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September 26, 2016

A weekend of insurrection

It was a weekend of anti-establishment insurrection. In Britain, Jeremy Corbyn was re-elected Labour leader with an even wider margin than last year. The Swiss Canton of Ticino voted in favour of a bill to discriminate against EU workers; and, over in the US, Donald Trump has caught up in the polls with Hillary Clinton on the eve of their first TV debate. 

The return of Corbyn tells us a lot about what is going on in European politics right now. As the FT points out, his 61.8% victory underestimates the true scale of his support. Many people who signed to join Labour in support of Corbyn were not eligible to participate because Labour's National Executive Committee managed to discriminate against Corbyn supporters. 

The scale of his victory against Owen Smith constitutes a massive defeat for the Blairite/Brownite wings of the party, which the press still calls moderate. But equally important, especially for us, has been the defeat of a candidate who made the promise of a second euro referendum the key plank of his campaign. This issue has not been talked about much in recent days, but we cannot see any candidate within the Labour or Conservative party now putting forward a credible back-to-the-EU path. The FT writes this morning that the moderates have decided not to separate and to create a new party, but to try to work from inside Labour, presumably in the hope that Corbyn will eventually self-destruct. 

In his analysis of what happened, George Eaton makes an important observation: Smith had the backing of all the Labour grandees - Sadiq Khan, the London mayor, Kezia Dugdale, the Scottish Labour leader, Neil Kinnock, Ed Miliband and Tony Blair. One Smith ally is quoted as saying that it had been "like the Remain campaign and the Archbishop of Canterbury" - no one is listening to the grandees anymore.

We also noted an interesting comment by Richard Rose on Scotland - where we could see the next stage of insurrection. Given the low support for independence after the June 23 referendum, it has been assumed that Scotland would not go down this route. But this may be wrong. The Scottish first minister, Nicola Sturgeon, is preparing for a referendum, and is currently busy drumming up support. The longer Theresa May takes to invoke Art 50, the more time Sturgeon has. And, by the middle of next year, May's honeymoon will be over and the economic costs of Brexit may be clearer.

We note a number of commentaries in the British press on whether Switzerland could be a model for the UK. We always thought this to be a particularly silly idea, not least because the EU itself no longer supports messy bilateral agreements such as the one with Switzerland. The 58% vote by the canton of Ticino to support a curb on foreign - and especially Italian - workers will not make the political process any easier. The country had voted in favour of immigration curbs in 2014. The government is trying to implement the referendum result through a law that would favour Swiss workers over foreign ones, which the EU considers as discriminatory. The Renzi administration said that if Switzerland imposed those restriction, the EU would retaliate with curbs on Swiss trade - which we also think is very likely. At that point, we presume that there will be less of talk of a Swiss model in the UK as well.

And finally, Wolfgang Munchau has a column the four major lessons for Brexit for policymakers from established political parties. The first one is not to trust the polls, as pollsters find it hard to assess the impact of non-establishment politicians on traditional non-voters. When turnout is the decisive factor in an election, polls err. The second is not to double down. Voters have a reason to be unhappy. These concerns need to be acknowledged and addressed. The third is: do not insult the voters. And finally: do not try to scare them. Economic scare stories no longer work with people whose real incomes have fallen for decades. Munchau concludes that Brexit was a cautionary tale of how quickly established positions can crumble, and how the improbable becomes the inevitable.

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September 26, 2016

The radicalisation of the French mainstream

Politics turns inside out in France: Nicolas Sarkozy and other Republican candidates take positions at the far end of the political spectrum while Marine Le Pen moves into the centre. The calculation is clear: Le Pen wants to become a presentable candidate with a real chance in the presidential elections. Nicolas Sarkozy wants to prove his credentials among FN voters.

But in this scene, the Republicans become the useful idiots for Marine Le Pen, writes the news magazine Nouvel Observateur. Le Pen needs no further statements to prove her credentials, as her name alone reminds everyone where she comes from. She can thus afford to appear more consensual. While mainstream candidates radicalise, she appeals to the masses. And this is not only affecting the Republican voters. She is up for the popular classes and the civil servants, who are not unaffected by this kind of talk. 

On the left, François Hollande prepares his bid by launching an offensive to prove his credentials.  He wants to regain parts of the electorate that he lost to Jean-Luc Mélenchon, by becoming the exact opposite candidate to Nicolas Sarkozy, writes Cecile Cornudet, with statements that are far more left than his policies.

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September 26, 2016

Leaving the customs union

Kevin O'Rourke makes a number of sensible comments in a comment on an article by Graham Gudgeon in the Irish Times, which shows some misunderstandings about Brexit as well as about the economic impact of EU membership on Ireland itself. On the latter point, Gudgeon claims that EU membership did not have much of a positive effect on Ireland. O'Rourke says this is wrong, both in terms of GDP and GNP, and especially considering that the EU itself had much stronger growth before 1973 than afterwards, while the opposite was the case in Ireland. O'Rourke makes the point that EU membership has been significantly beneficial. It is, however, not clearly whether euro membership has.

The second point made by Gudgeon was to advocate a policy of continued free trade between the UK and the EU. O'Rourke states correctly that the EU cannot simply open its borders if the UK does decide to leave the customs union. 

"There will be no choice in the matter: for the EU not to impose tariffs on UK exports would leave it in breach of its WTO obligations. And unless the UK has zero tariffs on everything from everyone, WTO rules would similarly oblige it to impose tariffs on EU exports."

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September 26, 2016

Meanwhile in Bosnia...

Bosnia is outside our reservation but the stability of the Balkans is a major object of concern for the EU. The latest worrying development is yesterday's contested referendum on the national holiday of the Serb part of Bosnia, the Republika Srpska. The proposed date for the holiday is January 9, the anniversary of the 1992 declaration of independence of the Bosnian Serbs during the Yugoslav wars. Bosnia's constitutional court ruled the date discriminatory of other ethnic and religious groups, as January 9 is an Orthodox holiday as well. The Republika Srpska political parties then called a referendum, which passed yesterday with over 99% of the vote for keeping the January 9 date, and about 60% turnout. The referendum has inflamed tensions within Bosnia and is being called a violation of the Dayton agreement. On Friday, the Bosnian Serb Premier Milorad Dodik met with Vladimir Putin in Moscow. According to Dodik, Putin supported the right of the people to have a referendum. This all comes a week after the European Council decided to refer Bosnia's application for EU membership to the Commission, which should initiate accession negotiations. Analysts quoted by Balkan Insight interpret the timing of the Council's decision as an attempt to "weaken nationalists" in Bosnia. Meanwhile, Bosnia and Montenegro didn't take part in the summit on the Balkan held in Vienna on Saturday, which did include Albania and Macedonia.

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  • High drama in the PSOE
  • What happened to Montebourg?
  • Why a hard Brexit is not inevitable
  • September 28, 2016
  • Sarkozy might have found his real enemy
  • Brexit delusions fading slowly
  • September 27, 2016
  • The knives are out in the PSOE
  • Macron, frontrunner on the left?
  • September 26, 2016
  • A weekend of insurrection
  • The radicalisation of the French mainstream
  • Leaving the customs union
  • Meanwhile in Bosnia...