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July 19, 2017

The comeback of the British rebate

The British rebate was bound to make a glorious entry into the Brexit negotiations eventually. It happened yesterday. The EU negotiators made the logical point that the British rebate was linked to agriculture. Britain justified the rebate on the grounds that its vastly more productive agricultural sector depended much less on EU farm subsidies. But surely that argument ends the minute the UK leaves the CAP, which it will do in 2019 under any scenario. So, as a result, if Britain were to seek a transitional agreement followed by some form of association agreement, the rebate has to be taken out of the financial basis of this future relationship.

The FT reports that France in particular was insistent on this issue. Without the rebate, the share of the UK in the EU’s future liabilities would rise from 13% to 15%, for an additional €10bn.

The two sides did not make any headway in the discussion on the Brexit divorce bill - but that was unlikely to happen anyway. At this stage, the emphasis is to set out some of the principles on which the calculations are to be based. The Guardian writes the divorce bill will be presented as a bill to cover the future relationship, because that is easier to sell politically. It also notes this:

"Seasoned Brussels negotiators think a deal is most likely to emerge at a late-night summit of EU leaders in the autumn of 2018."

There will be a further three rounds of Article 50 discussions in the next three months, before a European Council meeting in late October which will decide whether sufficient progress has been made in the Article 50 discussions. If so, that would pave the way for parallel talks on the future trade regime.

European debates, like the one on the rebate, move in cycles. They come up again and again. That’s true even of proposals you would have thought were dead and buried. In this context we read with some surprise a comment by David Allen Green that the UK and the EU should cast Article 50 aside, and negotiate a separate exit agreement or, if this is not possible, at least extend the two-year time period. While that may be technically possible, this proposition totally ignores the EU’s own preference. It wants to do this through Article 50 because this is the only prescribed procedure available. And it wants this completed in two years because it has other, more important business to attend to.

Meanwhile, a report in the house of Lords warned that Brexit is already undermining the political stability of Northern Ireland. According to the Irish Times the report says that Brexit has exacerbated the divisions between the communities in Northern Ireland, and calls on the British government to reassure nationalists following the Conservatives’ confidence-and-supply agreement with the unionist DUP.

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July 19, 2017

Macron wants complete abolition of housing tax

Emmanuel Macron kicked off the conference with the local authorities with a couple of surprise announcements: communes will have to contribute €13bn in savings to the government's budget consolidation efforts over the next five years. This is €3bn more than the initial announcement. The communes had already expressed their misgivings amid the perspective of being squeezed by another round of savings. In return the communes will get more freedom to rationalise and diminish expenses.

Macron also announced his plan to abolish the housing tax not only for 80% of the taxpayers but completely over three years. As an alternative revenue base he offers the communes a fraction of the social charges (CSG). A housing tax reform is an explosive subject, a similar reform caused Margaret Thatcher to resign in 1990. There are, however, several problems with this replacement. One is that, even though the French courts consider the CSG a tax, the European Court of Justice does not. For them the CSG is a social contribution, thus non-residents with properties in France would be exempted, according to l’Opinion. There is a great confusion over the financing, and the fact that the government changed its announcements already three times in the last 15 days does not help.

Another explosive announcement was to reduce the number of local elected officials, and a stronger differentiation according to public functions (state, hospitals, regional and local governments), also when it comes to wage increases.

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  • Montebourg en avant
  • Moisi on Sarkozy's chances
  • Binary choices
  • April 25, 2016
  • The death of the Grand Coalition
  • Insurrection against TTIP
  • Juppé to benefit from Macron hype
  • On optimal currency areas
  • Why the Artic region could be the next geopolitical troublespot
  • From a currency to a people
  • November 18, 2019
  • Is Macron facing another uprise against elites?
  • Forget the inflation target: Lagarde’s job is much bigger.
  • October 07, 2019
  • What did Conte know?
  • August 27, 2019
  • Remain’s narrowing pathway
  • Macron's diplomatic masterstroke
  • July 10, 2019
  • Turkish drilling off Cyprus - a test case for the EU
  • Labour’s new Brexit policy is not really a shift
  • June 03, 2019
  • Reinventing the French right without Wauquiez
  • Tory leadership election is between feasible and unfeasible Brexit options
  • April 29, 2019
  • Labour's national executive to vote on second referendum
  • What the debate about electric cars says about Germany
  • March 25, 2019
  • An object lesson in realpolitik
  • On the probability of a no-deal Brexit
  • February 18, 2019
  • How the splits on the left and the right will affect Brexit
  • January 14, 2019
  • Our Brexit predictions
  • 1789 - Macron's version
  • Tsipras calls confidence vote after Kammenos pulls out
  • December 14, 2018
  • Running down the clock
  • Macron, Philippe - untouchable no more
  • EP blasts Commission over Babis
  • November 14, 2018
  • Now what?
  • October 15, 2018
  • Black Brexit smoke
  • Bettel can relax and stay in office
  • Solving the crime vs solving the problem
  • September 17, 2018
  • About the new partnership between Russia and China
  • EU ponders Irish backstop protocol to help May
  • August 20, 2018
  • ... and a subtle shift in EU policies towards both Russia and Turkey
  • Nothing to celebrate about the end of the bailout programme
  • Support for Brexit holding up
  • July 20, 2018
  • Why preparations for no-deal Brexit are a positive development
  • On confirmation bias in the Brexit commentary
  • June 25, 2018
  • Trump's car tariff to come early
  • On the lack of a sharp focus in the eurozone debate
  • June 01, 2018
  • Will France and Germany stick together in their response to US trade tariffs?
  • From a eurozone budget to a slush fund
  • May 09, 2018
  • A moment of truth in the Brexit talks
  • A leap of faith, Mr Kierkegaard?
  • April 16, 2018
  • Italy's and Germany's pained response to the Syria attacks
  • On the end of the eurozone's economic honeymoon
  • Why Bulgaria should stay out of the euro
  • Where shall we meet after Brexit?
  • March 26, 2018
  • On the run no more
  • Terrorist attack will challenge Macron
  • A double-whammy of geopolitical and financial uncertainty
  • March 05, 2018
  • One rock, two vetos, three governments
  • Rutte weighs in
  • February 12, 2018
  • What the euro debate is really about
  • How Brexit can still falter
  • January 22, 2018
  • Carles Puigdemont's flying circus
  • Macedonia and the insurrection of Greek patriotism
  • On the real hurdles for Brexit revocation
  • And the satellites, too
  • January 05, 2018
  • Catalonia's government by Skype
  • The case for EEA membership
  • December 13, 2017
  • Danish government might fall over taxes and refugees
  • End-of-an-era mood in Germany
  • And now for the hard part
  • Property auctions - a ticking time bomb for Syriza?
  • November 27, 2017
  • Will Northern Ireland scupper a Brexit deal?
  • Last-ditch effort to prevent Irish elections
  • Pressure on Wauquiez
  • November 13, 2017
  • A pro-European list: Wauquiez' nightmare
  • Catalan separatism isn't going away
  • Why oh why does Germany behave the way it does?
  • Why the four freedoms matter
  • October 30, 2017
  • Italy's electoral reform seems to backfire already
  • Bregretometer hits another peak
  • October 17, 2017
  • Catalan separatism has its martyrs
  • European Parliament agrees to restrict posted workers
  • Foreign policy will be key in Austrian coalition talks
  • October 06, 2017
  • Catalan parliament session suspended
  • Can Jamaica fail? (not the country)
  • Portugal to give tax relief to the lower middle class
  • Stagnant wages and Central European populism
  • September 25, 2017
  • Where does this leave eurozone governance reform?
  • Is Mélenchon losing his momentum?
  • Lost in Florence
  • September 15, 2017
  • Juncker dragged into the Catalan fray
  • What to say in Florence
  • How to fill the gap left by the British MEPs
  • September 06, 2017
  • On the failure of global policy coordination
  • The day Catalonia disobeyed?
  • Waiting for Varadkar
  • August 29, 2017
  • The deep significance of Labour's Brexit U-turn
  • The day after the SPD loses
  • August 21, 2017
  • Soft, getting softer
  • Tsipras' chances of a boost
  • On the fallacy of a middle-ground option for the eurozone
  • July 31, 2017
  • Russia sanctions bill becomes US law
  • Spain's Guardia Civil in the eye of the Catalan storm
  • A grand bargain between France and Germany
  • July 27, 2017
  • Löfven's move
  • The nearing end of petrol and diesel engines
  • Why a second referendum in the UK won’t happen, and why it would be wrong
  • July 24, 2017
  • Macron's popularity falls amid more budget cuts
  • Orbán to support Polish government against EU
  • No exit from Brexit
  • July 21, 2017
  • Day of truth in EU-Turkey relationship coming closer
  • Germany’s over-dependence on diesel technology
  • July 20, 2017
  • Where France and Germany disagree
  • When the going gets tough, the Dutch go on vacation