Tale of Two Cities - Part XI

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19 June 2017

by Brexit task force - Cambre Associates / Newington

A Monday morning for the history books. Today, as Brexit negotiations finally start, Cambre and Newington's Brexit task-force unravel the complex starting conditions and key hopes and hurdles for the talks.

Scepticism about the feasibility of the task with such a tight deadline and fears of an early collapse abound. The UK is much less strong and stable than Theresa May had hoped when she called the snap election. The EU, reinvigorated by the Macron effect, seems as eager as ever to start talks but appears still too focused on its own urgencies.

After 362 days of post-UK-referendum political posturing and heated rhetoric, it is time to find common ground and technically workable solutions. Now is time for both sides to get to work.

The view from London

On 9 June Westminster woke up, rubbed its eyes and wondered whether the hours that followed the General Election’s exit poll had been a dream. They hadn’t. Theresa May’s majority Government went into reverse and her leadership of the Conservative Party was crippled. Meanwhile Jeremy Corbyn was cock-a-hoop with the palpable joy of a six-year-old in a sweet shop as an increase of 32 seats further increased his personal mandate.

Suddenly the Tories were tearing themselves apart looking for a reason to explain their catastrophic failure to turn an early 24 points lead in the polls into an increased majority while Labour were a picture of unity. We had entered a parallel universe with commentators gingerly feeling their way through a world turned on its head.

Brexit doesn’t mean Brexit

Beyond May’s stock response that an increased majority would strengthen her hand in Brexit negotiations, there were conversations in the build-up to polling day about the likely character of the backbenchers and their influence on the debate. An expected majority, dominated by Brexiteers, would take Brexit in a much harder direction than one dominated by Remainers, some argued.

While we have some fresh faces on the Conservative backbenches, they aren’t very numerous and are predominantly from Scotland and now join a severely diminished Parliamentary Party. Without an overall majority a Conservative Government must be reliant at the very least on the Opposition parties not voting against them at once – hence the attraction of securing support on big ticket items through a confidence and supply arrangement with Northern Ireland’s Democratic Unionist Party (DUP), which would give a working majority of 13.

With the majority of Scotland having voted to remain in the EU and the DUP calling for mutual access to markets in the pursuit of ‘common interests’, this would appear to suggest that the UK will go for a ‘softer’ Brexit, especially when it is factored in that Philip Hammond is staying in place as Chancellor and ardent Europhile Damian Green has been appointed as First Secretary of State.

Nevertheless, there is a strong cohort of Conservative Brexiteers still on the backbenches whose power is arguably redoubled by the parliamentary arithmetic. Add to this the appointment of Brexiteer MP ringleader Steve Baker as junior minister under David Davis in the Department for Exiting the European Union (DExEU) together with Michael Gove’s return as Secretary of State for Environment and Rural Affairs and you can see that resistance to any softening of the Government’s position on the fundamental principles of Brexit will remain strong. The appointment of Baroness Anelay, a Conservative peer with a very internationalist outlook, to DExEU provides an element of counterweight to Baker but the overall picture is one of tension rather than unity.

It’s not all about Brexit

Just like our friends across Europe there is more that preoccupies us Brits than Brexit and that was thrown into stark relief during this General Election. The Conservative Party may have wanted to focus on the leadership of May and upcoming negotiations, for better or for worse, but the electorate was crying out to hear more on the next Government’s plans for healthcare, housing and education, in particular, and its vision for Britain. The ramifications of the result for Brexit will be profound but it would be a mistake for people in Brussels to think that the referendum result has been thrown into doubt and a ‘Breturn’ is on the cards at this stage. The Lib Dems were the only national party to campaign on the ticket of a second referendum and although they increased their number of MPs from eight to 12, their vote share went slightly down.

We live in uncertain times

All that said, the resignation of Tim Farron as leader of the Lib Dems has led to speculation that there might eventually be a deal with the Conservatives. On the face of it this would go against the Lib Dem manifesto pledge not to ‘enter into coalition with either Theresa May’s Conservatives or Jeremy Corbyn’s Labour,’ but note the specific reference to a ‘coalition’ and to ‘May’, and the drawn out process in negotiating with the DUP. All considered a deal of sorts at some point after the new Lib Dem leader is appointed is not beyond the realms of possibility, if May does not survive a full term and/or the relationship with the DUP breaks down.

But there are substantial hurdles. One is provided by the hard-core of Brexiteers in the Conservative Party, who would shout blue murder at any sign of a ‘Breturn’ by the back door and would quite possibly be angry enough to side with Labour in a vote of no confidence – igniting another General Election. Another hurdle is the preference of many Lib Dems for the centre-left over the centre-right, and the justifiable fear among Lib Dems that any deal that props up an already unpopular Conservative party would re-toxify the Lib Dem reputation at a time when they are only starting to escape the legacy of the 2010-2015 coalition.

The Queen’s Speech is happening this week

After several days of uncertainty the date of the Queen’s Speech has been agreed for Wednesday 21 June. The speech itself is usually brief, but expectations are for a severely pared back legislative programme that leaves less room for conflict.

The view from Brussels

Time’s run out – but doors are open

On 9 June, many in Brussels chuckled. Theresa May’s campaign, started with accusations and the EU as the enemy, backfired. She lost the gamble to strengthen her majority and mandate for a hard Brexit. But the election also raised eyebrows in Brussels. A hung UK parliament means delays and more uncertainty. That is not what either side was hoping for.

European Commission President Juncker and Chief Negotiator Barnier swiftly pointed out that the EU is ready to go and that time is of the essence, even though he joined MEPs from across the spectrum in their doubt that the UK can be a strong and stable (hence reliable) negotiating partner. One year after the referendum and 22 months from the deadline, that is hardly progress. If anything, the election took the debate back to whether Brexit will actually happen or at least what kind of Brexit we will actually see. Rumours have surfaced that may herald a soft Brexit – with the UK looking to remain in the Customs Union, or even in the Single Market.

Echoing the less popular (but similarly influential) German Finance Minister Schäuble, France’s new President and Europe’s golden boy, Emmanuel Macron, said that the “door is always open” for the UK to come back – even if soon it could be too late. Theresa May, at their joint press point last week, merely said the UK wants a deep and special partnership, although everyone in Brussels is increasingly puzzled about what this actually means. The European Parliament’s Brexit chief, Guy Verhofstadt, followed suit, but warned that an open door would not come for free.

Keep calm and reform

Brexit is not slowing down the Union. During a tumultuous UK election campaign, the EU sat back and relaxed. Brussels moved forward on key files and enjoyed a reinvigorating Macron effect. Meanwhile, London struggles to focus the electorate on Brexit and suffered two tragic terrorist attacks that reminded everyone of the dramatic urgency and necessity of security cooperation.

Macron’s clear win in the French parliamentary vote – despite the record-low turnout – was perhaps more unexpected than May’s defeat and the exact opposite in terms of impact. After his presidential win, the repeated strong support for a pro-EU agenda in one of the core countries of the Union relieved Brussels and completed a reversal of position with London.

The EU is not a ship to jump anymore; it just needs some repairs – and is regaining citizens’ trust. And without British strings, Brussels is delivering more integration on defence in the form of a common fund and a shared EU command centre, as well as moving to establish an EU prosecutor, closing in on trade deals with Mexico and Japan, and preparing to strike others with Chile, Mercosur, Australia and New Zealand. With CETA soon to apply provisionally, the ECJ Singapore Opinion defining and enhancing the EU’s trade powers, and President Trump leaving the climate change scene to the EU and China, Brussels seems ready to be – without the UK – the Global Union that May had fabled.

Now let’s get to work

A short, joint EU-UK statement confirmed that the negotiations start today, Monday, 19 June, a day for the history books. A rejuvenated General Affairs Council – once one of the most powerful ‘formations’ of the Council, and now the body responsible for assessing ‘sufficient progress’ to move talks to the next phase – adopted the EU negotiating directives on 22 May. These restate and tighten its red lines and priorities. Everyone knows the drill now: citizens’ rights and paying the Brexit bill first, EU-UK trade agreement later, ECJ jurisdiction for the transition needed.

With the UK side at odds on all points throughout the election campaign, the EU rigidly standing its ground, authoritative voices warn that although the elections revamped ‘Bremainers’ and made soft Brexit more likely, a no-deal and pitfall scenario should be prepared before it simply happens. With EU moves to strip Euro-denominated clearing and EU agencies from London, the UK looking ever more divided, and the Commission ending budget rebates and slapping misbehaving member states with infraction procedures over migration quotas, good vibes could soon become earthquakes on and between both sides of the Channel.

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