1 March 2016

Cameron hits back at accusations of scaremongering in EU referendum campaign following publication of official document on withdrawal process

The government yesterday published its official assessment for what a potential UK withdrawal from the EU would look like. The report states that this would take place under the Article 50 mechanism, and warns that “it would take an extended period to negotiate first our exit from the EU, secondly our future arrangements with the EU, and thirdly our trade deals with countries outside of the EU, on any terms that would be acceptable to the UK… It could lead to up to a decade or more of uncertainty.”

The Daily Telegraph cites one Brexit supporting minister as saying that “This document is an apocalyptic vision for Britain in the aftermath of a British exit. And yet the Prime Minister has banned civil servants from planning for an exit. It is total hypocrisy.” London Mayor Boris Johnson described the warnings of uncertainty as “baloney” and argued that “there is absolutely nothing to be concerned about, indeed everything to gain. We need to lift our eyes to the horizon, we need to think globally.” Speaking in London yesterday, Scottish First Minister Nicola Sturgeon also warned against running a “miserable, negative, fear-based” campaign. However, Prime Minister David Cameron hit back at claims was running a ‘Project Fear’ operation ahead of the EU referendum, arguing that “The only project I’m interested in is Project Fact. Project Fact is about saying: ‘Stay in and you know what you’ll get.’”

Writing in The Daily Telegraph, former Foreign Secretary William Hague argues that “the biggest risk to the Prime Minister securing the result he has asked for is not Boris Johnson or Michael Gove… but the possibility of four months of mounting crisis in the EU itself.”

Source: Open Europe blog: Would Brexit lead to “up to a decade or more of uncertainty”? Open Europe blog: The mechanics of leaving the EU – explaining Article 50 HM Government: The process for withdrawing from the European Union Reuters The Guardian The Daily Telegraph The Daily Telegraph 2 The Daily Telegraph: Hague

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UK regulators refuse to implement bankers’ bonus cap fully

The Bank of England’s Prudential Regulation Authority (PRA) and the Financial Conduct Authority said in a joint statement yesterday that they do not agree with the European Banking Authorities “interpretation” of the EU’s Capital Requirements Directive (CRD) and will not apply the bank bonus cap rules to all firms subject to CRD. Head of the PRA Andrew Bailey said, “We have followed the principle of proportionality, which in practice means that smaller firms which pose less risk to the safety and soundness of the financial system face lower regulatory requirements.” A spokeswoman for the European Commission said in response, “At this stage it is too early to talk about whether or not to launch infringement proceedings.”

Source: Bank of England PRA and FCA statement Reuters The Guardian The Times The Daily Telegraph

Czech President voices support for potential referendum on EU exit

Czech President Milos Zeman yesterday voiced support for a potential referendum on EU exit in the country, arguing, “I’m on the side of those who are against a [Czech] EU exit, but I also oppose those who want to prevent citizens from voting on this issue.”

Source: Rai News 24 ANSA

Direct Line warns on impact on investments in the event of Brexit

Direct Line CFO John Reizenstein has said that in the event of Brexit, “We’d see some instability in investments and we have a large investment portfolio – sterling might weaken, gilts might weaken”. Meanwhile, The Financial Times reports that overseas investors are selling UK debt due to concerns around Brexit – in January overseas investors sold £6.3bn in UK gilts, the highest levels since March 2014. Demand for gilts at auction has also fallen to its lowest levels since 2009. Separately, Jupiter Fund Management boss Maarten Slendebroek has said his organisation will not take an official stance in the referendum but encourage his fund managers to voice their own views during the campaign.

Doug Monro, co-founder of job site Adzuna, has said, “A potential Brexit brings new unknowns into the jobs market. Politicians are at risk of fuelling uncertainty fears and only increasing doubts. By doing so they’re risking a weaker jobs market. It’s a dangerous game to play. Thousands of employers and employees are already on edge. This lack of consensus is causing understandable concern for many companies.”

Source: Reuters The Financial Times The Evening Standard

European Commission to announce refugee aid package for Greece while Merkel popularity rating bounces back after all-time low

The European Commission will this week propose an emergency aid package of €700m over three years to EU countries affected by the migrant crisis, mainly to Greece. Hundreds of refugees tried to break through a border fence into Macedonia from Greece yesterday; overall, some 7,000 refugees and migrants are being held in camps on the Greek border unable to continue their journey into northern Europe.

Meanwhile, Bundestag vice-president and CSU politician Johannes Singhammer criticised the prospect of granting visa-free travel to Turkey, as a concession to agree on a deal on refugee resettlements, telling the Passauer Neuen Presse that this would “lead to an additional and not calculable inflow.” A new ARD Deutschlandtrend poll shows that German Chancellor Angela Merkel’s popularity rating – which reached an all-time low last month within her current legislative period – has improved by 8 points to a total of 54% saying they are satisfied with her work.

Separately, violent clashes broke out yesterday as French police resumed their clearance of the makeshift shelters for refuges and migrants in the Calais camp known as ‘the jungle’.

Source: The Financial Times Süddeutsche Zeitung Handelsblatt Die Welt Frankfurter Allgemeine Zeitung BBC

EU and Canada agree to scrap controversial investment protection mechanism from free trade deal

The EU and Canada have agreed to replace the Investor to State Dispute Settlement (ISDS) mechanism in the EU-Canada free trade deal (CETA) concluded in 2014 with a permanent dispute settlement court, whose judges are to be appointed in advance. The text of CETA has also been ‘legally scrubbed’ to ensure consistency and is now going to be translated into all the official languages of the EU – before being submitted to the Council of Ministers and the European Parliament for final approval.

Source: European Commission Politico The Financial Times EUObserver

UK asks other countries to consult government before intervening in EU debate

Politico’s Brussels Playbook reports that Prime Minister David Cameron’s special adviser Daniel Korski held a meeting with diplomats from other EU states on Friday to brief them on the government’s approach to the EU referendum campaign. The key points included encouraging smaller and medium sized businesses speaking out in the campaign rather than big business and focusing on bigger questions rather than the renegotiated deal. Other states were also asked to consult the UK Government before intervening in the debate, while there were outstanding questions over whether or how the Conservative government could reach out to Labour voters.

Source: Politico: Brussels Playbook

French government pushes back publication of new labour market reform bill

The French government has decided to push back to March 24 the publication of its new labour market reform bill, initially scheduled for next week, following opposition from the left wing of French President François Hollande’s Socialist Party. The bill would cap the compensation employers can be ordered to pay in cases of wrongful dismissal, and would introduce greater flexibility on the organisation of working hours – although it would not scrap the 35-hour working week. Meanwhile, a new Harris Interactive poll has found that only 17% of French trust Hollande (-7 points compared to January’s survey) and 29% trust Prime Minister Manuel Valls (-3).

Source: The Financial Times Europe 1 La Tribune Le Figaro Harris Interactive

Spanish Socialist leader stands no chance of being voted in as new PM in first confidence vote

Spanish Socialist leader Pedro Sánchez will today face his investiture debate in the lower house of the Spanish parliament, with a first confidence vote scheduled for tomorrow night. Sánchez needs an absolute majority (176 votes in favour) to be voted in as new Prime Minister, but looks set to fail after his last-ditch offer to anti-establishment party Podemos was rejected yesterday as “not serious”. Should this be the case, a second confidence vote would take place on Friday night at the latest. If no candidate manages to be elected new Prime Minister by May 2, parliament will be dissolved and new elections will be called.

Source: El País El Mundo Politico

Taoiseach Enda Kenny to seek mandate from his Fine Gael colleagues to try and form a government

Taoiseach and Fine Gael leader Enda Kenny will today seek a mandate from his ministerial colleagues in the party to try and agree an approach to put together a government. As of this morning counting still wasn’t finished, but so far 37 of the 40 constituencies have finished counting, and 152 of the 158 seats of the Dáil have been filled. Fine Gael currently have 49 seats (25.5%), Fianna Fáil have 44 (24.4%), Sinn Féin are on 22 (13.8%), Labour have 6 (6.6%), while Independents and smaller parties make up the remaining 152 seats that have been declared so far. A deal being struck by where Fine Gael lead a minority government, with Fianna Fáil lending support has been touted as the most likely outcome.

Source: The Irish Times

Business Secretary says Brexit would not help the UK’s steel industry

Business Secretary Sajid Javid said yesterday that being outside the EU would not help the UK better protect its steel industry and may mean the UK “would be far more open to retaliation by other countries.” He also added that, “tariffs recently imposed on Chinese rebar were indeed too low” and that the UK would push for them to be increased.

Source: PA

Eurozone inflation drops, raising pressure on ECB

Eurozone annual inflation fell to -0.2% in February, down from 0.3% in January, according to a flash estimate yesterday. This is below expectations of 0%. Core inflation also fell from 1% in January to 0.7% in February.

Source: Eurostat BBC

EU competition chief rejects suggestions probes target US firms

EU Competition Chief Margrethe Vestager has written to US Treasury Secretary Jack Lew rejecting suggestions that the EU’s competition probes target US firms. Vestager insists in the letter that the probes “aim at a proper, non-discriminative, application of tax laws in Europe”, adding that they are “based on firm legal ground”. Vestager concludes by saying the two sides should not let “misunderstandings” of each other’s systems get in the way, but that there is “still some way to go” on this front.

Source: The Financial Times The Wall Street Journal