Wednesday, May 3, 2017

Beastly Brexit Battle

British P.M. Theresa May has called for an early parliamentary election in the U.K.: June 8th. This significant and most dramatic vote will come as Britain begins to negotiate its departure from the European Union after last years’ Brexit referendum.  It is May’s effort, perhaps tinged with a touch of British hubris, to consolidate her power and show the European Union that she has the backing of her people to extract a favorable deal with her former partners in the E.U. With parallel anti-E.U. sentiments fueling the rather heated French presidential elections, May might believe that she will fare reasonably well in setting limits on free travel across her international boundary as well as creating a very favorable set of trade agreements with Continental Europe. A soft Brexit, if you will.
But while there are positive signs from E.U. powerhouse, Germany, in favor of a smooth and positive negotiation with Britain creating a new, going-forward relationship with the E.U., there are some fairly angry critics among E.U. nations, including France, that suggest the talks will be anything but easy or harmonious. Many on the Continent believe May’s optimism is sorely misplaced, that she completely fails to understand the complexity of her own need to fill the statutory void left when E.U. law no longer applies, that there are no “automatics” in creating favorable trade agreements, that the status of E.U. residents in the U.K. and U.K. residents in the E.U. is not clear and that the U.K. owes the E.U. a staggering $50 billion in unpaid E.U. obligations that need to be settled before the balance of the exit is handled.
The British “Repeal Bill” is wending its way through Parliament, a complex “cut and paste” statutory proposal to fill that statutory void by lifting “necessary” laws and regulations covered by the E.U. But critics on the left wonder how those “cut and paste” decisions were made and embellished, while those on the right wonder why such a grand “taking” of the very laws they thought they were escaping would even be necessary. It isn’t pretty.
Meanwhile, clearly expecting the June election to solidify Britain’s strength in the negotiations, Ms. May had a preliminary meeting at her official residence with European Commission President, Jean-Claude Juncker and some of his senior staff. While the official U.K. government sources told the British press that the meeting was “constructive” and provided a “useful working dinner,” the German press (notably the prestigious Frankfurter Allgemeine in an April 4th story) reported quite a different result. 
Juncker purportedly told May, “I leave Downing Street 10 times more skeptical than I was before.” He came away from that dinner thinking it was either complete naivete or political posturing that generated an impression that Ms. May was rather unprepared for the negotiations to follow. “According to the [Frankfurter Allgemeine], EU officials and Mr Juncker were surprised that Ms May did not appear to be fully briefed for the meeting, claiming she had unrealistic expectations about the length and process of negotiations.
“The [U.K.] PM reportedly insisted on discussing other world problems as well as Brexit and refused to accept that the UK owed the EU billions of euros, saying there was no such demand in EU treaties…According to the report, Ms May told EU officials she expected to be elected Prime Minister next month and wanted to ‘make Brexit a success.’
“She was told that would not be possible, because the UK would become worse off in the future as a ‘third country’ - a country outside of the EU and the customs union… Ms May also informed the officials she wanted to clarify the rights of UK citizens in Europe at the EU Council meeting in June – an idea dismissed by Mr Juncker, given the complex nature of associated issues like healthcare.
“She also stated she wanted UK citizens to be treated no differently from other third-country nationals… The PM then said she wanted to deal with Brexit talks in four-day blocks every month, and keep discussions confidential… But Mr Juncker reportedly pulled two piles of paper from his bag: Croatia’s EU entry deal and Canada’s free trade deal, highlighting how complex these talks would be…
“The morning after the meeting, Mr Juncker called German Chancellor Angela Merkel and reportedly said Ms May ‘lived in another galaxy’ and was ‘deluding herself.’... It prompted Ms Merkel to quickly amend a passage in her speech to the EU’s Brexit summit, a speech that would be described as her toughest yet… ‘I have to put it in such clear terms because unfortunately I have the feeling that some in Britain still have illusions,’ she said… ‘But that would be a waste of time.’”, May 1st. E.U. member states have mostly rallied behind the cry of “E.U. first,” and that what Britain may or may not demand is not necessarily what Europe will offer or accept.
But is the U.K. whitewash of what happened at that dinner accurate… or are the Germans telling it as it was? The May 2nd, a British news source, seems to suggest that the Germans are more on the mark. “In Brussels, Politico quotes an EU diplomat saying the dinner went ‘badly, really badly.’ He reportedly went as far as to claim the British government was now ‘living in a different galaxy’ to the EU when it came to Brexit expectations…
“The accounts of the dinner were seized upon by European politicians and opposition parties in the UK… Guy Verhofstadt, the former Belgian prime minister who leads the Alliance of Liberals and Democrats for Europe, said it was time to ‘get real.’ He tweeted: ‘Any Brexit deal requires a strong and stable understanding of the complex issues involved.’
“Labour's shadow Brexit secretary Keir Starmer said Mrs. May's stance was ‘wrong, not strong’ while Lib Dem leader Tim Farron said the backlash in the European media was a ‘taste of things to come.’… ‘The reports show a prime minister who seems to have no idea how difficult these negotiations will be,’ he said.
In his first leader column as Evening Standard editor, former Conservative chancellor George Osborne urged Mrs. May to spell out her intentions more clearly regarding Brexit and other issues… ‘There's nothing wrong with repeating election campaign slogans,’ the article - published on ex-Tory MP Mr Osborne's first day in the editor's chair - stated… ‘The problem comes when the election campaign amounts to no more than a slogan. If you ask for a blank cheque, don't be surprised if later it bounces.’”
The tone set by all of this suggests that the U.K. has a long way to go in order to get even close to the expectations generated by those favoring Brexit… if those goals are even attainable given the rising negativity among the remaining E.U. nations. But then if France elects a leadership determined to rewrite the E.U. charter… or withdraw if it cannot get its way… who knows what will happen or if the E.U. can even survive?
In the wake of the Brexit referendum, even as many companies are reassuring locals that they will keep their London offices, many others are already leaving in droves. Financial giant Goldman Sachs is already relocating over a thousand workers to the Continent – where the necessary financial permits and licenses for E.U. operation will govern – and the U.K. is expecting to lose over 30,000 finance industry workers to Continental Europe in the near term. Without trade agreements in place, the U.K. will be relegated to reliance on the provisions of the World Trade Organization, which is hardly a set of rules that British manufacturers want to see in the exports to Europe.
Many believe that in the long run, British autonomy will bring newfound prosperity to the U.K. Perhaps, but in the shorter term, unless Britain can somehow miraculously pull a soft Brexit out of what looks like a very hard reality, experts suggest that the British pound will erode further and that stagnation, not growth, will be the U.K.’s road for the near term. And no one really can project what lies behind that horizon. Meanwhile, the polarization that generated the Brexit vote in the first place is only growing stronger. Scotland and Ireland are watching… and there may be some nasty realities on those fronts in the coming years as well.
I’m Peter Dekom, and instability in the U.K. and Europe is most certainly not good news, politically or economically, for those of us in the United States.

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