Brexit Bulletin: Facing the Consequences

(Bloomberg) -- Today in Brexit: The political crisis in Italy reminds the European establishment why it can’t allow the U.K. to walk away cost-free. There have to be consequences.

European Union officials have a new favorite word when discussing Brexit.

Chief Brexit negotiatior Michel Barnier referred to “consequences” five times in his speech in Portugal last weekend. He was reflecting the EU’s growing concern that too many of the British government’s positions on relations with the bloc after the divorce look too much like, well, staying in the EU.

“The United Kingdom wants to leave,” Barnier said. “That is its decision, not ours. And that has consequences.” He said: “When it comes to the economy, and foreign policy, the best way to influence the decision of the European Union is to be in the European Union.”

As Bloomberg reports today, the EU only has to look at the political crisis in Italy to remind its 27 governments why it should stick to its principles in the Brexit talks. The success of two populist parties, the anti-establishment Five Star Movement and the anti-immigrant League, both euroskeptics to varying degrees, might make it even harder for the U.K. to win its Brexit arguments. Now more than any time since the Brexit process began, the EU can’t let leaving look more attractive that staying.

Ever since the U.K. referendum in 2016, the EU has denied it wants to “punish” Britain. But the EU is adamant the U.K. can’t have as good a relationship with the 27 remaining countries as it has had while a member. It’s for that reason that negotiators are pouring cold water on British attempts to retain influence over European defense policy and to remain in Europol, the law enforcement agency, as well as on the ambitious system of “mutual recognition” of standards for trade that the U.K. aspires to.

This doesn’t sit well with Britain, which wants to establish a relationship of equals. The U.K. sees advantages in continuing to shape rules and to cooperate as if it were still a member on projects where both sides have common interests. The EU, by contrast, doesn’t want the U.K. hanging around like an ex-partner, still trying to throw its weight around.

Today’s Must-Reads

  • The Irish Times reports from the border between Northern Ireland and Ireland, where police are demanding machine guns over fears that a hard Brexit could lead to the re-emergence of violence
  • Chancellor of the Exchequer Philip Hammond has given an interview to the Financial Times in San Francisco this morning in which he says that the U.K. will have to remain “closely aligned” with the EU’s new privacy rules even after Brexit, despite the U.S. finding the new data protection regime “uncomfortable”

Brexit in Brief

History Lesson | A former U.K. Foreign Office minister and ex-deputy secretary-general of the United Nations said cutting ties with the EU risks a repeat of isolationist mistakes of the past, including Nazi appeasement. Mark Malloch-Brown, a non-affiliated lawmaker who sits in Parliament’s upper House of Lords, raised Neville Chamberlain’s attempt to reach a deal with Adolf Hitler in the 1930s when he was asked why Britain should stay close to the bloc.

Red Tape | New M&A rules to be applied in the U.K. from June 11 are likely to raise barriers for non-domestic buyers, according to Bloomberg Intelligence. More red tape and government intervention are in store for transactions involving Britain’s advanced technology and military sectors. Companies in Europe are likely to face regulatory hurdles and lengthier merger reviews after Brexit.

Chocolate Teapot | An Irish Senator quipped that “max fac,” a technology-heavy British idea to solve the Irish border issue, is so outlandish it might have been designed by Willy Wonka, the children’s book character. Such a system won’t be ready for “decades” and carries enormous costs, Neale Richmond, who chairs the Irish Senate’s Brexit committee, said at an event in Dublin on Wednesday.

 

Looking Up | British consumers are feeling more upbeat about their spending prospects, though they’re still worried about the economic outlook, according to GfK. An index of confidence increased by 2 points in May to minus 7, the market-research firm said in a report published Thursday, with consumers declaring themselves more optimistic about their personal financial situation. They are still downbeat about the general state of the economy, keeping the index in negative territory.

No Access | France is blocking Britain’s attempt to remain part of the EU security system called the Pruem Convention, which helps to identify foreign criminals, according to the Times. The newspaper says the government wanted a guarantee that it can continue to access and share DNA, fingerprint and vehicle information with other European countries after Brexit.

Investment Concerns | Europe’s biggest industrial companies warned Prime Minister Theresa May they will not invest in the U.K. as long as there is uncertainty over the terms of Brexit, the Financial Times reports. A delegation of executives from companies including BP, Vodafone, Nestle, BMW, and E.ON met with the prime minister and Brexit Secretary David Davis on Wednesday to voice their concerns about what Britain’s departure from the EU will mean for their U.K. operations.

Cashing In | The U.K. is considering issuing new series of coins to commemorate Brexit, according to the Sun. Conservative lawmakers have written to Exchequer Secretary to the Treasury Robert Jenrick, who replied saying he is supportive of the idea and can “see the argument”. The newspaper says the plans have now been sent to the official Royal Mint Advisory Committee, with the government’s blessing.


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