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Brexit Secretary David Davis yesterday told the Commons Brexit select committee that there are “no systematic impact assessments” on the implication of leaving the EU for different sectors of the British economy. Pressed on whether any impact assessment had been conducted on a list of sectors, including automotive, aerospace and financial services, Davis replied, “I think the answer will be ‘no’ to all of them.” Asked whether the government had undertaken any impact assessment on leaving the customs union, Davis said, “Not a formal, quantitative one.” Davis insisted, “We will at some stage, and some of this has been initiated, do the best we can to quantify the effect of different negotiating outcomes as we come up to them.” Meanwhile, The Sun reports that allies of Davis “have launched a fresh bid to make him [Prime Minister]” by Christmas.
Elsewhere, speaking to the Treasury select committee, Chancellor Philip Hammond has revealed that the Cabinet has held “general discussions” about the Brexit negotiations, but “we haven’t had a specific mandating of an end-state position.” Hammond also warned, “The economic and fiscal consequences of getting the right deal for Britain, compared to a less favourable deal for Britain over the years to come, would be significantly larger than any of the sums of money that are in question in this negotiation.” On the Brexit bill, Hammond argued, “I find it inconceivable that we as a nation would be walking away from an obligation that we recognised as an obligation. That’s just not a credible scenario.” A Downing Street spokesperson later dismissed this saying, “Nothing is agreed until everything is agreed, and that applies to the financial settlement” and that “Cabinet will be discussing end state before the end of the year.”
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Irish Taoiseach Leo Varadkar told the Irish parliament yesterday, “We want to move to phase two but if it is not possible to move to phase two next week because of the problems that have arisen, well then we can pick it up of course in the New Year.” He went on to say, “It is in our interest to move to phase two, that is where we talk about the transition period that we need, so individuals and businesses can prepare for any long-term change. It is where we can talk about the new trading arrangements which are so important for Irish importers and exporters, the agri-food industry and anyone whose job in Ireland depends on trade with Britain.” Meanwhile, speaking late last night, Varadkar said that Prime Minister Theresa May “wants to come back to us with some text tonight or tomorrow” on proposals for the Irish border issue. He also said, “I expressed my willingness to consider that because I want to move things forward as well.”
Elsewhere, Prime Minister Theresa May told the House of Commons yesterday, “We will ensure that there is no hard border between Northern Ireland and the Republic of Ireland. We will do that while we respect the constitutional integrity of the United Kingdom and while we respect the internal market and protect the internal market of the United Kingdom. That is the point of the second phase of the negotiations, because we aim to deliver this as part of our overall trade deal with the European Union and we can only talk about that when we get into phase two.” May is understood to have spoken yesterday to the leader of Northern Ireland’s Democratic Unionist Party (DUP), Arlene Foster. But Foster’s spokesperson said afterwards, “There is still work to be done in London before she would go over.”
Separately, the DUP’s leader in Westminster, Nigel Dodds, said, “The longer there is delay in getting onto the second phase of the negotiations about a trade deal, the greater the prospect of a ‘no trade deal’ outcome. The Irish Republic would suffer far worse economically from no trade deal than the United Kingdom.”
Open Europe’s Henry Newman is quoted in the Finanical Times saying, “The main shift on the Irish side is tone, but the substance has also shifted.”
Reuters reports a draft European Parliament resolution, which was prepared on the basis of the draft UK-EU agreement on the table on Monday. The document reportedly included that “core family members and persons in a durable relationship currently residing outside [the UK] shall be protected by the Withdrawal Agreement and that this is also the case for children born in the future and outside [the UK].” It also reportedly confirms that British citizens in the EU will be able to live freely in any member state after Brexit. In addition, it lays out the European Parliament’s own demands, include limiting British benefits from any future agreement and an insistence London continue to abide by the European human rights convention. According to Reuters, the European Parliament is also insisting that Britain automatically adopt any new EU legislation passed during a transition period after March 2019.
In a report published today, the House of Lords’ EU Committee warns of a ‘no deal’ scenario, saying this “would not be economically damaging, but would bring an abrupt end to cooperation between the UK and EU on issues such as counter terrorism, policy and security and nuclear safeguards.” The Committee further cautions that an “overwhelming weight of evidence” suggests negotiations over the UK’s withdrawal from EU cannot be concluded by March 2019, adding that enshrining a fixed exit date in the withdrawal bill would “not be in the national interest.” The report concludes that a “standstill” transition period lasting “several years” may be necessary.
House of Lords
Paul Drechsler, president of the Confederation of British Industry (CBI), one of the UK’s largest business lobby groups, has said, “We need progress at the EU council next week or 60 per cent of firms with contingency plans will have put these into effect by Easter. That means jobs leaving the UK — in most cases irreversibly…No company wants to move jobs or shift production, but business will if it has to.” He added, “In the immediate term, business needs to know the details of any [Brexit] transition deal — Rome is burning on that issue, there’s no time to waste.” He also said, “To those politicians suggesting we walk away from the negotiating table, I have a simple message: Careless talk will cost jobs…We can’t walk away when the going gets tough. We can’t enter into negotiations that affect the future of millions of people and then leave at the first sign of trouble. It would be an act of gross irresponsibility to walk away.”
The European Commission yesterday published a paper outlining wide-reaching reforms of the European Stability Mechanism (ESM). The Commission wants to transform the ESM, which currently is controlled by Eurozone finance minister and national parliament, into an EU institution, claiming, “The structures for the provision of financial support [to Eurozone member states] are best place in the hands of an institution of the [European] Union.” The Commission paper argues that “the coexistence of EU institutions and a permanent intergovernmental mechanism such as the EMF” leads to an “unbalanced” situation with lengthy procedures and a lack of transparency and democratic legitimacy.
The Commission further proposes to grant the EMF the right to lend money to banks. Under current rules, banks can only receive ESM funds through their respective national governments. Also a “stabilisation function” is included in the proposal, which would enable the EMF to grant additional support to member states during economic crises.
German acting Finance Minister Peter Altmaier commented, “We will examine these proposals very thoroughly, constructively and self-confidently,” adding there would be no need for concrete decisions on the proposals for some months. German Foreign Minister Sigmar Gabriel responded more positively, calling the proposals “the right direction” and warning, “The attempt to sit out this great need for reforms is naïve and outright dangerous for the European project.”
More than two dozen global pharmaceutical companies are pledging to invest in the UK as part of a multi-billion-pound effort to spur the country’s health-care industry, Bloomberg reports. This comes as the government announced yesterday that the UK’s two largest drug makers will invest in new research projects as part of a push to make the UK a more attractive investment destination after it leaves the EU. GlaxoSmithKline Plc’s president of research and development, Patrick Vallance, has argued that boosting the strength of the UK’s universities and research will be crucial to reinforcing the country’s life-science sector. He said, “It’s very difficult for countries to build a strong academic base and science base quickly,” and warned, “On the other hand, it’s quite easy to lose it quickly if you don’t get it right.” According to Bloomberg, agreements in the construction, artificial intelligence and automotive industries are also well under way as the government is aiming to restore certainty to the economy.
A new poll by the Koerber Stiftung suggests strong German support for increased defence integration in Europe. Asked which partnership Germany should prioritise for its defence policy, 88 percent opted for “European states”, and just 9 percent for the US. The idea of a “common European army” is supported by 58 percent of respondents, with 38 percent deeming the idea undesirable. Meanwhile, 31 percent of Germans think their country should spend more on defence, and just 41 percent would like to see Germany become more involved in international crises.
In a blog piece, Open Europe’s Leopold Traugott argues that the German Social Democrats (SPD) have put a heavy price tag on their support for another Merkel-led government. The SPD, which earlier this week backtracked from its initial rejection of another coalition, “was quick to follow up with a long list of demands […] To make sure his U-turn did not just look like a sellout.” The SPD “demands a lot from the [Angela Merkel’s conservative] CDU and [her Bavarian sister party] CSU – not only on domestic reforms, but also at the EU level. It strikes a decisively pro-European tone, and takes up many of the reforms French President Emmanuel Macron outlined in his Sorbonne speech in September.“ Traugott explains that the position paper ”takes up Macron’s idea of introducing a ‘system of European minimum wages’ (which in the mid-term would likely remain adjusted to different national economies), and seeks to combat tax havens ‘inside and outside the EU’. To achieve the latter, it identifies ‘the harmonisation of corporate taxes at the European level’ as the only way to ‘stop the tax avoidance schemes of major international corporations […] On Eurozone reform, the [SPD’s position] paper is largely sympathetic to the proposals coming from Paris. While it is quiet on the matter of a Eurozone finance minister, it stresses that Germany ‘must, together with France, take the initiative on an investment budget for the Eurozone’. The European Stability Mechanism (ESM) is to be transformed into a European Monetary Fund (EMF), and put under parliamentary control […] For all this, the EU will need more money, the SPD concludes, adding that contributions from national funds will not be enough. By claiming that the EU will need ‘additional own resources’ as well, it effectively makes the case for levying taxes at the European level, albeit without being totally explicit.” While the SPD might be able to push through some of these demands in coalition talks, “significant movement towards EU-wide minimum wage convergence and a powerful Eurozone budget remains unlikely.” Still, “the European angle may also deliver much-needed support to the SPD leadership”, Traugott concludes, as “Only a minority of party members is currently in favour of another Grand Coalition […] By presenting the return to the government benches in the cloak of a greater good – stability for Germany, social reforms for Europe – the SPD can at least try to increase its scope of action.”
Open Europe’s Leopold Traugott appeared on CNBC Europe’s Squawk Box this morning, discussing what to expect from the SPD’s party conference today.