14 November 2017

David Davis: Brexit deal will be implemented directly in UK law

Speaking in the House of Commons yesterday, Brexit Secretary David Davis announced that the UK-EU Withdrawal Agreement “will be directly implemented into UK law by primary legislation, not by secondary legislation [through the EU (Withdrawal) Bill].” He said, “This means that Parliament will be given time to debate, scrutinise and vote on the final agreement we strike with the European Union. This agreement will only hold if Parliament approves it.” But he warned that if parliament voted down the agreement, the UK would leave the EU in March 2019 without a deal. He said, “It’s a meaningful vote, but not meaningful in the sense that some believe meaningful [is], which is that you can reverse the whole thing [Brexit].” Labour’s shadow Brexit Secretary, Sir Keir Starmer, called it a “significant climbdown from a weak government on the verge of defeat”. This comes as the EU (Withdrawal Bill) enters committee stage today.

Separately, according to a source quoted in The Times, Davis was “furious” with Foreign Secretary Boris Johnson and Environment Secretary Michael Gove for the memo they sent to Prime Minister Theresa May saying they were “profoundly worried  that in some parts of Government the current [Brexit] preparations are not proceeding with anything like sufficient energy.” The source is quoted as saying, “He [Davis] wants to demonstrate he’s in charge and in control. He’s angry that other people are interfering.”

Source: The Times BBC Politico London Playbook Bloomberg Brexit Bulletin Sky News

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EU business leaders urge Prime Minister to secure a “status-quo like transitional arrangement”

Meeting at Downing Street on Monday, representatives from 15 British and European business groups, including Confederation of British Industry (CBI)  and BusinessEurope, urged Prime Minister Theresa May to speed up Brexit negotiations and argued in favour of a transition deal that preserves the current status quo. The executives also told May she needed to provide more clarity on the Brexit bill, citizens’ rights and the Irish border in order for talks to progress. The Times reports that the Prime Minister expressed her frustration to business leaders that the EU had not outlined clearly the exact requirements for Brexit talks to move on to the next phase. She also said she would not waste “political capital” at home at this stage by making concessions that could be rejected by the EU as insufficient.

Speaking after the meeting, the president of BusinessEurope, Emma Marcegaglia, said, “Business is extremely concerned with the slow pace of negotiations and the lack of progress only one month before the decisive December European Council…Business aims to avoid a cliff edge and therefore asks for a ‘status quo-like’ transitional arrangement with the UK staying in the customs union and the single market, as this will best provide citizens and businesses with greater certainty.” She also said of the EU’s requirement for sufficient progress, “Britain wants to have a little bit more openness from the EU, who [they feel] keep moving the objectives.” The director general of the CBI, Carolyn Fairbairn, said that all the representatives at the meeting had warned May about the dangers of leaving the EU without a trade deal. She argued that, “We now need to move beyond warm words if jobs, investment and living standards are to be protected”.


IMF: “Economic growth will suffer” in the event of a “disruptive” Brexit

The deputy director of the International Monetary Fund’s (IMF) European Department, Joerg Decressin, told Reuters yesterday that, in the event of a “disruptive” Brexit, “our concern is that economic growth will suffer, especially in the UK, but also in the euro area,” and added, “We are then possibly looking at appreciably lower growth than we presently project.” Decressin said that the IMF expected a deal with a Brexit transition period to be agreed, and that the IMF had not speculated on the possibility of a “no deal” scenario. Regarding the current state of the European economy, he said that, “Growth in the euro area has been positive for 18 quarters, lately around 2.5 percent”, and that “this recovery has not only become broader but also stronger.”

Elsewhere, the CIO of Northern Trust, Wayne Bowers, told Reuters yesterday that the pound could relapse by 10 percent in the event of the UK crashing out of the EU without a trade deal. He said, “This, I think, will suppress any significant gains we could expect to see from the pound.”


Irish Foreign Minister calls for more detail on a UK-EU “customs union partnership”

Speaking in Brussels yesterday, Irish Foreign Minister Simon Coveney said, “[The UK’s] current proposals for dealing with the border are not comprehensive enough and I don’t think we have a credible pathway to ensuring that we maintain what is largely now an invisible border.” He added, “Our preference is for Britain as a whole to remain within a customs union partnership, which is part of the British paper as well. I’d like to hear them talk more about that.” He also emphasised that “the need to avoid regulatory divergence on the island of Ireland is very important.” Coveney dismissed as “not viable” the idea that border issues would “drift into phase two [of Brexit negotiations] in the hope that it would be resolved through some form of trade agreement or trade partnership agreement in the future.”


Northern Ireland budget to be passed at Westminster this week

A budget for Northern Ireland will be passed into law at Westminster later this week. Northern Ireland Secretary James Brokenshire warned that the local civil service would begin to run out of money unless a budget is agreed by the end of the month. The leader of the Northern Irish Democratic Unionist Party, Arlene Foster, has welcomed the development as a means to ensure “good governance” in the region, adding, “If there continues to be a refusal to restore devolution then there will be greater intervention from London.” The leader of the Social Democratic and Labour Party, Colum Eastwood, said, “It is utter madness that while the Brexit negotiations are taking place, the voice of the majority of people in the north of Ireland who voted to remain is silenced. Brexit is a real threat to our way of life on this island. Any suggestion of any border here must be resisted. The challenges we face here are unique and deserve careful consideration.”


Theresa May warns Russia over propaganda to undermine the West

Addressing the Lord Mayor’s Banquet yesterday, Prime Minister Theresa May warned that Russia “is seeking to weaponise information [by] deploying its state-run media organisations to plant fake stories and photoshopped images in an attempt to sow discord in the West and undermine our institutions.” She stressed that Russia’s actions are “[threatening] the international order on which we all depend,” adding, “We know what you are doing. And you will not succeed… The UK will do what is necessary to protect ourselves, and work with our allies to do likewise.” May accused Russia of “meddling in elections, and hacking the Danish ministry of defence and the Bundestag [German parliament], among many others.” She reiterated that the UK will “remain unconditionally committed to maintaining Europe’s security.”


EU signs new defence pact

EU foreign and defence ministers from 23 member states yesterday agreed on a new defence cooperation pact, the Permanent Structured Cooperation (PESCO), which is to be formalised by EU heads of government in December. All member states bar Denmark, Ireland, Malta, Portugal and the UK joined the pact. German newspaper Der Spiegel cites unnamed diplomatic sources on a Franco-German split on the issue, with France allegedly having pushed for cooperation among few but more determined countries, while Germany tried to include as many member states as possible in the project.

All participants have agreed to a list of commitments, including “increasing the share of expenditure allocated to defence research and technology” and “regularly increasing defence budgets in real terms.” In addition, participating states already proposed 47 joint projects for the union, such as a “military Schengen” which would facilitate the transport of soldiers and heavy military equipment throughout the union. Members of the pact will be able to draw from the €5.5bn annually European Defence Fund established by the European Commission earlier this year, Politico reports. Reuters cites unnamed diplomatic sources saying Britain’s aerospace and defence industries fearing losing out on business if they remained outside the project.

The German Foreign Minister, Sigmar Gabriel, called the pact “a milestone in European development.” The German Defence Minister, Ursula von der Leyen, announced, “Today we found the European Security and Defence Union […] another step in the direction of the army of Europeans […] it was important for us – especially after the election of the American President [Donald Trump] – to organise ourselves independently […] when there occurs a crisis in our neighbourhood, we have to be able to act.” She further called the pact “complementary to NATO […] but there is a large number of topics, where I don’t see NATO, but Europe is called upon.” Estonian Defence Minister Jüri Luik called the idea of an EU army “something which is very unlikely,” adding, “collective defence will always remain in NATO.” The NATO General Secretary, Jens Stoltenberg, said a strong European defence was “good for Europe, but also good for NATO.” The British Foreign Secretary, Boris Johnson, said, “We are there, like a flying buttress to support the cathedral [of EU defence].”


Deutsche Bank CEO: “I don’t understand why the Europeans want [Euro] clearing”

The CEO of Deutsche Bank, John Cryan, told the Financial Times, “I don’t understand why the Europeans want [euro] clearing.” He added, “There’s confusion about what it is. The idea of 74,000 jobs being at risk is ridiculous, it’s more like 74.” The newspaper cites an unnamed source, saying, “This job argument is focusing on one single aspect of the debate which is really not at its centre […] The question on euro clearing boils down to the issue if Europe was feeling comfortable with a situation where some of the biggest financial markets – repos, interest rate swaps and credit derivatives – were settled in a an offshore location.”

Meanwhile, US banks, including Morgan Stanley, Citigroup and Bank of America, are in the process of defining “stop gap” plans, which would allow them to retain as many jobs in London as possible after Brexit. Under the plans, the banks would reverse their current organisational arrangements, whereby they use London as a base to passport to the European market, reconfiguring their presence in London as a branch of a continental subsidiary.


European parliament president: UK Brexit bill should be at least €60 billion

In an interview yesterday, President of the European Parliament, Antonio Tajani, said the UK’s Brexit financial settlement should be “at least €60 billion,” adding, “Why should Germans, Italians, Spaniards or the Dutch clear the bills of the British?” Speaking on the possibility that the opening of talks on the future UK-EU trading relationship could be delayed, Tajani said, “The problem is not us. The EU speaks with one voice […] government in London has to fight many difficulties.” Tajani concluded, “The British have to tell us which kind of relationship with the EU they want — if they desire the Norwegian model or the Swiss one. No one really knows this up to today,” and , “I think the majority of [British] citizens now see Brexit as a mistake.”

Elsewhere, Thomas Steffen, German State Secretary at the Finance Ministry, has warned, “We should all be prepared” for the possibility that the UK leaves the EU without a Brexit deal. He added that he hopes for an alternative scenario but said, “today, I do not see it.” Meanwhile, Steffen Seibert, spokesman to German Chancellor Angela Merkel, has said, more progress is required in the Brexit negotiations “as time is ticking.” He added, “It is understandable that the [EU] chief Brexit negotiator [Michel] Barnier stresses how urgent it is for Britain to act promptly, to make proposals.”

Separately, The Times quotes a senior EU diplomat saying the Prime Minister would not be allowed to negotiate the financial settlement herself at the European Council summit in December. They said, “If she tries to do that, it will end in tears. We know the British frustration but at this stage she does not have a choice. Germany will not allow it. Full stop. It will be a breakdown…No one can afford that at this stage so we hope there is enough movement on the money and a commitment to avoid regulatory divergence between Northern Ireland and the Irish Republic.” EU27 leaders will use the December summit to reassess whether sufficient progress has been made to allow negotiations to move on to discussions on a future UK-EU relationship.


Henry Newman: Voters know Brexit might be messy, but that doesn’t mean they want it called off

In a column for ConservativeHome, Open Europe’s director Henry Newman writes, “One of the most significant data points to have emerged recently is Opinium’s poll in late October which showed a majority of those surveyed thought Brexit would be bad for the UK in the next few years, but that a much larger majority thought it would be good in the next 10 to 20 years. It seems that the country understands that Brexit entails disruption and part of that is the messy process of untangling ourselves from Brussels after decades of membership. The negotiations were always going to be bumpy and have their sticky points. What is needed is for the Conservative Party, and their rivals, to hold their nerve and focus relentlessly on what comes next.” Despite political troubles, he adds, “I don’t yet detect significant Conservative divisions over Theresa May’s Brexit plan […] There are a few hardened critics, but the ubiquity of Anna Soubry on TV studio sofas is not representative of her following within the parliamentary Party.” Contrary to “predictions made by the Remain side during the campaign,” the economy “is proving remarkably robust”, he says, adding, “Since the referendum decision, employment has grown to new record highs and unemployment has fallen. Interest rates have risen, but only (so far) to the level at which they were at the time of the referendum – the rate they were at since March 2009. That rise has not, as anti-Brexit campaigners disingenuously claimed, produced “a beating” for “people’s mortgages”. The pound has weakened, but despite what at times looks like attempts to talk the economy into recession, the economic data is mixed with points of strength as well as weakness.”