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September 21, 2017

Time to get serious about Brexit

Nick Timothy was one of Theresa May’s two most important advisers before the last election, and the co-architect of May’s relatively-hard Brexit position. He now writes in the Daily Telegraph, rightly in our view, that we should not expect May’s speech in Florence tomorrow to break the deadlock. There will be a polite but not positive reply from Michel Barnier and others. May’s speech will not be enough for EU leaders to agree that sufficient progress has been made to move the Brexit negotiations to the next stage. EU leaders will react similarly. Angela Merkel is still in an election campaign. Emmanuel Macron is focusing on his eurozone agenda, and Leo Varadkar will side with whatever the EU’s position is.

Timothy is right in all of these, as well as in his assertion that the EU is not particularly interested in Brexit as such, except in terms of the damage it could unleash. He encourages May to drop the old foreign policy goal of being inside the EU with the intent to prevent the EU from integrating, in exchange for the exact opposite position of staying outside the EU and supporting European integration of any country that wishes to take part. 

Timothy notes that, in the long run, the trickiest issue of all will be to manage the divergence of UK and EU regulations. It will be unacceptable for the UK simply to take EU regulation as given, so the two sides will need to find a way to negotiate a balanced approach. He is urging his former boss to tackle the complexities of this issue, and is also urging ministers like Boris Johnson to stop their grandstanding because this is the surest way to a bad deal. 

Chris Cook of the BBC has an interesting analysis about the absence of any serious preparation for a no-deal scenario. He writes that there are a lot of memos about it, but this is not the same as serious preparation. He makes the point that, if the no-deal scenario is so awful as not to be countenanced, then surely the UK must be in an extremely vulnerable negotiating position. It needs to prepare for a no-deal scenario if only to signal to the other side that there are limits beyond which the UK will not go.

He then compiles a to-do-list that would become necessary in a case of a no-deal scenario. The UK would need to equip its ports and airports with completely new procedures and personnel. They would need to install immigration and customs officers. He cites an estimate of between 3000-5000 customs officers alone. Computer systems will need to work in this environment. Controls for the transport of livestock will need to be introduced. Some problems associated with a hard Brexit are simply unsolvable. The UK would no longer be part of the EU’s aviation regime. British airlines would have third-country status. So, if the government is really serious about its threat to walk away from a bad deal, it will need to deal with these and lots of other technical issues.

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September 21, 2017

Would the FDP claim the job of finance minister?

FAZ has an interesting, albeit speculative, article about the dynamics of a potential coalition of CDU/CSU and FDP. The polls are currently moving away from this constellation, but the article rightly notes that such a coalition is within the error margin of the polls, which is why we should not dismiss this possibility. We agree. Given the number of small parties that will not make it above the 5% threshold for representation in the Bundestag, one should expect that a joint share of the vote of 48% is sufficient for the two groups to assemble a parliamentary majority.

One of the issues is whether the FDP will demand the job of finance minister, as its leader Christian Lindner has done. The article thinks not. Lindner is not likely to do the job himself because he would be able to exert more influence on the government if he took the role of FDP parliamentary leader in addition to his role as FDP chairman. Another argument is the FDP’s weak position in the Bundesrat, the second chamber of the German parliament, which has important powers on financial policies. The FDP might get sidelined by the Bundesrat. It is also questionable whether fiscal policy is a good issue for the FDP to distinguish itself. The 2009-2013 coalition ended with the FDP’s defeat in the 2013 election, partly because the party failed to deliver on its promises of a tax cut.

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September 21, 2017

The return of the ultra-right to German politics

In our new public blog, Outside the Reservation, Wolfgang Munchau takes a look at the political implications of the return of the ultra-right to German politics. The AfD is no longer simply an anti-euro party. It has moved far further to the right than many other so-called populist parties in other European countries, like the Front National in France. And, while the AfD will not be included in any conceivable coalition negotiations, it will be in a position to influence German politics profoundly. Munchau expects that the elections will result in another grand coalition. If the AfD were to emerge as the third largest party, Alexander Gauland and Alice Weidel, the party's two extremist Spitzenkandidaten, would then become the official leaders of the opposition. Munchau calculates that the majority margins in the Bundestag for policies to reform the eurozone and the EU, and for any ESM programmes should they become necessary, would become very tight even under a grand coalition government. These German elections are not boring. They are troubling.

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