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June 14, 2017

Minority governments can be stronger and more stable than you think

Some of the Remainers in the UK still live in the perennial hope that something will happen that may undo Brexit. We have no other explanation for why newspapers find it newsworthy to report that Emmanuel Macron and Wolfgang Schäuble have both said that the UK would be welcomed back if it changed its mind. As so often, the continental European media are massively misjudging the political dynamics in the UK, where the debate is not about whether Brexit should happen or not but what negotiating position to take during the Article 50 talks.

There is a also a good deal of delusion in the UK, where there seems to be a consensus among commentators that minority governments simply cannot last. We very much liked the account by Bernard Donoughue, a former adviser to Harold Wilson and James Callaghan, who makes the point that minority governments can last surprisingly long. The Wilson/Callaghan administration lasted a full term from 1974 until 1979 - whatever we may think of its achievements. For Theresa May to survive the snake pit of Conservative Party politics she would have to develop what he called Wilsonian skills. Donoughue reminds his readers of an unwittingly timely West End play, This House, which is set in the 1970s and portrays the art of running a minority government.   

The main Brexit news is the departure of two of the four junior ministers in the Brexit departments, one fired by May, another who quit in protest at the way May is not communicating. These top-level departures come on top of three further exits by top-level officials, leaving the department depleted at the worst possible time. The exodus adds to concerns about the state of technical preparations before the official start of Article 50 talks. These news cement our view that a transitional period, with full customs union and single market membership, will be inevitable if only because the UK will simply not be ready for a full Brexit by March 2019.

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June 14, 2017

The anti-Corbyn

Apart from the short-lived blip in the polls for Martin Schulz, this German election campaign seems a throwback to the last century. While the AfD may just make it into the Bundestag, there is no real populist challenge. Both the CDU and the SPD have their own version of strong and stable leaders. And Angela Merkel will win in the absence of a major accident. 

One of the questions people are asking is why Schulz imploded. The answer is that he is not a man driven by an agenda, but a deal-maker, and a party loyalist. The SPD’s overall theme is equality and justice, which is in principle a good theme for a party of the left, and Schulz has fully embraced the theme in the campaign. But the policy proposals are microscopic. Frankfurter Allgemeine reports that the SPD's big idea is a right to further education for the long-term unemployed, and the usual pledge to spend a tiny bit more money for schools (of course, while respecting the balanced budget laws, which the SPD has supported). 

But the real problem with Schulz is an apparent lack of conviction, a need to be everything to everybody. Speaking at the German Federation of Industry (BDI), Schulz gave a toe-curling performance according to Die Welt, in which he declared that the proximity between the BDI and himself was enormous. And then he went on to support international trade agreements. Die Welt, somewhat unwittingly, puts its finger on the problem: Schulz believes that the SPD can only win the elections if the electorate believes the party "can do economics". It has been the SPD’s age-old fear, stemming from the 1950s, that it has no economic credibility. For this reason, the party has gradually shifted its economic position to the right, especially when in government. 

In substantive terms, the difference between the SPD and the CDU are worth some €10bn, about 0.3% of GDP - to be accounted for by a slightly different emphasis on taxes versus spending, and a slight shift in spending commitments.

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June 14, 2017

Watch out for Berlusconi

It is probably right not to over-interpret the local election results in Italy. National politics is different, and there are still over six months to go until the probable election date. But Ferdinando Giugliano has made a pertinent observation: watch out for Silvio Berlusconi. The centre-right alliance of Forza Italia with the Lega and the FdI, another small right-wing party, has done well at the local elections, and one should never underestimate Berlusconi as a campaigner. His party is once again well-placed to become a serious competitor to the Partito Democratico. This is partly due to Berlusconi’s ruthless campaigning, but also to the growing disillusionment with Matteo Renzi and his failed promises to reform Italy. The problem for Berlusconi will be whether he will be in a position to renew the alliance with the Lega, given the latter's strong commitment to take Italy out of the euro. Forza Italia is more circumspect and pragmatic on this issue, though Berlusconi is clearly no friend of the EU establishment which he blames for his forced resignation in 2011. 

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