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July 28, 2017

German government bans Porsche Cayenne

The German car cartel story is hugely significant because it connects the dots between various scandals that have recently hit the headlines. The car cartel has turned the VW emissions scandal into a Germany-wide scandal. Yesterday, the German government took the extreme measure of forcing a recall, and ordering a stop of sales, of the Diesel version of the Porsche Cayenne, the company’s four-wheel drive car. This model uses the same cheating software that VW has used elsewhere. The German government has been the guardian angel of the car industry, lobbying endlessly for the softening of EU emissions rules and in favour of low-budget emissions testing, but public opinion towards the car industry has shifted so dramatically that a CSU-run transport ministry can now impose a ban of one of the most prestigious German cars a few weeks before an election. 

The cheating software was discovered by the federal motor transport authority and the transport ministry. All existing cars face a forced recall. 7500 cars in Germany are affected, and 22,000 in Europe, according to FAZ. The software works by detecting whether a car is driving on the street, or whether it is in a test situation. In the latter case the emissions and the power of the vehicle are reduced.

It is an astonishing sign of the criminal will of German companies that they continued to use the software even after the VW scandal broke two years ago. FAZ reports that the forced recall may affect other models as well. The VW Touareg shows similar behaviour to the Cayenne, and will now be subject to detailed tests. 

Süddeutsche reports that Audi engineers had already warned in 2013 about the emissions cheating, according to internal documents. The importance of that story is that it debunks the lie told by the management of the German industry that the cheating was the work of a small group of rogue employees, and that senior management had no knowledge of what had happened. The document warns about the possibility that the cheating software is discovered, and recommends getting rid of it before this happens. But the warning was ignored by the management of the company. The memo contained all the arguments why the software would be extremely damaging to the company - very high penalties, plus an irreparable reputational loss.

The criminal will of the German car industry is now changing political attitudes. The German industry has enjoyed a special status in Germany politics. FAZ has a separate article explaining the German government’s position on diesel and petrol engines. While Germany will not legislate a specific end date for the sale of these engines, the policies they will be pursuing will ultimate amount to the same thing. We think this is an exaggeration, but the point is that people will stop buying a technology that is not future-proof, and that they associate with environmental damage and criminal activity. The German government will not be able to cut carbon dioxide emissions by 80 to 95 per cent below the 1990 levels without a change in the diesel technology. The government’s immediate goal is a sharp fall in car emissions by 2030, which will require a significant proportion of electric cars for the target to be met.

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July 28, 2017

More troubles for the AfD

The polling for the AfD in Germany is low but stable - polls consistently put the party’s share at between 7 and 9%, which would be just enough to attain parliamentary representation. But there is new trouble from another direction. An anonymous letter written to the state election official in North-Rhine Westphalia, and to a local newspaper, alleges that there have been irregularities in the drawing up of the AfD’s electoral lists, according to Die Welt. The details are scarce, so we have as yet no way of ascertaining whether there is any chance of the AfD being disqualified in the state, or whether this is just a matter a journalist going off on a tangent. But the point is that, without North-Rhine Westphalia, the AfD could well fall below 5% nationally. We will keep an eye on this.

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July 28, 2017

Of course there will be a soft transitional period for the UK

We have been saying for some time Brexit will happen, and it will happen with a transitional period inside the single market and the customs union. This was now confirmed by the chancellor Phillip Hammond, who said there would be no point in trying to negotiate a bespoke deal for the transitional period. He wants a quick deal on this - full budget contributions, and full participation in all EU programmes for that period. One important aspect of such a solution, not mentioned in this particular story, is that it would also go a long way to solving the biggest issue in the Article 50 negotiations - the Brexit bill. If the UK pays into the EU budget until the end of the budget period in 2020, the biggest source of controversy - also among the EU27 - is removed. 

The Guardian, meanwhile, reports that the two senior Labour politicians, shadow Brexit secretary Keir Starmer and shadow chancellor John McDonnell, have dropped their insistence that the UK should remain a member of the single market post-Brexit. This has been a point of controversy within the Labour Party. Jeremy Corbyn’s recent statement that Brexit is not consistent with single-market membership seems to have had an impact on the discussion. Starmer and McDonnell are now only talking about tariff-free market access, which is another misclassification, just as the access to the single market policy has been all along. Once the UK leaves the EU in 2019, it is a third country. The present arrangement can be maintained in a transitional period until an FTA is agreed. The FTA will, of course, impose zero tariffs on traded goods and may contain chapters on services. But this will be a third-country trade relationship, nothing to do with the single market which the UK will no longer be part of after March 2019.

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