Brexit Truss Fuss About to Start
But also — Meloni, Sanctions, Hungary, Revolving Doors
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Focus — Liz Truss Makes First Brexit Moves As UK Prime Minister
Liz Truss entered n°10 as the risk of a recession, a falling pound, surging inflation and repeated strikes rock the UK. The new government is also under tight scrutiny on the issue of the future of post-Brexit relations with the EU.
THE IRISH SAGA • The Northern Ireland Protocol, which governs post-Brexit relations between Dublin, Belfast and London, has been criticised by the British executive since it came into force in 2021.
After numerous unsuccessful exchanges with Brussels, Boris Johnson's government threatened to invoke Article 16 of the Protocol to unilaterally suspend the application of the text.
On 13 June 2022, Liz Truss, then Foreign Secretary, introduced a bill to unravel the Protocol — a move that was strongly condemned by Brussels. Needless to say her arrival at 10 Downing Street did not appease Europeans.
DEAD-END • With the 25th anniversary of the Good Friday Agreement around the corner, London is under pressure to find a quick solution to the gridlock.
Meanwhile, Belfast still has no government and Stormont Palace remains blocked by unionists who are fiercely opposed to the de facto customs controls that are in place in the Irish Sea since the Protocol came into force.
On her side, Liz Truss seems to continue defending the Bill that denounces the Protocol. Nonetheless, her recent discussions with Ursula Von der Leyen and Joe Biden may push her back to the negotiating table. In particular, Washington has made clear that no trade deal with London would be possible until the Northern Irish problem is resolved.
THE BIG CLEANUP • In parallel, London seems to be maintaining its hard Brexit stance, including on legal issues. On 22 September, the British government introduced a bill to review — by the end of 2023 — EU Retained Law, i.e., laws copy-pasted from the EU that remain in force in the UK since Brexit.
The bill is presented as a project to “emancipate” and “regain freedoms”. It would allow London to reform, replace or repel all European norms. These reforms — which could have an impact on environmental protection or workers' rights — echo the deregulatory agenda of the new Prime Minister and her Chancellor of the Exchequer, Kwasi Kwarteng. London's eagerness, along with the scope of expected reforms suggest that there is a risk of legal uncertainty or vacuum.
Finally, the UK continues to complain about the jurisdiction of the CJEU over trade with Northern Ireland which remains in the EU single market. The 22 September bill therefore proposes to restore British legal sovereignty over the whole territory, including Belfast.
NEXT • In this tense context, Liz Truss' openness to the European Political Community (EPC) reassures Europeans about future prospects of closer cooperation with the British. London is thus advancing its pawns one by one, forcing Brussels to remain on the edge.
In Case You Missed It — Giorgia, Mateus & Viktor, Revolving Doors and Nuclear War
GIORGIA • Giorgia Meloni, chief of the right-wing coalition and leader of political party Brothers of Italy, will most certainly replace Mario Draghi as the first female PM in the history of Italy. Given the eurosceptic leanings of the new parliamentary majority, Italian politics will be scrutinised by those in Brussels that fear that breaking away from Draghi’s reformist agenda will wreak havoc in the EU.
“We are facing the most powerful and violent attack against governments of sovereign nations opposing the dictatorship of politically correct ideology”, Meloni once declared, criticising the EU’s response to Hungary and Poland’s democratic backsliding. Moreover, the European Conservative and Reformist (ECR) group at the European Parliament will see its bargaining power and influence increased as Giorgia Meloni currently holds the presidency of the political group.
Meloni has nevertheless softened her hostile anti-EU rhetoric. Her positioning stems from the perception that antagonising the EU and isolating Italy will not benefit the country as the latter already struggles to solve economic weaknesses and energy vulnerabilities. “I want a Europe that does fewer things and does them better, with less centralism, more subsidiarity, less bureaucracy, and more politics. We are not at all against Europe, but for a more efficient Europe”, she recently said.
NUCLEAR REACTIONS • On 21 September, Vladimir Putin went a step up, claiming that he was ready to use "all necessary means" — including nuclear weapons — to defend his country in the war in Ukraine. Within the EU, these threats have revived calls for new sanctions on Russian oligarchs.
"We will not be intimidated," said Josep Borrell, the EU's high representative for foreign affairs, adding that additional measures against Russia would be put on the table immediately. The same day, EU foreign ministers met in New York on the sidelines of the UN General Assembly to consider new sanctions. These could include a price cap on Russian oil — a measure already suggested by the G7 earlier this month — as well as targeted measures on certain sectors.
MATEUS & VIKTOR • Poland will oppose “in the strongest terms” a proposal by the European Commission to withhold EU funding from Hungary, Polish Prime Minister Mateusz Morawiecki has stated. Morawiecki, whose government is also in Brussels’ crosshairs over the rule of law, described the Commission's plan as an attempt at “unlawfully depriving” Hungary of EU funds.
Warsaw’s support for Viktor Orbán’s government comes after a European Parliament report described Hungary as a “hybrid regime of electoral autocracy”. Following the Commission’s proposals, Janusz Kowalski, a deputy minister in the Polish government, warned in a tweet that Poland could become the next target for the “illegal deprivation of funds”.
Although Hungary is the first Member State to be targeted by the rule of law conditionality mechanism, the Commission has already withheld money allocated to Poland under the EU’s Covid recovery fund, Next Generation EU. In June, the Council of the EU signed off on a set of rule-of-law “milestones”, including reforming a controversial judicial disciplinary regime, which Warsaw would have to implement to receive the money.
If a qualified majority of Member States back Brussels’ most recent proposal, Hungary would lose one-third of the €22 billion cohesion funds it is due to receive up to 2027.
REVOLVING DOORS • The European Commission wants to crack down on the revolving doors between the EU’s executive branch and private practice.
According to the FT, the Commission intends to restrict the possibilities for Commission officials to take leave of absence to join private firms, raising many suspicions of conflicts of interest, while maintaining the possibility of retaining a job after a mobility in the private sector.
This back-and-forth between the public and private sectors has been a target of the European Ombudsman Emily O'Reilly, but also of the European Parliament. In May 2022, the European Ombudsman published a report on the subject, in which the management of revolving doors was considered to be at a "critical stage". Departures of officials from DG Competition to large law firms have raised many questions — some ex-officials going to law firms known to advise Big Tech on regulators they had to deal with at the Commission.
What we’ve been reading this week
For Bruegel, Shahin Vallée, Daniela Schwarzer, Franz Mayer and Jean Pisani-Ferry, explain how the European Political Community can act ‘as a bridge to an eventual larger EU and as a framework for continental-scale partnership’.
The world’s central bankers are facing tough decisions: Maurice Obstfeld of the PIIE encourages them to coordinate their actions, while Adam Tooze pounders whether exceptional times will lead to a paradigm shift in the profession.
This week’s newsletter is brought to you by Marine Sevilla, Matteo Gorgoni, Maxence de La Rochère, Brian Ó’Donnaile, and Augustin Bourleaud. See you next Tuesday!