Brexit warning: UK negotiators told ‘pinning hopes on Merkel is unwise’ – critical reason

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Professor Anand Menon, director of The UK in a Changing Europe, was speaking in response to a blog published on the Conservative Home website by Stephen Booth, Head of the Britain in the World Project at Policy Exchange. In it, Mr Booth pointed out Germany was due to take over the rotating EU presidency from next month “and Angela Merkel will not want a no deal outcome to be her legacy, if she can avoid it”.

Mr Booth also suggested the penny was dropping for Michel Barnier, suggesting the EU negotiator had last week acknowledged the need for more flexibility on state aid – whereby Governments can subsidise specific industries – and fishing rights after the end of the transition period on December 31.

However, Prof Menon, whose think tank is poised to publish a new report entitled Fisheries and Brexit, had his doubts.

Referring to the bloc’s insistence on a level playing field (LPF) aimed at ensuring the UK signs up to a set of common rules and standards, he tweeted: “First, yes, the EU will need to be more flexible on fish.

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“But equally, the UK will need to more ground on LPF (albeit probably not as far as EU is now claiming) and will struggle to get what it wants on recognition of qualifications, which will hit services hard.”

Prof Menon suggested the prospect of no deal would pale in comparison with Mrs Merkel’s other problems.

He added: “So another penny needs to drop – in London.

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The EU, and Merkel, now have far, far bigger (if you’ll forgive the phrase) fish to fry

Professor Anand Menon

“Pinning hopes on Merkel is unwise.

“Not only because it ignores the last seven years, when we assumed the same and were proven wrong.

“But also because the EU, and Merkel, now have far, far bigger (if you’ll forgive the phrase) fish to fry.”

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His remark was likely a reference to the devastating impact the coronavirus pandemic is likely to have on Germany’s economy.

A senior official with knowledge of the discussions yesterday claimed German Finance Minister Olaf Scholz was considering borrowing up to another 50 billion euros to help mitigate the coronavirus crisis.

Mrs Merkel’s cabinet is planning to pass a second supplementary budget on Monday to finance its 130-billion-euro stimulus package to support Europe’s largest economy, said the official, speaking on condition of anonymity.

Another official said the cabinet wanted to pass the extra budget next Wednesday, with the finance ministry looking to issue more debt than the 25-30 billion euros initially envisaged.

The additional borrowing of up to 50 billion euros would come on top of Berlin’s debt-financed supplementary budget worth 156 billion euros agreed in March.

This means the government’s overall net new borrowing could exceed 200 billion euros this year, equal to about six percent of Germany’s economic output.

In addition, the government in March issued debt authorisation of up to 100 billion euros for its economic stability fund which can take direct equity stakes in companies, plus up to 100 billion euros in further credit to public-sector development bank KfW for loans to struggling businesses.

A finance ministry spokesman refused to comment on the exact figure.

The government is projecting Germany’s debt-to-GDP ratio to jump to more than 75 percent this year from just under 60 percent in 2019, a leap in borrowing not seen since the financial crisis of 2008.

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