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October 09, 2019

A final push for a deal

There are two developments in the Brexit negotiations to look out for. After yesterday’s telephone call between Angela Merkel and Boris Johnson, the British PM will meet Leo Varadkar tomorrow to explore whether his proposed withdrawal agreement is at least negotiable - we presume it is, once you take the Stormont veto off the table. 

We think it is not helpful to speculate on what Merkel may or may not have said. Nor do we think that Donald Tusk’s tweets have been helpful. You cannot simultaneously complain about politicians resorting to a blame game, and then blame the other side.

As the negotiations in Brussels have now halted, Johnson and Leo Varadkar will attempt another, final round of talks tomorrow. If they break down, we will be heading towards an extension on October 31 - preceded by noise, legal challenges, and who knows, maybe an accident or an unforeseen event along the way. Our baseline remind an extension, followed by a UK election won by the Tories. We have been more cautious than others on the likelihood of an early election. See also our electoral analysis story below. The Telegraph columnist Philip Johnston also believes that an early election should not be taken for granted, given that a second referendum would be much more advantageous for Remain supporters. And in reality it would have to be done outside the scope of the fixed term parliaments act, for example through a dedicated bill.

Hillary Benn, the author of the Brexit extension bill, said last night that the House of Commons will push for a second referendum possibly next week. He said he was not sure whether it would have a majority, we don’t think that the maths we presented in a recent article has shifted sufficiently in favour of a second referendum. Another issue with the second referendum is what question to put in to the voters in the absence of a deal - Remain vs what exactly? Remain vs no-deal? There is a logic in Jeremy Corbyn to negotiate a deal and then put it to a referendum. You need a credible leave option. 

Benn’s own extension bill makes the prospect of a majority in favour of the second referendum less likely because the pressure is off. This is the trouble with extensions. They resolve nothing. 

Both the Times and the Guardian report this morning that EU ambassadors were already discussing, and disagreeing on, the length of an extension. Some are arguing for a very long extension, a prospect we consider ill-advised and likely to backfire. We believe that the persistent moralistic intervention by Tusk has strengthened the Brexit camp in the UK. The more you push, the bigger the push-back.

The Times writes that one influential government is calling for a very short extension to force the issue one way or the other. 

We presume, but cannot be certain, that this is France and/or Spain. We think there is a logic in a three-month extension, as it would allow the UK to hold elections.

Extension is becoming unpopular in the EU. The Times reports on a poll taken in six EU countries, in which a large majority disagreed with an extension. The Guardian writes that an outlier view in Brussels was for an extension all the way to the next general election in 2022, while some governments preferred the summer of next year. Those that favour a long extension include Tusk. 

There is a logical connection between next week’s attempt in the UK parliament to seek a majority for a second referendum, and the EU discussion on extension. If next week’s attempt fails, or is postponed, the argument for a long extension will be harder to win in the European Council. If the UK parliament does not have a majority in favour of a second referendum, then the only political way out is another general election - with an extension tailored to it. 

It is the prospect that Johnson might win those elections outright that is now pushing back against that scenario. 

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October 09, 2019

Costa mandated to form government

Officially mandated by the Portuguese president to form a government, António Costa will meet up with five parties today - the two partners of the previous term, Left bloc and Communists, as well as three smaller parties. A rerun of the last agreement is officially still the preferred scenario, eventually to be extended with the inclusion of the two smaller parties Pan and Livre. But the Communists already signalled they would prefer to stay out of a strategic alliance this time, since they lost votes and seats. They prefer to support the Socialists only on a case-by-case basis.  

A variable majority on a case-by-case basis with no formal partner is indeed one option for Costa. Such a minority government is possible though there is no guarantee that it can last four years. Portugal's last conservative government only lasted 11 days! In theory Costa would need ten more MPs for an absolute majority. The advantage of a minority government would allow him to open up to other partners such as the conservatives. With a clear majority on the left, Costa is safe from any insurrection of the right against him. The downside is that the socialists would be locked into negotiations with potential allies for each piece of legislation almost all the time, which might create animosities between the partners. 

This is why Costa is seeking a formal agreement. Costa could try and strike a deal with the Left Bloc alone. Together they have 125 MPs. Two smaller parties with 1 and 4 seats respectively might also join. Compared to 2015, Costa has more negotiating power this time as he has 106 seats. It remains to be seen how well the Left Bloc respond to that. Some of their spending demands may well be incompatible with Costa's fiscal caps. 

As the president was quick to nominate Costa as prime minister, it will now be up to legislators to decide on the new government's programme, which must be presented within ten days. If parliament decides to vote on it and it is rejected, the government could collapse. Neither the president nor any observers expect this to happen.

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