17 October 2018

Donald Tusk: Only new UK proposals can break Brexit deadlock

European Council President Donald Tusk yesterday said that the state of Brexit negotiations “gives [him] no grounds for optimism” and that he will ask Prime Minister Theresa May “whether she has concrete proposals on how to break the impasse. Only such proposals can determine if a breakthrough is possible.” Tusk called for new thinking on the Irish backstop issue, saying, “We need something very creative, while at the same time to protect our values and to protect [the] single market, and [at] the same time to fully respect the UK’s sovereignty. To me it is clear, the goal must be clear for all of us, but for this maybe we need a new method of thinking.” He added, “While working on a Brexit deal, we also need to make sure that we are prepared in case an agreement is not possible or in case it is rejected. Therefore tomorrow the leaders will discuss how to step up our preparations for a no-deal scenario.”

Meanwhile, the Prime Minister’s spokesman said that at yesterday’s meeting the Cabinet “strongly supported the Prime Minister over the importance of maintaining the integrity of the [UK]. The Cabinet also agreed that we must be able to ensure that we cannot be kept in the backstop arrangement indefinitely.” He added that Theresa May said that securing an agreement with the EU which “delivers on the referendum result, safeguards jobs and security and which preserves [the UK]” is possible, saying, “I’m convinced that if we as a government stand together and stand firm we can achieve this.” During the meeting, Chief Whip Julian Smith reportedly warned that Parliament would reject the EU’s current proposal for a backstop, while England and Wales Attorney General Geoffrey Cox told the Cabinet that the EU’s proposal for the Irish backstop would mean Northern Ireland “torn out of the UK” and would leave the UK with “no leverage in future talks.”

Separately, the Times reports that French President Emmanuel Macron would support a compromise over the Irish border backstop in order to reach a withdrawal agreement. A French official is quoted saying that there was “space” to bridge the EU’s and the UK’s proposals for the backstop, also suggesting that a special Brexit summit could happen in November if there is progress on the issue.

Source: The Guardian I The Guardian II Press Association Bloomberg The Times I The Times II

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UK and EU considering extension of Brexit transition period

RTÉ report that UK and EU negotiators are considering extending the Brexit transition period in order to allow time for a temporary UK-EU customs arrangement to be made operational. Under these plans, the current transition period, which lasts until December 2020, could be extended until the end of 2021. An extension could also reduce concerns that the Irish backstop would ever need to be used. The EU’s chief negotiator, Michel Barnier, briefed member states of this plan in Luxembourg.

Elsewhere, The Times reports that International Trade Secretary Liam Fox has suggested staying in a transition period for a “few more months” beyond December 2020, to avoid the need for the Irish backstop protocol to be implemented in 2021.

Source: RTE The Times

Barnier: No UK-EU agreement on withdrawal deal yet

The EU’s chief Brexit negotiator, Michel Barnier, yesterday said on Brexit negotiations, “We are not there yet. There are several subjects that remain open, including Ireland. As I understand we need more time to find this comprehensive agreement and achieve decisive progress.” Elsewhere, an EU diplomat told the Guardian, “Since there is no agreement on the Irish backstop there will not be an outline of [the] joint political declaration on the table on Wednesday evening.”

Separately, Germany’s Europe Minister, Michael Roth, advised Prime Minister Theresa May to “take responsibility and be constructive.” France’s Europe Minister Nathalie Loiseau also said, “We can have either a smooth Brexit or a rocky one. We’d prefer a smooth one but we have to stand ready. If there’s no deal we’ll also be ready for that.”

The European Council of EU leaders will meet today and tomorrow.

Source: The Guardian The Times

Irish ambassador says UK is "backsliding" on border promises

The Irish ambassador to the UK, Adrian O’Neill, said that the UK government is “backsliding” on its promise to avoid a hard border between Ireland and Northern Ireland. Referring to Prime Minister Theresa May’s proposal for a time-limited backstop arrangement to avoid a hard border, O’Neill said, “This demand for a time-limited version of a backstop is not consistent with what was agreed in December and March and we are concerned by that.” He added, “It is even more concerning hearing comments from some quarters here that the backstop is unnecessary…The truth, however inconvenient for some, is that a backstop is a crucial safety net for the Belfast Agreement and the peace process.”

Elsewhere, the Irish Prime Minister, Leo Varadkar, said yesterday that there was still work to do on the Irish backstop, and that he expected the UK to “honour the commitments it has already made” to maintain an open border on the island of Ireland.

This comes as the Irish Foreign Minister, Simon Coveney, predicted that it was “unlikely there will be a lot agreed” among EU leaders this evening. Coveney expressed opposition to May’s proposal of putting a time limit on a backstop, saying, “If you set a date in the future when a backstop falls, then it’s not a backstop at all.”

Source: The Daily Telegraph Reuters Bloomberg

Chancellor: £36 billion will be paid to EU even if no deal

The Chancellor of the Exchequer Philip Hammond has told Cabinet ministers that the UK would be liable to pay up to £36 billion to the EU even without a trade deal, the Daily Telegraph reports. Legal advice from the Treasury had indicated that the UK would be likely to lose a legal battle against paying the EU divorce bill in the event of no deal. The Chancellor’s comments contradict the earlier claims of Brexit Secretary Dominic Raab that the bill would only be paid if a deal was agreed.

Source: The Daily Telegraph

US to negotiate trade agreements with UK, Japan and EU

The United States trade representative Robert Lighthizer has announced that the Trump Administration will seek to negotiate trade agreements with the UK, Japan and the EU. In a letter to the US Congress, Lighthizer said that talks with Japan will commence “as soon as practicable” while talks with the UK will begin “as soon as it is ready”. He added that the aim is to “address both tariff and non-tariff barriers” to achieve “free, fair and reciprocal trade.” The UK Government issued a statement welcoming the announcement.

Elsewhere,  the College of European Commissioners is due today to approve EU-Vietnam trade and investment agreements, which would eliminate all tariffs on goods for a ten-year period.

Source: BBC Financial Times Politico Brussels Playbook

David Allen Green: The EU might have made a grave mistake with the Irish ‘backstop’

Writing in the Financial Times, contributing editor David Allen Green argues that insisting on a backstop arrangement to avoid a hard border on the island of Ireland was “an over-reach by the EU,” adding, “Unlike the issues of the financial settlement and the rights of UK and EU citizens, the demand for a backstop was not an explicit objective of the EU27 before last December. It has the appearance of being an improvised tactical ploy to achieve an objective, rather than an objective in and of itself.” He also writes, “If there is still no progress on the backstop issue in the next month or so, the UK and EU should consider opening a separate dialogue on the Irish border issue, with the view to a discrete agreement. All sides should accept that such permanent arrangements (and the nature of a backstop is potentially permanent) on a sensitive topic are better dealt with other than in an exit agreement.”

Source: Financial Times

Juncker: If Brussels accepts Italian budget, this may cause “violent reactions” in other Eurozone member states

European Commission President Jean-Claude Juncker yesterday said that “nothing has been decided so far” on whether the EU’s response to Rome’s budget proposals, yet warned that there would be a “violent reaction” from other Eurozone members if the Commission accepted the current proposals made by Italy. He added, “Everything will depend on what comes out of our conversations with the Italian government […] Italians understand things well, and they know they can’t keep spending more than what they have in the state’s coffer. It’s common sense.” This comes as Claudio Borghi, a leading politician of the co-governing Italian Lega party, called on Brussels to end their “war of words,” adding, “I do hope that good sense will prevail, and everyone will notice that this kind of budget is exactly what Italy needs to cope with its chronic lack of growth.”

Source: Politico

Brexit trumps UK wage growth for Bank of England

Figures from the Office for National Statistics published yesterday show average earnings (excluding bonuses) grew by 3.1% in the three months before August, the highest growth rate since January 2009. Despite wage growth now outpacing inflation, the Bank of England is unlikely to act until it has greater clarity on Brexit, Bloomberg reports.

Source: Bloomberg

Poland opposes Commission plans to boost Frontex staff numbers

Poland’s Prime Minister Mateusz Morawiecki on Monday rejected the European Commission’s proposal to increase the size of its border agency Frontex to 10,000 staff by 2020, saying, “A significant increase in the number of Frontex personnel is in our eyes unfounded.” Morawiecki argued, “We worry that more money for Frontex will mean less money for structural funds, less money for road or railway development.” His position is reportedly shared by Czech Prime Minister Andrej Babis.

Source: EurActiv EUObserver

Aarti Shankar: How costly would a no deal Brexit really be?

Writing for CapX, Open Europe’s Aarti Shankar presents the results of Open Europe’s recent report on a No Deal Brexit, which finds that “the implications of Brexit for the long-term trend of UK growth seem small compared to other (inevitable) disruptive factors” and that “unilateral liberalisation would see the UK recover up to 1.7 percentage points of the lost GDP from a no deal Brexit in 2030.” Arguing that while a No Deal Brexit is in neither the UK’s nor the EU’s interest, she writes, “Beyond the macroeconomic picture, the impact on political and strategic cooperation between the UK and the EU would likely be profound. But, as negotiations enter the critical phase – and with little obvious signs of compromise to get over the line – the possibility of a no deal outcome cannot be discounted.”