Extension beyond May could shift Brexit dynamics

Subject Brexit extension. Significance Prime Minister Theresa May accepted yesterday the EU’s offer to extend the United Kingdom’s departure from the EU until October 31. The extension gives more time for the ruling Conservatives and the Labour opposition, which are engaged in talks, to reach a compromise and deliver Brexit. Losses suffered in local and possibly European Parliament (EP) elections in May could increase pressure on the respective leaderships to stand down. Impacts A future government could try to overturn any potential legislation protecting a Conservative-Labour Brexit deal. The Conservatives can only oust May if cabinet members withdraw support for her. A pro-Leave Conservative leadership would rather be in government with the Brexit Party than Northern Ireland’s Democratic Unionist Party. May could hold indicative votes by proportional representation, and hope that her WA emerges with the most support.

Significance The statement is tougher than expected, and the EU also recalled its Moscow ambassador for consultations. The EU's shift is a win for UK Prime Minister Theresa May as she attempts to build a multilateral consensus rather than relying solely on unilateral retaliation. Impacts EU sectoral and individual sanctions on Russia will be extended in July and September despite reluctance among some members. Talk of blocking Russian natural gas imports is impracticable. The US Congress will pressure the White House to target individuals identified in January 2018 'oligarch list'.


Subject Brexit outlook. Significance If Prime Minister Theresa May can get the Withdrawal Agreement (WA) and Political Declaration on future relations approved in Parliament this week, the United Kingdom should leave the EU on May 22. However, it remains unlikely that her deal will gain a parliamentary majority, setting up a different deadline. The United Kingdom must come up with an alternative plan by April 12 or face the prospect of crashing out of the EU with no deal. Impacts The United Kingdom could have a new prime minister within weeks; a general election cannot be ruled out. The EU will remain distracted by Brexit as it heads into a season of political change beginning with European Parliament elections in May. As a final option, May could commit to resigning to get support for the WA from Conservative Party MPs.


Significance Prime Minister Theresa May has committed herself to triggering Article 50 by the end of March 2017. No member state has made use of Article 50 and there is thus much uncertainty about what leaving and, more specifically, triggering Article 50 might involve. Impacts May's timetable could be derailed if the Supreme Court decides that the government cannot invoke Article 50 without parliamentary approval. The EU is likely to maintain its firm stance and refuse to engage in any negotiations before Article 50 is triggered. The continued uncertainty over the terms of Brexit is likely to hit business confidence and could deter investments.


Significance The summit represented an opportunity for UK Prime Minister Theresa May to discuss her Brexit plans directly with other heads of state and government rather than doing so via the European Commission’s Article 50 task force. Impacts The negative mood music from the Salzburg summit is weakening May’s position in her Conservative Party. The poor personal relationship between May and her Irish counterpart Leo Varadkar is complicating discussions on the Irish border. The unity of the EU27 could crumble once trade negotiations bring their divergent interests to the fore. The EU is maintaining its insistence that there can be no ‘hybrid model’ between Norway and Canada.


Significance This follows the defeat of the Brexit Withdrawal Agreement (WA) for a second time on March 12. Despite parliamentary support, an extension poses risks to all parties and positions on Brexit. Prime Minister Theresa May will look for newfound momentum for the WA, which will encourage others to support the deal and get it over the line. Impacts If MPs reject the WA and EU leaders demand national concessions in return for extending Article 50, a no-deal Brexit could happen. Businesses are running out of resources to prepare for worst-case scenarios; an extension to Article 50 could force some to close. Given a long extension, there may be more willingness in the next European Parliament to reopen the WA.


Significance The next challenge for UK Prime Minister Theresa May is to reconcile the requirements laid down by the EU and domestic political pressures in progressing the Brexit talks still further. Impacts The EU’s proposals would not allow the United Kingdom to sign trade deals before the end of transition. A Canada-style trade agreement would damage the United Kingdom’s services sector. Failure to negotiate a transition period within the next few months could lead to some companies beginning to relocate.


Significance As many as a dozen lockdown parties are now alleged to have been held at Downing Street, significantly damaging Johnson’s support among the public and his Conservative Party. His position as party leader and prime minister is gravely threatened. Impacts Johnson’s domestic troubles, coupled with rising economic concerns, increase the chance of an agreement with the EU over Northern Ireland. Disillusionment with Johnson, opposition to net-zero and culture wars open the door for Nigel Farage’s Reform Party to revive its appeal. Rising inflation threatens to undermine consumer confidence and slow the economic recovery over the coming year.


Significance He did not name a new prime minister. Over July 25-26, Saied dismissed Prime Minister Hicham Mechichi, dissolved his government, suspended parliament for 30 days, lifted parliamentary immunity and declared himself chief prosecutor, triggering Tunisia’s worst political crisis in a decade. Impacts The Ennahda party could be persecuted once again, this time on corruption charges, as the reconciliation offered excludes its members. Tunisia may become a new ideological battleground, pitting Turkey and Qatar against the United Arab Emirates (UAE), Saudi Arabia and Egypt. The EU, the United States and Algeria have some influence on Tunisia and could perhaps play a moderating role.


Significance The government led by the Slovenian Democratic Party (SDS) is under mounting pressure as Slovenia prepares to take over the European Council presidency. This is due mainly to hostility in parliament and society to Prime Minister Janez Jansa, who promotes a popular but divisive form of national conservatism. Impacts A successful no-confidence vote in the government followed by early elections would complicate Slovenia’s handling of its EU presidency. The fall of the current government and its replacement by the centre-left would improve Slovenia’s relations with the EU and United States. Hungarian Prime Minister Viktor Orban would lose an ally at EU level if Jansa lost office.


Significance Government formation should have been relatively straightforward but a series of political controversies have damaged VVD leader and Dutch Prime Minister Mark Rutte’s credibility with the CU and some opposition parties. Impacts The collective rise of the far-right vote means the far right will continue to worry centrist parties and thus influence government policy. Investment in nuclear energy to meet climate targets is unlikely to be a priority for the new government. Dutch influence in the EU could grow with the departure of Merkel in September, and Macron’s focus on the 2022 election.


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