Monday, May 27, 2024
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TCW’s Brexit Watch: A German bombshell


I HAVE focused today’s Brexit Watch around the internal shocks and tensions being suffered by the EU and by the UK as a result of the Covid-19 pandemic.

Germany has stuck to its guns in refusing to open the Bundesbank coffers to fund the massive economic damage done to its Club Med members in terms of a common taxation across all the states. The German Constitutional Court has, in the words of the Telegraph’s Ambrose Evans-Pritchard, ‘In an explosive judgement . . . ruled that the European Central Bank had exceeded its legal mandate and “manifestly” breached the principle of proportionality with mass bond purchases, now topping €2.2trillion and set to rise dramatically. The bank had strayed from the monetary realm into broad economic policy-making.’ 

The German court has also criticised the European Court of Justice, another astonishing move and utter heresy in the eyes of Brussels, which regards the ECJ as the holy of holies for deciding what is lawful and within Treaty rules. Astonishing because we must remember that Barnier wants the UK to remain under ECJ jurisdiction. This German bombshell shakes the foundations of EU bonding and ensures that Germany will not unconditionally underwrite the desperately damaged economies of Club Med now or after Covid. Investors will note that. Again we must note that the UK, if it delays Brexit after December 31, will certainly be played for vast sums to help the eurozone and will remain under the ECJ. Not to get out as soon as we can will be akin to economic self-harm close to suicide, a national psychosis. How remainers can continue their well funded battle is now impossible to fathom.

Ambrose Evans-Pritchard has a second very important article in the Daily Telegraph entitled ‘Europe’s level playing field has disintegrated – and so has Mr Barnier’s Brexit’. In it he details the way that EU rules and regulations, that eye watering catechism of unbreakable rules governing all EU affairs, according to M Barnier, have been melted away by the reactions of the 27 states to Covid. AEP reports: ‘State aid rules were suspended almost entirely as soon as Germany flicked its fingers. North and South are today pursuing radically different policies, according to their economic means, and this will lead to radically different outcomes when Europe emerges from the Covid-19 depression. “It destroys the argument that the EU is rule-compliant. It hits that narrative on the head,” says Professor Lorand Bartels, an expert on trade law and Brexit at Cambridge University.’  

We can only hope that David Frost is constantly rubbing M Barnier’s nose into this EU mess of sheer hypocrisy. His framework of demands is now bust, null and void; he cannot require of the UK what the EU is demonstrably breaking.

AEP points out that Germany internally is pouring billions into safeguarding its own industry and business, while neither the Club Med nor even France can afford the same levels of help, so when recovery comes Germany will be fine, the others desperate. He says: ‘The relevant point is the way in which the national, sauve qui peut, free-for-all approach – without a joint fiscal support mechanism to offset it – has shattered equity within the EU itself. The level playing refrain has become a sick joke.

‘Germany is drawing on its AAA-rating and deep fiscal pockets to bail out Deutschland Inc with €1trillion of credits, guarantees, and emergency spending. It accounts for 52 per cent of the €1.9trillion of the EU’s state aid approvals since Covid-19 hit.

‘Those of us who covered the eurozone austerity crisis from 2010-16 note with weary cynicism how rigidly EU budget law was enforced during that episode (when it suited the northern creditor bloc) and how quickly state aid law is being waived this time because it suits Berlin.

‘The Club Med bloc can only dream of German largesse. The Spanish are spending hardly anything. Italy’s direct fiscal support – as opposed to theoretical guarantees – barely covers two weeks of actual economic damage. The result is that southern Europe will suffer a flood of avoidable insolvencies.

‘Viable firms and industries will collapse. There will be lasting structural damage and hysteresis. Club Med recovery will take longer. The shrinkage of nominal GDP – and lack of a V-shaped rebound – will cause debt dynamics to turn toxic.’

Italy recalls that the Greeks were subject to harsh repayment measures for being kept afloat by EU guarantees, including the sale of national assets. Germany snapped up these assets, and will snap up good viable Italian factories of companies destroyed by this economic calamity engulfing them. Italians are turning against the EU as they learn how false the EU brotherhood really is. 

AEP has more to say about the EU’s sleight of hand in terms of EU environmental policy. He says: ‘The new guidelines for ESG sustainable disclosure exempts oil and gas from the definition of fossil fuels. Does one detect the hand of the German Gazprom lobby and the diesel fraternity in that farce?

‘The German BDI industry federation wants to roll back the EU’s CO2 targets. Armin Laschet, the front runner to succeed Angela Merkel as Chancellor, is a closet climate denialist who opened a new lignite coal plant in January. The UK has essentially stopped burning coal.’

 Yet the Barnier red lines are still insisting that the UK is to be regulated by the EU for such policy! David Frost should get a summer panto ready featuring such ludicrous hypocrisy being thrust at the UK. It is only because Mrs May conceded so much so easily that Barnier continues to try his luck.

In short, the EU is in a desperate state economically and existentially; Club Med now detests its northern powerhouse neighbour.

 But in the UK remainerdom, ever more irrational, continues to survive and maintain itself, although China’s behaviour over the coronavirus outbreak is rapidly weakening the reputation of Whitehall in terms of competence and the national interest. China evidently sat on vital evidence of the virus having been spawned and escaping, and amazingly UK intelligence services, topped by Sir Huawei Sedwill, ignored it.

The PM is said to have known, and did nothing for weeks, when the UK could have taken early decisive action. Was this delay to indulge the Chinese who now have leverage over us, as they have over Australia? This does make the decision to award Huawei the contract to develop our telecoms 5G network look very bad. Many Tory MPs are realising that it should be cancelled now. China’s world domination motives are now being worked out. 

The UK has to reverse Whitehall’s geopolitical orientation to the EU and China, and back to the USA. They don’t want to, and they don’t want Brexit.

This brings us to the good news that the green light has been given to US-UK trade talks. Trade Secretary Lynne Truss is happily enthusiastic. This will also help us in the talks with the EU by way of leverage. The UK does need a post-Brexit friend, rather than a controlling mother. But no sooner were we given this good news than the Express told us that President Trump is not bluffing about Huawei controlling UK telecoms being a block on US-UK intelligence sharing and thus trade in sensitive technologies. 

PM Johnson is a bluffer and talks the talk, but President Trump tends to do what he says and not emit empty words. He means it when he says the US has to protect itself in the UK where it has agencies at work with formerly totally trustworthy UK ‘Five Eyes’ allies. This will now hinder important trade talks.

Tom Tugendhat, leading critic of our trust in China in the Commons, needs to tell PM Johnson and Sir Huawei that the UK simply must cancel that Huawei contract in the national interst. There can be no doubt that it is already threatening our security, our core alliance with the USA and our trading future.

By way of a coda on the elephantine quality of our governmental machinery: why is HMG not imposing driverless trains in this national emergency, resisted so long and successfully by the unions? They cannot refuse to go back to work if computers are doing the work, and of course the drivers can be paid handsome compensation. This is a golden chance, in the name of kick-starting transport post Covid. Switch the HS2 billions to modern technology for transport. And to reconnect to Brexit Watch: Johnson bottled out of doing that while Mayor of London.

Finally, Irish eyes are not smiling. The EU is again weaponising Northern Ireland by pushing the Irish Protocol which PM Johnson so foolishly signed, keeping NI in the single market and customs union, having been blackmailed by Barnier with the threat of the EU putting a hard border between Eire and NI. These absolutely unbreakable EU regulations, see above, are once again being weaponised with gross irresponsibility in the context of the Irish tribal neurosis – so much for the EU as a peace-bringer. The UK has refused an EU office in Belfast to supervise the sea border Johnson conceded. But Michael Gove says some light touch arrangements must be made to implement this de facto economic annexation of NI. The bad faith of the EU is shown in this, as is Johnson’s fallibility under pressure. Don’t forget that any spats between the UK and EU now, till December 31, are adjudicated by the EU court, the ECJ, with no appeal to the WTO.

The UK would be well within its rights to ignore the Irish Protocol as Germany et al are ignoring the state aid laws and open border laws, after all Barnier is almost certainly breaching the legal obligations of Withdrawal Agreement. As Anna Bailey put it in the Spectator: ‘Indeed, by refusing to comply with international norms on the provisions of FTAs and fisheries agreements, there is a case to be made that the EU is already in breach of its legally binding commitment in the Withdrawal Agreement to use its ‘best endeavours’ to reach a mutually acceptable outcome.’

Using the threat to renew a European guerilla war by building a hard border, Barnier is not engaging in trade negotiations but power play. The Irish Protocol will have to be abrogated, and trade with Eire done by advanced technological checks. Brussels clearly wants to keep controls over part of an independent sovereign state: that is not remotely part of Article 50 and should be struck down legally.

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Timothy Bradshaw
Timothy Bradshaw
Timothy Bradshaw is a Theological lecturer and Anglican clergyman

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