Red lines and black swans

The British and Spanish governments are having problems asserting their authority.

Once upon a time, Britain and Spain ran vast territories overseas. Today their governments don’t even have the authority to run their own countries smoothly.

Prime Minister Theresa May struggles to keep her ministers in check, most notably Foreign Secretary Boris Johnson.

Johnson again used the press to send his PM instructions on how to go about negotiating Brexit.

The Spanish government may not be suffering from disunity, but it is fast losing control over its own regions.

Excessive force used against its people couldn’t prevent the Catalan call for independence growing louder. In fact, it’s more likely to have bolstered the case for secession.

Boris Johnson’s master plan

He couldn’t help himself, could he?

Barely two weeks after being criticised by fellow cabinet members for setting out his competing vision for Brexit, Boris Johnson was at it again.

Johnson is in campaign mode and this time he went to The Sun to impose four “red lines” for the Brexit talks on his boss, Theresa May.

The transition period should be two years max “and not a second more”; Britain shouldn’t accept new EU rules in the transition phase; no paying for Single Market access after the transition; and no “shadowing of EU rules”.

Though Downing Street insisted Johnson’s views weren’t inconsistent with the government’s, May will have cursed under her breath when she read Johnson’s latest instructions.

Still, Johnson can’t count on enough support to overthrow May, so a leadership challenge this month seems unlikely.

More likely is he’ll let Theresa May ‘in charge’ for the remainder of the Brexit talks while publicly chipping away at her authority as he has been doing of late.

By setting out his own Brexit ‘red lines’ in papers like the Telegraph and the Sun, he could be setting himself up perfectly to relieve May of the PM job.

His frequent public interventions on Brexit, which clearly undermine his PM, help the Foreign Secretary in this respect.

By going beyond his job brief, he’ll come across to the public as an influential government voice on Brexit. The Sun has even started calling him a “Brexit Beast”, whatever that means.

And that’s exactly what Johnson wants.

If the general public likes the way Brexit’s looking in a year or so, Johnson could take (part) credit. He could claim his interventions helped steer May towards a successful outcome.

If the British government’s efforts fail for whatever reason, Johnson could point to all those column inches he wrote going against May’s vision.

‘Should’ve gone with my plan,’ he’ll say.

As I wrote two weeks ago, the bad timing of Johnson’s interventions has made him vulnerable. May would get a lot of backing if she were to discipline him.

The time to rid herself of this insubordinate minister is now.

As one senior Conservative MP told the Financial Times, the PM is in a much stronger position than she may realise.

“The vast majority of the Tories would support her if she imposed discipline on the cabinet.”

May can’t expect her Johnson problem to go away by itself. The past days have proved as much. The Foreign Secretary is not going to be silenced.

May urgently needs to bring back party discipline if she’s going to have any form of success negotiating Brexit.

To re-establish her authority, she can’t keep letting Johnson get away with his insubordinate behaviour.

“Boris is Boris” is how May excused her Foreign Secretary last time. How much longer will Johnson be allowed to be himself without consequences?

Could Catalonia become a black swan?

Meanwhile the Spanish state is fast losing its authority over one of its most prosperous regions – Catalonia.

Not even the excessive force that was used against its own people allowed the Spanish authorities to stop the referendum taking place.

How did the markets react to the events in Catalonia?

The euro was pushed lower against the US dollar but not significantly. It fell 0.4% to $1.1766.

As such, in-house currency trader Tom Tragett doesn’t expect the Catalan referendum to be a game changer for the Eurozone in itself.

“But it is just the sort of potential ‘Black Swan’ development that could set in place a chain of events that might be [a game changer], further down the road,” writes Tom this morning.

When Tom uses the term ‘Black Swan’, he means an event that comes out of the blue and has a big (negative) impact.

I think he could be right. After all, the Catalan question puts the EU in an awkward position.

While it’ll officially say it’s an internal matter for the Spanish state, Brussels can’t turn a blind eye to the brutal way the central government has tried to mar the referendum.

Though Madrid didn’t authorise the referendum, the fact that it went ahead anyway didn’t justify the police brutality that was on display yesterday.

The EU has (rightly) criticised Poland and Hungary recently for undermining their democracies. The Polish government tried to interfere with the independence of the courts, while the Hungarian government undermined the free press.

Brussels will have to speak out against the Spanish state if it doesn’t want to be accused of double standards when it comes to Western and Eastern European states.

That could drive a wedge and threaten the European project in the long run.

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