"Don't leave us alone with the French", the Germans say.. But we did. Brexit means Britain is no longer at the top table
MICHAEL WHITE on the Brexit-obsessed UK's diminished international status as the EU looks to tackle its own problems
Was Michel Barnier right to threaten British voters with 'an educational process' about the grave consequences of leaving the EU's single market? Was Theresa May right to tell reporters during her trade trip to Japan that she plans to carry on as prime minister beyond Brexit Day and the next election? For that matter, was it OK for Jeremy Corbyn to reveal that he is moving from mere vegetarianism towards a less neo-liberal, centrist position as a red-blooded vegan?
The answer to all three such perfectly wholesome ambitions must surely be 'Yes'. Whether it was wise of May – or even of the Labour leader in his dietary journey – to be so frank is another matter. That is even before we address the important ancillary question of whether or not Brexit negotiator Barnier was misquoted at the Ambrosetti Forum in north Italy. Barnier took to Twitter to protest that his words had indeed been misrepresented. A friend who attended the event – and took notes – tells me the same. At a time of flux for the EU27, the Frenchman's educational remark had not been directly exclusively at the Brits, nor in a punitive way.
Never mind, the caravan quickly moved on after the usual renta-quote chorus of Brexit indignants – John Redwood, Peter Bone, 'Jake' Mogg and Co – had echoed DExEU secretary Davis in condemning Barnier. By nightfall on Sunday hardcore Remainers, even the Blessed Alastair Campbell of this parish, were bemoaning the fact that Chancellor Merkel's much-trumpeted TV debate with her election challenger, the SPD's Martin Schulz, had gone its full, earnest 90 minutes without a single mention of Brexit.
The omission was deemed to be a reminder of how marginalised Britain has already become on the world stage even before Brexit happens in March 2019. How parochial can these Germans get, eh! Staging an election debate without a single passing reference to von Mogg or Bent Bananas Boris, our disappearing foreign secretary, who may not rate a mention in Britain's next election debate at his current rate of decline.
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What I think the Germans and other EU opinion formers like President Emmanuel Macron of France are trying to do is signal business as usual. Brexit is happening ('I am a realist,' Jean-Claude Juncker's powerful chef du cabinet, Martin 'The Monster' Selmayr, said this week) and Barnier has been appointed to sort out the details. But the EU27 will carry on, seeking to advance their own urgent agenda for necessary reform, both domestic and collective. Britain's departure should make that easier, so the theory goes. There is even talk of using Britain's 73 vacated MEP places – Bye, bye, Nigel – to create a new class of 'transnational' MEPs.
In Germany's case, reform involves consequences of the mass migration of 2015 (Schulz accused Merkel of failing to involve the EU in her decision to admit so many refugees from the South), foreign policy – rising nationalism in neighbouring Poland and Hungary as well as in Erdogan-led Turkey, which may lose its EU accession status. The party rivals addressed legal class action against German carmakers' diesel and parts cartel scandals, domestic security (15,000 more cops promised) and inequality. Outsiders sometimes forget that many German workers face stagnant wages, job insecurity and higher rents too.
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Commentators seemed agreed that Merkel consolidated her pole position status – the Lewis Hamilton of the contest – and that Schulz came across as too deferential and consensual. At 15 million on four channels, viewing figures were disappointingly low. It all points to a continuation of the CDU-SPD grand coalition after September 24, a stable anchor for which – in the Age of Trump – we should all be grateful. Grand coalitions are part of the consensual German tradition, Merkel has governed with one since 2005, albeit with the free market FDP liberals from 2009-13.
Yet German voters show signs of being as fed up as less prosperous electorates in the G7/EU world. Assuming no dramatic upset – a dangerous assumption in the Trump/Brexit decade – the coalition's 80% share of seats in the Bundestag is likely to shrink. The far left or right – Die Linke or Alternative for Germany (AfD) – might benefit. Voter discomfort could force Merkel to find new partners, the FDP or even the Greens. Renewed FDP influence would reinforce Germany's deflationary pressure on the eurozone's Greek-Italian southern flank and make it harder for King Emmanuel both to reform French labour laws and boost the economy to ease the consequent pain.
France's domestic reform agenda would then come into conflict with Macron's declared ambition to strengthen the eurozone's cohesion via a full-time European finance minister, a common investment budget and even a common debt instrument, though Paris is now backing off that one. Is the talk really about deepening monetary union, largely on austere German terms? Or about renewing the battered Franco-German axis, another case of Macron cosying up to an older woman?
We shall see. Either way Brexit means that London is no longer at the top table, helping the Germans resist the protectionist and statist instincts which have usually guided the French state since Louis XIV was a boy. 'Don't leave us alone with the French,' a German politician once begged a Tory audience. But we did. If Macron's ambitious plans succeed – belatedly nurturing French tech start-ups was one of this month's eye-catching initiatives – French growth rates will continue to upstage Britain's and its stubbornly high unemployment rates (double the UK's) finally decline.
We shall see. Numerically weak and divided the French trades unions may be, but they are politically strong and have done better than Arthur Scargill managed in seeing off French presidents. The eurozone states are enjoying their long-awaited economic recovery – as consumer-led UK growth dips to an annualised rate of 1% – and even the stricken Greeks are able to borrow again. But both sides of the Channel have fragile levels of bank debt.
The latest Bain review of the profitability and balance sheet strength of 110 major European banks (including four British ones), undertaken on behalf of the European Central Bank (ECB), saw a sharp polarisation in 2016: at 31 the number of very weak ones is again close to the 2013 level of 35, despite tighter regulation and recapitalisation. The long-term implications of quantitative easing – in the UK, US and EU – remain a ticking time bomb, not fully understood, but needing to be defused one day without triggering the apocalyptic crisis QE prevented after the 2008 crash.
Looked at inside the bigger picture – we will avert our gaze from nuclear brinkmanship over North Korea – it makes MPs' tactical manoeuvres inside the post-holiday House of Commons over the European Union (Withdrawal) Bill, let alone the high drama over the UK's divorce bill (£30 bn? £50 bn?), look pretty parochial. The Bank of England alone has spent £435 billion buying government bonds in its not conspicuously successful effort to restore liquidity and borrowing.
No longer the economic 'corpse' of Douglas (whatever happened to him?) Carswell's prediction, Europe's modest recovery raises the Brexit stakes for Britain, where there are also plenty of mixed economic signals. The same edition of any conscientious newspaper (the economic pages of pro-Brexit media are a more reliable guide to trends than the political pages) usually report conflicting data on different pages.
So manufacturing orders are up as a result of the 12% devaluation of sterling – not yet reflected in the trade balance – but construction is in difficulties, imported skilled labour shortages being one of them. The low wage jobs market booms, but – there is a connection – business investment has stalled. There is speculation about losing the high tech manufacture of Airbus wings in North Wales to offset Japanese assurances that they still want to invest in the UK.
'Rebalancing the economy' takes longer than rebalancing a family's holiday budget when sterling is now trading below parity with the euro (did I read 85 cents in some airports?). So the better-than-EU economy which Brexiteers have long predicted will take more time to materialise, even they admit that. The dramatic collapse predicted by Remain did not happen, but a gentle relapse into relative decline may already be under way. It will be less visible than the price of a euro-denominated pint of Spanish lager, but far more expensive to public finances and family budgets in the long run.
For Roger Bootle, highly successful economic consultant and author of yet another Brexit book (Making a Success of Brexit and Reforming the EU), this is defeatist talk. The single market which Margaret Thatcher helped pioneer in the 1980s never delivered the additional wealth (up to 7% of EU GDP?) it promised and succumbed to regulatory excess. When Britain leaves it will still have to adhere to EU rules and regulations – much as US or Chinese importers do – but it will no longer be required to apply those regulations across the whole UK economy, including those parts (90%?) which don't trade in Europe.
Dick Jenkins, who runs a small building society in Bath made the same point in the FT this week: why should we be burdened with costly and onerous 'one size fits all' regulations designed for the financial big boys, he asked? Because the EU says so. By the same token much of British business is either unprepared or irked by the current transition towards the EU's General Data Protection Regulation (GDPR) in 2018, stringent regulation, enforced by heavy fines and a global reach, all in the name of consumer rights and privacy. Brexit Britain will adhere.
These are fair debating points, but invites a baby and bathwater response. Bootle's analysis rests on the hunch that the slower growth of British exports to the EU since the single market started in 1992 might have been stronger without the burden of single market regulation and the annual EU bill – the money Boris has stopped promising to divert to the NHS. But it's only a hypothesis, unprovable by its very nature, as is the bigger Brexit gamble we now face.
Even Bootle's vision – his book was extracted in the Telegraph – acknowledges that we will have to pay an 'entrance fee' at the door to gain access to the single market, the common external tariff. In Westminster and Whitehall, where the Phil Hammond/David Davis Axis of Pragmatism still prevails a month after Hammond's supposed defeat, the prevailing orthodoxy now makes similar accommodations. Britain will not only pay a sizeable divorce bill (plus £1 billion a year to joint scientific research, so the government's latest position paper confirms); it will also continue to let in much-needed migrants and adhere, albeit indirectly, to EU regulations and the rulings of the tabloid-reviled European Court of Justice (ECJ). Soft Brexit indeed.
No wonder that pro-Remain Tory MPs like Anna Soubry have welcomed Keir Starmer's consolidation of Labour's position on the single market and customs union: support for continued membership during the Brexit transition. No wonder that thoughtful Dominic Grieve, sacked as attorney general by careless David Cameron for resisting populist nonsense over human rights, has been protesting about the EU (Withdrawal) Bill.
How can a country which thought it had voted to reassert the rights of its sovereign parliament give the executive branch of government – Whitehall – unfettered power to pick and choose which bits of 9,000 EU rights and regulations accumulated over 43 years it will entrench in domestic law? As things stand it will do so without recourse to the legislative branch, the elected Commons and its unelected appeal court, the House of Lords.
The bill's methodology is to undertake this daunting, perilous task via ministerial statutory instrument, delegated powers which are routinely likened to the use of royal proclamation to sidestep parliament. They were popular with that impatient Tudor monarch and pioneer Brexiteer, Henry VIII, who also broke with Europe for tactical reasons (he wanted a new wife to provide a male heir) and invaded France to the annoyance of Scotland. The row incidentally allowed him to seize church lands and give them to oligarch supporters on a scale that would impress Vladimir Putin, but not the ECJ.
Whether statutory instruments would routinely be referred to today as 'Henry VIII powers' if the obese monarch had not led such a tabloid private life is doubtful. But the substantial point remains valid, the potential abuse of unaccountable power. Soubry and Co made clear they would not vote against the bill's second reading. But line by line analysis of its 60 pages of text this autumn will provide legitimate reasons to assert parliamentary sovereignty. Then the Lords get their chance.
That may be why No 10 has sought to wave the prime minister's Alpine walking stick in recent days, reminding that closet majority of pro-Remain Tory MPs that rebellions which destabilise her government, hardly a tower of stability in any case, run the risk of triggering an election that could put Jeremy Corbyn into Downing St.
Despite my failure to predict the Corbyn surge on June 8 (the Labour leader didn't spot it either), I persist in regarding that threat as bogeyman talk, useful but as unlikely as Martin Schulz's arrival at Berlin's modernist chancellery on September 25.
Who knows, perhaps Corbyn's revelation of his incipient veganism – a rare policy initiative on his part, one which John McDonnell may yet veto – was a sub-conscious response to May's warning.
Was it an attempt to head off that alarming prospect by reminding voters that, despite the Glastonbury-to-Islington hype, he remains a lovable old beardie, about as suitable to become prime minister as Wayne Rooney?
Less easy to explain is May's decision to reassert her leadership for the longer term on her flight to Tokyo. Leaders are always vulnerable to media ambush on foreign trips. They are far from home and their staff not always across the details which may be fed to reporters from news desks in London which have shelled out proper money for air fares and want something to show for it. In May's case she apparently sidestepped a challenge during the media 'huddle' on the back of her plane, then discussed it with aides in the privacy of her first class quarters before deciding to be emphatic in subsequent TV interviews.
Perhaps it was all a cunning ruse to distract the hack pack from the paucity of her achievements with the ever-polite Japanese. But I doubt it, they're rarely that crafty. What it did was prod a hornet's nest that had gone quiet during the summer when both Brexit Tory MPs and activists and their Remain critics seemed content to let Theresa carry the Brexit burden before allowing her to bow out – 'job done' – after March 29, 2019.
It may not have turned out that way, but no one knows how it will turn out. A pragmatic deal with Barnier that benefits both sides? A bad deal? Or no deal at all? When No 10 hinted this week that May would like the pattern of talks between the Barnier and Davis camps accelerated, it sounded like a fresh version of an earlier hint that bilateral talks in Paris and Berlin might break the apparent deadlock. In both instances the initial reaction from Brussels, at least as reported in the troublemaking media, was to suggest the opposite. The solidarity of the EU27 remains solid and the Brits just aren't doing enough yet to warrant the opportunity costs of accelerated talks for the 27's highly-paid negotiators.
That's risky for the negotiators, a chunk of their generous but unfunded pensions may depend on the final size of the Brexit bill. Negotiations contain plenty of bluff and crude one-upmanship, but no one benefits from a renewed lapse into petty insults from either direction. It only encourages some Brexit headbanger wing of the Tory party – yes, John Redwood and Julian Lewis, I mean you – to revive demands for a more aggressive stance to the negotiation, fired up by clever Mr Bootle's optimism and Professor Patrick Minford's sun-lit uplands of free trade Britain.
Notwithstanding the rent-a-quote outbursts, usually initiated by newspapers whose columnists also rattle their sabres, the bulk of the Brexit camp has been relatively subdued in recent weeks, despite growing ministerial pragmatism. But leadership talk unsettles both camps in the Tory ranks, fearful that their enemies may pull a flanker.
Labour spent much of last year in similar pointless distraction until Jeremy Corbyn's meat-free leadership was confirmed for the foreseeable future. In these diminished times, there is no plausible challenger.
The same dismal lack of alternative leaders in waiting is what keeps May in place for the time being. There was no need for her to point it out, let alone to suggest she might win her second stab at an election campaign. Merely to name fancied runners and riders to replace her is to confirm the obvious point. To say 'Boris' or 'Jacob Rees-Mogg' is to invite ridicule, not least from Paris, Brussels and Berlin whose leaders may be complacent and even nostalgic, but not for a parody of the 18th century.
In most major capitals the leaders we have is the leadership we seem destined to keep until the next crisis – military, political, financial – disrupts it. Fourth term Merkel, thrusting young Macron and modest May, that should be a recipe for stability, respite and recovery in Europe. But it is not. Stability that reflects a deeper inertia or grand coalitions which underscore a lack of choice have the potential to become rapidly unstable.