There seems to be a recognition in Brussels and at senior official levels in the UK that our future relationship with the EU has got off to a spectacularly bad start and that things need to be put back on a more harmonious track. Tony Connelly, Europe editor at RTE in Ireland, has a piece this morning which is intended I think to try and calm things down a bit. He reports that officials on both sides of the Channel are looking at a 'major reset' in relations when the TCA is formally ratified in April.
Here is Connelly's Twitter thread:
Major reset of EU-UK relations being considered by EU via @RTENews https://t.co/UWvWqDWsiT
— Tony Connelly (@tconnellyRTE) February 26, 2021
He is usually reliable and I am sure this is being talked about as he says. However, it takes two to tango and I'm not sure the political will is there in the Tory party. It suits the government to keep up a running battle and to constantly blame someone else for Brexit's failure. Connelly writes:
"There has been a fractious start to the new post-Brexit relationship from the beginning of January, with simmering tension over the Northern Ireland Protocol, vaccine procurement, the diplomatic rights of the EU ambassador to the UK and the alleged discrimination against citizens from a number of eastern European member states over UK work visas.
"The fear among senior EU officials is that unless there is a clear reset then the relationship could become one of perpetual tension."
This is an echo of Rafael Behr's article in The Guardian the other day.
Senior figures have told RTÉ News that a formal, set-piece event marking the ratification of the TCA) "could inaugurate a more harmonious relationship" and apparently "very tentative discussions have been under way at a senior level between officials in Brussels and London."
I am sure this is all genuine but it will ultimately be a forlorn hope. The Conservative party has been, and probably always will be, riven by division over Europe. It is a party of little Englanders and an acrimonious relationship with Europe is essential to party unity. They want to be sullen, resentful and jealous of Europe because they enjoy having a bogeyman to blame for their own inadequacies,
For the foreseeable future the party membership is on the UKIP side of the argument of the European argument. Eustice, a senior cabinet minister is a former member of UKIP for heaven's sake. This is not likely to change much in he near future.
And I can't see how the relationship can ever be close and warm, at least not in the way Connelly seems to suggest.
I've spoken before about how salesmen work in any particular industry. You might have a colleague that you are very close to, meeting outside work as friends and helping each other - when you work for the same company. Then you learn he is joining a competitor and worse, his territory now overlaps yours. You are both competing for the same business. The relationship can never be the same again. You don't meet because you are both afraid of giving the other privileged information.
Even saying which town or city you were in last week might give a clue. Details of a new product might slip out and so on. No, you are no longer 'friends' and can never be as close again because any order is a zero sum game. If he wins you lose and vice versa.
So, I turn to Andrew Bailey, governor of the Bank of England. who is warning the EU about trying to steal a piece of the Euro derivatives trading market. Let me say here that I have no idea what these things are, but Euro denominated trades are worth £83 trillion a year. and 90% of them are made in London with all the attendant fee and commission income. Bailey thinks after mid 2022 when the present equivalence deal expires about a quarter will move to the EU.
What he's concerned about is the other 75%. Giving evidence to the UK’s Treasury select committee on Wednesday, Bailey said that to gain control of the rest, the EU would have to introduce extraterritorial legislation, or “attempt to force and cajole banks and dealers to say there will be some other penalty for you unless you move this clearing activity”.
“That seems to be where debate is heading . . . That would be very controversial and, frankly, would be a very serious escalation of the issue,” he said.
Derivatives are, I understand, quite risky things and there is no way the European Central Bank is going to allow their own currency's stability to be controlled by banks regulated in a third country for ever. They will slowly squeeze the banks and derivatives trading to move into Europe and away from London. And again when the EU gain, London loses. It's a zero sum game.
At the moment the Tories and the bankers are counting on London retaining its place as the leading European financial centre and they may be right, but wind forward twenty years and who know what European banking will look like. There will be a constant, steady, gravitational pull away from the UK.
Britain and the EU will be arguing over this sort of thing for years. The EU works hard to keep the peace (diplomatically) between members, that's half the reason it exists. Arguments simmer quietly away until an agreement is reached. Officials smooth things over, unruffle feathers and keep the whole thing moving forward in some kind of harmony. But let's not pretend the disagreements aren't there, they are, but hidden under the surface.
Now consider things now we have left. The reasons and the mechanisms for keeping things quiet are reduced. The Tory party needs an enemy. There are plenty of areas where the UK is going to be damaged by Brexit and therefore plenty of contentious stuff. Northern Ireland is the big one at the moment but there is no shortage of arguments to come.
The appointment of Lord Frost as the UK's lead on EU matters is a signal that we want a fractious relationship.
I really don't see how there can be a reset while the Conservative party is in power.
