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September 01, 2016

High noon in Dublin

The three independent ministers refused to support Michael Noonan in his request to launch an appeal against the Commission’s ruling on Apple, putting the future of the Irish government in question. They say that the would support the appeal in principle but only after the parliament is summoned for a vote (ahead of its first meeting end of September). They also want an examination on how multinationals use the tax law and to put in a motion on tax justice, the Irish Times reports. Meetings will continue today, with Fine Gael insisting that an agreement will have to be reached by tomorrow. The government wants to make a decision on this matter in its meeting on Friday morning. Some ministers warned that if there is no agreement on the appeal it will be the end of the coalition government, and general elections loom.  

The Apple ruling of the European commission is devious for Ireland, especially as the sum of €13bn, which could come up to €19bn with interest payments, is so enormous that it matters. It forces the Irish government to confront fundamental choices: whether it wants to forego €13bn in tax payments, or use it to towards some policy objective that benefits the Irish people; whether to be loyal to the EU or to US companies, thereby also thinking of Ireland’s role after Brexit. Whether to stick with the Irish tax haven policy in times when tax avoidance has become unpopular internationally. Whether the EU has the right to interfere with national tax policies using the state aid argument. 

Columnists agree that the decision will redefine the relationship between Ireland and the EU, but they have different futures in mind. David McWilliams in the Independent writes the EU is a thing of the past and an Atlantic Ireland is the future. He sees Ireland as a mercantile part of a supply chain of innovative companies from the US, reminding his readers that, without multinational investment, Ireland would be "Albania with brutal weather". McWilliams sees this as a win-win situation for Ireland. Either they lose the appeal and get a €13bn in windfall profit, or win the appeal, and get the credibility of being the place to be for multinational companies doing business in Europe. And, just to counter resentment against the profit-making of which the Irish people hardly see anything, he suggests that large companies such as Apple pay a contribution in shares to an Irish wealth fund.

Fintan O'Toole in the Irish Times recommends the opposite. His argument is that the decade-old model allowing multinational companies to legally avoid taxes is a thing of the past. In times when capitalism is accused of producing huge inequalities, this is now an opportunity to make the right choices. With this enormous amount of €19bn, the Irish government could really make a difference in e.g. combatting child poverty. The Irish society has to decide whether their collective identity lies in being the world’s best pal for global corporations, or whether Ireland should be part of an international order in which those corporations have responsibilities, including the duty to pay fair taxes. This decision is the greatest single challenge since abandoning economic nationalism in 1958, he writes, as it is about what kind of future the Irish see for themselves as a republic.

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September 01, 2016

On the death of TTIP

Until recently the German press dismissed Sigmar Gabriel's repeated anti-TTIP comments as a case of political entertainment. Only in the last few days did they come to realise that the SPD really wants to block it - and they have the votes to do this.

Majid Sattar has a strong analysis of the politics behind Gabriel's anti-TTIP position. First, it is for real. They will block it. The intention is to allow Ceta, the trade with Canada, to go ahead, which is going to be difficult enough, but they need to sacrifice TTIP for that to happen. Gabriel needs a sacrificial lamb for the party congress on 19 September. Gabriel and Frank-Walter Steinmeier agree on this. 

Even the Ceta is not yet dry. There are still objections relating to the passage on investor protection. But these can be dealt with through a protocol. The negotiated treaty will not need to be changed. Furthermore, both Brussels and Ottawa are aware that these requests are coming. 

The French position on TTIP is even more hostile - across the board. The left is violently opposed. Marine Le Pen called it "an ultra-liberal, anti-democratic, anti-business and anti-social war machine". And she says that TTIP would force the French to eat genetically modified foods. But what really matters now politically is that the mainstream view is changing. Nicolas Sarkozy is opposed. Alain Juppé says France should be ready to say no if necessary. And even the government is now in retreat - note our coverage yesterday on the proposal by the French trade minister to pull the plug. 

Hendrik Kafsack, writing in FAZ, explains why there is no progress in the TTIP negotiations. For one, there are still real unresolved differences: on public procurement; on access by Europeans companies to the US services sector; on the protection of European regional brands like Parmesan cheese; on a US request for access to the European energy market; and for access to the agricultural markets. Secondly, the US and the EU have different negotiating strategies. While the EU prefers to negotiate in stages, the US prefers to leave everything open and negotiate a package only at the end of the process. That strategy puts the EU in a difficult position as they need to consult with member states.

While France and Germany are moving against TTIP, the pact is still supported elsewhere in the EU, notably in Italy. We noted a comment by Mariasole Lisciandro who says that at a time when European integration has stalled, a failure of this agreement and a reassertion of national interests would be a disaster.

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September 01, 2016

Macron, the modern Brutus

Is Emmanuel Macron a modern-day Brutus in French politics? That Macron betrayed him with method, is what François Hollande told his Socialist friends over dinner according to Le Monde. Even if Hollande does not believe Macron stands a chance outside partisan politics, he also knows that Macron's departure weakens him. Without the young reformer at his side, he loses parts of the vote that are difficult for him to reach out to. The departure of Macron was long expected, and planned at least since July.  Macron defends his decision out of coherence and having nothing to do with Hollande's own decision to run, due in December, in Ouest France. But there is no way denying that Macron's departure impacts Hollande directly. Arnaud Montebourg destructs Hollande, while Macron obstructs, summarises one observer.

Commentators agree that there is a method behind Macron's moves and that Hollande is the first casualty. But, to have a realistic chance in the presidential campaign, Macron needs Nicolas Sarkozy to win the Republican primaries. Only then can he present himself as the neither-left-nor-right candidate against a polarising Sarkozy. Francois Bayrou would still be there to battle for the centre ground, but he would have a tiny chance at least. If Alain Juppé wins the primaries, there is no chance for Macron at all, according to the consensus view.

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September 01, 2016

The outer perimeters of the meaning of Brexit

It was the first meeting of the British cabinet after the summer holidays at the prime minister's residence at Checkers, where she underlined a couple of the red lines going forward: no second referendum; no article 50 trigger this year; and no attempt to frustrate Brexit through bureaucracy. The BBC quoted a Downing Street spokeswoman as stating the following Brexit goals:

"This must mean controls on the numbers of people of people who come to Britain from Europe but also a positive outcome for those who wish to trade goods and services. We must be clear that we are going to make a success of it - that means no second referendum, no attempts to sort of stay in the EU by the back door. That we are actually going to deliver on it."

Note that both goals allow significant wiggle-room, which the UK will need in the negotiations. Controls on the number of people would still be consistent with the idea of an emergency break - i.e. no controls until a certain moment when immigration thresholds are exceeded. A positive outcome for traders is not necessarily the same as single market access. The stated goal is consistent with a number of post-Brexit models. It appears to us that May has not made up her mind on this. Her concern is to complete the process, to ensure that Brexit is not frustrated, and to lay out the outer perimeters of the negotiations.

The possibility of a "Breversal" is receding fast with the dwindling probability of Owen Smith to replace Jeremy Corbyn as leader of the Labour Party. Smith's big idea is a second referendum. If he were elected, the issue would at least be on the political agenda. George Eaton notes that the YouGov poll (see also our coverage yesterday) was hugely significant. It would take a political earthquake now to unseat Corbyn in the few weeks that are left in the leadership contest. Eaton makes a couple of important points in his analysis. The challenge to Corbyn came far too early. It is delusional to think that a leader can be judged to have failed after only one year. And the procedural trick to limit the number of voters, by excluding those who registered late, backfired. The Labour moderates need to expand their voter base, not contract it. 

Chris Patten has a thoughtful column in which he, too, said that Brexit will happen. But it is going to be an extraordinary difficult process. The real difficulties for May are political.  

"...even if she succeeds, she may find that not just some people are dissatisfied – an unavoidable outcome – but that everyone is. That would compound another major challenge facing May’s government: narrowing the yawning divide in British society that the Brexit campaign exposed."

And finally, we noted Andrew Duff's take on the impact of Brexit on the EU's institutions. The council is the least affected, and the European Parliament the most. 73 out of the 751 MEPs are British. Of those, 45 belong to the right, as a result of which Brexit will shift the power balance marginally to the left. The European Conservatives and Reformists will lose 21 MPs and fall from third to fourth place in the group hierarchy, behind the Liberals. And Nigel Farage's lot will dissolve altogether because they will fail to meet the minimum thresholds. For the federalists in the parliament, Brexit offers an opportunity for electoral reform. Last November MEPs voted in support of pan-European constituency lists. The snag is that mid-sized countries would have had most to lose, given their numeric over-representation. But Brexit conveniently vacates 73 seats, which can now be used for that purpose, and nobody will lose a single seat.

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