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July 15, 2016

Celebrations in an age of terror

The big news this morning is, of course, the horrific attack in Nice. At this stage the assumption is that of a terrorist attack, but the killer was not known to the security services. Nor has any organisation claimed responsibility yet. 

One thing to watch out for are political ramifications. With hindsight it now seems questionable to allow crowds to gather and celebrate 14 July under a state of emergency. This was a decision taken by Francois Hollande personally. The attack, which killed at least 84 people, took place at 10.30pm last night. A white lorry ploughed through a crowd of people gathered at the Promenade des Anglais in Nice to watch the Bastille day fireworks, the driver shooting around before he himself was killed by the police. For comprehensive coverage on the ongoing revelations see Le Journal du Dimanche or Le Figaro

At 3.45am a visibly shaken Hollande announced in a speech that his government would seek to extend the state of emergency by three months, only hours after he announced he wanted to lift it by the end of the month. The military operation known as Sentinelle, in which 10,000 French soldiers have patrolled and protected sensitive sites around the country, will remain at a high-level and not be scaled down to 7,000 as announced earlier. For the first time, the president also calls upon reservist soldiers and gendarmes to help secure the country, including for border controls, and said that France would ramp up its military action in Syria and Iraq.

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July 15, 2016

Shadows of a deal

It is still too early to judge, but from the events of the last few days it appears to us that Brexit is going to be less disruptive to both the UK and European economies than many feared. It would be wrong to say that the new UK government has a strategy - but at least the new team seems to be converging towards what appears to be a perceptible line. Yesterday the new chancellor - or finance minister - Philip Hammond openly acknowledged that Britain will not be a part of the single market, but will only seek access to it - a request that Wolfgang Schauble described as "reasonable". We personally would have preferred an EEA agreement, but if this is not politically acceptable to the UK government, then we are looking at a series of free-trade agreements. Some, but clearly not all of those, can be negotiated in parallel to two-year Article 50 process. And, since the EU will not even start negotiating on trade deals before Article 50 is triggered, an undue delay in article 50 would not achieve much, except to generate doubts among some of the increasingly paranoid Leave supporters that Theresa May's secret plan is to sabotage Brexit. We note an article by Charles Moore in the Spectator, who draws parallels with the French leaving, and later rejoining, Nato.

We think this is very unlikely. We also disagree with the views expressed by several commentators yesterday that she put the three Brexiteers in charge of Brexit - Boris Johnson, David Davis, and Liam Fox - so that she has somebody to blame when things go wrong. Given the monumental importance of Brexit there is no way that May will be able to extricate herself from any mishaps. If Brexit fails, so will her government, and the Conservative Party will fall apart. May appears to us at least rational - if not cold blooded, judging by yesterday's appointments and sackings. We would deduce the game plan is for her government to agree a Brexit strategy, to agree a framework for negotiations with the EU partners, and for article 50 to be triggered with parallel trade negotiations. Since there is no hope of a trade deal with the EU within two years, the British government will also need to agree whether it wants an EEA-style transition period.

That said, the May government is clearly not yet up to its brief. The strategy outlined by Davis in his essay three days before his appointments seems to underestimate the technical difficulties the UK will have negotiating multiple trade agreements in time for Brexit. And we noted a statement by May that tells us that she, too, has a steep learning curve ahead.

“Ken Clarke says I am a bloody difficult woman. The next man to find that out will be Jean-Claude Juncker.”

Juncker is the least of her problems. She will not be negotiating Brexit with Juncker, but with the European Council. 

There were many comments yesterday, of which we thought two were noteworthy for different reasons. Martin Kettle writes in the Guardian that May did three astonishing things. She brought in the three Brexiteers; she sacked George Osborne, thus signaling a clear break with past economic policy; and she gave an astonishingly inclusive speech in front of Downing Street on Wednesday. Kettle says the confluence of these three events will make a Brexit betrayal not theoretically impossible, but a lot less likely.

Peter Foster's comment in the Daily Telegraph is intriguing for a different reason. He tried to explain to his presumably bewildered Tory readers why those funny Europeans care so much about the free movement of labour - as though this was a really strange thing. He mentioned Schengen, workers who cross borders each day, and even invoked the post-nationalist European ideal. There is nothing wrong with any of this, except it misses the obvious. Free movement of labour has been a core principle of the European Economic Communities right from the beginning. The acceptance of free movement of labour is not a policy, let alone an attitude, but a fundamental right, deeply enshrined in the Treaty of Rome and its multiple successors. This is not something you can easily negotiate away at the European Council.

And finally, we noted this article on pre-referendum polling. We are not going into the technical statistical details, but the bottom line is that the internet polls performed better than the telephone polls - in other words, the opposite of what happened during the general elections. Another finding is that Project Fear, or at least some of the more outrageous instances, backfired. President Barack Obama's endorsement of Remain and his back-of-the-line threat may have boosted Leave support. By contrast, the murder of Labour MP Jo Cox had an effect that was more in line with expectations: it weakened the Leave vote. The bottom line of this research shows that Leave was marginally ahead of Remain during the entire period of the campaign.

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July 15, 2016

Poland blames Germany for Brexit

A narrative seems to be taking hold in some EU countries that the Brexit vote was the result of too much integration - which seems to us implausible since the vote occurred in the country with the most opt-outs from EU policies. Our narrative is a different one: Britain's opt outs from almost every policy area had led to progressive alienation. There remains a strong case for political integration within the eurozone - where political integration is a prerequisite to enforcing policies that would make the euro work - but not for the EU at large.

Another narrative, as told by Poland's foreign secretary Witold Waszczykowski - is that Germany is to blame for Brexit. He was particularly galled at not being invited to Frank-Walter Steinmeier's meeting of the foreign ministers of the EU's six founding members. Waszczykowski also criticised the European Commission for being in Germany's pocket, especially on subjects like immigration policy. He then ended with the threat of a Plexit - even though EU approval is among the highest in his country right now, but this may be about to change.

We are reporting this story not because  we want to lend any credibility to Waszczykowski, but because of the way narratives are taking hold in European politics these days. Even German mainstream politicians have now fully bought into the idea that this is a bad time for further integration. This would, in our view, make further political accidents more likely.

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July 15, 2016

What's behind Gabriel's impending boycott of TTIP

This is not yet official news (though we reported on it), but Frankfurter Allgemeine gives this unfolding story the space it deserves. The SPD really is preparing to boycott TTIP, and there is no way out even if the CDU were to enter into a coalition with the Greens after the 2017 elections - since the Greens also reject TTIP. Majid Sattar has a front-page editorial in which he alerts his readers that the SPD is about to make a decision of immense geopolitical significance and that would have serious consequences for the economic future of the North-Atlantic alliance. Europe is on the verge of sacrificing such an important trade deal because the leader of the SPD does not know how to lead his party. Worse, he nourishes the party's innate anti-Americanism. Sattar draws comparison's to David Cameron's EU referendum, and makes another point: together with Frank-Walter Steinmeier, Gabriel is putting pressure on the German government to scale back the sanctions against Russia. So, the combination of the two decisions would clearly reposition Germany in a rather unwelcome direction.

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