2 – My big fat European Divorce
As Theresa May prepares to trigger Article 50 and begin the two years of negotiations over Britain’s exit from the European Union, we set out the positions of the UK’s negotiating partners. This collection of views from the capitals shows a variety of attitudes towards Brexit, ranging from nervousness to indifference. Several EU partners have vulnerabilities – whether in terms of citizens’ rights or economic interests – to a ‘hard’ Brexit, which the UK will no doubt seek to leverage in the negotiations. But the overall impression is that Europe seems ready to accept some damage to national interests in order to protect the European project. In this context, securing a favourable deal for Britain looks a very tall order for Ms May’s negotiating team.
VIEW FROM PARIS
by Manuel Lafont Rapnouil
The outcome of the French presidential election in May will likely change France’s position on Brexit.
In France, as elsewhere in Europe, Brexit is far from the headlines. The presidential election campaign is heating up and, beyond France’s borders, the future of Europe is of much greater concern than the future of the UK-Europe relationship. If March is a deadline for Europe, it is because of the Summit in Rome, which Paris hopes will pave the way for a rebound of European effort (if need be through more flexibility), rather than because Ms. May’s cabinet will trigger article 50.
Some members of the British cabinet seem convinced that the French are in a “punitive” mind-set. But the current French government’s approach is more pragmatic than the British press would have you believe. In his recent meeting with Theresa May, Prime Minister Cazeneuve’s appeasing message struck a balance between his “respect” for the choice made by the British people and the importance of “defending the European Union’s unity and interests”.
In this regard, France fully supports the methods put forward by EU negotiators, including the sequencing, which puts exit negotiations before the future relationship. Paris has also been clear in its opposition to any cherry-picking among the “four freedoms”. Nonetheless, France is also aware of the need to move beyond the divorce to help building a new relationship. And on issues ranging from the status of citizens expatriated on either side of the Channel to security co-operation (both bilateral and at a European level), Paris is conscious that both sides would lose in the case of a bad deal.
Yet the outcome of the French presidential election in May will likely change the way it views the topics at the core of the negotiations. Right now, the presidential race is still very much open and its final result hard to predict. Brexit is far from a topic in the campaign, but the future of the EU is certainly on the agenda. By looking at the key positions in the debate, one can anticipate very distinct options for France’s future Brexit policy.
Centrist Emmanuel Macron, who would bring the most continuity, promised to be a tough interlocutor for Britain, mentioning a “Canadian-style” trade agreement, strict conditions for financial passporting, or the persisting European Court of Justice’s jurisdiction under any transitional arrangement in a recent visit to London. But other candidates have very different agendas.
Extreme-right Marine Le Pen and her “Frexit” platform would sympathise with the UK’s choice, but complicate matters for Ms May by putting the future of the EU under pressure and provoking significant economic uncertainties.
Conservative François Fillon stands for an uncompromising deal, and insists on a renegotiation of the bilateral agreement on migration; but his economically liberal agenda, his conservative approach to immigration or his preference for a more intergovernmental EU might eventually tilt France’s positions more in favour of the UK.
Socialist Benoît Hamon, meanwhile, with his anti-neoliberalism platform, would probably also stand for an uncompromising negotiation position on Brexit, but also be reluctant to the kind of new trade agreement Britain is looking forward to.
In this sense, the French position on Brexit will be less a reflection of French national interests than a by-product of the next president’s European policy.
VIEW FROM ROME
by Silvia Francescon
Italy’s domestic economic situation makes it vulnerable to a ‘hard’ Brexit.
Brexit is not the primary international concern for policymakers in Italy, with Libya and Russia occupying much greater attention. As such, the priority for Italy in dealing with Brexit is to keep disruption to a minimum, and to avoid a domino effect of anti-EU sentiment in the rest of the bloc.
Italian PM Paolo Gentiloni, during his UK visit in February, announced his determination to continue constructive co-operation with Theresa May’s government. This is a softer approach than that of his predecessor Matteo Renzi, who saw Brexit as “a boulder in EU history”. Nonetheless, both share the aim of safeguarding Italian interests, and both respect the British decision despite their disagreement with its wisdom.
While maintaining the link between single market access and free movement is important for Italy, it faces a troubling domestic economic situation, making it vulnerable to a ‘hard’ Brexit. SACE, an Italian joint stock company, estimates that Brexit could result in a 3-7% contraction in exports in 2017 alone. Investment will also likely take a hefty hit, with reciprocal transfers set to decline by €1.7 billion in the same year.
Three major Italian companies will be particularly vulnerable, given that much of their revenue comes from the UK market. The fashion retailer, YOOX, aerospace and defence multinational, Leonardo, and cable manufacturer, Prysmian, are all set for losses of between 13% and 15% in sales volume, and risk being subject to speculative attacks.
Even a 5% tariff on exports to the UK (seen as a ‘soft’ figure) will create huge losses for Italian companies. Given their focus on maintaining competitiveness, any such tariff is likely to be internally absorbed, reducing Italian profits by at least €1 billion per year.
Italy will welcome the UK House of Lords’ demand that the government safeguards the rights of EU citizens already in the UK, given that more than 600,000 Italians live in Britain at present. With a further 65,000 UK citizens resident in Italy, labour market and residency rights are a bilateral priority that needs to be addressed as soon as possible.
The final crucial sector for Italy in the Brexit negotiations is that of security-cooperation. Theresa May and Paolo Gentiloni seem to agree on this, and have already begun laying the groundwork for cooperation on stabilizing Libya and Ukraine, among other issues. In other words, both parties seem to be ready to work together to foster continued cooperation after Brexit.
In advance of the Brexit negotiations themselves, there will be an important symbolic moment on the 25th of March, when Europeans will celebrate the 60th anniversary of the Rome Treaties. Even if Brexit represents – as Theresa May often repeats – a withdrawal from the “European Union” and not from “Europe” in a broader sense, it is clear that Brexit is a break-up of sorts. This is regrettable for Italy, but far more important now is safeguarding the relationship between the remaining 27. To risk that for the sake of preserving ties with the UK could result in much greater regrets in the future.
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