The next five days will go a long way in determining how Brexit eventually plays out for the British people. It is a week that will be dominated by two speeches from Jeremy Corbyn on Monday and Theresa May on Friday, as well as by the release of the EU protocol of the December agreement that concluded Phase One of the talks.
This is only the very high-level summary of events and there are also other key players and actions that could influence the week. However, I am focusing on these three critical dynamics as they may also determine the future of Theresa May as Prime Minister.
May is currently under pressure from both flanks of her party, as well as from the Labour opposition who have returned to polling ahead of the Conservatives, after a short recent blip…
Until recently most of the pressure came from the pro-Brexit side of the party with Michael Gove, Boris Johnson, Liam Fox all pushing May to pursue a “hard” Brexit which they believed would allow Britain to sign mutually beneficial free trade agreements around the globe.
Of late, Jacob Rees-Mogg, the Tory backbencher, who heads up the European Research Group, has become the most vocal advocate of this from of Brexit through some savvy media appearances and his bi-weekly blog on Conservative Home, aptly named the Moggcast.
While this group have been focused and efficient in their lobbying, they simply don’t have the MP numbers to lead the party (there were 62 MP signatures on a recent letter addressed to the Prime Minister) but could force a leadership contest for the Tories (48 MP letters required).
More worrying for Theresa May is the recent re-invigorated onslaught from the pro-EU side of her party under the likes of Anna Soubry and Sarah Wollaston. Soubry’s proposed new clause 5 in the Trade Bill is potentially very damaging to May’s authority as it is a motion for the UK to remain in a customs union with the EU, if not the customs union.
This clause was also signed by Chuka Umunna, the Labour MP who has been very vocal on Brexit. Any customs union agreement with the EU will severely impede on Britain’s ability to conclude free trade deals with third party nations.
This brings me to the first of the two speeches this week. Jeremy Corbyn announced last week that he would make a speech, laying out his party’s vision for Brexit. In recent times, Corbyn has remained quite coy on what Labour’s official policy for Brexit is. It has exposed Corbyn to quite a lot of flak, particularly from its young and London based voters, who typically voted Remain.
The rumours coming out of the party are that Corbyn will call for a customs union with the EU. This will potentially give Soubry’s clause the numbers to pass in Westminster, inflicting a heavy defeat on May and a major victory for those seeking a soft Brexit. Keir Starmer and Emily Thornberry, two potential future leaders of the party, have both hinted that this will be part of Corbyn’s speech.
It has rarely been that straightforward with anything Brexit-related though. While many Labour supporters voted Leave, backing a customs union would be popular with the majority of his party and could finally differentiate Labour’s strategy from that of the Conservatives, who have continually ruled out a post-Brexit customs Union.
However, Corbyn has been unconvincing in his defence of the European Union and his previous track record of votes in relation to Europe is far from emphatically pro-EU. His style is also not one of bombastic, engaging speeches that capture the imagination and I am quite worried that today may be a damp squib that hands the initiative back to Theresa May on Friday.
May supposedly had a very successful Brexit subcommittee cabinet meeting at Chequers last Thursday where she managed to keep both factions happy and onside. Very little of what was agreed was leaked to the press and we may have to wait until her Friday speech for the detail. It may be that May has come up with a plan that keeps the party united and has found a way around the Irish border issue, one of the major sticking points an almost any proposed plan thus far.
This issue is a about to get a lot more complex on Wednesday when the College of 27 EU Commissioners sign off on a draft legal text of the December Phase 1 agreement. Tony Connolly, from Ireland’s national broadcaster RTE, is reporting here that it will only include the reference to avoid the hard border on the island of Ireland (paragraph 49) and not paragraph 50 which made reference no border down the Irish Sea. This was inserted after pushback from the DUP, who prop up the British government.
If this is the case, then May will be severely limited by this agreement. It will be very interesting to note if any of her Friday demands explicitly contradict the agreement or if May will simply acquiesce to the EU’s rules of negotiation.
Simple acceptance could be fatal for May’s premiership if Corbyn has offered a compelling alternative and the EU have effectively ruled out most of her “fudge” options that have kept party together.
It promises to be a very exciting week of drama, political brinkmanship and intrigue. I am now going to sit back and watch it all unfold…
Last Thursday, Israeli police announced they had recommended the Attorney General that Benjamin Netanyahu be indicted on charges of bribery, fraud and breach of trust in two cases.
Then on Sunday, numerous Israeli media outlets linked him to a case where seven Israelis have been arrested for allegedly helping the Bezeq Group, a communications group, in exchange for favourable coverage of Netanyahu and his wife.
Over the weekend Netanyahu was in Munich, speaking at the same security event as Theresa May. He gave a bellicose speech where he threatened that Israel would take action directly against Iran if any of its redlines were crossed;
“And we will act, if necessary, not just against Iran's proxies that are attacking us, but against Iran itself.”
The speech was incredibly aggressive and what made it even more noteworthy was the he directed these threats at the Iranian Foreign Minister, Mohammed Zarif, who was in the audience.
However, the pièce de résistance came when he displayed a piece of the drone that Israel shot down which he claimed came from Iran (see title pictures).
In the nine years Netanyahu has spent as Israeli Prime Minister in this current run (he was also Prime Minister from 1996 to 1999) he has been one of the most pugnacious leaders in the democratic world, both in words and deeds.
He has led two military campaigns in this time against the Palestinians, Operation Pillar Defence in 2012 and Operation Protective Edge in 2014. Despite the defensive titles, these claimed over 2,250 Palestinian lives, a large proportion of which were civilians.
He has also continually focused on Iran and has threatened pre-emptive strikes on multiple occasions. He also famously displayed a diagram with a bomb during a speech in 2012 (see title pictures again) saying Iran were 90% there to getting a nuclear weapon. Thankfully, his calls for a strike were ignored by most leaders who went on to sign the Joint Comprehensive Plan of Action in 2015.
Since the election of Donald Trump, Netanyahu has displayed considerable influence over the US President. He pulled off a major diplomatic coup by convincing the US to relocate its Israeli embassy to Jerusalem and he has improved relations with Saudi Arabia in a bid to further isolate Iran.
I won’t speculate on what would come next for Israel and the Middle East if he is forced to resign, though hopefully a more sensible leader will emerge. It would be hard to imagine a more belligerent Israeli Prime Minister taking the mantle from Netanyahu but it is possible. Fortunately, they will almost certainly not have the same influence over the US President and this may lead to a more nuanced Middle East policy from the United States…
I was genuinely annoyed yesterday with the decision of the Democratic Unionist Party to end the talks on reforming a Northern Ireland Assembly and their decision to request the British Government to restore Direct Rule in Northern Ireland. I thought it was worth trying to look at this solely from the perspective of the DUP and not from where I stand as a liberal and Irish nationalist.
It had seemed since last Friday that a deal was very close and that a compromise over a standalone Irish Language Act had been agreed (three Acts; Irish, Ulster-Scots and Culture under an umbrella Act).
However, plenty of unionist politicians and political commentators came out quite vehemently against this and the consensus is that this may have spooked Foster and her party leaders.
I think there may be more to it than this. A new Northern Ireland Assembly deal required compromise from both sides. It did involve potential acquiescence by the DUP on an Irish Language Act and also potentially on Marriage Equality.
Why does the DUP need to compromise though? They have the balance of power at Westminster with their ten seats so when they call for Direct Rule they will have an influence on the governing of Northern Ireland.
It is actually even more emphatic than this when we look closer at the 2017 General Election results. The DUP took ten of eighteen seats and with Sinn Fein abstaining from Westminster it leaves only one non-DUP MP from Northern Ireland, Lady Hermon in North Down.
I would be slightly concerned though if I was Arlene Foster. It now appears as if the ten MPs are the future of the party, particularly in the continued absence of an Assembly.
The RHI scandal still looms over the head of Foster (this was the original reason for the Assembly collapsing in the first place) and if the Inquiry leads a damning conclusion, she may even be quietly removed with a number of potential leaders from the MP pool.
Without an Assembly there will be no Irish Language Act or Marriage Equality Act in Northern Ireland, why would the Tories risk either when they need the support of the DUP.
Karen Bradley, the relatively new Northern Ireland secretary recently compared the issue of Marriage Equality to broadband, deeming both devolved issues;
“It will be a matter for the elected politicians in Northern Ireland to make a decision about equal marriage,” ... “That’s not for me to impose, in the same way it’s not for me to impose the way that super-fast broadband is rolled out across the country.”
If the DUP cross the Rubicon and decide that the Northern Ireland Assembly is no longer needed (for now they have just suggested that a return won’t be happening in the short to midterm) they will leave nationalists without any representation in a local or British parliament.
There is very little possibility of Sinn Fein taking their seats at Westminster, even if their continued absence hurts their constituents. Equally, Sinn Fein are in such a position of dominance over their main nationalist rival, the SDLP, that there isn’t much possibility of SDLP getting any seats at the next Westminster election.
The Good Friday Agreement does call for the Republic of Ireland to have a role in overseeing the implementation of the agreement but it is hard to see how this could become joint authority or joint governance.
Unless the Irish government makes some concrete form of joint rule a red line for approving the UK’s Brexit Deal (which is highly unlikely) than it leaves nationalists almost completely out in the cold. The Irish government will most likely focus on the border and even this will require a lot of work and compromise with the British government, leaving little leverage for pushing for a more direct role in managing NI affairs.
This is probably not the consensus view of the next few years and there is every chance that a deal will still be agreed at some point in 2018.
There is every chance that this could lead to a massive backlash against the DUP in the next Westminster election as many citizens place the blame on the lack of progress, economic or social, in the state.
Alternatively, many potential voters may be so disillusioned by the time the next election rolls around that the opposition parties may not be able to rally a large turnout. A low turnout would almost certainly favour the DUP.
In my view, this success of the DUP’s decision to effectively shut down Stormont for the foreseeable future will be determined by when the next UK General election is called. If it is as late as 2022 (as the bookies currently believe) then they are effectively the only voice in Northern Ireland politics with actual power. The latest date for the next election is May 2022, that’s a staggering fifty one months of dominance.
However, if the UK govt falls in the short to midterm, which may be possible given the internal Tory turmoil, the DUP may lose some seats and not hold the Westminster majority after the election.
I haven’t touched upon Brexit or demographics in this article (I covered it here quite recently) as this has been extensively covered and wanted to try and understand the DUP’s mentality and decision making.
They are often lampooned by the media and their strategic direction and intelligence questioned but when I took a cold, analytical look at where both major parties stand, the DUP seem to be in a much stronger position without Stormont…
Labour have recently encountered a slight setback in British General Election polling, suffering their first three consecutive poll defeats since the General Election in June 2017.
It has encouraged calls for Jeremy Corbyn to come out stronger against a “Hard Brexit” and to make a greater case for the United Kingdom to remain in the Single Market and Customs Union.
In recent weeks Chuka Umunna, the young Labour MP from London, has been one of the most vocal proponents of the United Kingdom remaining in both.
His appearance on the Andrew Marr show last weekend was quite impressive, even if the image of him speaking in solidarity with Conservative MP Anna Soubry, an ardent pro-remain MP, would be difficult to accept for many Labour supporters.
Umunna has been quite astute in trying to rally the pro-remain Labour supporters without directly criticising Corbyn. Instead, he said he could not envision Corbyn using party whip to vote for a Hard Brexit;
“I cannot conceive of circumstances where Labour MPs are marshalled to go through the lobby and vote against us staying in the customs union and the single market with the likes of Jacob Rees-Mogg, Boris Johnson and Michael Gove,”
“I cannot see Jeremy saying to Labour MPs, “we’re going through the lobby with those guys” and damaging the interests of our constituents.”
Personally, I don’t think it’s a definite negative that Corbyn isn’t taking the lead on Brexit. There is a significant element of his party who voted Leave and with so many things uncertain and fluid in the UK-EU negotiations, there will be plenty of time to lay out position ahead of a “meaningful” vote in the Commons on a final deal.
The challenge for Corbyn is to ensure his policies and plans for Healthcare, Education etc get enough airtime and continued publicity in the current environment where many in the British media are focused almost exclusively on Brexit and the internecine internal Tory disputes.
I thought that this dispute would be more damaging to Conservative poll support. However, I am beginning to theink the continued publicity and coverage of both sides may be helping the Tories in the short term.
For now, until there is a clear Brexit policy by the Conservative party, every potential voter in the Tory universe who has accepted that Brexit cannot be wholly reversed can still envisage a successful outcome to the talks.
Until the Conservatives policy becomes clear and Labour know where they stand I don’t think the polls should overly concern Labour HQ.
Corbyn and his team should continue to lay out their vision for government while making contingency plans for Labour’s position in the various potential scenarios that arise from the talks…
After four months, the German parties involved in negotiations have reached an agreement to conclude a new coalition, pending a vote from the members of the Social Democrats (SPD).
However, the key point to take from this agreement is how much Angela Merkel and her Christian Democrats/Bavarian sister party (CDU/CSU) had to concede to get it over the line.
To appease the previously sceptical Martin Schulz and his Social Democrats, she has given his party the Foreign and Finance portfolios, plus some others. The former are two major coups for his party.
Schulz is expected to step down as leader of the party and take the role of Foreign Minister. He has been a major advocate of a more federal Europe and has even tweeted his desire for a “United States of Europe” by 2025.
Merkel is not expected to finish the next term and may even retire if the approximately 460,000 SPD members vote down the coalition in early March.
Even if it passes, she will not be able to lead and execute on her decisions in the same capacity as she has previously done. Her leadership has been characterised by a progressive approach to the many issues facing Europe and Germany over the last decade but in a timely and non-radical manner.
Merkel will have to balance all factions’ ambitions in this coalition as well as defending against the Alternative for Germany attacks from the opposition benches, who went from no seats in 2013 to the current third largest party.
Their populist, anti-immigrant rhetoric and policies are resonating with more voters since the decision of Merkel to allow up to a million immigrants into Germany since the Syrian Civil War.
Contrast this with Emmanuel Macron, who has four more years until the next Presidential election and has a majority of 350 seats of a total of 577 in the National Assembly.
He has so far been able to reform the previously impregnable French Labour laws , has political momentum and the French economy had its strongest performance in 2017 in six years, growing 1.9%.
There are challenges for Macron ahead. Things can change quickly in French politics and major protests may still erupt over the labour reforms or other legislative changes.
“It’s the economy stupid” – I’ve heard this quote dozens of times over the years in political parlance. I had attributed it incorrectly to Ronald Reagan and not James Carville, part of Bill Clinton’s 1992 presidential campaign team.
The central tenet of this claim was that the electorate vote with their pockets. Their perception of the economy has a major bearing on the way they vote. Incumbents can point to a strong economy, while candidates will offer an alternative solution that they believe will improve the economy.
This is not an American phenomenon and can often be the case in any election across the globe. What is a little different with President Trump is that he has repeatedly boasted about how much the stock market has risen in his time as president as opposed to the overall performance of the economy.
At Davos in January, he spuriously claimed that the stock market had increased 50% since he was elected and that it would have dropped 50% if Hillary Clinton had been elected. This was met with a mixture of gasps and derision from the audience. The market has undoubtedly increased under his tenure but this is a continuation of an exceptionally long bull run (I won’t delve into the details here as this run has been covered extensively).
However, what we have seen over the past few days is that the stock market is a volatile beast that can’t be controlled or tamed. On Monday, the Dow Jones dropped 1,175 points (4.6%) which was its largest fall in absolute terms ever.
There are numerous theories as to this occurred, ranging from the beginning of a major correction to profit taking by savvy investors.
Regardless of whether it heralds the beginning of something major or not, Trump should heed the warning it offers. The economy consists of a lot more than the Dow Jones Industrial Average.
If Trump stakes his presidential performance to a simple and crude metric measure like this he could swiftly find himself out of touch with an electorate that had become frustrated with the lack of tangible economic progress felt under earlier part of the same bull run under Barack Obama.
To be fair to Trump, he has also focused on job creation as well, although according to some economists that may soon suffer from supply constraints. Equally, his tax reforms have been met with a lot of cynicism from the Democrats who see them as tax cuts for the rich while not offering enough benefits across the spectrum of the labour force.
It’s a long way until the next US presidential election. The current bull run would have to break a lot more records for it to still be going by the time campaign season swings around.
Trump speaks a lot about fake news and how his positions and events are misconstrued. In many ways this has been successful to an extent. However, he will find it a lot more difficult to dismiss a plummet in share prices or a major market correction as simply not true.
By not diversifying his offering and thinking in greater terms than an equity index, Trump may lose the election before the first ballot in the Democratic presidential nominee campaign is even cast.
At the start of the year I did a quick scan of what elections are coming up in Europe in 2018. The Italian election on Mach 4th caught my eye and I decided to do a little research on the the Italian economy, the general state of Italian politics and the key political players and parties heading into the election.
All three areas really captured my imagination but I quickly became concerned about the direction Italy is heading in and what tangible progress it has made since the worst days of the Financial Crisis and the European Sovereign Debt Crisis.
I wrote a little about Italy a while back when discussing the current states of the PIIGS but it was quite high level and I didn’t delve deep enough to really get an insight into the current malaise troubling many Italians and its economy.
The first thing to note is that the current global economy overall is as strong as it has been in a decade. There is positive news emanating from all across the globe, boosted by stronger than predicted economic performance in China, positive economic sentiment in Europe and the continued stock market bull run in the US (Trump’s tax deal may be a factor in the very short term to this but will ultimately be damaging in the long term).
However, the headline figures do not look good for Italy. The overall debt to GDP has continued to grow and stood at 132.6% of GDP at the end of 2016. This is dangerously high for a developed economy and compares very unfavourably to its peers in the EU (highlighted in red and blue in the chart respectively)
Other European nations had have had similar levels of debt but have benefitted from strong levels of growth recently as the overall EU economy enjoys a period of strong growth which has led to the lowering of their Debt/GDP ratios. Unfortunately, the growth in Italy has been quite slow and continues to lag most of its peers.
The Italian statistics office has estimated that YoY growth in Q3 2017 was 1.7%. This is the best figure since Q1 2011 and 2017 looks set to be the best year 2010. The growth is encouraging and has been welcomed by investors and pundits alike. If the growth continues like this over the next two to three years Italy may see itself in a more structurally strong state.
In relation to Italy, it does appear JFK’s old words hold slightly true; “a rising tide lifts all ships”. I say slightly as it more from those looking from the outside inwards than the feelings of every day Italians, many of whom still feel disillusioned and left behind.
The political situation is a lot more challenging. The current government is led by a coalition of centre-left parties under the leadership of Paolo Gentiloni and the Democratic Party (PD). The previous Prime Minister, Matteo Renzi, was performing well in polls and election. He may even have joined (in the eyes of the media at least) the ranks of young, progressive global leaders like Justin Trudeau and Emmanuel Macron. However, he fell on the sword of constitutional reform and resigned after the Italian electorate rejected his proposed changes.
In polls PD and its probable coalition allies are now significantly trailing the “centre right” coalition, of which the two largest parties are Forza Italia and Lega Norda.
The former is led by Silvio Berlusconi, the comeback “kid” of Italian politics whose resurgence has been partly fuelled by his promise for a flat tax rate for all Italians, initially starting at 23% but eventually moving down to 20%.
A flat 15% rate has been a campaign pledge of their key ally, Lega Norda (under the leadership of Matteo Salvini) for quite some time. It has proven popular with the electorate but is seen as quixotic by their opposition and most economists.
While austerity has certainly not been a purely positive factor for peripheral nations in the EU in recent years, abandoning fiscal prudence with such a policy like this could be absolutely devastating to the Italian economy, particularly when debt is already greater than 130% of GDP as previously discussed.
Another factor that could potentially be detrimental to Italy is the Lega Norda’s stance on immigration and their ties with other right wing parties in Europe. Salvini has come out quite strongly against Muslims in Italy with quotes like;
“The problem of the Muslim presence is increasingly worrying. There are more and more clashes, more and more demands. And I doubt the compatibility of Italian law with Muslim law, because it's not just a religion but a law. And problems can be seen in Great Britain as well as in Germany, so reassessing our coexistence is fundamental.”
This sounds a lot closer to what we associate with leaders in Hungary and other Eastern EU states then Italy’s traditional place at the heart of Europe as a founding member of the European Economic Community.
The X factor in Italian politics currently at the moment is the Five Star Movement. They are currently leading most polls to secure the most seats (I punted on them recently and the odds have dropped significantly since). They claim not to be a political party and neither see themselves on the left or right of the political spectrum.
They have dropped their pledge for a referendum on the euro but little else is known of their polices and aims apart from “transparency” and tackling corruption. In recent days, there has been more mootings for potential coalitions based on the numbers, though it is still difficult to envisage who they could go into government that would deliver a majority of seats in the Chamber of Deputies.
In all likelihood, they will get the most seats but the centre right will be the closest to forming a majority. In either case, it will lead to a stalemate with political uncertainty and paralysis until Italians go back to the polls or a centre right coalition with a heavy populist element and major tax cuts at a time when Italy has the second highest debt to GDP ratio after Greece.
The world is in a strange place currently where economic optimism is high and markets are performing well. Paradoxically, geopolitical risk is reaching levels not seen for quite some time. If Italy continues down the same path without clear reform or strategic direction it may be one of the biggest casualties globally in an economic downturn.
The good times cannot last indefinitely and ultimately it is the tough decisions you make in them that determine your ability to handle recessions.
Unfortunately for Italians, their political leaders have not yet identified these challenges, let alone started to tackle them…