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October 14, 2016

Tusk's awkward choice

We think the following statement by Donald Tusk is really strange: "in my opinion the only real alternative to a hard Brexit is no Brexit. Even if today hardly anyone believes in such a possibility," he said yesterday.

This is only an excerpt of a broader statement on Brexit, most of which makes perfect sense. He is right, of course, to say that there are no soft middle-of-the-road options. What we find strange is the idea that people today may not believe in a no-Brexit scenario. Does it mean tomorrow, perhaps, people will believe in such a possibility? Is Tusk a Bremainer? We think he is playing with fire. The Bremain campaign has had the most toxic imaginable impact in the UK debate. It has driven the Conservatives towards a hard shut-the-door-and-throw-away-the-key type of Brexit because they fear, rightly, that there is a possibility of a legal or technical stitch-up. 

We should also note hard Brexit is not a precise term. We know that it implies no membership of the single market, nor of the customs union. But it leaves open a whole series of possibilities, such as EEA-style transitional agreements, a gradual phase-out programme, participation in selected EU policies, and bilateral co-operation agreements in areas such as defence. Even within the hard Brexit world, there is a choice between an outwardly open or an inwardly closed UK. There is a lot at stake.

One of the options that will clearly not be possible is for Scotland to be a member of the single market. Nicola Sturgeon, the Scottish first minister, said yesterday that she would table legislation to make it possible even if the UK decides to leave. She said Scotland was not yet ready for a referendum, which would happen only after the terms of Brexit are clear, so that the people of Scotland face a real choice. One of the more intriguing suggestions in this article in the Daily Telegraph is the idea that Scotland remains in the UK, but seizes the powers for itself that are returned from Brussels on Brexit. Considering that the EU will never accept to fast-track the membership application of an independent Scotland, and that Scotland presumably does not want to join the euro and Schengen, we think it is far more likely for Scotland to succeed with a strategy of semi-independence. 

And finally, we noted a comment by Paul de Grauwe with whom we disagree fundamentally in his discourse over Brexit:

"When the UK joined the EU in 1973, arguably its main strategy was to prevent the union from becoming too strong. The UK political elite decided that this could best be achieved from inside the union. Now that the UK is departing, the century-old British strategy remains the same, i.e. to weaken the forces that aim to make Europe stronger. The UK can achieve this by insisting on a special deal with the EU whereby it maintains the benefits of the union while not sharing in the costs. Such a deal, if it comes about, would signal to other member countries that by exiting they, too, could continue to enjoy the benefits of the union without contributing to the costs. Such a prospect would fatally weaken the European Union."

We would like to make two points:

First, the UK was a drag on the integration process in the early 1990s, but with the arrival of enhanced co-operation, and its strengthening in the Lisbon Treaty, that argument can no longer made. It wasn't Britain that stopped eurozone integration, but Germany (and France to some extent).

Second, it is trivially true that the EU cannot offer Britain a deal of having their cake and eating it. But we do not understand why an association agreement, or EEA membership, would weaken the union. We think the core EU would be strengthened by the departure of countries that disagree with the thrust of further European integration. 

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October 14, 2016

Seven candidates, three debates

Seven candidates for the primaries on the French right had their first TV debate (out of three) last night. They talked about their economic projects, immigration, and national identity. The news coverage this morning suggest that Alain Juppé emerged as the winner. Two polls directly after the debate suggest that Juppé convinces 35% of the viewers, 32% among those who support the centre right, while Nicolas Sarkozy lags behind with 21% among all viewers, faring better among centre-right supporters with 27%, according to JDD. It is clear that Juppé can only gain from mobilising the left to vote in the Republican primaries. 

The debate was courteous but tense. The two leading candidates avoided open confrontation though everybody had a pick on Sarkozy. Jean-François Copé was the most aggressive, as well as Jean-Frédéric Poisson, the unknown candidate who became famous overnight. The debate on the economy was technical, which is not surprising if they want to mark their differences despite the fact that they have a lot in common. The chart below from Les Echos comparing their tax proposals gives a taste of this. 

The four main candidates all want to lower the charges on enterprises and salaries, three want to cut taxes on companies, all want some tax relief for households, and promise to cut public expenses, though to varying degrees. It is interesting to note here that Juppé is the least ambitious on corporation tax cuts, with his €21bn, and Francois Fillon the most ambitious with €40bn.

There will be two more televised debates before the primary vote on 27 November.

 

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