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What Britain’s Brexit Negotiations Can Learn From Greece

Posted by hkarner - 1. September 2017

Date: 31-08-2017
Source: The Wall Street Journal By Simon Nixon

To succeed with talks, the U.K. needs to prepare public opinion for inevitable trade-offs, costs

Former Greek finance minister Yanis Varoufakis has become an unlikely hero to many in the U.K.

If the Brexit negotiations have got off to a tempestuous start after the summer break, blame Yanis Varoufakis.

It appears that top of the summer reading list for some senior British ministers was the former Greek finance minister’s book “Adults in the Room”—his account of the Greek debt crisis in which he played a starring role in the first half of 2015.

Mr. Varoufakis has become an unlikely hero to many in the U.K.: To those on the left, he is feted as a leader of the global antiausterity resistance; to the euroskeptic right, he is championed as the man who came close to delivering their dream of destroying the euro. Now his book is being trawled at the highest levels of the British government for insights into how to handle Brexit.

For many directly involved in the Greek crisis—not least in Greece itself—this lionizing of Mr. Varoufakis is surreal. They regard his portrayal of plucky Greece bought to its knees by an inflexible Brussels bureaucracy, while supposed allies stood aside terrified of alienating their German paymasters as seriously distorted.

In essence, many claim that what actually happened in Greece is this: a populist government was elected on the basis that it could persuade the rest of the eurozone to write off its debts with no strings attached. When the eurozone rejected this “have-your-cake-and-eat-it” proposal, Mr. Varoufakis engaged in six months of brinkmanship, convinced that the EU would ultimately capitulate to prevent wider damage to the eurozone—until Athens itself capitulated, signing up the deal that was on the table all along, having achieved nothing but to damage its own economy.

There are indeed lessons for the U.K. from the Greek crisis but the risk is that it draws the wrong ones. The government published a series of Brexit position papers this month which Prime Minister Theresa May and Brexit minister David Davis say shows that the U.K.—in contrast to Greece —is coming up with constructive proposals to advance the negotiations. Yet many of these papers are as threadbare as the papers Mr. Varoufakis circulated when similarly seeking to win in the court of public opinion.
Some papers do little more than explain why it is in both the U.K. and EU’s interests to preserve the status quo as far as possible. In the paper discussing possible dispute resolution mechanisms, the government lists options without offering any judgments. Where it does make proposals, they are typically of the “cake-and-eat-it” variety, for example in proposing that the EU should agree to let the U.K. continue to sit on the EU’s data protection rule-making body while allowing it to write its own rules.

Meanwhile one U.K. proposal has been greeted with incredulity by experts in the U.K. and EU: the idea that Britain can somehow leave the EU’s customs union but retain its benefits by attaching tracking devices to all imports to establish whether they are entering the domestic or EU supply chain so that they can be taxed accordingly. Senior government ministers say that serious work has gone into this proposal but the paper provides no evidence to back this up, instead it acknowledges that the idea is “unprecedented,” “untested” and requires further research “to understand the practical complexities in making it work.” The risk for the U.K. government is that this proposal becomes its equivalent of Mr. Varoufakis’s suggestion that the solution to endemic tax evasion was to arm tourists with cameras to catch value added tax cheats, which damaged his credibility with Greece’s creditors.

The British government appears intent on following the Varoufakis playbook in other ways, too. Mr. Varoufakis and his Prime Minister Alexis Tsipras wasted six months trying to bypass Brussels to negotiate directly with Berlin and Paris—which was ironic because the greatest pressure for a deal was actually coming from the Commission itself.

Now Mrs. May and Mr. Davis appear to have similarly concluded that the key to Brexit lies in a political deal with national leaders. Yet eurozone governments never budged on their insistence that Greece should stick to the EU’s sequencing and processes—and nor are EU governments likely to budge over Brexit, even after the German elections.

The EU won’t budge because it doesn’t need to: It believes it is strong enough to withstand Grexit or Brexit. Indeed, the greater risk to the EU lies in yielding to what many regard as blackmail. The EU draws its legitimacy from the rule of law: giving the U.K. a cake-and-eat-it Brexit deal would undermine the legitimacy of the EU as surely as a strings-free fiscal transfer to Greece would have destroyed the euro.

The real lesson the U.K. can learn from the Greek crisis is the need to make a sober assessment of where the negotiation is likely to end up and then prepare public opinion for the inevitable trade-offs and costs—before you get locked into positions from which there is no escape. The good news is that while the U.K. has so far not presented many credible proposals, nor has it ruled anything out and in some cases—notably in acknowledging the possibility of accepting continued indirect jurisdiction of the European Court of Justice—it has started to prepare the ground for possible future compromises. The government still has time to avoid repeating Mr. Varoufakis’s mistakes—though maybe not much.

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