Brussels Brexit Briefing – 27th July

Westminster

Theresa May’s new government has made its first practical moves towards Brexit by pulling the UK out of its scheduled slot in the EU’s rotating presidency in the second half of 2017.

The UK’s space will be taken over by Estonia, which will bring forward its own presidency by six months. A spokesman for European Council President Donald Tusk said there was “broad agreement” when EU ambassadors met in Brussels, although the decision still has to be formally confirmed.

Mrs May informed Mr Tusk of her decision in a phone call on July 19, noting that her government will be “very busy with negotiations to leave the EU”, a spokesman said. Mr Tusk told Mrs May in the same call that Brexit should be something like a “velvet divorce”.

Subsequent presidencies in the order they are currently foreseen, would in turn, be brought forward by six months, meaning that Bulgaria will now take over in January 2018. Slovakia currently holds the presidency and will be followed by Malta in the first half of 2017.

Austria still has a reservation because its presidency would then fall in an election period, and it might change with Romania. The EU’s newest member state Croatia, which is not yet on the list to resume the rotating EU presidency, is expected to be included in the first half of 2020 when the officially scheduled list of future presidencies currently ends.

Holding the presidency is no longer as influential as it was before 2009, when the EU created a permanent president of the European Council to chair the leaders’ meetings, and the High Representative to chair Foreign Affairs Councils. But, countries that hold the rotating presidency still play a key role in helping set the EU’s policy priorities and lead key decision-making meetings of ministers.

Meanwhile, one month after the vote, the effects are starting to have an impact on economic forecasts. Both the International Monetary Fund (IMF) and the European Commission have revised their expectations for economic growth as a result of the outcome of the referendum, for the world, EU and the UK.

The IMF now expects global growth of 3.1% and 3.4% for 2016 and 2017, respectively, down 0.1 percentage point from its baseline global growth forecasts in April. Economic growth in the UK will fall by 0.2 percentage points for 2016 and close to 1 percentage point next year, it said.

The European Commission meanwhile, also expects that the uncertainty to curtail economic growth, for the UK and for the Euro-zone. Euro-zone forecasts growth of 1.7% in 2016 and 2017, have been revised down to 1.5 from 1.6% in 2016. The effects will be even worse in the UK: the Commission forecast a 1 to 2.75% drop in economic growth by 2017.

On July 25, central bankers and finance ministers from the G20 group of leading countries meeting in the Chinese city of Chengdu, said Brexit heightened risks for the world economy, as they vowed to use “all policy tools” to boost growth. The outcome of June’s referendum “adds to the uncertainty in the global economy”, they said in a communique after their meeting.

Words  Leo Cendrowicz
Photo CC/Flickr Takashi Hososhima

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