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February 22, 2017

Schulz and the neoliberals

Martin Schulz has found his campaign theme, which Gunter Bannas describes as the fight against neoliberalism. This notion is as common in Germany as it is uncommon in the Anglo-Saxon world, where liberalism never disappeared to be rediscovered. In Germany it is a dirty word, not used by liberals themselves, an amalgam that brings up a whole number of connotations: financial excesses; tax havens; oligarchs; rising income inequality; and weakening social systems. In his speech on which we reported yesterday, Schulz acknowledged that the SPD (or rather Gerhard Schröder) made mistakes, while simultaneously distancing himself from those policies. No SPD politician has been able to do this. Frank-Walter Steinmeier was the co-author of the Agenda 2010 reforms. Sigmar Gabriel was a close political ally of Schröder's; and Peer Steinbrück was the epitome of the neoliberal Social Democrat. Schulz offers the SPD a policy that bears resemblances to those of Oskar Lafontaine, but with a much greater chance of success since many of the right-wingers of the SPD now accept that the Agenda 2010 reforms - while right in principle - had many short-comings. One widely acknowledged problem has been the rising trend towards precarious forms of employment, like short-term contracts. 

There is another contrast to Schröder that Schulz embodies. While Schröder took on the trade unions, Schulz aligns himself with them.

Consider for a moment how the CDU/CSU might confront this. The CSU reluctantly supports Merkel as their joint candidate, but there are deep divisions on the chancellor’s refugee policies. And we would not be surprised if some CDU/CSU dissidents were hoping to come second at the election, which would allow them to get rid of Merkel and sharpen their conservative profile in a future grand coalition. We think this is the single biggest danger for Merkel.

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February 22, 2017

How to get back into the EU

We thought that Janan Ganesh nailed it this morning. The Remainers are right in the substance of their argument, he argues, but wrong in their strategy of trying to frustrate Brexit. The only way to undo Brexit is for Brexit to happen. We like the concise elegance of his main point:

“The people voted for a proposition. They want to see that proposition tested. If it tests badly enough, they will change their minds. But there is no way to skip a stage in the sequence. Brexit is an idea whose only effective rebuttal is its own implementation.”

He goes through a number of policy areas where Britain will want to keep as close ties as possible with the EU. The UK will opt back into Europol. It will maintain a system of regulatory equivalence. Over time, the UK will want to regain as much access to the EU as possible. The pro-Europeans will be able to salvage everything they want. He concluded with another true observation: the best case against Brexit was not the steep downside but the non-existent upside.

As a macro perspective on Brexit we see it exactly the same way - keep the UK as closely aligned to the EU as possible, but under no circumstance try to frustrate Brexit. We think this would be the most counter-productive strategy by pro-EU forces, many of whom still behave like they are under shock. 

In his latest analysis of how the Brexit negotiations will unfold, Charles Grant arrives at a similar conclusion:

"Whatever happens in the negotiations, Brexit will be hard. That is because both the UK and the 27 are placing politics and principles ahead of economically optimal outcomes. In the very long run, once both the UK and its partners have understood that a hard separation is not in anyone’s interests, serious politicians will start thinking about how to engineer closer relations."

Grant's observations are sensible from today’s position. But we expect the positions of both the EU, and possibly the UK as well, to shift as the reality of the Brexit negotiations sinks in. It is a mistake to think, as some commentators do, that the EU is strong and united in its approach to Brexit. That is only apparently so because the negotiations have not yet started, so we are still in the sound-bite stage with lots of reference to “cherry-picking” and the like. We noted a recent comment from Sigmar Gabriel that the EU should not penalise the UK, which we know is also the position of Angela Merkel. Germany will be a force of moderation. Once both sides are confronted with the actual costs of Brexit, they might conclude that they want to minimise those costs. That process has not started yet.

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February 22, 2017

The second phase of Trump

The appointment of retired army general H R McMaster as Donald Trump’s new national security adviser constitutes an important development, also for the EU. Following the utter confusion that dominated the Munich Security Conference over the weekend, with conflicting messages, there is now a foreign policy leadership in place that is very likely to tread more cautiously than many Europeans had feared. So, it is probably time to reconsider the notion that Trump will seek to destroy Nato and the EU. 

This is also why we would not overplay the report that Steven Bannon had told the German ambassador to the US that the EU was a flawed construct, and that the US would favour conducting its European policies on the basis of bilateral ties with member states. Bannon may well have said this, but his influence over the foreign policy course of the Trump administration is probably exaggerated. 

So is the notion of a US alliance with Russia. We noted a comment by Dmitri Trenin, who argues that there are superficial similarities between Trump and Vladimir Putin, but the strategic interests diverge. 

"Trump is clearly focused on containing China and destroying Islamic terrorism. For Putin, however, there is no question of siding with Washington against Beijing, with whom Moscow has built a solid relationship over the past 30 years. This relationship will not break unless China embarks on an adversarial course against Russia – a highly unlikely eventuality in the foreseeable future. The Washington-Beijing-Moscow triangle is back in play, but the US is far from being its main player."

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  • March 22, 2019
  • Kicking the can down the cliff
  • February 13, 2019
  • What to make of the man in the pub - and other tales
  • Macron loses more early advisers - or cuts them loose
  • January 07, 2019
  • What to look out for in the Brexit debates
  • Macron's last-resort tool for the gilets jaunes
  • December 03, 2018
  • French protests coming to a head this week
  • The Galileo fiasco, an ill omen for the future UK-EU relationship
  • October 29, 2018
  • Why the EEA is no longer a Brexit option
  • Behold the rising superpower: post-catholic Ireland’s European miracle
  • September 25, 2018
  • Be careful what you wish for - second referendum edition
  • August 23, 2018
  • Chancellor says No to Maas' one and only substantive idea
  • French households yet to see reduction in fiscal burden
  • July 23, 2018
  • A Watergate affair for Macron?
  • Irish insist hard border is politically impossible
  • June 20, 2018
  • Does Macron support Merkel over refugees?
  • Arising doubts whether the meaningful vote rebellion will succeed
  • The message of two shocking polls
  • May 22, 2018
  • A €60bn ESM credit line - is this what they call a backstop?
  • Will Nato survive Trump?
  • Northern Ireland's Brexit disillusion
  • Would Corbyn become prime minister if he accepted the single market?
  • April 23, 2018
  • More bad news for the SPD
  • Will Theresa May accept a customs union? The Times says yes. We think so too.
  • A comeback for Marine Le Pen?
  • March 26, 2018
  • On the run no more
  • Terrorist attack will challenge Macron
  • A double-whammy of geopolitical and financial uncertainty
  • February 26, 2018
  • Angela Merkel's cabinet
  • January 29, 2018
  • Where is the opposition in France?
  • Scenarios and risks for Syriza over Macedonia
  • January 05, 2018
  • Catalonia's government by Skype
  • The case for EEA membership
  • December 06, 2017
  • Ireland in search of its own path in the EU
  • Who owns the eurozone?
  • Gabriel's big speech
  • November 14, 2017
  • The apolitical movement inside LREM
  • On the unity of the PD and the visions of the Italian left
  • A clarification on glyphosate
  • On freedom of movement
  • October 23, 2017
  • Macron's plans for the European Parliament
  • First phase of Brexit negotiations in final stretch
  • Why the left hates Europe
  • October 02, 2017
  • Catalonia recalls EU and eurozone instability
  • French trade unions increase pressure over labour reforms
  • Watch out for a political accident in the UK
  • Municipal elections boost Portugal's Socialists
  • September 11, 2017
  • Turkey issues travel warning for visitors to Germany
  • How nasty is the AfD?
  • August 21, 2017
  • Soft, getting softer
  • Tsipras' chances of a boost
  • On the fallacy of a middle-ground option for the eurozone
  • July 24, 2017
  • Macron's popularity falls amid more budget cuts
  • Orbán to support Polish government against EU
  • No exit from Brexit
  • July 05, 2017
  • Europe’s next migration crisis
  • Philippe: French need to kick spending addiction
  • June 20, 2017
  • How to soften Brexit?
  • The deep roots of Brexit: Thatcher and the Germans
  • June 05, 2017
  • What happens to Brexit if Labour wins?
  • What Russia wants
  • May 22, 2017
  • Catalonia's independence blueprint
  • Commission wants completion of eurozone by 2025
  • The case for more honesty about the abolition of cash
  • The case against an Italian euro exit
  • May 08, 2017
  • A message of hope
  • Barnier's not so easily agreed Brexit principles
  • The rebirth of the paranoid conspiracy theory
  • April 26, 2017
  • The realities of Brexit - residency rights edition
  • How Franco-German economic imbalances manifest
  • Pasok - the now classic Socialist dilemma
  • April 15, 2017
  • Happy Easter
  • April 05, 2017
  • What if Macron were to become president?
  • The case for relative optimism about Article 50
  • March 28, 2017
  • To vote or not to vote
  • The pressure is on for the Dutch Green Left
  • On macro risk in the eurozone
  • March 20, 2017
  • Does the language of communiques matter?
  • Spain snap election rumblings
  • Will there be a Brexit deal?
  • March 13, 2017
  • Poland and the future of the EU
  • Polls show 40% support for Costa's Socialists
  • Council of Europe questions Spanish constitutional court reform
  • March 07, 2017
  • Dinner in Versailles
  • The shape of Brexit financial migration
  • March 03, 2017
  • Death of Diesel
  • February 27, 2017
  • May’s next gamble
  • Macron and the rise of the centre
  • Bite the bullet and get on with it
  • Who is the AfD?
  • February 24, 2017
  • Schulz effect stabilises
  • Wilders security breach becomes campaign issue
  • Kenny wants Ireland clause in Brexit deal
  • On why Europe should not overreact to Trump
  • February 23, 2017
  • Ukraine agreement passes Dutch lower house
  • Brexit from Euratom
  • Why is Merkel not fighting back against Schulz?