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June 27, 2018

The ramifications of the Macedonia name deal

The name deal on North Macedonia hit another couple of roadblocks and damaged the Greek coalition further. Yesterday, France, the Netherlands and Denmark vetoed the start of EU accession talks for Macedonia and Albania, arguing that the entry conditions are not yet met. 

The Greek foreign minister Nikos Kotzias made a passionate plea among EU foreign ministers to allow the start of the negotiations for geostrategic and geopolitical reasons. In an interview with Euractiv he called on the EU member states to keep their word and warns that, if a date for accession is not given to North Macedonia, the name deal could be jeopardised. 

Greece lobbies for negotiations to start before the deal goes to a referendum in Macedonia in the autumn, writes Kathimerini. With no date it could complicate politics in Skopje more immediately. Now that the Macedonian president has refused to sign the deal, the agreement will go back to the parliament in Skopje for a second vote.

The Greek government also got hit as another Anel MP quit the coalition over the name deal. This brings the majority down to 152 in the 300-seat parliament, and the number of Anel MPs in the coalition down to seven. Syriza is reportedly wooing independent lawmakers and MPs from other parties to prepare for further departures, according to this other article by Kathimerini 

Alexis Tsipras refused yesterday any suggestions that this departure has any political consequences, but the government is visibly shaken. Anel leader Panos Kammenos suggested in an interview yesterday to call snap elections before the deal comes to the Greek parliament. This is certainly not what Tsipras had in mind. 

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June 27, 2018

Could no-deal Brexit preparations become a self-fulfilling prophecy?

It is normally sensible for both sides in a negotiation to make preparations for a no deal. We also think it is perfectly sensible for negotiating partners to say that no deal is better than a bad deal. If you don't say it, you end up with a bad deal. 

It was the game plan of the UK's Remainers to use a parliament procedure to rule out the possibility of a no deal for that precise reason: it would have forced the government to agree a bad deal, which would then have been defeated, followed by a procedure that would have paved the way for a second referendum. The meaningful-vote amendment would have delivered such a procedure. Because of its defeat, people have to take the possibility of a no-deal Brexit much more seriously, as evidenced by recent announcements from companies like Airbus and BMW.

We still see an agreed Brexit as the more likely outcome, also in view of Donald Trump's now-daily threats to impose tariffs on EU products. Neither side in the Brexit negotiations can afford to erect another tariff barrier, which would be the result of a hard Brexit. 

The probability of a no-deal Brexit is rising, however. First of all, industry is creating facts on the ground by reducing investment. The more this goes on, the smaller the value of a transitional agreement for the UK. If the negotiations go all the way until the end of the year, with rising expectations of a no-deal Brexit, it is quite possible that the UK government may conclude that the political cost of an agreement is too high and the benefits from a Brexit transition followed by a customs union are too low, given the changed economic situation. 

We noted a story yesterday that investment in Britain's car industry has fallen from £647m to £347m between the first six months of 2017 and 2018 respectively, according to figures the Society of Motor Manufacturers and Traders. This is the lowest figure since the financial crisis. The society attributes the fall to conflicting messages about the Brexit process. BMW also questions its level of investment in the UK. A no-deal Brexit would not necessarily threaten its Oxford plant, where it produces the Mini. But it would threaten the UK-based production of parts for the global supply chains of its main production sites in Germany.

This is why a decision by the UK to join the EEA, or a customs union with the EU, has a declining economic value the closer it gets to the Brexit deadline. We are now well into the phase where people have to make preparations, and those preparations create irreversible facts. 

We also noted a story in Politico about the Commission telling diplomats that member states need to prepare their airports and the aviation sector for a no-deal Brexit. If there is no Brexit deal, the UK would also drop out of its aviation agreements with the EU. At that point all operating licences for air carriers to and from the UK would cease instantly. The UK would also drop out of the European Aviation Safety Agency. And member states would also have to deal with the logistical implications of additional customs checks. 

Being prepared for eventualities is a good thing, but we also have to be aware of the extent to which the preparations themselves increase the probability of a no-deal scenario. It was the fear of a no-deal Brexit which drove both sides closer together. There seems to be a lot less urgency in the talks, as the UK government in particular remains largely unchallenged by various potential rebellions.

The big issue to watch out for is the Trade Bill, which could yet result in a successful amendment to call on the government to negotiate a goods-only customs union. But, since the EU already rejected this idea, such an amendment would probably not constitute a strong constraint on Theresa May's negotiating position.

We still think a deal is most likely, but accidents can - and probably will - intrude.

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June 27, 2018

Why it is so difficult to agree a post-Brexit defence and security co-operation

What about the future of EU-UK defence co-operation post-Brexit? This is an important and highly complex issue, which was addressed in a policy paper by Alice Pannier, an expert on European defence, for the German Marshall Fund. She focuses closely on the French position. Franco-British bilateralism was part of a wider network of France's multipolar security strategy. From a French perspective, the Lancaster House Agreement with the UK in 2010 was initially successful, including the joint intervention in Libya, but successively became a disappointment as the UK was unwilling to commit resources to defend French interests in Africa, including in Mali. The cooperation persisted, especially in the area of counter-terrorism, and it was revived in 2015 through the joint action in Syria. And today, the UK remains France's key military ally. 

Brexit poses a big dilemma for France. There is already a waning trend in military-industrial cooperation, especially on the joint future combat air system. The current political situation in the UK led to a dearth of funds. Emmanuel Macron is turning towards Germany as a potential alternative partner for this project. But Pannier also makes the point that French industrial interests are not pushing for a hard French line on defence co-operation post-Brexit, even though some of them would probably gain market share if the UK were excluded. The main issue is that the UK remains the country with which French military interests are most closely aligned. While there is an overwhelming case for a post-Brexit deal on defence and security co-operation, the problem is that the interests in the rest of the EU are not fully aligned, which could yet frustrate a deal.

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