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March 02, 2018

What will Theresa May say?

The answer to the question is: we don't know. It is quite possible that the speech is still being written now - on Friday morning. What we do know is that the speech has been subject of yet another row in the British cabinet. The real absurdity of this disagreement is that it pitches against one another two views which are equally unacceptable to the EU. There are those like Philip Hammond who want convergence with the EU, and others like Boris Johnson, who want as much independence as possible. As we keep on pointing out, all of this matters only for domestic political consumption. The EU will only offer EEA membership, a customs union treaty, or ordinary third-country status, but the latter option is now severely hindered by the EU's insistence that Northern Ireland stays in the customs union. The only relevant UK debate is the one on Anna Soubry's amendment to keep the UK in a customs union with the EU. If she gets majority support, that will change the course of Brexit. If not, we will end up with a Canada-type agreement at best, and no deal at worst.

The FT reports that May's speech will set out five tests for Brexit:

  1. taking back control of money, laws, and borders;
  2. enduring solutions;
  3. job protection;
  4. creation of an “outward looking” Britain;
  5. strengthening the UK.

There is nothing in this that would suggest May has changed her mind on the customs union. This is a hard-Brexit agenda. The EU has already rejected May's stated policy of managed divergence and mutual recognition - concepts totally alien to the EU. Michel Barnier said this week that that there can be no mutual recognition without the rule of EU law. There can be no free trade deal with the same benefits as the single market. Donald Tusk even went further than merely pointing out the inconsistency of the UK position. He said he was not happy with May's red lines -  of exiting the customs union and the single market. This is in contrast to what he and his colleagues said last year when they welcomed the clarity of May's Article 50 letter. The Irish question has clearly also intruded into the EU's agenda. 

What concerns us is that the EU is now effectively determining single market and customs union membership as the sole Brexit option to which it can agree politically, which we think is a counter-productive position as it drives many political fence-sitters in Britain towards the hard-Brexit camp.

One of those is Nick Timothy, May's former political adviser, who has been instrumental in devising a political Brexit strategy that straddles the gap of extreme Brexit and Remain positions in the Conservative Party and in the country at large. He writes in his Daily Telegraph column that the UK is offering a relationship based on free trade, further devolution in Northern Ireland, and efficient pre-registration systems for customs checks, which would minimise trade disruption.

"Yet Brussels has laughed off Britain’s proposals because they want to deny the plausibility of any solution that does not bind the UK to the EU’s rules and regulations. They want us locked into a customs union and the single market, so they can maintain trade with us while exerting control over our economy."

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March 02, 2018

The show must go on

Carles Puigdemont has finally given up his bid to be reappointed after his list Junts per Catalunya (JxC) was the largest separatist party at the December regional elections. The Spanish government and the PP are taking credit for preventing Puigdemont's reappointment, but this victory will not resolve the Catalan impasse. Nor will it end the associated troubles of the Spanish government, such as being unable to pass a budget due to the Basque nationalists withdrawing their parliamentary support in solidarity with the Catalans.

First of all, Puigdemont is not going away. A foundation will be set up for him to preside in Belgium as part of a government in exile. Secondly, when Puigdemont withdrew his candidacy to actually preside the next regional government, he named Jordi Sánchez - an activist who has been in pre-emptive jail for over four months - as his alternate. The Spanish government is already letting it be known it hopes the Supreme court, which keeps Sánchez in preventative prison pending trial for rebellion, will not authorise him to attend his confidence vote. If Sánchez is not allowed to be appointed, Jordi Turull - another co-defendant in the rebellion case, but who has been released - has been mentioned as a possible replacement. 

Argelia Queralt, a Catalan professor of constitutional law, pleaded for a real and effective regional premier in an op-ed for El Periódico. While her argument is impeccable from the legal point of view and in the interest of restoring the Catalan institutions, we think it completely misses the point of what the Catalan independence movement is about. It suits them much better to have a succession of candidates barred in one way or another by the Spanish justice system, because it sustains the narrative of the legitimate government in exile. Fortunately for Catalonia a modern state runs pretty much on autopilot so long as civil servants show up for work, which Catalan civil servants are doing regardless of whether they work under a normal Catalan regional government or Mariano Rajoy's exceptional administration per Article 155 of the Spanish constitution.

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March 02, 2018

Macron - a modern hero's tale

Taking risks and confronting challenging tasks are the stuff that heroes are made of. Emmanuel Macron is seen as a modern hero, at least by the active working population in France. The latest example are his railway reforms, on which he did not even campaign. This quality is what endears him to the people, regardless whether they are for or against individual reforms. His popularity rose among those aged 35-49 by 13 points, and by 8 points among those who voted for François Fillon, according to the Elabe poll taken after the announcement of the reform of the national rail company SNCF. A majority of the French (52%) believe that Macron is capable of tackling the principal challenges of our time. He remains weak in rural areas and in lower-income classes. His 12-hour visit to an agricultural fair might have helped to improve his ratings by 8 points among low earners, but his popularity of 34% in that group is still comparatively low. 

Despite the reduction of unemployment contributions, he is still seen as weak on purchasing power, explains Les Échos. Pensioners are the most outraged as they have smaller pensions due to the 1.7-point increase in social charges introduced in January. One problem is also that the tax reductions are hardly perceived by the households, according to Le Point. Delays last year meant that the benefits only to kicked in as late as October, and the abolition of the housing tax will only be achieved in autumn this year. It is also a question of size: at minimum wage, tax cuts only amount to €8, which is really not that much. This is why the polls taken before the SNCF announcement all showed a fall in popularity of both Emmanuel Macron and Édouard Philippe.

More popular among rural people is Laurent Wauquiez, who is competing with Marine Le Pen for the same electorate. But his dismissive way of talking about others, as revealed by his intervention among students, is not appreciated and his popularity has fallen 13 points to 36% among right-wing supporters, and is down to only 35% among Les Républicans voters. In the combined polls, his popularity rating is 15%, his ranking falling from third place to seventh. Cécile Cornudet observes that, while Marine Le Pen will crown the seven years of de-radicalising the Front National by adopting a new and less militant party name, Wauquiez is going the other direction and becoming more radicalised. He uses sharp words, curses the media, and is narrowing the party base.  Both target the same electorate, popular and provincial, and both are trying to convince it that they are the real deal.

The tale of a modern hero has its advantages: it can inspire people and make them part of a history where decisions matter. But for a successful hero story it is important that the hero emerges victorious from the struggle eventually. Fighting too many battles at the same time is also risky. The end has not been written yet for Macron.

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