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November 30, 2018

May’s one and only trump card

There is an admirable stubbornness about Theresa May, a quality surely needed to get a Brexit deal passed. But this is a quality that might also backfire. We note that even now she refuses to engage in any of the plan-B discussions currently taking place. The best argument in favour of her plan is that it is the only one that is consistent internally, consistent with both UK and EU red lines, and legally feasible. Virtually all alternative suggestions, including Labour’s unicorn Brexit, fails at least one of those tests. In the case of Labour's version, there is no way the EU would agree to both a customs union as well as an internal market relationship, and then allow restrictions on free movement on top of that. May’s delivery remains wooden and unappealing but, when she faces Jeremy Corbyn in a TV debate on Sunday, it may just become apparent that her plan is the only feasible one. The politics, however, may not work that way. She could still manage to lose that debate. She has an enormous information advantage, though, even over the members of her own cabinet let alone the opposition frontbench team. We urge readers not to deduce that the outcome of the vote is a forgone conclusions. The vote count is indeed looking awful for May at this point. But the realisation of a lack of alternatives has yet to sink in.

One alternative under discussion is the Norway option. Jean-Claude Piris is worth reading on the subject. His conclusion is that Efta is legally possible but not politically, and especially not as an interim option. He gives a detailed summary of the many subtle, and not so subtle, issues that are involved. We would like to highlight two big issues. We fail to see how the Norway option can get rid of the backstop. The EU will still require an Irish backstop in case the Norway option cannot be agreed on time. 

Secondly, the EU is very unlikely to agree both an Efta/EEA deal as well as a customs union. In fact, the EEA treaty states explicitly that there shall be no customs union. That treaty would need to be changed, and that treaty change would have to be ratified by all EU member states plus the four EEA member countries. The political price the EU would extract from the UK could bordering on extortion.

The Times reports that the UK government may end up reviving another plan B option, which Theresa May briefly considered in the final phases of the negotiations, but dropped when she realised that the EU would not accept it. This is the right to opt out of the backstop unilaterally. We recall that the EU would have accepted this idea only on the condition of a backstop only for Northern Ireland becoming active. The price for an all-UK backstop was not having a unilateral opt-out. We also fail to see the political logic of this. While a unilateral opt-out would please the Tory backbenchers, the version that would be acceptable to the EU would drive an even bigger wedge between Northern Ireland and mainland UK. The proposal would not help May to secure support from the DUP.

In this context we noted an amendment by another backbencher who advocates that the UK signs the agreement, but then exits unilaterally using the provision of the Vienna Convention on the Law of Treaties. This backbencher wants to break the treaty even before he signs it.

May also yesterday ruled out a second referendum once again. We believe that her strategy is simply to drive the process towards the cliff, and confront the Commons with a final take-it-or-leave-it choice between her deal and no Brexit. It is possible, in theory, that she could change her mind on the issue of a second referendum, or that the Tory party could replace her with someone who drops her deal - and proposes a Remain vs no-Deal Brexit referendum. We saw a poll yesterday that showed a 52/48 split in favour of no-deal brexit in a direct run-off. We are also not sure whether the EU would agree to an Art. 50 extension if the UK rejected the withdrawal agreement for good. Another Brexit referendum defeat would be a reputational disaster for the EU, especially coming around the time of the EU elections. As MPs approach the final stretch of the Brexit process they may start to realise the binary nature of Art. 50, over which much of the UK has been in denial. 

While this is the technical reality of the situation, politics may drive the process in other directions. We noted a very good analysis by Simon Nixon who makes a point May’s lack of leadership during the last two years. She has failed to be straight to the public and

"she appears to have concluded that Brexit could only be delivered by stealth, obfuscation and subterfuge. Her Whitehall operation has been secretive, in contrast with the transparency of the EU negotiators and the openness of other national governments. She has relied for advice on a tight circle of advisers with little experience of the EU; even senior cabinet ministers have complained of being left in the dark. Her public statements have been full of endlessly repeated soundbites full of evasions and euphemisms. Above all, she has consistently made claims that have proved to be disingenuous, which has undermined trust among many whose backing she needs to secure."

We agree. The potential for the process to go wrong is massive.

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November 30, 2018

Are the gilets jaunes as powerful as the 1995 protests?

Protest movements have a long tradition in France, going all the way back to the French Revolution. Street protests have deeply shaped the politics of the 5th Republic. Revolution was the title Emmanuel Macron chose for his book when he was campaigning for the presidency. What he certainly did not have in mind was a grassroots protest movement like the gilets jaunes directed against himself. 

The current protest movement is like none of its predecessors. it has mobilised people from across France, many of whom protest for the first time in their lives. Many are non-voters. They are not experienced, but they are fast learners, writes Cécile Cornudet. Their momentum is as unpredictable as can be, with a list of demands growing by the day. There is no clear organisational structure, no rulebook for interactions with the government.

The government has basically made the bet that the movement will eventually run out of steam or at least lose public support. But, despite the images of burning barricades on the Champs-Élysées last weekend and Macron's speech on Tuesday, the movement still has a strong public backing with the latest polls suggesting between 75% and 85% support. As the numbers of protesters have dropped, public support has surged. Most of it comes from the middle working classes. But leading intellectuals have swung behind the movement as well. 

This protest is no longer about the carbon tax alone. It is now a protest against Macron. Much of the population has lost faith in him and his project to transform the country. He is widely seen as ignorant or even contemptuous of the plight of the less well-off. Pent-up rage against him and against the whole political class is coming out. The sociologist Stéphane Rozès compares the movement with the big protests back 1995 that forced Alain Juppé, then prime minister, out of office. Despite the focus on fiscal and social demands, it is a political movement after all.

How will Macron respond to the next wave of protests? Can the authorities prevent the protesters from coming to the Champs-Élysées tomorrow? This is not clear. Other organisations are joining in. Trade unions, anti-racist organisations and students all announced they would come to protest in Paris tomorrow. The government hopes that the movement will run out of steam over Christmas at the latest. But the underlying anger will be there to stay.

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November 30, 2018

Tsipras is dishing out more goodies

Alexis Tsipras made it clear this week that this is only the beginning of giving back to taxpayers, according to Macropolis. Parliament discussed the details of the social dividend and the cuts in the property tax on Wednesday. Tspiras told MPs that, on top of scrapping the pension cuts, there will be other policies until a majority of Greeks sees that their life is improving after eight years under bailout programmes. MPs discussed the draft bill on the reduction of the Enfia property tax, due to come into force next year affecting 85% of homeowners. The government also has plans for a staggered reduction in corporate tax, though this was meant to go in parallel with the pension cuts and now will have to be postponed until there is enough fiscal space. Parliament also discussed the social dividend, a direct payout from what the primary surplus is above the 3.5% target. An amendment stated that the recipients will receive a minimum amount of €710. 

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