18 October 2017

Wednesday, 06:01

CURRENCY

NO CLARITY YET

The UK starts the divorce with the EU being torn apart by internal contradictions

Author:

01.08.2017

Usually, August is vacation time for everybody, including the European leaders. At the end of July, Theresa May spent a week in Italy, then moved to Austria, where she would spend the rest of her vacation with her husband, Philip John May. This has been a traditional route for spouses for twenty years, and they do not want to change their habits because of the divorce process with the Continent.

In fact, some traditions had to be cancelled. Usually a Prime Minister delegates his powers to one of the cabinet members. However, Mrs. May refused to do so because of the Brexit. Negotiations with the EU representatives are not interrupted, and the next meeting is scheduled to take place in Brussels during the second half of August.

Not only does May want to keep the progress of negotiations under control, but she is also reluctant to entrust the tools of influence to anyone, albeit for a short period. There are different approaches to the negotiations within the British cabinet. The UK's Secretary of State (SoS) for Exiting the European Union David Davis, SoS for Foreign Affairs Boris Johnson and Chancellor of the Exchequer Philip Hammond are eager to earn points on Brexit and expect to get the prime ministerial seat.

Constant information leaks by the debating groups trying to undermine the rival’s position is also a real headache for May.

 

What about the "clear plan"?

The UK government had no unanimity of views on Brexit even before the parliamentary elections. And now it is torn apart by such serious contradictions that the Prime Minister still cannot formulate a clear position for the negotiation process, although she had enough time to think about it - thirteen months after the referendum (June 26, 2016) and four months from the start of the official Brexit procedure (March 29, 2017). According to EU rules, the withdrawal process must be finalised exactly two years later, on March 29, 2019.

"It is this generation’s chance to shape a brighter future for our country. I am confident that we have the vision and the plan to use this moment to build a better Britain", announced May in March before the early parliamentary elections to strengthen her positions, and... failed.

Now the UK has a "suspended" parliament (the conservatives could not get a simple majority and were forced to seek support from other parties for the approval of the new Cabinet), a government torn by contradictions, less time for the negotiations and no "clear plan".

The first meeting was held in Brussels in June, but it was later announced that it was a fact-finding meeting and "real" negotiations will be held on July 17-20.

A month passed, and the main negotiator from the EU, Michel Barnier, joked at a joint press conference with David Davis that the talks "are moving at the speed of a snail" and they can even "be called successful, since they did not go back." He added that Britain had no clear position on any issue.

But there is no much time left, considering that the EU intends to complete the negotiations by November 2018 - the remaining six months before the official Brexit are necessary for the approval of the agreements reached in the European Parliament and national parliaments.

The EU requested that the talks were divided into two stages. First, the settlement of all conditions for Britain's withdrawal from the EU, and then discussion of future relations. London was dissatisfied with this but had to agree.

The first stage is focused on three main issues: the guarantees to respect the rights of the EU citizens in the UK (about 3.2 million), and the British living in 27 EU countries (1.2 million), the border between Northern Ireland and the EU member Republic of Ireland, the UK obligations to the EU.

Each of these issues is very painful for both sides. If the last two battles are still ahead, the issue of a guarantor of the rights of the EU citizens in the UK gave rise to a serious scandal.

 

Disputes about migrants

The British citizens, mostly the older generation, who voted for Brexit, believe that a large influx of labour from other EU countries is the main reason for the growing unemployment in the country. Also they believe that the state treasury bears outrageous expenses for social payments for immigrants and their families.

Theresa May has promised to put the migration issue in order. In June, she said that after leaving the EU, London would rely on national legislation in this matter. Thus, the EU nationals living in Great Britain will have to apply for the right to reside there. Brussels’ reaction was very harsh stating that this would imply granting "second class status" to its citizens while the European immigrants deserved the same rights as British citizens residing in the EU, and it should be controlled by the European Court, not by local regulations.

London responded that the European Court would not have jurisdiction in the UK after Brexit, and as a compromise suggested the idea of ​​creating some sort of a joint structure similar to an ombudsman institution that would settle disputes. The EU did not like the idea.

 

The Irish problem

The question of the border between the Northern Ireland and the Republic of Ireland promises to be no less difficult. If the UK leaves the single market and the customs union, which Teresa May believes is inevitable, there will be a need to introduce border controls on the border with the EU, including between the south and the north of Ireland.

This will provoke statements for the unification of Ireland. It is unlikely that a joint front of the Conservatives with the Democratic Unionist Party (DUP) of the Northern Ireland will help to improve the situation in this case, even though the Tories needed the ten mandates from DUP to retain power after the defeat in the recent parliamentary elections. Incidentally, this union became possible also because Northern Ireland has been promised an additional billion pounds over the next two years for the development of infrastructure, construction and repair of schools and hospitals. However, the peace process in this region may be threatened as soon as migration and customs barriers are erected. Social subsidies will not remove the tensions.

 

Account about the account!

Yet the most critical issue is the financial debt of the UK to the EU, which London has argued for a long time but acknowledged just recently. In fact, London has acknowledged certain financial obligations, but none of the parties has so far formulated the method of calculation. Informal estimates range from 40 to 100 billion Euros.

The main debts of the UK are made of the obligations of the EU countries to implement the seven-year community development plan for 2014-2020 (1 trillion Euros), and also the implementation of common projects covering a period up to 2025 (another 250 billion Euros). In addition, there are still obligations for a number of other programs.

Margaret Thatcher had once made a deal that the UK returns part of its deductions to the EU budget through various benefits and subsidies. Moreover, the share of Great Britain in the capital of the European Central Bank, the European Investment Bank (11.6 billion Euros), as well as in the property of the European Union will be taken into account in the settlement of mutual debts.

 

It’s not even funny…

The jokes of Michel Barnier that the ‘talks had not gone backwards’ do not mean that the EU negotiators enjoy a small triumph, for they understand the reasons of London’s delay.

European officials emphasize that they do not care what kind of political party is in charge of the UK. But they expected that after the elections in the UK, which has delayed the beginning of the talks for several months, the country would have a stable strong government capable of adopting complex and sometimes compromise solutions. Otherwise, it is impossible to reach a mutually acceptable solution on such a complex issue as the withdrawal from the forty-old-year plus Union.

Now not only do they fail to hear a clear announcement of position from the British side, but that they also are unconfident that the agreements will be unexpectedly challenged due to any internal political cataclysms in the UK. After all, this is not ruled out given such unstable positions of the current government.

Europeans do want to agree with Great Britain. They will strive for it, but not at any cost.

The rich countries of the EU such as Germany and the Netherlands are interested in this, since they do not wish to pay additional surcharges to the European budget due to unfulfilled obligations once taken by Britons. EU recipient countries such as Hungary and Romania are also interested in this, as they may not receive the expected funding.

The political processes in the UK after the referendum have unexpectedly cooled the zeal of Eurosceptics in other countries of the Union. Moreover, Brexit reminded that the EU countries have common values ​​and interests that are worth defending, and it was necessary to unite for them.

Meanwhile, the new British parliament will have a heated debates in September 2017 on the bill to repeal the EU legislation on the territory of the country. The Labour Party and the Liberal Democrats have already announced that they were going to vote against the bill in its current form.

But for now Teresa May is traveling in the Austrian Alps trying to regain strength before the hot autumn of 2017.



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