Brexit: What a “No Deal 2.0” means for Germany

Dhe daily video press conference of the EU Commission is the place where correspondents in Brussels address urgent questions to the authority. Brussels coordinates border openings and vacation rules in the Corona crisis, puts together a 750 billion euro stimulus package with two dozen legal texts and a new draft for the one trillion euro budget.

That a significant negotiation on Brexit is going into the last round this week – side note. Boris Johnson has to make a decision with potentially serious consequences by the end of June. Since the British left on 31 January last, all EU rules continue to apply in a transition phase. If Johnson does not renew it on time, he may release all lines on December 31, 2020 without an agreement.

Because the important fourth round of negotiations has not brought a breakthrough for an agreement between Brussels and London. “It is my responsibility to tell the truth,” said EU negotiator Michel Barnier. “There was no significant progress this week.” And he added, “We can’t go on like this forever.” Nevertheless, the talks should continue. Otherwise the “No Deal 2.0” threatens.

What does that mean for Germany?

Economic relations between Germany and Great Britain have already decreased as a result of Brexit. The United Kingdom was in seventh place in the export rankings before the Corona crisis. At the time of the Brexit referendum in 2016, it was still fifth. Trend: Falling further. In addition, German companies are replacing previous suppliers in Great Britain with suppliers in continental Europe because the supply chains threaten to become slower and more expensive.

Now there could be considerable costs. If there is no free trade agreement by the end of 2020, WTO tariffs will have to be raised. It is already known that London will impose a ten percent duty on cars to protect its own businesses. Planned import duties also make agricultural products more expensive, to the delight of British farmers.

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Britain is more dependent on Europe than the continent on the island. “A ‘no deal’ would have far more dramatic consequences for Great Britain than for Germany and the rest of Europe,” says Bernd Lange (SPD), chairman of the trade committee in the European Parliament. “Around half of UK exports go to the EU, but only 6 percent of EU exports go to the UK.”

What are the consequences for the British?

Because of the Covid 19 pandemic, economists forecast the worst economic downturn in 300 years and a 14 percent drop in GDP. A “no deal” could mean another five to seven percent. Because an end to the transition period without agreement could exacerbate a desolate situation because the prices of imported goods rise due to new tariffs. In addition, all exports and imports suddenly have to be checked, which leads to congestion.

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Great Britain and Corona – – – – –

79 percent of the goods on British supermarket shelves come from the EU. “There can be massive bottlenecks in the supply of food from the EU, for example fresh fruit and vegetables. In addition, the British economy will hardly have any storage capacity because the warehouses are occupied by the Christmas season, ”says Sam Lowe, trade expert from the Center for European Reform. According to Lowe, the supply of British pharmaceutical manufacturers with EU chemicals could be at risk – “just in times of corona and the annual wave of influenza”.

Why is Boris Johnson taking such a risk?

Johnson has won the presidency of his party and the general election as “Mister Brexit”. In previous rounds of negotiations, his chief negotiator David Frost has therefore always faced confrontation. Most recently, he criticized Brussels’ “ideological approach” because the EU insisted on the establishment of fair competition rules from 2021. London insists that as a sovereign state at last it will not be subject to any regulations, arguing that the EU did not set Canada competition rules in the free trade agreement.

For Europeans like SPD politicians not negotiable for a long time: “An agreement like that with Canada is not acceptable for Europe. Britain could attract companies with poorer labor rights, lax environmental standards and low taxes under such an agreement. A dumping island with full market access, we will not accept that. ”

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London, however, sticks to its hard line. “If the EU is not ready for an agreement – good too. We are now a sovereign country and govern ourselves. We can easily act on the basis of WTO rules, ”said Tory MP Mark Francois WELT. “The end of the transition period on December 31st is legally stipulated. The law would have to be repealed by the lower house – unimaginable. “

Raoul Ruparel, former European advisor to ex-Prime Minister Theresa May, also sees tactics behind the tough demeanor, both externally and domestically. “The government thinks the time pressure in autumn will be so great that the EU will compromise. At the same time, she calculates that a ‘no deal’ will not be felt that much in the face of the expected corona shock in the country, ”he says to WELT. He advises both sides in the negotiations on flexibility. A farewell without an agreement would harm both sides, even more in the shadow of the corona crisis.

Why could Angela Merkel play a crucial role?

Germany will take over the EU Council Presidency in the second half of 2020. Since a crash is now expected in June, the decisive rounds of negotiations fall under German leadership. This is entirely to Johnson’s taste, who had already collided in October 2019, but reached an agreement at the last moment.

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The question is whether the Chancellor, who is interested in good relations with London, leaps over her own shadow and seeks compromises. Right after the Brexit vote in 2016, she was one of those who insisted on a strict competitive framework. In addition, Merkel would have to deal with French President Emmanuel Macron, who has always been tough on the British.

EU voices therefore give warning voices towards London. The compromise on the exit agreement found in 2019 was more important for the EU-27 than a future free trade agreement. It ensured the rights of EU citizens in Great Britain, an open border in Northern Ireland and the British money to be paid to Brussels.

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