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September 16, 2016

Campaigning for higher deficits in France

Deficit trespassing used to be a fait accompli rather than something to pre-announce on the campaign trail. But this has changed. All Republican candidates for the primaries admit that under their stewardship France’s deficit would be above the 3% limit. This includes even the moderate Alan Juppé. All promise tax cuts. Francois Fillon, for example, expects that the deficit would jump to 4.7% in 2017 and 4.8% in 2018 as the result of his programme. All candidates emphasise that this would only be temporary. Well, we will see about that. Since 1974 none of the French governments has managed to present a balanced budget.

So how do they want to sell this to Brussels? Promising to push the retirement age up to 65 and labour market reforms.  “Necessary reforms” seem to be the new magic word in this exchange, writes Le Monde.

We suspect that they will use a similar tactic as Renzi did - asking for flexibility in exchange for reforms. Technically, this is currently only possible if the deficit is below 3%, but the EU will no doubt find a way to re-interpret that rule as well.

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September 16, 2016

Corbyn open to compromise on Article 50

The much maligned Jeremy Corbyn set out what we believe is a clever agenda for his party's approach to Brexit, which may be more liberal and pro-EU than what the British government is setting out to do. He said the Labour Party would respect the Brexit vote, and not try to undo it. But he reserves the right not to endorse an Article 50 procedure if certain minimal conditions are not fulfilled. He is quite specific. He wants market access for British companies, no fall in the level of protection of workers' right post-Brexit, and a protection of the interests of the 2m Brits who live elsewhere in the EU, mostly in France and Spain. We don't think this is a particularly controversial list - which tells us that there is likely to be a large consensus in the House of Commons -  the unelected House of Lords might hold things up though without the power of frustrating the process eventually. Corbyn also said that his party had dispatched a team to Norway to see how that model works. And while the EEA was not a model for the UK, some bits of it might be used. 

George Eaton, who is one of our favourite political commentators in the UK, writes that even the Liberals are getting more cautious about creating a new centrist political force to take on the Conservatives. There was speculation after the Brexit vote that the pro-EU camps of all the parties would unite in a new centrist political force. As it turned out, the Conservatives have found that Brexit has miraculously dissipated their internal divisions, and the Labour Party is turning its back on a leadership candidate who has campaigned against Corbyn with the specific pledge of a second referendum. Eaton writes that Nick Clegg is no longer thinking about another party, but about a caucus of liberals within the House of Commons. It will be about creating a soft opposition to the policies of the government. It will be about "comparing notes" as he puts it.

Simon Nixon is making a good point in his WSJ column when he writes that the attempt by some of Brexiteers to go it alone might not be workable at a time when the global trend in trade policies is towards protectionism. While we would not classify the TTIP protests as protectionism, Nixon is right to point out that the global climate has clearly turned against trade liberalisation - not the most auspicious time to negotiate. He also notes that, the UK voted consistently against anti-dumping duties within the EU. But once they go it alone, the government will come under massive lobbying pressure domestically to protect industries against cheap imports.

And finally, we note a comment by Nate Silver on the US election polls - with some obvious parallels to the Brexit referendum. He writes 

"there's still a lot of denial among Democrats about how tight the race has become, despite abundant evidence from high-quality polls."

We are still perplexed why that is? Can people not make a distinction between what they want to happen and they expect to happen? Or is the fact that they are clinging to the old and no longer functioning modes of political analysis?

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