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April 04, 2017

This means war!

It is easy to dismiss the war threats over Gibraltar as a tempest in a teacup, and Theresa May has laughed off the suggestion that she might go to war over Gibraltar. To us, however, the controversy started by the former Tory leader Michael (now Lord) Howard, points to a real risk that the Brexit negotiations could be derailed over Gibraltar, and that the failure to reach an agreement on the future EU/UK relation could have serious consequences. We can envisage the following sequence of events: 

  1. the UK refuses to negotiate a separate status for Gibraltar as set out by the EU at Spain's behest;
  2. on account of Gibraltar's airport, Spain blocks the air traffic part of either the Brexit transitional agreement - by convincing the rest of the Council - or the ultimate free-trade agreement with the UK;
  3. air traffic between the UK and the EU is seriously disrupted as a result, either in 2019, or at the end of the transitional period two to five years later;
  4. English politicians and tabloids construe this as a 'blockade' of the UK by Spain over Gibraltar;
  5. a 'blockade' is a classic example of casus belli - Lord Howard gets his punitive expedition on Spain.

These events are not likely, but it is not out of the question either given the rhetoric of the past week-end. If the rest of the Council overrules Spain on the transitional agreement, Spain might even adopt an 'empty chair' policy in protest for the EU's lack of solidarity.

The Council's negotiating guidelines reflect Spain's position that the future relations of the EU with the UK and with Gibraltar must be subject to separate agreements. As Spain's foreign minister Alfonso Dastis put it in an interview with El País over the week-end: 

"when the UK exits the EU, the EU partner will be Spain, and in the case of Gibraltar the EU is therefore obliged to take Spain's side"

When Spain joined the EEC in 1986, it had to accept the status of Gibraltar, as the UK had been in the EEC for 13 years prior. But now that the UK is leaving the EU the tables are turned. The rest of the EU council could overrule Spain on Gibraltar in the Brexit agreement and transitional arrangement, which will be agreed under qualified majority voting. However, in that case Spain would most likely use its veto on the future relation of the UK (and Gibraltar) with the EU, which will almost certainly require unanimity. This would be a more serious veto, and harder to overturn, than that of the Netherlands on the Ukraine association agreement, or of Wallonia on CETA.

Now, while Dastis has denied any talk of a Spanish veto, Spain has shown its willingness to be a nuisance to the other 27 - now 26 - EU member states by blocking otherwise reasonable EU legislation, over Gibraltar. As we noted six weeks ago from this FT story, Spain has blocked revisions of the EU aviation agreements for four years now, on the issue of whether they would apply to Gibraltar's airport which Spain claims was built on no-man's land, outside Gibraltar's territory. It is worth noting that Mariano Rajoy has taken a noticeably less compromising stance to Gibraltar than his Socialist predecessor José Luis Rodríguez Zapatero did. This background article by the deputy chief minister of Gibraltar Joseph García notes that in 2004 Zapatero encouraged a three-way forum involving the UK, Gibraltar and Spain. In 2011, immediately after taking office, Rajoy's conservative government abandoned this forum.

Ryanair has been quite vociferous in warning about the consequences of a failure to agree an air traffic agreement that would apply between the UK and the EU after Brexit. We have heard informed opinions that, at worst, the UK could fall back on bilateral aviation agreements with individual member states, predating the EU's single European sky. However, just last week-end Bloomberg had a Ryanair executive warning that the UK cannot simply go back to bilateral agreements. The reason, as far as we can make it out, is that a 2002 ECJ ruling found that bilateral agreements were contrary to the freedom of establishment in the EU treaties. This can be remedied by amending the bilateral agreements to make them apply to EU carriers regardless of their nationality, or by the EU negotiating a new horizontal agreement with the UK on behalf of all member states. Spain would probably demand that this excludes Gibraltar, though. In addition, some air traffic matters regulated by the old bilateral agreements are now exclusive EU competences. Since the UK intends to get out of the jurisdiction of the ECJ, this all becomes problematic post-Brexit. The outcome could well be a severe restriction of air traffic between the UK and the EU, and Ryanair is urging an agreement within the 2017 calendar year in order to prevent disruption of air travel in 2019, as airline planning has long lead times of at least a year. 

Considering that British Airways and Iberia have actually merged into IAG, one would expect that an aviation agreement would be in the mutual interest of Spain and the UK, but who knows whether Gibraltar will intrude.

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April 04, 2017

The question for after April 23

Tonight will be the second TV debate, this time with all eleven candidates for the French presidency. A first in French history. They will be asked to talk about employment, security, and social policies. The risk is of course that it ends in a cacophony, a spectacle unworthy of a presidential campaign. But it can also focus the profile of the candidates into one or two broad strokes. To make a lasting impression the candidates will have to concentrate on bringing just one or two messages across. 

Some already picked their main adversary. François Fillon targets Emmanuel Macron, while Macron targets François Hollande to make sure everyone understands that he will be different. And Marine Le Pen still leads the polls for the first round. We also expect Benoît Hamon and Jean-Luc Mélenchon to have a go at each other to determine who is the best candidate on the left. And the others? Three of them, Nicolas Dupont-Aignan, Jean Lasalle, and Philippe Poutou, are polling at 4%. 

For some, the really important question is what happens after the first round, on April 23. Christian Estrosi, a loyal Sarkozy man and president of the Provence region, had a much commented meeting with Emmanuel Macron last week. The question is what the Republicans should do if François Fillon crashes out of the race in the first round. Shall they vote neither-nor, or rally behind Macron to block the far right from winning? And what are the consequences for the Republican party? 

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April 04, 2017

Can Schulz really form a coalition with the Left Party?

The main obstacle to a red-red-green coalition in Berlin is not arithmetical - whether the three parties together have a majority of seats in the Bundestag. It is political. And that makes such a coalition look increasingly less likely.

The Left Party yesterday published its election manifesto, in which it demanded a radical turn in Germany’s foreign policy. It wants Germany to exit Nato and forge a military alliance with Russia, and immediately stop all military engagements outside the country (no such demands on Russia).

It also wants an exit from what it calls the neoliberal policies of the past 25 years, including the Hartz IV labour reforms. It proposes steep tax increases, with income tax rates of up to 75%, a wealth tax, and tax cuts for the lowest incomes. The party’s group leader in the Bundestag, Dietmar Bartsch, said it would make no sense for the party to moderate its position ahead of the election, since voters are not voting for coalitions, but single parties.

The problem for Schulz is that he will be confronted during the election campaign with whether he would consider or rule out a coalition with the Left Party. At the moment the strategy is to nt commit himself either way, but this is getting more difficult, as conservative SPD voters are drifting to the CDU. This is what happened in the Saarland. The SPD will want to wait for the results in the more important state elections in North-Rhine Westphalia and Schleswig-Holstein in May, before jumping one way or the other. 

We think that Schulz may well conclude that his best option to become chancellor would be to rule out a coalition with the Left Party, and to seek a coalition with the CDU/CSU instead (or with the Greens and the FDP, if that were to suffice arithmetically). This would, however, require that the SPD becomes the strongest party at the election. The attraction of r2g is that this would allow a power option while coming second.

One important factor is the AfD. The party has sunk to 7% in the polls, and there are no signs of an end to its internal strife. If the AfD falls below 5%, which is possible if current trends persist, the hurdle for an r2g majority is significantly reduced.

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