3 May 2018

Brexit Cabinet rejects “customs partnership” option

At a meeting of her Brexit “war Cabinet” sub-committee yesterday, Prime Minister Theresa May reportedly failed to secure the support of a majority of the sub-committee for the “customs partnership” option, with six of the eleven members opposing the model.  The Daily Telegraph reports that the option of a “customs partnership” is now excluded, while Ministers agreed that the Government’s second option, the “maximum facilitation” model, had to be revised.  A Government source is quoted saying, “The customs partnership idea in its current form is no longer on the table. Everyone agrees that there are also problems with max fac [maximum facilitation] model, and it will have to be refined into something that might be somewhere between the two,” adding, “It’s possible that elements of the customs partnership idea might be incorporated into a new model, but in its current form the customs partnership idea is dead.” However, May’s aides insist that the Prime Minister’s preferred option is “not dead.” According to the Times, officials have been instructed by May to draft “revised proposals” of the “customs partnership” model, with Downing Street sources quoted saying that a solution needs to be found within “days, not weeks.”

Source: The Daily Telegraph The Times

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European Commission publishes proposal for next EU long-term budget

The European Commission yesterday published its proposal for the next Multiannual Financial Framework, the EU’s long-term budget. The proposal calls for a €1.279 trillion spending plan for 2021 to 2027, which would take the EU budget up to 1.11% of the EU27’s gross national income (GNI). While calling for limited cuts in some policy areas, mostly agriculture and cohesion, the proposal would increase the funds for areas such as research and development, defence and border controls. The Commission President Jean-Claude Juncker commented, “We propose an ambitious but balanced budget, one that is fair for all,” adding, “We want to present a proposal that is taken seriously, and a proposal that can represent a basis for future negotiations.” The budget will be source of contentious debate in the European Council in the upcoming months. The final agreement requires unanimity in the Council, after having received a favourable vote in the European Parliament.

Source: Politico

Irish Prime Minister says there is "real risk" of no-deal Brexit by October deadline

Irish Prime Minister Leo Varadkar has yesterday warned about the risk of the UK and the EU not concluding a withdrawal agreement by the deadline of October if no progress is made by the June European Council Summit. Speaking in Parliament in Dublin, Varadkar said, “Our [the EU27 and Ireland’s] position is that we will review progress at the meeting in Brussels in June and we want to see real and meaningful progress by June if we are going to meet that December deadline… There is a real risk that we won’t meet the October deadline if we don’t see real and meaningful progress in June…We are very far from what the maximum amount of progress that can be achieved in June is.”

Meanwhile, the Lords yesterday defeated the government on another amendment to its European Union (Withdrawal) Bill. The amendment would prevent the government to establish any form of physical infrastructure on the Irish border in the absence of an agreement with the Irish government. The Bill is scheduled to return to the House of Commons next week.

Elsewhere, Prime Minister Theresa May has yesterday reiterated the UK Government’s commitments to both leaving the EU customs union and avoiding a hard border on the island of Ireland, stating that  are “a number of ways” for the Government to achieve both of these goals simultaneously.

Source: RTE Bloomberg Bloomberg

Plans for a European Intervention Initiative moves ahead

Plans for a European Intervention Initiative outside EU structures are moving ahead, as ten EU member states are expected to sign a letter of intent on future cooperation in June. The initiative is led by France, but is understood to also include the UK as well as Germany, Italy, Spain, the Netherlands, Belgium, Portugal, Denmark and Estonia. According to Politico, the project’s aim is to ensure that European forces are ready to act together in emergencies, with an unnamed French official adding, “It is about scoping out and jointly analysing the sort of problems that can arise and knowing how to manage them together as effectively as possible if they materialize… It is about feeling out our partners’ priorities and knowing in advance how and how much they could contribute if a specific crisis arises.” While Berlin reportedly is sceptical about the project, fearing it would undermine the EU’s Permanent Structured Cooperation (PESCO) framework, French officials are confident that their initiative allows continued uncomplicated cooperation with the UK, arguing, “It is really important to have the British on board, not just because they have the most capable, rapidly deployable armed forces along with our own, but also because we share the same strategic culture and history of projecting force outside Europe.”

Source: Politico

EU will face "other restrictions" despite tariff exemptions, warns White House trade adviser

Director of the White House National Trade Council, Peter Navarro, warned on Tuesday that all countries and actors exempt from the increase on the US steel and aluminium tariffs would face other restrictions and quotas. Navarro said, “The guiding principle of this administration, from the president [Trump] down to his team, is that any country or entity like the European Union, which is exempt from the tariffs, will have a quota and other restrictions,” explaining that these measures “are necessary to defend the aluminum and steel industries from imports in defense of our national security.”

Source: Politico

Eurozone growth slows down

Eurozone growth has fallen to its lowest rate in 18 months, with growth in the first quarter of 2018 amounting to just 0.4 percent, as compared to 0.7 percent in the last quarter of 2017. According to the Financial Times, poor export figures play an important role in lower growth rates, with Stephen Brown of Capital Economics adding that “temporary factors, including unseasonably cold weather, striking workers, short-term bottlenecks and even an outbreak of the flu, appear to have weighed on gross domestic product growth.”

Source: Financial Times Eurostat

Ireland will be affected by Brexit more than any other EU member state, says new report

In a report published on Tuesday, the Irish Oireachtas Committee on Budgetary Oversight stated that, “As a small, peripheral country, Ireland will suffer the worst impacts of Brexit more so than any other [EU] Member State.” The Committee warned of the “significant challenge” posed by Brexit to Ireland and recommended that the “new MFF [Multiannual Financial Framework] includes funding and financial supports that offer a Brexit initiative to Ireland in order to counteract the impact of Brexit on the Border region in particular.” The Committee report also stated that a reduction in funding for the EU’s Common Agricultural Policy (CAP) after Brexit would have a “detrimental effect on both the Irish agricultural sector and the economy as a whole.”

Source: The Irish Times Oireachtas Committee on Budgetary Oversight

Enea Desideri: Will Brexit really force the UK out of the Galileo satellite programme?

Commenting for Prospect Magazine on “reports that the UK could soon be cut out of the EU’s Galileo satellite programme,” Open Europe’s Enea Desideri writes, “The exact nature of the UK’s future involvement in Galileo will ultimately depend on the details of the future relationship.” He adds, “If the UK were to be frozen out of the PRS, this could have significant implications not only economically but, perhaps more importantly, (geo)politically” as “From a British perspective, UK exclusion could push it further towards privileging closer cooperation with the US over a UK-EU security partnership in the future.” Commenting on reports that the UK government would be considering launching its own satellite programme, Desideri argues, “While the UK has the capacities to develop its own programme, this would be extremely costly for a country to do alone and requires time – the development phase of Galileo started in 2002. Reaching an agreement with the EU on continued participation would clearly be more convenient.” He concludes, “Ultimately the real problem might be one of timing; if no deal is reached soon, the UK space industry is set to lose out,” and “The political consequences… for the future UK-EU security partnership could be significant.”