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22 Feb 2016
Brexit: Now the real battle begins – SocGen
Research Team at Societe Generale, suggests that the agreement has been reached on “A new settlement for the United Kingdom within the European Union”.
Key Quotes
“It is much-diluted set of “reforms” compared to David Cameron’s original aims stated when he first promised a referendum on Brexit. As such, it will not satisfy the Eurosceptics who forced him to make the promise in the first place. His task to convince the UK public to vote to remain within the EU will not be an easy one. We still see a 45% risk of a Brexit which could reduce UK and EU growth by as much 1% pa and ¼% pa respectively for ten years.
Was the deal a success? It falls far short of what was originally proposed but was probably the best that could have been achieved in the circumstances. The UK is an imperfect EU partner; nevertheless it is an invaluable one. In other words, a deal was struck because it was in the interests of both sides to do so. It is not yet clear which parts of this deal will be enshrined in future treaty change. Also, it has to be approved by the European Parliament and national parliaments, with clear potential for mishap.
Some limits on benefits to make the UK a less attractive destination for migrants: The deal does not permit any limits on immigration. Instead, it imposes a tapered exclusion of new migrant workers from in-work benefits for four years. This exclusion will be operated as an “emergency brake” for a maximum of seven years.
Weak restrictions on child benefits: The proposed limits on child benefits are much weaker than in the 2 February draft agreement. The benefits will be indexed to the conditions in the country of residence of the child, not of the worker. However, initially that will only apply to new EU workers; it will only extend to existing EU workers in 2020.
Red card on legislation: There is a new process to force discussion of halting plans for legislation that might be detrimental to some EU countries. If countries representing 55% of the votes in the EU Council so wish, the Council will discuss the offending legislation and it will be withdrawn unless amended. Inter alia, this is designed to allay fears that euro area legislation will encroach on the competitiveness of the City of London.
Status of non-euro countries: The separate currency status of the non-euro countries is more prominently acknowledged.
Brexit would hurt the remaining EU as well as the UK: Although the EU should win some business from the UK in such an event, it is likely to lose as much as ¼% pa growth because of its close trade ties with the UK, which would lose as much as 1% pa growth for ten years.
What happens next? Within six weeks the UK Electoral Commission will designate one campaign on each side of the debate as a “lead campaign group.” This will confer significant funding rights and access to broadcast airtime. The formal campaigning will start 10 weeks before the referendum to be held on 23 June. However, with the deal concluded, members of the government will now be free to campaign immediately for whichever side they choose.”
Key Quotes
“It is much-diluted set of “reforms” compared to David Cameron’s original aims stated when he first promised a referendum on Brexit. As such, it will not satisfy the Eurosceptics who forced him to make the promise in the first place. His task to convince the UK public to vote to remain within the EU will not be an easy one. We still see a 45% risk of a Brexit which could reduce UK and EU growth by as much 1% pa and ¼% pa respectively for ten years.
Was the deal a success? It falls far short of what was originally proposed but was probably the best that could have been achieved in the circumstances. The UK is an imperfect EU partner; nevertheless it is an invaluable one. In other words, a deal was struck because it was in the interests of both sides to do so. It is not yet clear which parts of this deal will be enshrined in future treaty change. Also, it has to be approved by the European Parliament and national parliaments, with clear potential for mishap.
Some limits on benefits to make the UK a less attractive destination for migrants: The deal does not permit any limits on immigration. Instead, it imposes a tapered exclusion of new migrant workers from in-work benefits for four years. This exclusion will be operated as an “emergency brake” for a maximum of seven years.
Weak restrictions on child benefits: The proposed limits on child benefits are much weaker than in the 2 February draft agreement. The benefits will be indexed to the conditions in the country of residence of the child, not of the worker. However, initially that will only apply to new EU workers; it will only extend to existing EU workers in 2020.
Red card on legislation: There is a new process to force discussion of halting plans for legislation that might be detrimental to some EU countries. If countries representing 55% of the votes in the EU Council so wish, the Council will discuss the offending legislation and it will be withdrawn unless amended. Inter alia, this is designed to allay fears that euro area legislation will encroach on the competitiveness of the City of London.
Status of non-euro countries: The separate currency status of the non-euro countries is more prominently acknowledged.
Brexit would hurt the remaining EU as well as the UK: Although the EU should win some business from the UK in such an event, it is likely to lose as much as ¼% pa growth because of its close trade ties with the UK, which would lose as much as 1% pa growth for ten years.
What happens next? Within six weeks the UK Electoral Commission will designate one campaign on each side of the debate as a “lead campaign group.” This will confer significant funding rights and access to broadcast airtime. The formal campaigning will start 10 weeks before the referendum to be held on 23 June. However, with the deal concluded, members of the government will now be free to campaign immediately for whichever side they choose.”