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October 10, 2017

The UK is slowly gearing up for a no-deal Brexit scenario

Another speech, and once again not enough to break the Brexit negotiation gridlock in time for next week's EU summit. But Theresa May did say something important, which she hinted at during her Tory conference speech but did not elaborate on. She went into some detail on the contingency planning for a no-deal Brexit. This is not another hollow better-no-deal-than-a-bad-deal threat, but serves two specific purposes: the first is to be physically able to reject a deal, or prepared if the other sides rejects it. The probability of either scenario is clearly not zero. And the second purpose is to signal to the EU that there is a danger of overplaying its hand.

At prime minister's questions in the House of Commons, May said the UK would accept ECJ jurisdiction during the transitional period, which is now agreed by her eurosceptic cabinet colleagues including Boris Johnson, though not by all MPs. The Financial Times quotes the ultra-conservative Jacob Rees-Mogg as saying that for him ECJ jurisdiction is the test of whether the UK has left the EU or not. He sees the transition as an extension of EU membership.

The FT calls her strategy twin-tracked: ready to make a concession on the ECJ, while signalling readiness for no deal. Ms May's comments were accompanied by more details in a customs white paper, which notes that the biggest problem of a sudden Brexit would be for the country's sea ports, which are not equipped to deal with customs procedures. The customs paper sets out a procedure where inspection is moved inland. It said that, in a no-deal scenario, a lorry would be required to lodge pre-arrival safety and security declaration for imports and exports.

We are still at an early stage of contingency planning, with virtually no money being spent on the no-deal scenario yet. But funding for this will be stepped up in the new year - on staff, IT systems, and real estate, needed for a new customs and regulatory system. We presume that this process would be accelerated if the Brexit negotiations in Brussels remained gridlocked beyond December.

The Times and the Telegraph also carry more specific information on May's latest thinking about a cabinet reshuffle. The Times columnist Rachel Sylvester writes that there had been extensive discussions within 10 Downing Street with the consensus in favour of sacking Boris Johnson - or rather offering him a diminished job, which he will almost certainly refuse. Sylvester noted that either Johnson or Philip Hammond will have to go, and that May is closer to Hammond. The majority of the cabinet also wants Johnson out. If she reshuffled leaving him in place, this would be interpreted as a sign of weakness. The Daily Telegraph, however, has obtained the information that the Chief Whip in the House of Commons, Gavin Williamson, had warned May that a reshuffle would carry significant risks.

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October 10, 2017

No liberal parties in Austria

Austria goes to the polls this weekend - with expectations of a coalition between the ÖVP, led by the young foreign minister Sebastian Kurz, and the the ultra-right-wing FPÖ. The SPÖ was doing well until a few months ago, but is now following the same downward trend of social democratic parties all over Europe. Chancellor Christian Kern, the SPÖ chairman, used a very similar strategy to that of Martin Schulz during his failed campaign in Germany, notes FAZ, with similar result. The German paper makes an interesting observation about the election. Austria is the land of liberal economics, of Menger, Schumpeter, von Mises, and von Hayek. Yet, unlike in Germany, there is no liberal party defending those ideas now. The FPÖ is much closer to the AfD than to the FDP. And there is virtually nobody in Austria making a robust defence of free-market economics. The article also noted that this is an area where Austria is distinct from Switzerland, which has a similar population, and which is far more pro-free-market.

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