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January 12, 2018

No, there won't be a second referendum

Nigel Farage has a talent for getting onto the front pages of newspapers. The latest instance is for his support of a second referendum, but this is absurd on so many levels that it is hardly worth discussing. So were the reactions from some of those who have been campaigning for it, and who now believe that they are within striking distance of a Brexit revocation. 

In theory, almost everything is possible in politics. But you would have to be a foolhardy gambler to bet on such an outcome. Theresa May is still in office and, while nobody really seems to be impressed with her, the Conservative Party is too gridlocked to replace her. And the last thing the Tories want is another referendum that would expose their internal divisions. Even those Tory rebels who recently gained parliamentary support for an amendment to the Brexit act would not go as far as to ditch May. It would result in unbelievably messy situation for the party.

This is also why we think the proposal by the otherwise impressive Anand Menon in favour of an extension of the Article 50 deadline is not going to fly. He notes, quite rightly, that there is still a lot of work to be done even on issues on which there now exists a political agreement in principle, let alone on the transition and the future trading relationship. The best course of action would be to allow more time, not to frustrate Brexit but to make it work, he argues. We share the sentiment, but the problem is that an extension of the Article 50 deadline will prolong uncertainty over Brexit itself. For as long as the UK is a full member of the EU, the UK will be in a position to pull the plug on Brexit. The main reason to stick to the March 2019 deadline is to get that uncertainty out of the way.

A far more likely course of events was sketched by the FT this morning. It quoted an internal discussion in the Coreper, the assembled EU ambassadors of member states, where some members voiced support for a renewal of the transition period. This is an important subject because, without the possibility of renewal, a cliff-edge Brexit is still possible if there is no prior agreement on the provisional application of a trade deal. There is also the consideration that a permanent renewal of the transitional period could be construed as a quasi trade-agreement, and this would constitute an abuse of the Article 50 process which only allows for a time-limited transition towards a future trade deal. Art 50 is silent on how long the transition can last, however.

Hungary and Ireland raised the idea of an extension clause, but this was strongly opposed by France and Germany, the FT writes. The ambassadors did, in the end, not agree to recommend a change in the negotiating mandate. 

Apart from those who support an extension clause right now, and those who object to it on categorical grounds, there is a group of countries that wants to deal with the situation only when it arises. That group of countries includes the UK itself. We think therefore that the transition is essentially a done deal. 

The main outstanding issue is the future trade deal. Art 50 suggests that it should be outlined in the withdrawal agreement, but gives no clues as to the level of detail. We suspect that it will only underline a commitment to an association agreement, covering trade and areas of bilateral cooperation. We don't think, for example, that it will tell us whether financial services or other services will have continued market access. That is for later.

Philip Collins reminds us in his Times column just how important the City of London continues to be the country at large. He refers to the impact assessment of the Mayor of London, which warned of the loss of half a million jobs by 2030 in the event of a cliff-edge Brexit. Collins makes a broader point: the forecasts themselves are not what matters, but the report contains an important truth that is independent of the accuracy of the forecast itself. Even ten years after the financial crisis the country remains dependent on London and the revenues that flow from it. London and the southeast of England are the only regions that generate a revenue surplus. The rest of the country is subsidised by London. London alone accounts for a quarter of the entire income tax paid in the UK, three times the size of the income taxes paid in Scotland, and more than the northeast, the northwest, and Yorkshire and Humber, combined.

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January 12, 2018

The Italian centre-right, too, is divided

The campaign for the Italian election on March 4 is in full swing with a strong, but possibly not yet sufficient, lead by the centre-right alliance. Each of the three blocks has its own problems: the left is divided, Five Star is wobbling of the euro, and divisions have also emerged within the centre-right alliance. The latter is the subject of an article in La Repubblica this morning. There are substantive differences in the positions of Matteo Salvini, the leader of the Lega Nord, and Silvio Berlusconi, on two important pieces of current legislation. The Lega wants to overturn the pension reforms introduced by Elsa Fornero, a former labour minister, and also wants to undo the labour reforms of Matteo Renzi's government. Berlusconi said he does not support a change, and wants to move on instead. There are also divisions on the future of the euro. The Lega remains firmly in favour of withdrawal from the eurozone, while Forza Italia has returned to its previous position. It seems very clear to us that Berlusconi has returned to governing mode, while the Lega remains deeply steeped in opposition. 

In addition to all of this, there is the continued rivalry between Salvini and his predecessor Roberto Moroni, the president of the Lombardy region. Maroni, who served as interior minister under Berlusconi, has announced that he will not be a candidate in Lombardy again, as he is clearly getting ready to serve in the national government.

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January 12, 2018

Greek church raises the bar in name diplomacy with Macedonia

The Greek and Macedonian foreign ministries may be ready to agree on a new name for the former Yugoslav republic of Macedonia (Fyrom), but there is still a long way to go before an agreement can be reached. Opposition is picking up, and there is always the chance of an accident derailing the process despite the progress achieved so far.

And the opposition is indeed formidable. The powerful Greek Orthodox Church has come out against the use of the name Macedonia. The Holy Synod unanimously said it would oppose any solution that included the use of the term "Macedonia" by Fyrom, citing political, national, and ecclesiastical reasons, as it could bolster claims by Fyrom’s self-declared "Church of Macedonia"Kathimerini reports. A foreign ministry official then compared the church's stance with the one of the neo-Nazi Golden Dawn party. It is not hard to imagine the tensions that resulted from this exchange. Alexis Tsipras had to write to the archbishop to de-escalate the situation, appealing to the spirit of unity to find a solution for the age-old name dispute. 

The church stance was then a curtain raiser for others to come forward. Panos Kammenos, the leader of the junior coalition party Anel, and defence minister, reiterated his party's opposition to the use of the Greek term Macedonia in the new name, even if it is called "New Macedonia" as reported. Instead, reports suggest that he is open to the Slavic name of "Makedonija". Also, opposition leader Kyriakos Mitsotakis defied the secret diplomacy yesterday and called on the government to "stop dividing Greeks" over the issue. 

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