2 March 2016

Government report: All existing alternatives to EU membership come with serious risks

The Government is due to publish its official report into alternative arrangements for relations with Europe in the event of Brexit. The report, which looks at arrangements adopted by Norway, Switzerland and Canada as well as the option of falling back on World Trade Organisation (WTO) rules, will say each would carry serious risks if they were adopted by the UK. The Times notes that the report will also warn that, under the WTO option, companies whose supply chain is in Europe would suffer thanks to increased tariffs and bureaucratic burdens, the cost of which “could be passed on to consumers.”

Foreign Secretary Philip Hammond told the BBC Radio 4 Today programme that, “It is not credible to suggest that you could have continued access to the single market without having to accept freedom of movement of labour, without having to accept EU regulations, and without having to contribute to the EU budget.” However, Work and Pensions Secretary Ian Duncan Smith claimed that “The truth is, we won’t copy any other country’s deal. We will have a settlement on our own terms, and one that will return control of our borders, and money to Britain.”

Writing in City AM, Pascal Couchepin, President of Switzerland between 2003 and 2008, argues that, “No one knows what sort of terms Britain would have to accept if it left the EU, but past experience tells me that the outcome Leave campaigners outline is an unlikely scenario… Given the complexity of the Swiss bilateral agreements, it isn’t clear that EU member states would be willing to replicate this structure with another country.” Writing in The Daily Telegraph, former Chancellor Norman Lamont argues that “I have often said that we could succeed economically outside the EU… What is often forgotten is that the EU needs a [post Brexit trade] agreement just as much as we do.” He adds, “For me the decision is not, however, primarily about economics. It is about democracy and accountability.”

Source: Open Europe Intelligence: What would happen in the event of Brexit? The Daily Telegraph The Daily Mail The BBC The Financial Times City AM: Couchepin

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Austria calls for migrants to be “sent directly” to Germany as Greece becomes new migrant bottleneck

Relations between Vienna and Berlin have hit a new low over the migration crisis with Austrian Chancellor Werner Faymann telling Kurier that Germany should “set up a daily quota, and then bring over these refugees directly from Greece, Turkey or Jordan.” He added, “Austria cannot, and must not, become a distribution hub” for refugees. German Chancellor Angela Merkel hit back saying, “Anyone who closes national borders is not addressing the causes of the refugee movement…We have to find sustainable solutions that we will still be able to justify in the future.”

Meanwhile, the EU is set to release €700m in emergency funding, largely to Greece, to combat the crisis over the next three years, with €300m to be sent to Athens in 2016. Reports suggest that over 24,000 migrants are currently trapped in Greece, as Macedonia employed extra forces on their shared border on Tuesday to prevent migrants from crossing. Greek Foreign Minister, Nikos Kotzias told Skai TV, however, that it is “unlikely” that Greek Prime Minister Alexis Tsipras will  use his veto at next week’s EU-Turkey Summit as he has threatened to do.

Separately, the European Commission will urge European countries to lift internal border control to save the “crowning achievement” of the Schengen passport-free area before the end of 2016, according to a draft report seen by The Guardian. The report says that the demise of Schengen will result in immediate costs of €18bn a year. European Council President Donald Tusk will today visit Croatia and Macedonia, then moving on to Greece and Turkey to attempt and ease the situation. Open Europe’s Pieter Cleppe appeared on France TV analysing the latest developments.


BlackRock: Brexit “offers a lot of risk with little obvious reward”

Philipp Hildebrand, vice-chairman of BlackRock, the world’s largest asset manager, wrote in a report for clients that “Brexit offers a lot of risk with little obvious reward…We see an EU exit leading to lower UK growth and investment and potentially higher unemployment and inflation.” Meanwhile, in a letter seen by City AM, over 30 leading City figures – including former UK Chancellor Lord Lamont, CMC Markets founder Peter Cruddas and Risk Capital Partners chairman Luke Johnson – have tried to dissuade the City of London Corporation from campaigning for the UK to remain in the EU. Separately, Société Générale has warned in a note to clients that Brexit could put some European institutions at risk of credit rating downgrades, with the London-based European Investment Bank (EIB) singled out as “particularly at risk.”

Meawhile, German financial daily Handelsblatt writes that Brexit would end the growth boom for the automotive industry in Western Europe. The paper quotes the President of the German Association of the Automotive Industry, Matthias Wissmann, saying that “looking at the car industry – one sees the significance of the British market.”


Gerard Lyons: Many factors explaining London’s success “may be immune to EU debate”

A new report entitled, ‘London: The Global Powerhouse’, authored by London Mayor Boris Johnson’s economic advisor Gerard Lyons and others, argues that “future economic and financial success for London and the UK will not depend solely on whether the UK is in the EU or not…An important point is whether the institutional structures that propel our economy and attitudes evolve to become flexible enough to prosper in the challenging environment of the global economy.” In an op-ed for the Evening Standard coinciding with the release of the report, Lyons argues, “London has seen the growth of new clusters of economic activity, in areas such as technology, the arts, creativity and culture, in addition to its existing expertise in finance and law. Many of the factors explaining London’s success may be immune to the EU debate…The challenges facing London will be there whether we choose to remain in the EU or leave. These are issues such as the high cost of living, housing, the need for investment in new transport links and connectivity.”


NATO General warns ISIS “spreading like cancer” amongst migrants, blames Putin for “weaponising” refugees

Speaking in Brussels yesterday, General Philip Breedlove of NATO warned that migrants are “masking the movement” of terrorists and criminals, and that ISIS is “spreading like a cancer among refugees.” He blamed Russia’s bombing in Syria for “wildly exacerbating the problem,” accusing the Kremlin and Syrian President, Bashar Al-Assad, of using migration as a weapon to weaken European unity and infrastructure.


Heywood: Ministers backing Brexit will be allowed access to EU documents

The UK’s most senior civil servant, Cabinet Secretary Sir Jeremy Heywood, yesterday told MPs on the Public Administration and Constitutional Affairs Committee that reports that Brexit supporting ministers would be denied access to official documents containing factual evidence about the EU were the result of a “misunderstanding… This talk of conspiracy or bypassing is well wide of the mark, we have no intention of doing that.” However, he confirmed that such ministers would not receive proactive briefings or help with speeches which would allow them to attack the official government position on the EU.


Tory party members back Boris Johnson as next party leader

A YouGov poll for The Times of 1,005 Conservative party members has found that when it comes to choosing the next leader of the party, London Mayor Boris Johnson leads on 43% followed by Chancellor George Osborne on 22%, Home Secretary Theresa May on 19% and Business Secretary Sajid Javid on 7%. In a final run-off between Johnson and Osborne, Johnson would win 56% to 38%. The poll also found that 59% of Tory members intend to vote in favour of Britain leaving the EU.


ECJ puts curbs on Germany’s refugee policy

The EU’s top court, the European Court of Justice, has ruled that Germany cannot use the argument of spreading the burden of social welfare payments across its regions to dictate to refugees where they can live in the country. But the Court also ruled that “a-place-of residence condition” could be imposed in certain situations to help “integration” into society. Germany is looking to further tighten the conditions of where refugees can live – a strategy to prevent inner-city ghettos forming , and to distribute the burden to the east of the country. Berlin cautiously welcomed the ECJ ruling, with an Interior Ministry spokesperson saying, “It makes clear that our residence conditions are in compliance with European law… and that the integration argument is an acceptable reason.”


Commission to think again on the application of bankers’ bonus cap

EU Financial Services Commissioner Lord Hill has confirmed that the Commission is looking again at the application of the bankers’ bonus cap, following complaints by the UK and other states. He said that the Commission is considering whether it should be implemented in a “uniform way” or “proportionately”, with the latter approach meaning smaller institutions would not be bound by the cap.


Fine Gael shows willingness to talk to all parties about forming a government following uncertain Irish election

Fine Gael Leader Enda Kenny said following the inconclusive election outcome that, “We will engage fully and inclusively with other parties, groups and independent deputies to ensure that a government is established.” Other members of his party suggested this would include talks with Fianna Fail, with some members of Fianna Fail indicating a willingness to support a Fine Gael minority government.


Spanish Socialist leader bound to lose first confidence vote as PP and Podemos officially declare their ‘No’

Spain’s centre-right Partido Popular and anti-establishment party Podemos this morning officially declared that they will vote against Socialist leader Pedro Sánchez – making it impossible for him to be voted in as new Prime Minister in the confidence vote scheduled for tonight. A second ballot will therefore have to take place by Friday night at the latest. Failing that, the King of Spain would have to resume talks with political parties with a view to finding a solution to the current impasse. If no candidate is elected Prime Minister by May 2, new elections will have to be called.


Dutch Presidency of EU, backed by Britain, rejects Commission demands to impose higher tariffs on China

The Dutch presidency of the EU, with the backing of the UK, has rejected demands from the European Commission and some member states to come to a position on strengthening trade defence instruments to protect against steel dumping from China.


Head of EU Single Resolution Board: It makes “perfect sense” to cap Eurozone banks’ holdings of sovereign debt

Elke Koenig, head of the EU’s newly-established Single Resolution Board (SRB), told MEPs yesterday that it makes “perfect sense” to set a limit on Eurozone banks’ holdings of sovereign debt, arguing that “there is no asset that is totally risk free.” Such a cap is strongly opposed by Italy, with Prime Minister Matteo Renzi recently saying that he would veto any plans to introduce it.


European Commission proposals could see sharp rise in price of e-cigarettes

EUObserver reports that EU ministers have asked the European Commission to draft “an appropriate legislative proposal” that would see e-cigarettes placed under the same tax arrangements as cigarettes and cigars. There are concerns the plans could damage public health with Deborah Arnott, of the health charity ASH, saying “If the EU were to require states to tax electronic cigarettes like tobacco products it would be detrimental to public health. It would discourage smokers from switching.”



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