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November 15, 2018

Ratification is more probable than it appears

Yesterday’s approval of the draft withdrawal agreement by Theresa May’s cabinet was a hugely important step in the process towards Brexit. It means that the draft treaty will be formally agreed at a special European Council on November 25, and presented to the UK parliament for approval presumably in December. 

As virtually every political commentator pointed out, the draft does not command a majority in the House of Commons as of now. In fact, it is some 40-50 votes short, which appears to be an insurmountable hurdle.

We, too, see risks of a failure to pass the deal, but would urge readers to consider the following: the EU will line up behind the treaty and Ms May. By the time of the vote, it will have become impossible for Remainers to claim that they can get a better deal from the EU. And, by then, Remainers might also become aware that a second referendum cannot happen without unanimous support of both the British prime minister and the European Council. 

The Brexit hardliners will have to weigh the possibility of new elections that would almost certainly happen if the deal were voted down. In her short statement after a gruelling five-hour cabinet meeting, May said that those who think of voting against the treaty should consider that there is a risk both of a no-deal Brexit and no Brexit at all. The latter was probably the most interesting part of her statement. She did not explain how this would come about. But, given her own firm rejection of a second referendum, it can only mean that she would use the provisions of the Fixed Term Parliaments Act requiring a two-thirds Commons majority in favour of new elections in that case. The prospect of a Labour election victory is what makes this a credible three-way trade-off. 

Brandon Lewis, chairman of the Conservative Party, made the point in a TV interview yesterday that the treaty specifically addresses one of the persistent fears of Brexiteers - that of being locked in a customs union with the EU forever. Article 50 cannot be used to negotiate a permanent future relationship. The backstop thus cannot replace a separate treaty on the future relationship. The withdrawal agreement itself says that both sides are eager to avoid the backstop ever being triggered. The treaty also allows for a one-time renewal of the transitional phase, but it leaves open the end date for now. 

We, too, have yet to read the treaty, but from the information available we doubt that May could have obtained a better deal. The UK will be able to leave the customs union and single market after a transition of uncertain length; the UK will have control of immigration policy; disturbance in the flow of traded goods will be kept to a minimum; and there will be no hard border within Ireland or in the Irish Sea. The EU also maintained its red lines, especially on a level playing field during the backstop phase, and on the Irish border. The negative reactions to the agreement in the UK have nothing to do with the actual agreement itself. Remainers want to frustrate Brexit, and many Brexiteers want no deal at all. Yesterday was just another opportunity for them to restate their points.

News reports suggested that nine or ten of the thirty cabinet ministers were unhappy to varying degrees, but there were no immediate resignations. May will make a full statement to the Commons today. It is possible that 48 Tory MPs formally trigger a vote of no-confidence in the prime minister. But, to actually remove her, it would take a majority of 158 Tory MPs in a secret ballot. In the unlikely event that this succeeds, a new party leader would be elected according to a set procedure. In 2016, the foreseen timetable for a leadership election was two and a half months. In the end, it ended faster because the second-placed candidate pulled out. If the Tories were to remove May now, no new leader would likely be in place until February at the earliest. The new leader could either proceed with a no-deal Brexit, or get parliament or her or his own party to reconsider their positions and ratify the agreed deal at a late stage. The new PM could possibly seek a short extension, or seek immediate elections, either of which would take us into March. 

In the more likely scenario that May survives the no-confidence vote, she will conclude the withdrawal agreement with the EU on November 25. Michel Barnier said yesterday that the House of Commons should do the responsible thing and pass the treaty. Expect to hear a lot more of this. We also expect that, at the summit, the EU will formally rule out an extension of Article 50 if so requested by May.

In this scenario, MPs on both extremes of the debate face stark choices. The more likely of the no-deal scenarios remains a hard Brexit. It would take nothing less than a prime minister fully committed to a Brexit reversal to shift the entire process towards a second referendum. We do not see an alternative Tory leader undoing Brexit. Jeremy Corbyn has kept a position of constructive ambiguity, but we don’t believe that as prime minister he would spend political capital on a Brexit reversal, especially given his own pro-Brexit views. He and the EU would renegotiate the political declaration but keep the agreement itself unchanged.

UK political commentators keep on making the il-informed point that a no-deal Brexit is unlikely because there is no parliamentary majority in its favour. They have not understood the full implications of the withdrawal process. If they didn’t bother to read the delightfully short and very explicit Article 50, they will clearly not bother to read the the convoluted 585 pages of the draft treaty. The biggest risk therefore remains the same as it is now: a political misjudgement resulting from MPs relying on hearsay, having persuaded themselves that they can frustrate Brexit by voting against the deal.

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November 15, 2018

Romania's problematic presidency

The rotating presidency of the EU Council is not as important as it used to be, and the EU has coped with dysfunctional or idiosyncratic governments before. But Romania, the country taking over from Austria on January 1st, might soon set a new standard here. The EU affairs minister, Victor Negrescu, has suddenly resigned last weekend; the country’s own President Klaus Iohannis has said publicly that the government is not ready for the EU presidency; and the European Commission has stepped up its sharp criticism of Bucharest, effectively charging the social democratic government with deliberately undermining the anti-corruption fight it has promised the EU to undertake. In its annual report on the famously corruption-prone justice system in Romania, the Commission called on Bucharest to stop its - counterproductive, says Brussels - current reform drive, and appoint a new anti-corruption prosecutor.

The EU system is robust enough to deal with a problematic presidency; but the timing is highly unfortunate. If the European elections in May are overshadowed or accompanied by reports about the corruption of the country and government holding the presidency, perceptions of European disarray will be reinforced. How this would affect exactly voter behaviour is hard to predict, but the most likely impact should be the usual one of turning people off from going to vote. Expect more handwringing about the low turnout at EU elections, and the alleged impairment of the European Parliament’s democratic legitimacy.

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