Michel Barnier returned to action last week after recovering from his brush with Covid-19, but the negotiations he is leading with the UK are in much less good health.
The EU’s chief negotiator said that he had been left “disappointed” and “worried” after a week of virtual talks between his 100-strong team and their British counterparts. The discussions were the first formal negotiations since coronavirus forced the cancellation of face-to-face talks last month. Mr Barnier spent much of the past few weeks in self-isolation after contracting the illness.
In unusually direct language for an international negotiation, Mr Barnier accused the UK on Friday of refusing “to engage seriously” on some topics, and of seeking to “slow down discussions”. He warned that the talks may be in trouble by June unless Britain changes course.
What Brussels criticises as a lack of urgency, the UK insists is a reflection of its determination to fight for the national interest. UK officials argue that Britain has done what Brussels has so often asked it to do during the Brexit process: it has explained what it wants.
The problem is that what Britain wants bears scant resemblance to the EU’s notions. At his press conference on Friday, Mr Barnier brandished a copy of the political declaration on future relations that Boris Johnson agreed with EU leaders last year.
That document is barely six months old, but it already seems like a relic from the distant past, and that’s not just because of the transformations wrought by the pandemic.
The UK already made clear earlier this year that its vision of future co-operation with the EU is quite different to the kind of overarching, institutionalised relationship that the political declaration sets out. Instead, Britain wants to negotiate a standalone trade deal, with some separate treaties covering issues such as air transport and co-operation on nuclear energy.
Mr Barnier argued on Friday that the EU’s negotiating stance — which includes demands for Britain to grant access to its fishing waters and for the UK to sign up to a binding “level playing field” of competition, labour market and environmental rules — is simply an attempt to put the political declaration into practice.
This is only partly true: the declaration, for example, does not explicitly say that Britain should stay within the EU’s system of state-aid rules; the EU’s negotiating mandate for the talks does.
The UK counterargument is that its position is founded on something equally legitimate: precedent. Britain claims that it wants a trade deal like Canada’s and will accept the kind of fisheries agreement that the EU has with Norway — one that leaves access to waters up to annual negotiation.
UK chief negotiator David Frost took to Twitter on Friday to claim that “there is no need” for a trade deal to contain novel and unprecedented ‘level playing field’ rules, for example tying us to EU laws, or a role for the EU Court”.
But the UK’s appeal to precedent has holes as well: Britain wants more extensive market access (including tariff-free — quota-free trade in goods) than any existing EU trade deal grants to an advanced economy.
What last week’s discussions served to underline is that the UK and the EU are seeking to negotiate fundamentally different projects.
Nowhere in Britain’s vision is there anything like the kind of governance arrangements that the EU has in mind: an arbitration system covering different aspects of the future partnership, complete with a role for the European Court of Justice when there are questions over how to interpret EU law. Britain does not want the future relationship to refer to EU law.
So where do we go from here? We should not expect much progress from the upcoming rounds of talks. Some top-level political intervention will probably be needed sooner rather than later, especially given Britain’s continued insistence that it will not seek an extension to its post-Brexit transition period, which expires at the end of this year.
An EU-UK stocktaking summit is scheduled for June. No one yet knows exactly when, or under what conditions, it will take place. But it is looking ever more important.
jim.brunsden@ft.com; @jimbrunsden
Your coronavirus reads
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Donald Trump and his aides are seeking fresh ways of sidelining the World Health Organization as they attempt to blame the institution for the pandemic, according to the Washington Post. The State Department is stripping out references to the WHO from fact sheets, and the US is delaying a UN resolution because of language that supports the WHO (Washington Post)
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Which is the bigger risk: inflation or deflation? Olivier Blanchard, the former IMF chief economist, argues in favour of the latter because of precautionary saving and low consumption. But an inflationary upsurge could yet occur if three preconditions are fulfilled, he says (CEPR)
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Australia, New Zealand, South Korea and Taiwan are now contemplating how to manage life after the virus. Authorities stress that things are by no means back to normal (The Economist)
Chart du jour: stimulus splurge
Why have stock markets been soaring for a month? Central bank asset purchases are a big factor, say investors. Citigroup estimates that the biggest central banks will buy $5tn of bonds this year, led by the US Federal Reserve, which is more than twice the size of the stimulus seen at the peak of the 2008-09 financial crisis. (FT)
Pandemic news round-up
Lagarde back in the spotlight
Christine Lagarde, European Central Bank president, will be back on stage this week. Last month she ramped up quantitative easing by announcing another €750bn of bond-buying, and the ECB has also loosened many of the restrictions previously governing such purchases.
But this will by no means be the end of the story, and the pressure is on the ECB to deliver yet more as it prepares to meet on Thursday. Many economists expect the ECB to increase the scale of its bond-buying further, albeit not necessarily as soon as this week, or even include riskier high-yield bonds, as the US Federal Reserve has done.
The ECB’s existing efforts have not removed signs of stress from the financial markets; among the concerns has been an upward drift in spreads between Italian and German bond yields and a rise in Euribor — a measure of the interest rates that euro area banks pay to borrow from one another.
While EU leaders last Thursday endorsed a series of emergency measures to battle the economic ill-effects of the pandemic, the jury is very much out on whether their associated decision to set up a “recovery fund” will have macroeconomic significance for the EU economy.
As the FT reported, draft plans suggest the commission wants to raise just over €300bn on capital markets to seed the recovery fund, but some economists worry that if the money is deployed on loans and investment guarantees the fund will do little to spur an economic rebound.
As such, the ECB may remain the key actor when it comes to mitigating the economic fallout from coronavirus.
Krishna Guha of Evercore ISI said that recent market developments suggest the ECB’s so-called PEPP asset purchase programme is “both too small and deployed with insufficient conviction” to achieve all its goals. He expects a further increase in the programme to be agreed eventually, boosting it by between €500bn and €1tn.
Johnson’s return
Boris Johnson will return to work on Monday to face big decisions on lifting the UK’s nationwide lockdown. The UK prime minister has been recuperating from coronavirus at his country residence Chequers. Some members of the government are eager to lift the restrictions as rapidly as possible, while others are concerned that moving too quickly could see the virus spreading out of control. (FT)
Trump unplugged
Donald Trump has pulled the plug on daily White House press briefings as he complains the US media has been asking him hostile questions and been guilty of inaccurate reporting. The move comes as the US president comes under a barrage of criticism after a briefing in which he asked his scientific advisers to test the idea of injecting disinfectant or irradiating the body with ultraviolet light to treat coronavirus. The president claimed his suggestion was sarcastic. (FT)
Elsewhere in Europe
Running freer
Spain is debating the impact of its recently-eased policy to keep children in their homes to reduce virus transmission. Under the new rules, under-14-year-olds can leave their homes every day for a total of an hour, but they can’t go further than a kilometre. Psychologists have welcomed the decision, saying just an hour of time outside every day can have beneficial effects. (BBC)
True count
The death toll from the coronavirus may be as much as twice as high as current official figures suggest in France, according to a report in Le Journal du Dimanche. An FT analysis of deaths in 14 countries reveals that the global coronavirus death toll may be almost 60 per cent higher than official counts. (JDD)
Sound of silence
Berliners celebrated the reopening of shops last week after a five-week shutdown that turned one of Europe’s liveliest capital cities into a ghost town. But what should have been a celebration felt more like a wake, including in Mitte, one of the German capital’s trendiest neighbourhoods, where most stores were still shut, and those that were open were largely devoid of customers. (FT)
Three strikes from China
China complained to the EU at least three times and warned bilateral relations would be hit should the bloc publicly accuse it of spreading coronavirus crisis propaganda, according to European officials. The Communist government made the protests last week after details emerged of an internal EU report that pointed to evidence of Beijing using “both overt and covert tactics” in a “global disinformation campaign” to avoid blame for the pandemic. (FT)
Good morning Vienna
International financial institutions are reviving a crisis-era initiative that sought to reduce the risk of capital flight from eastern European countries as the coronavirus pandemic sparks fears that cross-border banks and investors could start pulling back from vulnerable states. The European Bank for Reconstruction and Development, the IMF and other institutions are stepping up work within the so-called Vienna Initiative. The initial focus will be on western Balkan countries, said Sir Suma Chakrabarti, the president of the EBRD. (FT)
Coming up this week T
ourism ministers are due to hold a video conference on Monday, followed by virtual meetings of energy, home affairs and transport ministers during the week. The ECB holds its next policy meeting on Thursday.
