • 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
  • August 30, 2016
  • Brexit facts on the ground
  • Burkinis and Republican primaries
  • The SPD and TTIP
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • June 10, 2019
  • How to create Brexit facts
  • The new Alde is already in trouble
  • April 24, 2019
  • May's final and biggest gamble
  • Will the EP be Brexit's great parliamentary beneficiary?
  • Can Loiseau fight the far right given her past?
  • March 11, 2019
  • Ask what Europe can do for Germany - AKK's EU manifesto
  • January 28, 2019
  • Battle of the amendments
  • How the Prespes deal affects the next Greek elections
  • December 17, 2018
  • A second referendum is no closer today than last Friday
  • Philippe expects 3.2% deficit next year
  • November 05, 2018
  • Macron trails behind Le Pen in European elections poll
  • How the CDU will organise leadership campaign
  • September 27, 2018
  • Two ways out of the Brexit impasse
  • 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 12, 2018
  • Remainers are facing an acute dilemma now
  • June 05, 2018
  • Merkel sets the terms. What response from Macron?
  • Vollgeld: an accident not waiting to happen
  • Germany shocked, shocked, by Mr Ambassador
  • April 30, 2018
  • Looming May protests against Macron
  • France has discovered the Laffer curve
  • An important resignation in the UK
  • March 26, 2018
  • On the run no more
  • Terrorist attack will challenge Macron
  • A double-whammy of geopolitical and financial uncertainty
  • February 19, 2018
  • SPD divided over grand coalition
  • Wauquiez - the French Trump?
  • Why Brexit will be extremely hard to reverse
  • January 16, 2018
  • Towards a radicalisation of Les Républicains?
  • EU toughens its position on Brexit transition
  • December 15, 2017
  • Amendment 9 conundrum
  • The negligible GDP impact of the single market
  • November 15, 2017
  • A Christmas bonus for poor Greeks
  • Dim prospects of negotiated de-escalation on Catalonia
  • Macron's favourite to succeed Juncker - first round
  • On sovereignty
  • Gli Azzurri
  • October 16, 2017
  • What‘s the deep meaning of the elections in Lower Saxony?
  • Can Brexit be revoked?
  • Macron's grand narrative
  • September 18, 2017
  • Why Germany cannot lead Europe, let alone the free world
  • Will Macron help to build up Mélenchon?
  • Boris' Coup
  • August 21, 2017
  • Soft, getting softer
  • Tsipras' chances of a boost
  • On the fallacy of a middle-ground option for the eurozone
  • July 25, 2017
  • The impact of Duda's veto
  • How to undo Brexit
  • Front National: Frexit or not?
  • June 30, 2017
  • Recurring Brexit myths
  • On EU citizen rights
  • On Brexodus
  • June 05, 2017
  • What happens to Brexit if Labour wins?
  • What Russia wants
  • May 11, 2017
  • Germany rejects IMF’s policy recommendations before they are issued
  • Why Labour is losing
  • April 19, 2017
  • Shadows of money
  • Breppe Grillo vs Eurointelligence
  • March 27, 2017
  • Governing formation troubles - Northern Ireland edition
  • Did Trump present Merkel with a bill for Nato?
  • March 05, 2017
  • Poland vs Tusk
  • Juppé - a recovered candidate?
  • Will Italy leave the euro?
  • February 13, 2017
  • What decides the French elections: cult or programme?
  • Sense and nonsense on globalisation
  • Towards the next European crisis
  • January 23, 2017
  • What if the populists clash with one another?
  • Why the euro is a real problem for the German left
  • When you call the US, what number do you dial?
  • 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 07, 2016
  • Matterella says No to early elections
  • Looking for alternatives to Valls?
  • Local taxes and citizenship in Ireland
  • Brexit contours
  • November 21, 2016
  • Merkel IV
  • Erdogan increasingly alienated from the West
  • EU may force a hard Brexit
  • The day after
  • November 07, 2016
  • Why UK elections are becoming more likely
  • The EU's moral bankruptcy on Turkey
  • Merkel's presidential mess
  • The case for a No vote in Italy
  • October 24, 2016
  • Ceta - the next deadline
  • Who will lead Germany?
  • Peasant party upsets Lithuanian election
  • Ségolène Royal, seriously?
  • October 11, 2016
  • Towards the fifty-first state
  • Brexit and Northern Ireland
  • Enemies of the state
  • September 30, 2016
  • High drama in the PSOE
  • What happened to Montebourg?
  • Why a hard Brexit is not inevitable
  • September 19, 2016
  • Unhappy in Bratislava
  • Au nom du peuple
  • Pressure rising towards a hard Brexit
  • September 08, 2016
  • Le Pen leads and Macron comes third in polls
  • Corbyn wants out of the single market
  • Is Renzi's strategy plausible?
  • August 30, 2016
  • Brexit facts on the ground
  • Burkinis and Republican primaries
  • The SPD and TTIP
  • August 22, 2016
  • Gold for Brexit
  • EU and Turkey talking past each other
  • Switzerland is the next migrant transit country
  • On the death of neoliberal economics
  • August 15, 2016
  • Sarkozy to declare his candidacy
  • Do intra-eurozone current account deficits matter?
  • On the failures of modern macroeconomics
  • July 26, 2016
  • The limits of May's freedom of manoeuvre
  • Don't misread the lack of visible panic in Germany
  • July 18, 2016
  • What now in Turkey?
  • French politics after Nice
  • How to address the Scottish question?
  • What Brexit means
  • 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 13, 2016
  • Brexit could take six years to complete
  • Macron - a modern Brutus?
  • The failings of Steinmeier
  • July 12, 2016
  • What to expect from Theresa May
  • July 11, 2016
  • Towards Brexit outside the EEA
  • On the EU's deteriorating relationship with Russia