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February 20, 2018

Merkel and her friends

The SPD referendum begins today, accompanied by an opinion poll that shows - for the first time - the AfD overtaking the SPD. Insa is usually ahead of the others in picking up big electoral shifts, which means that the first part of the campaign will be accompanied by other polls of the SPD weakening. As we have pointed out before, this constitutes an ambiguous factor of uncertainty in the referendum. It may scare SPD voters into avoiding an election, or it may encourage them to end their own party's misery, especially if they believe that Angela Merkel will end up running a minority government.

The more important political news yesterday is Merkel's appointment of Annegret Kramp-Karrenbauer, the prime minister of the Saarland region, as the party's general secretary, the most important party job after the lead, and often a springboard for a future leadership candidate. This was how Merkel got into the job herself. Merkel went out of her way to deny that this has a signal effect. Merkel will make further announcements - about the CDU ministers in her cabinet - on Sunday. 

Berthold Kohler makes the point in his commentary that Merkel has chosen the politician who is closest to her, rather than a critic. He says that Merkel does not understand the mood in her party as it confronts the AfD as a rival.

It appears to us that Merkel has a different narrative to those in the CDU who are demanding a shift in politics, and who had hoped that Jens Spahn, the young conservative finance secretary, would become general secretary or obtain a senior ministerial post. It is possible that she might promote him to the cabinet  in order to appease her rivals from the right. But the appointment of Kramp-Karrenbauer, known in Germany by her initials AKK, suggests that the party will keep its centrist course.

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February 20, 2018

UK threatens to block EU payments if there is no progress on trade

It looks like the Brexit negotiations are hitting another crisis - as they did last autumn - with both sides inserting threats of sanctions into their negotiating positions. We do not want to overplay these developments so long as they don't get out of hand. Much of it is the usual noise that accompanies bilateral negotiations. 

One of the open questions about Brexit is what will happen if the EU cannot agree a trade deal with the UK. There is a clear time inconsistency problem because the withdrawal agreement under Article 50 will be concluded by October and ratified soon afterwards, while the future trade deal could take several years to conclude. A narrow deal could be negotiated and adopted at EU level itself, but the UK is seeking a wider trade agreement - a so-called mixed agreement - which will require the approval of all national and some regional parliaments both for preliminary application and final ratification. In other words, there will come a time in the post-Brexit negotiations when the EU is no longer in full control of the process.

Bloomberg has an important story that the UK is drawing up a contingency plan to halt Brexit payments if the EU procrastinates on the trade deal - or even if the EU does not offer the UK the deal it wants. This is a bit of a nuclear-option threat. The whole idea of the Art 50 process, from the perspective of the EU, is to ensure budgetary certainty and to guarante the rights of EU citizens in the UK, no matter what. If the UK already threatens not to observe what it will agree under Art 50, and to use what has been agreed as a future bargaining chip, it throws doubts on the value of the Art 50 deal itself. At the same time, there are no genuine solution to the time inconsistency problem because the EU has no way of guaranteeing the conclusion of a mixed trade agreement. 

The UK is currently playing a good cop - bad cop strategy. Theresa May herself held out the possibility of a close relationship in security co-operation with the EU, both internally and externally, on areas such as the European arrest warrant, the fight against cyber-crime, and data exchange. We agree with the analysis by Bronwen Maddox at the Institute for Government who writes that, if there is any hope of a bespoke deal, then surely this must be in the area of security where the UK has much to offer. She cites that their may be possible objections from some member states, like Denmark which has its own bilateral security deal with the EU - having opted out of the common security and defence policy in the Maastricht Treaty. To get a deal on foreign and security co-operation, the real constraint is time, though.

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