20 July 2018

European Commission document warns of effects of no-deal Brexit

The European Commission yesterday published a briefing on preparations for a no deal Brexit. It notes that “in the absence of an agreement on a withdrawal agreement…there will be no transition period and EU law will cease to apply to and in the United Kingdom as of 30 March 2019.” It warns that under this scenario, “There would be no specific arrangement in place for EU citizens in the United Kingdom, or for UK citizens in the European Union.” It also notes that regulatory checks and tariffs would need to be applied “at borders with the UK,” warning that “transport between the United Kingdom and the European Union would be severly impacted.” However, it suggests, “Depending on the circumstances leading to the withdrawal without an agreement, the EU may wish to enter into negotiations with the United Kingdom as a third country.”

This comes as The CityAM reports that EU negotiators and MEPs are considering temporarily extending Article 50 if necessary to conclude a Brexit deal. One MEP said, “It will probably only happen if the negotiations are so advanced that the EU believes a deal can be struck.”

Separately, a study by the International Monetary Fund finds the EU would suffer a long-term reduction in GDP of 1.5 percent, with Ireland worst hit, followed by the Netherlands, Belgium and Luxembourg. The IMF said, “The strength of the euro area-UK integration implies that there would be no Brexit winners.”

Source: European Commission City AM Buzzfeed Reuters

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Treasury to prioritise flow of goods over border revenue collection in case of no-deal Brexit

In the case of a ‘no deal’ Brexit, the Treasury is planning to relax efforts to collect border taxes in order to keep the flow of goods moving. Financial Secretary to the Treasury Mel Stride yesterday told the Lords EU External Affairs committee that in case of having to choose between revenue collection and the flow of goods, “The priority [for the Government] will be to keep flow moving.” Stride added, “We will not compromise on security…But there will be, perhaps particularly in the case of a place like Dover, where you have to keep flow moving very quickly or you have all sorts of problems.”

Meanwhile, Stride also told the committee that it is difficult to predict when the repayment mechanism which is part of the Government’s plan for a ‘facilitated customs arrangement’ (FCA) would be ready, explaining that the system is “contingent on a number of different factors, not least the negotiation…For the thing to be up and functioning will be a little way off but I couldn’t pin a precise date on it.” HMRC Chief Executive Jon Thompson told the same committee that the repayment mechanism “would be a unique technology project” which could take longer to implement than the transition period. Thompson also said that the FCA proposal would result in an additional cost of £700m per year for businesses.

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Theresa May to reject EU Irish backstop as “unworkable” and urge them to “evolve their position”

In a speech in Belfast today, Prime Minister Theresa May will again reject the EU’s backstop proposal for the Irish border, which would see Northern Ireland remain part of the EU’s customs territory and regulatory area. She will say, “The economic and constitutional dislocation of a formal ‘third country’ customs border within our own country is something I will never accept and I believe no British Prime Minister could ever accept. And as they made clear this week, it is not something the House of Commons will accept either. ” May will add, “It is now for the EU to respond. Not simply to fall back on to previous positions which have already been proven unworkable, but to evolve their position in kind.”

Irish Foreign Minister Simon Coveney later tweeted, “If UK [government] don’t support current EU wording on Backstop in draft Withdrawal Agreement, then obligation is on them to propose a viable and legally operable alternative wording that delivers same result: no border infrastructure. Clear UK commitments were made on this in [December and March].”

Elsewhere, Buzzfeed reports that a senior EU official has warned EU27 diplomats that the chances of a no deal exit have substantially increased after a UK parliamentary vote on Brexit legislation this week made it unlawful for Northern Ireland to be part of a separate customs territory to Great Britain. This would rule out the EU’s proposal for an Irish backstop solution. The EU also reportedly believes the vote this week meant Prime Minister Theresa May had reneged on commitments made for the backstop in December last year.

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The Times: “Challenge” to find “common ground” between EU principles and UK position, says Barnier

The Times reports that the EU’s chief Brexit negotiator, Michel Barnier, yesterday said it would be a “challenge” to “find common ground between the fundamental principles that define the EU and the UK’s position.” Speaking ahead of his meeting with Brexit Secretary Dominic Raab, Barnier also said the future deal would have to “respect” the integrity of the Single Market. Raab called for more “vim, vigour and energy” in negotiations, and called for talks to “intensify” during the summer.

Elsewhere, Andrea Leadsom, leader of the House of Commons, yesterday told Parliament’s The House magazine that May’s Chequers proposal was the UK’s “final offer” in Brexit negotiations, and that the EU should take the UK “seriously” or risk a “no-deal” situation. Foreign Secretary Jeremy Hunt is quoted in the same magazine, saying the Chequers deal is “absolutely alive” and will be “key to unlocking” talks with Brussels.

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City of London Corporation: Brexit could create split between UK and international financial firms

The City of London Corporation policy chair Catherine McGuiness yesterday warned about a potential split between domestic and international financial businesses due to Brexit, adding that the financial sector should expect “turbulence over the next few months, and a greater variety of views from the sector than we have seen so far.” In a statement to the Court of Common Council, McGuinness said, “There may also be points at which our fundamental interest, the prosperity and wellbeing of the City of London and all that it contributes to this country, may differ from those of international businesses based here, and we should be alive to that.” She also criticised the Government’s approach of “expanded equivalence” for financial services after Brexit, arguing that it is “likely to mean less business and fewer jobs.”

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Labour rules out second Brexit referendum, says Emily Thornberry

According to the Huffington Post UK, Shadow Foreign Secretary Emily Thornberry told a meeting that the Labour Party does not support holding a second Brexit referendum. Thornberry reportedly said, “What we need is not a Government of National Unity, what we need is not a second referendum – we need a general election.”

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IMF warns about "mounting" risks to Eurozone growth

In an assessment published yesterday, the International Monetary Fund (IMF) stated that the Eurozone growth “appears to be leveling off from the very high levels of late last year, but is projected to remain solid,” while warning that both internal and external risks such as trade tensions with the US and the lack of progress in Brexit negotiations “are mounting.” The assessment added, “Risks are particularly serious at this time…Recent events have skewed the balance of risks downward, reflecting both domestic and global factors. If these were to materialise, the economy could yet be tipped into a hard landing.” It also stated that “The European Central Bank’s (ECB) commitment to keep policy rates at their current low levels, at least through next summer, is…vital,” and recommended, “Raising rates too early could be a costly error – for the euro area, and for the rest of the world.”

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“Too early” to say if US will slap tariffs on car imports from EU, Commerce Secretary says

US Commerce Secretary Wilbur Ross yesterday said it was “too early” to say whether his country would impose additional tariffs on imported cars and car parts. This comes as US President Donald Trump earlier this week threatened with “tremendous retribution” in case the EU and US did not “negotiate something fair” on trade in cars and car parts. Trump also ordered the Commerce Department to investigate whether current imports constitute a threat to US national security.

Meanwhile, EU Trade Commissioner Cecilia Malmstrom yesterday said the EU was preparing a list of “rebalancing measures” to apply in case the US was imposing higher car tariffs, adding that such an action on US-side “would be very unfortunate.”

Elsewhere, Trump criticised the EU’s decision to put a €4.3bn fine on Google, accusing the EU of having “truly taken advantage of the US, but not for long.”

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EU refers Hungary to ECJ over treatment of asylum seekers

The European Commission yesterday referred Hungary to the European Court of Justice, claiming that its treatment of asylum seekers was in breach of EU rules. The Commission accused Hungary of expelling refugees without respecting appropriate safeguards, also adding that Hungary’s practice of “the indefinite detention of asylum seekers in transit zones without respecting the applicable procedural guarantees” was against EU law. While this referral is the final step of a procedure started in 2015, the Commission also launched another infringement procedure against Hungary yesterday over its new ‘Stop Soros’ law. The institution argues that the new law “curtail[s] the right to asylum in a way which is incompatible with the Asylum Qualifications Directive and the EU Charter of Fundamental Rights,” adding that it “also unduly restricts the exercise of free movement rights of EU citizens without due regard for procedural guarantees or for the rights of the people affected.”

Meanwhile, Italian Prime Minister Giuseppe Conte yesterday said he had written to the European Commission to set up a crisis committee “which can then mediate with the various governments” regarding the allocation of arriving asylum seekers. Conte added that he was “trying to convince [the Hungarian and the Czech governments] that even they, who do not border the Mediterranean, are not immune to this problem.” European Commission President Jean-Claude Juncker responded, saying, “I agree that better coordination mechanisms are needed, but only as a step towards a more stable framework,” adding, “the Commission is ready to play its full role as coordinator.”

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European Commission: Kosovo is ready for visa liberalisation

The European Commission this week announced that Kosovo had met all remaining benchmarks to be granted visa liberalisation with the EU,  and said it would “continue to monitor the implementation of all requirements set out in the visa liberalisation roadmap.” The European Parliament and the European Council still need to approve of the liberalisation however. Kosovo’s Foreign Minister Behgjet Pacolli welcomed the announcement, calling it “a historic moment for Kosovo” and “a test for EU leaders and for Kosovo’s European future.”

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