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Pound hits highest level since 2018 on hopes of Brexit trade deal

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Sterling hit its highest level in more than two years on Wednesday as hopes increase in Westminster that a post-Brexit trade deal with the EU could be ready for approval before Christmas.

The pound climbed as much as 0.65 per cent to $1.3548 after British MPs were put on standby for an extended House of Commons sitting next week, which could provide an opportunity for lawmakers to scrutinise any deal. The last time it traded at these levels was in May 2018.

In addition to growing investor expectations of a deal, sterling’s rise was aided by broad weakness in the US dollar. The British currency was recently up 0.2 per cent against the euro at €1.1095.

Ursula von der Leyen, European Commission president, on Wednesday morning confirmed that “there is a path to an agreement now” even if it “may be very narrow”.

She highlighted progress on the previously difficult issue of state aid and more broadly on agreeing dispute-settlement arrangements for the new relationship. But she cautioned that some issues around fair competition for business were not settled and that talks on fishing rights were “still very difficult”.

One ally of UK prime minister Boris Johnson said there was “certainly no breakthrough” and that a no-deal scenario was still the most likely outcome.

Line chart of $ per £ showing UK pound rallies to strongest level since May 2018

But in London and Brussels, the debate has turned to how any possible deal might receive parliamentary scrutiny ahead of the end of Britain’s post-Brexit transition period on January 1. Betting markets put the prospect of a deal at more than 70 per cent.

Some Conservative Eurosceptic MPs have indicated they could tolerate the deal taking shape. Jacob Rees-Mogg, leader of the House of Commons, is clearing the decks to legislate on the details of a deal at breakneck speed.

Mr Rees-Mogg has not moved a “recess motion”, suggesting that plans for parliament to rise for its Christmas break on Thursday have been scrapped.

“It’s highly likely we’ll be sitting next week,” said one senior government official.

Although MPs would want to debate a possible no-deal outcome next week, ministers hope the extra time will instead be used to legislate for a deal.

One British official said talks in Brussels last weekend had been “positive” and that progress had been made on resolving the biggest outstanding issue: a new level playing field to ensure fair competition.

Eurosceptic MPs said they could accept what the EU calls “a rebalancing mechanism”, which would allow both sides to call foul if they felt they were being unfairly undercut on regulations.

The mechanism would involve an arbitration panel to determine whether any harms caused by regulatory divergence were serious and to ensure any punitive sanctions were proportionate.

Some Conservatives have called this a “freedom clause” because it would allow the UK to set its own regulatory course, albeit with the possibility of an orderly sanctions regime if the divergence became too great.

Speaking at the European Parliament on Wednesday morning, Ms von der Leyen said that “difficulties still remain on the question of how to really future-proof fair competition”. 

But she signalled that fisheries was now the most intractable issue in the talks, saying: “It sometimes feels that we will not be able to resolve this question. But we must continue to try.”

Andrea Leadsom, a pro-Brexit former cabinet minister, said she thought there would be a deal: “The key has always been to make sure that any deal is fair to both sides and doesn’t give one side undiluted power and is a relationship between two sovereign bodies.”

John Hayes, a Brexit-supporting former minister, said he also expected an agreement “if the EU have removed their unilateral threat over the level playing field”. He said negotiators could then “move on to the final issues such as fishing”. 

Mr Rees-Mogg told a ConservativeHome podcast on Tuesday that ideally there would be six days between a deal being signed and the Queen giving her Royal Assent to legislation, with one day each for debate in the Commons and Lords. But he said the process could be “truncated”.

The developments came as the European Parliament sought to pressure the European Commission to move quickly so it has enough time to scrutinise any deal in time for ratification. Senior MEPs are concerned that if negotiations drag on too close to Christmas they will not have sufficient time to examine the highly complex trade deal before giving it their endorsement.

They expressed their frustrations about the slow progress in a call with Ms von der Leyen on Monday, according to people familiar with the discussions. 

Michel Barnier, the EU’s chief Brexit negotiator, told ambassadors on Monday that a deal could be approved in time if it was struck within a few days. But he added that if the discussions dragged on a lot longer, the two sides could be forced into a short-term, no-deal scenario early in the new year before any trade agreement could be brought into effect. 

This would be a disruptive outcome, however, which officials are eager to avoid. One alternative would be to bring the deal into “provisional” application, under which it takes force on time subject to ratification by the European Parliament down the line, said an EU official.

But the commission and the parliament are sceptical of that route because of the legal complications it would entail. 

Meanwhile, the UK Cabinet Office will on Wednesday carry out “Operation Capstone” to war-game various no-deal scenarios such as border disruption. 

It has emerged that a lorry park designed to relieve road congestion in Kent will not be fully operational on January 1.

The site at Sevington — with space for 1,200 lorries to park — will not be ready for customs checks until February, officials confirmed on Tuesday. Instead, the checks will have to take place at another site in Ashford. 



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Fears grow over media independence in Czech Republic

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European media groups have warned that the independence of the Czech public broadcaster is under mounting pressure, ahead of a parliamentary election in the central European nation later this year.

Czech Television (CT) remains one of the few independent public broadcasters in central Europe, where governments in countries such as Poland and Hungary have reduced public media to their mouthpieces.

However, media groups and Czech opposition politicians are worried that new appointments to CT’s governing body, which are due to be voted on in the next parliamentary session starting today, could lead to CT’s autonomy being undermined.

Czech MPs are set to pick four new members of CT’s governing body, the Council. The Council does not directly control the broadcaster’s content, but has the power to fire its director-general.

Opposition MPs have claimed that candidates on the shortlist for the four open positions on the 15-strong Council have been picked not for their media expertise but because their views align with those of the ANO party of prime minister Andrej Babis and its allies.

Czech Republic prime minister Andrej Babis owned various media titles including two big newspapers through his company Agrofert © AP

MPs from ANO deny this. “For us, the only criterion is whether the candidates have met all the requirements for selection required by law,” Stanislav Berkovec, an ANO MP, told the website iRozhlas.cz last month.

However, the situation in Prague has prompted the European Broadcasting Union, which represents public service media, to issue an unusually strong warning about governments across Europe “trying to silence opposition voices by restricting freedom of the press”.

EBU director-general Noel Curran and Delphine Ernotte, the chief executive of France Televisions and EBU president, have written to Czech MPs urging them to protect the independence of the national broadcaster.

“In recent months, it has become alarmingly clear that the Czech Republic’s government is trying to exert pressure on [the independence of Czech Television], directly and indirectly,” the EBU said in a statement.

“It may be that only pressure from outside will preserve the hard-won independence of a public-service broadcaster that is crucial . . . to the democratic future of a nation often seen as a bulwark against authoritarianism in central and eastern Europe.”

The Vienna-based International Press Institute, a media watchdog, has expressed similar concerns, warning that the manoeuvring around the Council appointments could, in the worst case, pave the way for the removal of the current director-general of CT, Petr Dvorak.

“We find it hard to avoid the conclusion that the real aim is to fill the CT Council with enough figures who are critical of Dvorak to ensure that there is a majority to vote to dismiss him when the opportunity arises,” it said.

Observers say that CT’s independence is particularly important, given that many private Czech media groups are controlled by oligarchs. Prime minister Babis, himself a billionaire, owned various titles including two big newspapers through his company Agrofert, before he put his assets in trust in 2017.

“Czech public television, especially its information channel, is one of the most trusted of sources of information, especially concerning the pandemic . . . It is also one of the few which has overall reach and can get to everyone in the country,” said Martin Ehl, a senior journalist at Hospodarske Noviny, a leading Czech daily, and senior associate at the think-tank Visegrad Insight. “It is very important in this media environment, where different oligarchs own different media.”

The battle in Prague comes ahead of a parliamentary election in October, in which Babis’s ANO, which has headed a coalition government for the past four years, is facing a serious challenge from opposition parties. A poll last month put ANO second behind the centrist Pirate party.

The battle also has echoes of conflicts around Europe as public broadcasters in various countries are fighting to preserve their independence against governments who are aggressively seeking to influence output, or hobble the organisations by cutting taxpayer funding. 

Poland and Hungary are the most striking examples of how public broadcasters have been turned, through management and staff changes, into enthusiastic champions of the ruling party’s illiberal political agenda. But MEPs and campaigners fear the tactics are spreading to countries such as Slovenia, the Czech Republic and beyond. 

Adam Cerny from the Czech journalists’ group, Syndikat Novinaru, said there was “increasing risk” that the Czech Republic could go in the same direction as Poland and Hungary. But he expressed scepticism that ANO would want to have a such a big fight before the election. “I don’t think that Babis wants open political confrontation because of Czech TV,” he said.



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CDU leadership backs Armin Laschet’s bid to be German chancellor

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Armin Laschet won a key victory in his campaign to succeed Angela Merkel when the party he leads, the Christian Democratic Union, backed him as their candidate for chancellor in September’s Bundestag election.

The CDU governing executive’s decision to back Laschet was a setback for Markus Söder, governor of Bavaria, who has also laid claim to the title.

The move was expected, but could prove controversial. Söder is by far the more popular politician, and many CDU MPs had argued in recent days that the party would have a much better chance of winning September’s election with Söder as their candidate.

After throwing his hat into the ring on Sunday, Söder said he would accept the CDU’s decision. However, it is still unclear whether his party, the Bavarian Christian Social Union, will accept Laschet as the CDU/CSU’s joint candidate. The CSU’s executive is meeting later on Monday.

Sunday’s events threw the process for finding a successor to Merkel, who will step down this year after 16 years as Germany’s leader, into confusion. The CDU and CSU traditionally field a joint candidate for chancellor: that person is usually the leader of the CDU, which is by far the larger party.

Volker Bouffier, governor of the western state of Hesse, said the CDU’s executive had unanimously backed Laschet at a meeting in Berlin on Monday morning. He added, however, that no formal decision had been made on the issue.

Bouffier said the executive had made clear “that we consider [Laschet] exceptionally well-suited and asked him to discuss together with Markus Söder how we proceed”. He added that “the current polls should not determine the decision over [who we choose as] candidate”.

Since Laschet was elected CDU leader in January, the party has suffered a precipitous slump in the polls and that created an opening for Söder. He has frequently argued that the CDU/CSU’s joint candidate should be the politician with the best chances of winning in September.

Voters have blamed the CDU for the government’s recent missteps in its handling of the coronavirus pandemic, in particular the slow pace of Covid-19 vaccinations. Revelations that a number of CDU and CSU MPs earned huge commissions on deals to procure face masks also badly damaged the party’s image.

The malaise in the CDU was highlighted last month when it slumped to its worst ever election results in the two states of Baden-Württemberg and Rhineland-Palatinate, which for decades had been Christian Democrat strongholds. National polls currently put support for the CDU/CSU at between 26 per cent and 28 per cent, way down on the 33 per cent it garnered in the last Bundestag election in 2017.

There was more bad news at the weekend for Laschet, who as well as being CDU leader is also prime minister of North Rhine-Westphalia, Germany’s most populous state. A poll for broadcaster WDR in NRW found that only 26 per cent of voters in the state are satisfied with the work of the regional government Laschet leads and only 24 per cent of voters consider him a suitable candidate for chancellor.

The slide in the CDU’s fortunes contrasts with the rise of the Greens. The party garnered 8.9 per cent of the vote in 2017 and is now polling at 23 per cent. It is seen as a racing certainty that it will be part of Germany’s next government.



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EU and UK edge towards accord on trade rules for Northern Ireland

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The UK and the EU are making progress in talks on how to apply post-Brexit trade rules in Northern Ireland, raising hopes of an agreement that could help reduce tensions that have spilled over into violence on the streets of Belfast.

Officials on both sides said that recent days of intensive contacts had given cause for optimism that the UK and EU can craft a “work plan” on how to implement the Northern Ireland protocol, which sets the post-Brexit terms for goods to flow between the region and Great Britain. EU Brexit commissioner Maros Sefcovic and his UK counterpart David Frost may meet to review progress this week. 

“They are advancing on a technical level and probably we will see a [Frost-Sefcovic] meeting rather sooner than later”, said one EU diplomat, while cautioning progress depended on firm commitments from the UK and its “unequivocal support” for the Brexit withdrawal agreement.

Other EU diplomats and officials said strong UK engagement in the technical talks on implementation of the Northern Ireland protocol had raised hopes that an understanding could be reached. 

“The mood seems to have warmed up a bit — the tone of the discussions is quite good,” said one British official. 

The talks are a follow up to a draft plan about implementation of the Northern Ireland protocol that was submitted by the UK to Brussels at the end of last month — a step the EU said was essential to rebuilding trust after Britain unilaterally extended waivers for traders from some aspects of the rules in March. This move prompted EU legal action.

The discussions between British and EU officials in recent days have taken place against the backdrop of violence in Northern Ireland, stoked in part by resentment within the unionist community at how the protocol treats their region differently to the rest of the UK.

From April 2 there were eight consecutive nights of unrest in Northern Ireland, involving both unionist and nationalist areas. The police responded by deploying water cannons for the first time in six years.

The Brexit deal placed a trade border down the Irish Sea in order to keep commerce seamless on the island of Ireland. The Northern Ireland protocol requires customs and food safety checks for goods entering Northern Ireland from Great Britain.

Officials said the EU-UK talks now under way about implementation of the protocol cover a wide array of practical issues ranging from trade in steel and medicines to the policing of food safety standards, how to deal with residual soil on plant bulbs, and the construction of border inspection posts. 

“Technical talks are ongoing”, said an EU official. “Depending on the progress made at technical level, a political-level meeting may be held soon.”

But EU diplomats and officials also cautioned that more work remains to be done, especially on the thorny issue of applying food safety checks. Difficult talks also lie ahead on the timetable for putting particular measures in place.

Meanwhile Downing Street played down a report in The Observer that it was resisting proposals by Dublin for a special crisis summit to address the outbreak of violence in Northern Ireland.

“We have not refused anything,” said a Number 10 official. “It’s something we will consider.”

However there are concerns on the British side about the wisdom of holding a summit in Northern Ireland with Irish government ministers at a time when pro-UK loyalist groups have been engaged in street violence.

Irish officials said taoiseach Micheál Martin and British prime minister Boris Johnson have spoken and would “maintain close contact over coming days”.



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