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October 09, 2018

Can Le Pen and Salvini pull it off?

Marine Le Pen met Matteo Salvini in Rome yesterday launching their common campaign for the European elections in May next year with the aim for the far-right movement to become an alternative force in Europe.  While the meeting produced many symbolic gestures and defined common enemies, it still lacks substance.

The first thing to note is that their relationship is more complex than yesterday’s display of friendship suggests. Marine Le Pen may have inspired Matteo Salvini years ago to take his regional party to the national level on the back of a populist wave. But it is Salvini today who is in government with a strong backing of over 30% in the polls and an alliance with other right wing parties that consolidates his power. Le Pen by comparison seems isolated in France. Salvini was in no rush to meet Le Pen. Instead, he  sought to get closer to Viktor Orbàn as well as to the Austrian government and the CSU in Bavaria. But Salvini returned from those meetings disappointed by the conflicting interests over immigration question. He ended up aborting the idea of an axis between Rome, Vienna and Munich, writes Le Monde. So here he is back again with Le Pen, where his opponents feel he belongs anyway.

Now that they reaffirmed their alliance, what next for their European movement? Will it be enough just to define a common enemy to mobilise the electorate? They named their usual favourite foes yesterday: the bunker in Brussels, which is how they refer to the European Commission, and Emmanuel Macron. They portray the EU as an authoritarian system operating like an occupying force. But they also seized the opportunity to seek distance from Steve Bannon, former adviser to Donald Trump, who plans to unite far-right groups in Europe around a common strategy.

Their joint attacks cannot mask the inherent fragility of their alliance. To build an effective political force across Europe requires more than just a common enemy, and more than repeating Salvini's mantra that where there is a way, there is a will. So far, the contours of their Europe of Nations remain blurry. Yesterday, there were no news about the organisation or the cooperation of the populist movement. Will this change over the coming months? Le Pen has no track record of building lasting alliances. Salvini might well be busy fighting other battles. A consolation for them is that Emmanuel Macron has his own difficulties to mobilise forces against them.

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October 09, 2018

The next ten days

There is always a degree of expectations management in any European negotiations, but we think that Downing Street is right to have warned against excessive optimism of an imminent deal. We note that the tone has changed for the better in the last few days, though we question the wisdom of Jean-Claude Juncker’s imitation of Theresa May’s dance moves. These are, after all, the most difficult EU-level negotiations we have witnessed since the late 1980s.

The FT has the story that the UK is demanding a legally-watertight commitment to frictionless trade as a quid-pro-quo for the Irish backstop. This means the UK does not want these commitments to be relegated to the political declaration, which has a different legal status from the withdrawal treaty itself. It wants an equal commitment to ensure that there is no friction once the second interim period ends, during which the UK will be a member of the customs union. The Irish backstop also causes additional complication in UK politics, as Scotland and Wales are now also demanding legally enforceable backstops - which, of course, is not possible, but makes great newspaper headlines nevertheless.

The demands made by the UK are not insurmountable, but they are very hard to meet. Article 50 gives the EU the right to negotiate an interim trade deal, using a fast-track procedure, but not a permanent deal. Arlene Foster, the DUP leader, is in Brussels today for talks with Michel Barnier. The position of the DUP is going to be critical, not only because of the DUP’s support of Theresa May’s minority government but also because of the general role the Stormont parliament will play in the post-Brexit world. It remains the UK’s position that Stormont has the final say over any regulatory divergence, another point of contention. If that is so, it is essential that the DUP is on board.

We remain convinced that a deal is possible, but not on the foreseen timescale. The bigger uncertainty relates to whether a deal would command a UK parliamentary majority. The closer the process gets to the final deadline - sometime in January next year given the ratification procedures - the greater the chances of parliamentary ratification.

There will, however, be a strong push towards a preliminary outline of the deal. The FT reports a comment by Sabine Weyand, the EU’s deputy Brexit negotiator, who spoke of a 10-day negotiating marathon with the hope of a joint statement next week.

We have now come to a point where people are taking the no-deal scenario more seriously. The IMF is warning that the UK should consider an expansionary fiscal and monetary policy in that scenario, which makes total sense given the obvious economic hit that would occur in the short-to-medium term. This is exactly the kind of shock one should address through anti-cyclical policy. 

The Germans, too, are starting to consider the possibility of a hard Brexit, having previously only considered the possibility of a Brexit reversal as an alternative scenario to a deal. FAZ reports on a study by the Kiel Institute for the World Economy, which predicted a halving of trade volumes. A WTO regime would result in €5bn in net transfers from EU companies to the UK per year. German companies would be hit particularly hard, given the large trading volumes between the two countries. IW estimates a fall in German exports to the UK by 57%.

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October 09, 2018

Don't shoot the social democratic ambulance

Good old schadenfreude, like the much newer spitzenkandidat, is a word the Germans have gifted to the English language. But we leave it to dyed-in-the-wool conservatives amongst our readers to yield to wicked schadenfreude when considering the current state of the spitzenkandidat process in the world of European social democracy. We prefer to hold it with the French, whose far more humane advice in such cases is "don’t shoot the ambulance". We agree that, increasingly, the whole spectacle looks like a political farce. But, as in any good farce, beneath the laughter there is the smell of tragedy.

The latest twist in the saga is Christian Kern's surprise announcement that, far from running as the Austrian socialists’ lead candidate in the European elections, with his hat thrown in the ring to become the European spitzenkandidat, he is withdrawing from politics altogether. The former Austrian chancellor’s move came a mere 48 hours after a similar one by Pierre Moscovici. Like the French EU commissioner, though less savagely, the former Austrian chancellor motivated his withdrawal with his party’s inability to overcome its inner divisions so as to present a sufficiently-united front in the run-up to the elections in May.

This new debacle leaves the EU’s social democrats with just one declared hopeful for spitzenkandidat currently in the race, the Slovak commissioner Maros Sefcovic. Given the likely make-up of the European Parliament it seems certain at this stage that the social democrats' nominee, whoever she or he is, will stand no chance to succeed Jean-Claude Juncker. But even then, the current shortage of candidates is beginning to look to us like the perfect expression of the existential crisis of Europe’s social democracy. For over 150 years, European social democrats have won elections by promising a more generous welfare state, more generous old-age pensions, more worker’s rights and better education for the less privileged. Technological change and the rebalancing of the global wealth distribution make most such promises sound hollow today. Unless social democracy faces up to that fact and finds a new way to propose positive and credible change, we see no reason why their decline will not continue.

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