RPP Olli Rehn “Europe seeks renewal in the shadow of Brexit”

Overview

Conservative Party Conference continued to dominate the political and Brexit news last week. Whilst the Conference will arguably be viewed as a success, see article below, the mood of the country, media and Conservative Party is volatile. For the full text of Theresa May's speech on Wednesday (5th) of Conference click here. Whilst the medium and long term effects of Brexit will not become apparent for many years, the short term effect of the Prime Minister's announcement over Article 50 was quite dramatic with the £ falling significantly against the $ and the €, after indications that there would be a "Hard Brexit". Whilst this further fall in the value of the £ has caused concern in many quarters in the UK, it has been welcomed by others including Lord Mervyn King, former Governor of the Bank of England, who has said that:

"reactions are over the top. During the referendum, some said the danger of Brexit is you'll end up with higher interest rates, lower house prices and a lower exchange rate, and I thought dream on. Because that's what we've been trying to achieve for the past three years and now we have a chance of getting it".

Highlights

  • On Monday (10th October) Theresa May travelled to Denmark to meet with Danish Prime Minister Lars-Lokke Rasmussen. The meeting is being reported positively in the UK with Mr Rasmussen being suggested as a potential ally for the UK in Brexit negotiations. The Prime Minister said after the meeting in Copenhagen that he wants to “stand up for free trade”, an issue on which the UK and Denmark “firmly agrees” on.
  • Also on the 10th October, David Davis spoke in the House of Commons warning European leaders against trying to implement a "punishment plan" against the UK for leaving the EU. This was in response to statements from several European leaders, the most strident being President Hollande, who last week said Britain will have to “pay a price” for the Brexit vote. Mr Davis said that any attempt to cause economic damage to Britain will lead to other countries deciding to hold referendums and potentially quit the EU. “If the EU adheres to a punishment plan and it fails, as I believe it would, then that's an even bigger incentive to countries that want to leave than no punishment at all.”
  • The High Court Case against Brexit begins on Thursday (13th). The main argument will be whether the Government can trigger Article 50 without a vote in Parliament. Also from a legal perspective, last week a lawyer for anti-Brexit campaigners told the high court in Belfast that Northern Ireland could veto its exit from the European Union. A senior barrister argued that the Good Friday agreement, ratified by a referendum in 1998, meant that the province had some control over such constitutional changes. Also from an Anglo-Irish perspective, Secretary of State for Northern Ireland, James Brokenshire MP has suggested that British border controls could be introduced at Irish ports and airports in order to maintain the open border between Northern Ireland and the Republic.
  • Finally, the UKIP leadership situation descended into chaos last week with Diane James MEP announcing that she would be standing down as leader of UKIP, just 18 days after winning the leadership contest. She said that she didn't have sufficient authority, nor the full support of Ukip MEPs and officers to reform the party. This leaves UKIP in the slightly farcical position of having Nigel Farage MEP back as leader for the time being anyway. He is certainly making a habit of standing down and then being drawn back in. UKIP's week descended into further chaos on Thursday 6th when a meeting of their MEPs resulted in a fight between Stephen Woolfe MEP and Mike Hookem MEP. Whilst the fight is being downplayed by UKIP, there was certainly significant concern for Mr Woolfe at the time, who collapsed in the European Parliament in Strasbourg and spent several nights in hospital.


Written by RPP Head of London Office, Andrew Brown

Europe seeks renewal in the shadow of Brexit

The Bratislava meeting of the heads of 27 Member States launched a reflection procedure on the future of the European Union, aiming to define guidelines by the 60th anniversary of Treaty of Rome in March 2017.

What Europe needs now is a common vision and political leadership.

The EU has been going through several – even too many – crises over the last years: the eurozone debt crisis, the refugee crisis, the Brexit saga, to name a few. We have been forced to search for solutions to difficult questions in a tight time pressure, at the same time we have seen the rise of populism and euroscepticism It should not come as a surprise that there is an urgent need for real reforms.

The EU has to focus on the essentials and put a special emphasis on delivering concrete results. The reformed EU has to be big on big issues and small on small issues. After Bratislava it rightly seems that the main themes to develop the EU will be the economy and security.

But ideas alone are not sufficient. We need political leadership to make the change happen. The unity of the EU will be of essence. Like-minded groups can add value for our deliberations, but we should not let them disunite the EU into opposite camps.

It is still premature to estimate the long term implications of the Brexit vote for the economy. Most probably they will be realized only when UK’s future relationship with the EU has been negotiated, even if the prevailing uncertainty is felt certainly earlier in investment decisions.

It is clear, however, that globalization and free trade are facing headwinds. The EU and its export-orientated nations have a lot to lose, if we don’t fight against protectionist tendencies.

Britain should remain a close partner of the EU in the future, and our future relationship can be made mutually beneficial. This requires a constructive approach from both sides. Britain’s access to the single market will be at the core of the negotiations. It goes without saying that the four freedoms are a package and there is no single market à la carte.

The Finnish Government has started an internal reflection process to define Finnish EU priorities in the post-Brexit world. With Brexit, we will lose one of our most important partners in such policy sectors as the single market, competitiveness and free trade. Our voice will no doubt be even stronger in these issues in the future.

To sum up, the very basis for the European integration remains the same: safeguarding peace and security and ensuring the conditions for sustainable growth and employment. It is now up to us to make sure that the EU will continue to contribute for the benefit of the generations to come.

Written by Dr Olli Rehn, Finnish Minister of Economic Affairs & former Vice-President of the European Commission in charge of Economic and Monetary Affairs and the Euro (2010-14 and Commissioner for Enlargement (2004-10) & Enterprise & Information Security (2004).

A European Perspective to this week's Brexit Events

The announcement of Prime Minister May to opt for the best deal possible for Britain in Brexit negotiations on the Conservative party conference last weekend provoked severe resistance and criticism from inside and outside the UK. Former British secretary and remain-campaigner Anna Soubry criticised May’s Brexit plans and advocated to postpone the start of the negotiations after the German and French elections in 2017. Manfred Weber (CSU), leader of the centre-right European People’s Party bloc in the European Parliament, and Elmar Brok (CDU), German MEP and Merkel confidant, welcomed May’s announcement finally proposing a Brexit schedule ending before the next elections in Europe in 2019. Yet Gunther Krichbaum (CDU), Chairman of the committee for European Affairs in the German Bundestag, criticised May, since the schedule unnecessarily prolongs the negotiations for several months, without having a thorough plan of action. The Czech Republic’s state secretary for European Affairs countered the conservative party conference saying it ‘looks like the Brits still have not found a way to explain their promises were completely unrealistic.’

Nevertheless, Foreign Minister of Lithuania, Linas Linkevičius, urged for respectful negotiations, since the British people should not be punished for their decision to leave the EU. James Sproule, Director of Policy at the Institute of Directors countered Mrs May’s restrictions on migration, since ‘Britain is at its best when it is open and offering a home to the world’s brightest and best who want to study and build a better life for themselves, while contributing to the British economy’. Similarly, Angela Merkel said on Wednesday that if Britain wanted to maintain unrestricted access to the single market they would have to accept freedom of movement. At a conference organised by the Federal Association for German Wholesale and Foreign Trade she said ‘Full access to the internal market is linked to the acceptance of the four fundamental freedoms, including the freedom of movement for per-sons, and cannot be separated from it’. Furthermore, Guy Verhofstadt contended, that the four freedoms are ‘one package’ thus inextricably linked and detaching them would ‘destroy the union and its internal market’. Hence he acknowledges fears commonly spread within Europe, that allowing the UK a special treatment would open Pandora’s box and lead other member countries of the EU to follow. Demanding special circumstances, the thinking goes, destabilises the union and destroys it form the inside in the long run.

Subsequently, Francois Hollande has sent one of the strongest warnings yet that Britain will have to pay a heavy price for leaving the European Union, adding deep concern in financial markets. The French president addressed a dinner in Paris attended by Jean-Claude Junker, and the EU’s top Brexit negotiator, Michel Barnier. He declared ‘There must be a threat, there must be a risk, there must be a price, otherwise we will be in negotiations that will not end well and, inevitably, will have economic and human consequences. Britain has decided on a Brexit, I believe even a hard Brexit. Well, we must go all the way with Britain’s will to leave the European Union.’ There is speculation that this story, published in the Financial Times, sent the pound plummeting.

Written by RPP London Policy Researcher, Anna Rößing

Brexit & Conservative Party Conference

Last Sunday's (2nd October) announcement by Theresa May that the UK would trigger Article 50 by March 2017 certainly started Conservative Party Conference with a bang. RPP followed the Conference closely both up in Birmingham as well as reviewing the key speeches from the comfort of our London office.

The overarching goal of the Conference from a no 10 perspective, was to convince the country, the EU and the Conservative right that the Prime Minister was serious about Brexit. As well as the strap line of "A Country for Hard Working People", "Brexit means Brexit" was certainly another key message. Unfortunately for one Government Minister, who we won't be so cruel as to name, an error with/or reading the autocue resulted in him announcing "Brexit means Breakfast".

On the main stage, on Monday, the new Home Secretary, Amber Rudd proposed that businesses should disclose how many of their employees are foreigners. This policy was widely criticised in the media and from all sides of the political spectrum, including from many leading Brexiteers. The Health Secretary, Jeremy Hunt, like Amber Rudd also a Remainer, seemed to try to emulate the tough talking Brexit friendly policies by announcing that the UK aimed to become self-sufficient in doctors over the coming years. Whilst the policy of increasing medical student places by 1,500 a year is widely welcomed, the rhetoric that accompanied it both in conference hall and in the media was viewed to be too anti-migrant, especially from within the NHS that relies heavily on its foreign trained staff.

Away from the main Conference hall, at the fringe events and in the Conference bars, where the real discussions go on between MPs and Tory members, whilst there was a very positive, vibrant atmosphere, there was also some nervousness about how the Brexit negotiations would unfold. Many on the Tory Right, were certainly pleased by the Prime Minister's statements, but many also felt that certain other Government ministers had gone too far, Amber Rudd in particular.

Whilst many Conservatives, who voted and campaigned for Remain, agree with Sir Michael Fallon, the Defence Secretary, that "we're all Brexiteers now", there is also a significant amount of disagreement on what Brexit means, whether a hard or soft Brexit is desirable and how achievable our negotiating aims will be. Brexit may mean Brexit, but for the next few years it also means uncertainty.

Overall the Conference will be viewed as a success by the Prime Minister and her team, without any serious gaffs. Theresa May even joked about this in her main conference speech saying "Can Boris Johnson stay on message for a full four days? Just about." The true test for Theresa May as leader of the Conservative Party and Prime Minister, is whether she can keep her Party behind her, her Ministers in-line, the Country happy and negotiations progressing well by next Party Conference. A Herculean task perhaps, but either way, next Conservative Party Conference will almost certainly be an interesting one.

Written by RPP Head of London Office, Andrew Brown & RPP Policy Researcher, Lucy Kerr

EU leaders urged to take a firm stance on Russia, trade deals and Brexit talks

Last week's debate in Strasbourg has been dominated by debates about Syria and trade deals currently under scrutiny such as the Transatlantic Trade and Investment Partnership (TTIP) and CETA (Comprehensive Economic and Trade Agreement).

Although Prime Minister May announced that she would trigger Article 50 in Spring next year, Brexit was not the dominant topic of the Key Debate last Wednesday. Action to stop massacres in Syria, implementation of migration policies and border controls, and ensuring a balanced approach to trade deals while defending EU industry are the key challenges that EU heads of state or government should tackle at their 20th-21st October meeting in Brussels. These priorities were identified by the European Parliament’s political group leaders in a debate with the Slovak Council Presidency and EU the Commission in Strasbourg.

Manfred Weber (Christian-Democrats, DE) welcomed UK Prime Minister Theresa May’s announcement that the UK would trigger Article 50 to start “Brexit” negotiations in March 2017. “If one wants to leave, one should not block the further deepening of the EU”. The four freedoms of the EU, including free movement of people, are not negotiable, he repeated. Mr Weber blamed Russia’s President Putin and Syria’s President, “mass murderer” Bashar al- Assad, for causing the “biggest humanitarian tragedy ever since Sarajevo’s siege” and called on EU leaders to “stop the madness”. On the Nord Stream II pipeline project, “This is no time for doing business with Putin”, he added.

Gianni Pitella for the Socialist group, criticised Ms May for announcing that her government will scrap EU laws, as this would have a bad impact on EU citizens living in the country. He called for an expansionist economic policy “to avoid falling back into recession” and a strong industrial policy to avoid falling “victim to multinationals (...) who exploit workers”. Referring to progress on CETA and doubts on TTIP, he stressed that trade agreements should never lower EU social, environmental and health standards. Finally, Mr Pittella called for an immediate cease-fire in Syria to allow humanitarian aid.

Syed Kamall (Conservatives, UK) replied that the UK government wants to ”make stable UK laws”. He called the Bratislava summit a “failed opportunity” and urged EU leaders to address the real concerns of citizens: jobs, growth, and migration control by “returning those who are not fleeing persecution”. Mr Kamall asked EU leaders to send a clear signal in favour of open trade with Canada and to maintain sanctions against Russia until the Minsk agreement is fully implemented.

Guy Verhofstadt (Liberal Group, BE) added to Mr Weber’s priorities for EU leaders moving forward on a full-fledged Banking Union and economic governance. On Brexit, he insisted that there must be no pre-negotiations, that the negotiations must be completed before the next EU elections and that the EU’s future relationship with the UK must be ”close”, bearing in mind that 48% of voters wanted to remain. He reiterated that the four freedoms must not be split.

Frans Timmermans, First Vice-President of the Commission, responded that “fences and walls will not solve the problems! We need a comprehensive approach. There is no “pick and choose” - we need to do it all and at the same time: protect borders, redistribute and resettle refugees, and help develop the economy in countries of origin.”

Written by RPP Senior Director Advocacy & Policy, Thomas Krings