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September 14, 2016

Tusk's confusing message

The German media got their hands on a letter sent by Donald Tusk to the EU leaders ahead of the Bratislava summit this Friday, in which they are due to discuss the future of a post-Brexit EU. It is also the first summit in modern times, in which the UK does not take part. 

Tusk's letter contains a whole string of truisms so much so that one finds it hard to stop nodding in agreement. But what changes is he actually proposing? He says it would be a fatal mistake to interpret the Brexit vote as a typically British problem. He sees it as a desperate attempt to answer questions that millions of Europeans are asking themselves every day. Really? Either Tusk did not understand the nature of the UK's debate - which was about stopping EU migrants - or he confounds these issues on purpose. The British debate had nothing to do with fortifying the EU external borders. Tusks is right that the external borders have to be better protected, but this is an entirely unrelated issue.

He then goes on to say the Europeans want to know whether their leaders are capable of regaining the control of events, which are confusing and frightening them. We suppose that he is expressing the problem of external migration. And, he continues, once people conclude that they are not protected, they will look for alternatives, and they will find them. 

Another platitude was his plea to be more inclusive of those who are opposed to the establishment view on economic and social policy, as the TTIP opponents do. He did, of course, not call for TTIP to be ditched, which is the one and only thing the TTIP opponents want. One gets the impression that this is about language, not about about substance.

The wider pre-Bratislava commentary is rather noisy. Jean Asselborn, the foreign minister of Luxembourg, caused a bit of a stir with his comment that the Hungarians should be kicked out of the EU.

And the FT has a quote by Markus Ferber, a senior CSU MEP, who said that after Brexit the "Club Med" countries are a blocking minority in the EU "with which they will obstruct all the laws that don’t suit them". He is then quoted describing the countries as “a strong coalition of reform-resistant redistributors”. Nice alliteration.

 

 

There is a lot confused thinking ahead of the informal EU summit. Minus the UK, the EU is essentially the eurozone. The eurozone has still not recovered from the crisis - and this is the root of the insurrection mindset of electorates, and the readiness to embrace anti-establishment candidates. We very much agree with the idea of further co-ordination on internal and external security, on the lines the French and Germans have suggested. But there is no point in starting a new phase of integration when the existing phase is incomplete, and not likely to be completed. If you don't solve the problems in the eurozone, you will depress real incomes, which is the main factor driving the hostility towards migrants. The solution is not to keep the migrants out, but to fix the economy.

We find it astonishing to see the extent to which Tusk is misreading the UK Brexit vote. The EU's external borders were not a central issue since the UK is not part of the Schengen area. The UK wants intra-EU immigration controls. Is Tusk saying that this is a message we should be listening to? If so, he should be more explicit.

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September 14, 2016

Kenny says European Council won't allow single market access

The Irish prime minister has become the first member of the European Council to state explicitly that there will not be single market access for the UK for as long as they want immigration control. He told Irish radio that the European Council will not give in on this issue. We heard Francois Hollande and Angela Merkel making diplomatic remarks about cherry-picking, but this is the most explicit statement so far of a binary tradeoff between market access and immigration control.

That sentiment was also echoed by Guy Verhofstadt in his press conference yesterday. Agata Gostynska (@agatagostynska) got her hand on Verhoftstadt's briefing paper, which contained a passage that caught our eye - the point 10 and 11 in the paper. They refer to the status of associated membership, which allows non-EU members to participate in some of the EU's policies. The associated rights would have to be balanced by associated obligations. The paper then goes on to say associated member status might well be the outcome of the Art 50 process. It also goes on to say that the Brexit vote would have to respected. 

And finally, we note a comment from Barry Eichengreen who looks at historical evidence of the impact of a fall in sterling. He concludes that the fall in sterling is welcome, but we should not expect too much. The external environment is unfavourable to any sudden shifts in export performance, he writes, and it will take time to reallocate resources towards trade goods. He concludes that the main task of the UK government - one they have not yet grasped - is to use fiscal policy more aggressively to support the economy.

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September 14, 2016

Barroso ups the ante

We thought that Jean Claude Juncker's decision to treat José Manuel Durão Barroso as a lobbyist rather than as a former Commission president would be the end of the story of the public outcry over Barroso's job at Goldman Sachs. But Barroso is escalating the situation with a letter to the Commission complaining that he and Goldman Sachs are being discriminated against, given the more tolerant treatment of other former Commissioners. While Barroso has a point that the mere fact of working for Goldman Sachs cannot by itself raise questions of integrity, we think he is misjudging the political climate. This conflict cannot end well.

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September 14, 2016

Italy has its Obama-on-Brexit moment

Italy had its Obama-Brexit moment when Barrack Obama visited London to lend his weight to the Remain campaign, an act that was widely and rightly described as undue interference from abroad. Yesterday, the US ambassador to Rome told a conference that a No vote in the constitutional referendum would be a step backwards for foreign investment in Italy. To top this, the rating agency Fitch said it would consider a No vote as a shock to the Italian economy, with negative consequences for the country's sovereign rating. 

It should come as no surprise that Italian opposition politicians have seized on these comments as an attempt to rig the referendum in favour of a Yes vote. Massimo Franco has a comment in Corriere della Sera, in which he cautions against such interference, which as so often achieves only the opposite of what was intended. The problem with catastrophe scenario in a case of a no vote is that this itself could trigger a government crisis, and destabilise the country. This kind of talk only help those who want Italy to lose its independence and to be subjected to European surveillance.

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