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October 10, 2019

What if UK parliament rejects both elections and the second referendum?

Is the deal dead already? Experience has taught us to be careful. The EU has a history of last-minute breakthroughs. In this case, it depends very much on Leo Varadkar. Today's meeting in Liverpool with Boris Johnson may bring some progress. There was a leaked report yesterday that the EU was exploring a compromise option, which is only telling us that somebody, somewhere, is still fighting for a compromise. 

The big decision is likely to be Saturday, 19 October, right after the EU summit. The UK parliament will meet to seize control of the order paper, and then push through one of several potential courses of action. UK parliamentarians know that they cannot just force the prime minister to write an extension letter without a concrete political plan. They will have to decide between elections and a second referendum. It is possible that they fail to do either.

We still have no evidence of a shift in the position of a sufficient number of MPs in favour of a second referendum. The reason we think this is likely to fail is the parallel necessity to agree to a plausible leave option. The only alternative would be Theresa May's unloved withdrawal deal. There may be a majority in the parliament now in favour of that deal - if the government were to support it. But we struggle a see a majority simultaneously in favour of resurrecting May's deal and of a second referendum. And be careful what you wish for. That would be a second referendum boycotted by the government and the Leave campaign on the grounds that there is no credible Leave option on the table. A farcical second referendum would not only fail to settle the issue, but mobilise the leave vote to support Johnson at the next general election whenever it comes. A returning Tory-majority parliament would then press on with Brexit.

The more probable alternative option is elections. But don't take this for granted either. There is a big pushback. Jeremy Corbyn will today double down on his promise to offer Johnson an election once an extension is granted. The Sun's political editor reports that Corbyn is ready to offer Johnson an election date of November 26 in a speech he will make later today. A vote in the Commons, under the fixed term parliament act, would have to take place on October 21. We are not sure that there would be a two-thirds majority in the Commons for an election. There is a lot of opposition within Labour to an election, including from the likes of John McDonnell the shadow Chancellor. The motion may fall short of the two-thirds majority required. In that case, another procedure would have to be considered, either a vote of no confidence brought by Corbyn, or an act of parliament to override the FTPA.

Now consider this situation: suppose parliaments fails to agree a second referendum as well as elections. What then? In this case, it is possible that France along with a few other countries will refuse a Brexit extension. It would be deeply ironic if, in the end, the UK parliament and not Johnson were to frustrate the Brexit extension. 

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October 10, 2019

Should Europeans really look forward to President Warren?

One of the more widely followed polls of polls in the US, the RealClearPolitics average of polls, had Elizabeth Warren ahead of Joe Biden for the first time. The race is not over, but we think this is a significant moment to take a look at the issues that might confront Europe under a Warren presidency. Unsurprisingly, everybody in the EU takes an anybody-but-Trump view, but we don't think the EU is prepared for the senator from Massachusetts if she were to make it all the way to the White House, just as they were unprepared for Trump.

One of the many issues in which the EU would find Warren a very difficult counterpart is trade. She will be less erratic than Trump, but in many respects much tougher. Do not expect her to strike the kind of deal Jean-Claude Juncker managed to extract from Trump last year, getting him to hold off on car tariffs in exchange for an EU commitment to buy soybeans. 

Warren's big idea on trade is to include stakeholders in the discussion, and to sideline the interests of large corporations. The purpose of trade deals will no longer be to maximise exports. The influential advisory committees would include representatives from consumer groups, from rural areas, and one from each region in the country. This approach will be completely incompatible with that of the EU, which acts like a producer's cartel especially in trade talks. 

Environmental goals will play a much bigger role. This means that tariffs on German cars are likely to be back on the table - but for different reasons to Trump's.

Warren would sign up to the Paris accord again. But, unlike the Germans who signed up to it only to ignore it, she will overfulfill and demand that others do the same. 

And she will put greater emphasis than Trump did on countries deemed by the US treasury to be currency manipulators. Given the persistent dysfunctionality of the eurozone, we see a real risk of conflict in this area too.

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