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EU to plough ahead with UK trade talks despite Johnson rebuff

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French president Emmanuel Macron put the situation bluntly on Friday: the UK still needs a post-Brexit trade deal more than the EU does. 

Speaking after UK prime minister Boris Johnson excoriated the state of the Brexit talks, and told Britain’s businesses to prepare for a hard exit from the EU single market in 11 weeks time, Mr Macron insisted that the EU retained the upper hand. 

“The British, no matter what was said to them during the referendum campaign, need the European single market,” he said after an EU summit in Brussels on Friday. “They are much more dependent on us than we are on them”.

That calculation underpinned a decision in Brussels to prepare for further talks in London despite Mr Johnson’s insistence that only a “fundamental” rethink of the EU’s demands could unblock negotiations. 

“There is no point in trade talks if the EU doesn’t change their negotiating position,” said a UK spokesperson.

Britain’s threat to abandon the discussions was widely seen in Brussels as a negotiating ploy. Mr Macron said that Michel Barnier, the EU’s chief negotiator, has been authorised to “continue talks for the coming two weeks”, while Ursula von der Leyen, the commission president, wrote on Twitter that, “as planned”, officials would head to London next week “to intensify these negotiations”.

EU officials also noted the real stakes for Britain in walking away. Leaving the talks and pursuing what the UK calls “Australian-style” terms would mean EU import tariffs on UK goods, notably on agricultural produce, and a loss of access rights for services providers from lawyers to truck drivers. 

The message was echoed by UK business groups, which warned that many companies were not prepared for the disruption, red tape and expense of having to trade with EU counterparts next year. 

Carolyn Fairbairn, CBI director-general, said that “this was no time to give up”. She added: “A deal is the only outcome that protects Covid-hit livelihoods at a time when every job in every country counts.”

British carmakers would face new tariffs while Michael Gove, Cabinet Office minister, has admitted that leaving the EU without a deal would have a “significant and damaging” effect on farmers, who would face tariffs of at least 40 per cent on sheep meat and beef.

In his short televised statement, Mr Johnson focused his ire on the EU summit, which was held on the date he had identified as the deadline for a deal. Officials in London seized upon a decision by EU leaders on Thursday to delete a pledge to intensify talks from its concluding statement. (EU diplomats said the change was made to avoid making it look like pressure was being placed on Mr Barnier.)

A senior UK official with knowledge of the talks said the mood on the UK side was “very gloomy” and that the EU leaders’ summit conclusions demanding that London make the first move in search of a deal had landed like a “cup of cold sick”.

Mark Rutte, the Dutch prime minister, admitted after the summit there had been a “misunderstanding” about the wording of the conclusions, leaving the UK with the false impression that the EU was asking it to make all the concessions.

“On our side we also think we should speed up, together,” Mr Rutte said.

That message was shared by other EU leaders, including Angela Merkel, who insisted a deal is still there to be done if both sides compromise. “We have seen some light in the last few days of negotiations, but also shadow,” the German leader said on Friday afternoon. 

The question now is how to overcome the deadlock. The three key sticking points are the vexed questions of EU fishing rights in UK waters, “level playing field” conditions to prevent unfair competition between British and EU companies, and dispute-settlement arrangements for the deal. 

While there has been intense focus in recent days on the stand-off over fisheries, Ms Merkel and Mr Macron stressed that the question of fair competition — notably in the area of state aid — is crucial, with the French president saying it is the “principal problem, the number one”. 

Even as leaders called on the UK to cede ground on that issue, the bloc gave its clearest indication yet that it is ready to explore creative compromises on the highly sensitive issue of fishing.

Mr Macron acknowledged that life will indeed have to change for France’s fishing fleet.

“Will the situation be the same as today? No, for sure, our fishermen know it, we know and we will be at their side,” he said. “Can we accept a Brexit that sacrifices our fishermen? No, equally not.”

France’s leader said he knew that access “will not be of the same nature, it will not be as ambitious as now”. 

“It will be doubtless be with conditions, perhaps with a fee. But it must be long-term because we must give each other visibility,” he said. 

Many Conservative MPs still believe Mr Johnson will strike a “five minutes to midnight” deal with the EU and the pressure on him to compromise with Brussels from business leaders and farmers will be intense as the clock ticks down to the end of the Brexit transition period on December 31.

Brussels believes that talks could continue until early to mid-November if needed even though it will dramatically squeeze the timetable for ratification. 

Peter Mandelson, former EU trade commissioner, said: “There is now too little separating the two sides for either to afford a no-deal outcome. Of course Downing Street will inflate their language to put pressure on the EU. But my judgment is that Johnson is too weak politically to have the commotion of no-deal coming on top of the Covid mayhem.”

Additional reporting from Mehreen Khan, Guy Chazan, Dan Thomas, Michael Pooler and Peter Foster





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Analysis

Iranian TV action thriller delivers warning to Zarif

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It is hardly surprising that Mohammad Javad Zarif, Iran’s foreign minister and nuclear negotiator, is not a fan of Gando, a popular television drama that depicts an incompetent minister who scuppers nuclear talks with world powers by hiring dual nationals who turn out to be spies for MI6.

The series — made by an institute believed to be affiliated to the elite and hardline Revolutionary Guards — “is a lie from the beginning to the end” that “damages foreign policy more than me” by fuelling public mistrust, Zarif said.

By focusing on the nuclear talks, the Guards’ motive goes beyond creating compelling drama, reformist analysts say. Iran is in discussion with western powers about reviving the nuclear deal, a key reformist achievement, and hardliners want to deter the popular foreign minister from declaring his interest in the presidency in what is a crucial election year.

“I’ll be grateful to Gando-makers to let us continue our current job,” Zarif said this month, and commented that he would not run for the presidency.

The possibility of nuclear talks with the US and other powers has complicated an already fraught Iranian political scene ahead of the June election. Many reformists are pinning their hopes on Iran’s top diplomat to reinvigorate the nuclear deal and boost support at the ballot box. Hardliners might prefer to negotiate the deal themselves after the election. The polls are also seen as particularly crucial in case supreme leader Ayatollah Ali Khamenei, 81, dies during the next president’s term.

Pendar Akbari, left, and Ashkan Delavari, right, in a scene from ‘Gando’
Pendar Akbari, left, and Ashkan Delavari, right, in a scene from an episode of ‘Gando’. The series title refers to an Iranian crocodile able to distinguish its friends from its enemies © Bahar Asgari/Shahid Avini Cultural and Artistic Institute via AP

The purpose of Gando, which refers to an Iranian crocodile able to distinguish its friends from its enemies, “is to tell Zarif that should he dare to announce his candidacy, he will be destroyed immediately,” said one reformist analyst. “When the intelligence service of the Guards truly believes in the Gando plot lines, it means even if Zarif decides to defy such warnings, he will not be allowed to run.”

Centrist president Hassan Rouhani is due to step down this year after two terms and it is not yet clear who the presidential candidates will be. Politicians register as late as May and then have to be vetted by the Guardian Council, the hardline constitutional watchdog, which can disqualify nominees. Potential hardline candidates include Mohammad Bagher Ghalibaf, the parliament speaker and a former guards commander; Ebrahim Raisi, the judiciary chief; and Ali Larijani, a former speaker of parliament. On the reformist side, speculation has centred on Es’haq Jahangiri, first vice-president, Hassan Khomeini, a grandson of the founder of the Islamic republic, and Zarif.

A US-educated career diplomat widely respected in the west for his pragmatism, Zarif was instrumental in the historic deal in 2015, under which Iran curbed its nuclear activity in exchange for the lifting of sanctions. But Donald Trump abandoned the accord in 2018, imposed sanctions, including on Zarif, and said he would pursue a new accord to contain Iran’s regional and military policies. The US move emboldened hardliners, confirming to them the untrustworthiness of the US.

Zarif’s background in the US both as a university student and as Iran’s head of mission at the UN — during which he met US politicians including then senator Joe Biden — has long made him a source of suspicion for hardliners.

This wariness of both Zarif and the west is evident to viewers of Gando, as is the heroism of the Revolutionary Guards. Mohammad, the action hero protagonist, warns that western negotiators may sabotage refineries as part of nuclear talks. Mohammad works out of elaborate facilities akin to those in a James Bond film. The fictional foreign minister is advised by a media adviser, the main culprit, “to enter into direct talks with the US and accept the conditions of the leader of the global village”.

Vahid Rahbani in a scene from an episode of ‘Gando’
Vahid Rahbani in a scene from an episode of ‘Gando’. State TV abruptly stopped broadcasting the series that was less than halfway through its 30-episode run © Hassan Hendi/Shahid Avini Cultural and Artistic Institute via AP

The dramatic scenes reflect, in part, the worldview of some of Zarif’s critics. “Reformists, Mr Zarif and his lobby group in Washington [Iranian dual nationals] should be wiped out from Iran’s politics,” said an aide to a senior hardline politician who is a potential presidential candidate. “We have to get rid of this cancerous tumour once for good.”

Gholamali Jafarzadeh, a former conservative member of parliament, said Zarif “is not a good statesman and should not run for president” while “reformists should know that their choices have no chance to be allowed to run”. 

This month, state TV abruptly stopped broadcasting the series that was less than halfway through its 30-episode run. Local media said broadcasts would resume when the presidential race was over. Iran’s centrist president Hassan Rouhani, whose signature achievement is the nuclear deal — alluded to the show on Wednesday and said “people’s money” should not be spent on “fabrication of the truth” and “distortion of facts”.

After three years of sanctions, many voters are disillusioned by the infighting and the prospect of real change, whatever the outcome of the election. “Whether Zarif or a figure more senior than him runs or not, I’m not going to vote,” said Hamid, a 40-year-old engineer. “Let the Guards win the election as they are the ones who are running the country anyway. Why shall I make a fool of myself?” 



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Rising inflation complicates Brazil’s Covid-19 crisis

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After seven months in lockdown, Michele Marques received some unwelcome news when she returned to work: while she was away the prices of almost all the products she uses as a hairdresser had soared.

“A box of gloves rose 200 per cent. Colouring products increased at least 100 per cent,” said the 37-year-old from São Paulo, underlining how costs were rising while her revenue had collapsed. “I had to raise the price of my services, too.”

It is a dynamic that is playing out across Brazil, adding an extra layer of complexity to the country’s coronavirus crisis, which has already claimed the lives of almost 350,000 individuals and pushed hospital services to the brink.

With much of Latin America’s largest economy being shuttered, inflation is surging to its highest level in years, fuelling a silent scourge of hunger among poorer citizens that has run in parallel to the Covid-19 pandemic.

“The high price of staple foods — rice and beans, for example — has led to the disappearance of these items from the table of millions of Brazilians,” said Ana Maria Segall, a researcher at the Brazilian Research Network on Food and Nutritional Sovereignty and Security. In the 12 months to the end of March, the price of rice increased 64 per cent and black beans 51 per cent.

“In Brazil currently food inflation has penalised the very poorest, preventing them from having adequate access to food and in many situations leading to hunger,” she said, adding that rising unemployment and the curtailment of social programmes were also contributing factors.

Volunteers hand out food in São Paulo © Alexandre Schneider/Getty Images

Less than half of Brazil’s population of 212m now has access to adequate food all the time, with 19m people, or 9 per cent of its inhabitants, facing hunger, according to a recent report by Segall’s group.

“I’m doing some odd jobs, but it’s not enough to keep us going,” said Jonathan, a 28-year-old who lost his job in the kitchen of a Chinese restaurant in São Paulo when the pandemic began. He said he now struggles to provide enough food for his three young children and pregnant wife.

On a 12-month basis, inflation in June is expected to surpass 8 per cent, far above earlier estimates. In the 12 months to March, food prices jumped 18.5 per cent, while the price of agricultural commodities in local currency surged 55 per cent and the cost of fuel increased almost 92 per cent.

Line chart of Percentage increase over past 12 months showing The price of rice in Brazil is soaring

The developments pose a fresh challenge to President Jair Bolsonaro, who is already under fire for his handling of the Covid-19 pandemic. Across Brazil’s biggest cities, graffiti has sprung up labelling the populist leader “Bolsocaro” — a portmanteau of his name and the Portuguese word for expensive.

The rising prices are also likely to provide useful ammunition to leftist former president Luiz Inácio Lula da Silva, who returned to the political fray last month and may challenge Bolsonaro in elections next year.

“Bolsonaro is to blame for the increase in food prices, he is to blame for everything. They have to remove this guy,” said Maria Izabel de Jesus, a retiree from São Paulo.

Armando Castelar, a researcher at the Brazilian Institute of Economics, said the government had underestimated inflation both in terms of the numbers and also “how much a concern it should be”.

He attributed the rising prices to the devaluation of the Brazilian currency, triggered in part by the stimulus packages passed by the US government — which helped to bolster the dollar and led to higher Treasury yields — and the brighter economic outlook outside Latin America.

“You have a situation where commodity prices are going up because the global economy is going to grow a lot this year. With the growth in the US, interest rates are going up and the dollar is strengthening. This puts a lot of pressure on the exchange rate in Brazil and emerging markets in general,” he said.

As the spectre of inflation loomed last month, the Brazilian central bank raised its key interest rate by 75 basis points, higher than the half-percentage point many economists had expected. A further rate rise is expected next month.

“The central bank acted correctly, but it cannot stop there. It is important not to be too lenient in dealing with this,” said Castelar.

Silvia Matos, a co-ordinator at the Brazilian Economy Institute, also pointed to Brazil’s weakening currency as a contributing factor to inflation. But she said the slide in the real was triggered by investor concerns over Brazil’s deteriorating public finances.

Following the creation of two separate stimulus packages to mitigate the impact of Covid-19, government debt has risen to about 90 per cent of gross domestic product, a high level for an emerging market economy.

The rollout of the second of these packages began this month, with 45m Brazilians set to receive $50 a month for four months.

Critics said, however, these stipends were not nearly enough to keep people both fed and at home in lockdown.

“It is essential that the emergency aid is of a greater value, so that people do not leave the house but no one also stays at home starving,” said Marcelo Freixo, a federal lawmaker with the leftwing PSOL party.

“We need to reduce the circulation of the disease. Brazil is already experiencing 4,000 deaths per day. We will reach 500,000 total deaths by the middle of the year.”

Matos says that inflation had hit poorer citizens much harder than middle-class and rich Brazilians because a larger portion of their income was dedicated to food, the price of which has increased substantially.

“The only thing that could help right now is to get out of this pandemic,” she said.

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Can CVC pull off a $20bn ‘deal of the century’ at Toshiba?

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Proposed management buyout looks like an improbable win for the Japanese conglomerate’s embattled CEO



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