Friday, February 15, 2019

Thoughts from Galicia, Spain: 15.2.19

Spanish life is not always likeable but it is compellingly loveable.
          Christopher Howse: A Pilgrim in Spain
Spain
  • The FT says that New elections loom as Spain is stuck in a cycle of instability. The article is behind a paywall, unfortunately. 
  • Here's how some Spaniards - possibly only the minority - see themselves, justifiably.
  • And here's how some foreigners see the Spanish. Equally justifiably.
  • Here's some Galician fears about Brexit.
  • There's a 1942 film I've been wanting to take a look at for some time. It's called Raza and it's said that Franco himself wrote the self-glorifying script. Most IMDB reviewers rate it 1/10(mostly non-Spanish), several rate it 10/10 (all Spanish) and 1 or 2 give it between 2 and 6. I suspect I'll be at the lowest end, as and when I get round to watching in. There are bits on on youtube here, plus a long documentary on it. Which probably isn't very laudatory.
Portugal
  • I went down to Valença yesterday. It's hard to get away from tree logs there, wood pulping being a major industry in North Portugal (and South Galicia). If it wasn't a long train of tree trunks passing through the station, it was trucks with trailers on the main road north-south. Where they are something of a scourge.
Brexit and the UK
  • Article 1 below is from what I regard as a sensible Brexiteer. Others would disagree, of course. Both with him and with me.
Brexit and Expats
  • Here's a useful guide for The Local on what Brits in the EU can expect in their country of residence in the event of a No Deal Brexit.
  • And here's what The Olive Press says every Brit needs to know. Also useful.
Brexit and the EU
  • The second article below is Ambrose Evan Pritchard's view of the real politik of the situation. He might well be wrong, of course. But, again, he seems to be spot on to me.
The USA
  • A Fox News poll found that 25% of Americans believe God wanted Donald Trump to become president,  That's more than 80m people, folks . . . 
Spanish
Finally . . .
  • Good got see that Alan Partridge will be back on the BBC on 26th February. Something to look forward to during the dark winter days. That said, our weather has been magnificent for the last few days, with lots of sun and temperatures as high as 18C.
ARTICLE 1

1. The eurozone’s coming recession will confirm Brexiteers’ warnings: Allister Heath

Remind me: what’s so great about the single market and the single currency again? The latest economic statistics from the eurozone are appalling, and point to a continent that is sleepwalking into a catastrophic recession. Our own establishment is too busy self-flagellating to have noticed, even though a eurozone meltdown would not only hurt British businesses and workers but could transform the Brexit negotiations.

Like the eurozone crisis which destroyed Greece and crippled Cyprus and Italy, this sudden economic storm could change everything. That earlier episode, a near-death experience for the euro, was a seminal moment in the rise of British Euroscepticism. It mattered almost as much as the migration crisis, a point that few Remainers understand because they cannot accept that Brexiteers care about economics, not just sovereignty. 

To Eurosceptics, the quasi-bankruptcy of the Club Med economies in the mid-2010s was the final confirmation that the EU was no longer a land of milk and honey, as it had appeared to be in the 1970s and early 1980s, but an economic basket case with terrifyingly authoritarian tendencies. The French Trentes Glorieuses, the Wirtschaftswunder in Germany and the Auf Wiedersehn, Pet phenomenon – when British workers moved to Europe for employment: all belong to a distant past. 

The issue isn’t so much British strength as European weakness: Brexit voters know that there is much that is wrong with the UK economy but they rightly no longer believe that the EU has any of the answers. Their critique is rational and forward-looking: it is the Remainers who are emotional and obsessed with past dreams, and who still see sunshine, prosperity and peace when they look over the Channel, rather than gilets jaunes and criminal levels of youth unemployment. 

Between 1999, when the euro was launched, and the start of 2017, the latest period for which IMF data is available from Bloomberg, the eurozone’s GDP grew by 26 per cent, against the UK’s 44 per cent and 42 per cent in the United States. Italy is up by just 6.7 per cent and Greece by 1.3 per cent; both have suffered two wasted decades.

If being part of the single market and customs union mattered so much more than any other policy, the eurozone would have boomed. Yet it didn’t, and the voters know they have been sold a pup. If you want to see proper growth, you need to turn to the emerging world, to China (which has multiplied the size of its economy in extraordinary fashion), to India, to Singapore, to Israel (up 98 per cent).

Of course, the UK has underperformed these past two years; and yes, Brexit uncertainty, compounded by the Government’s incompetence, was one important reason. Yet this brief period of EU overperformance is ending. Eurozone industrial production was down a calamitous 4.2 per cent, year‑on-year in December, led by a 6.7 per cent collapse in Spain, 5.5 per cent in Italy and 3.9 per cent in Germany. French industry’s crisis was less pronounced at minus 1.7 per cent; Britain did slightly better again, by shrinking only 1.2 per cent. 

How is any of this possible given that leaving the EU, we are told, is the only explanation for any and all bad economic news? I’m being facetious, of course: China’s downturn, dearer money in the eurozone and America, a general turning of the cycle after years of expansion, as well as some jitters about Brexit, all help explain the looming euro-recession.  Yet listening to Remain propaganda, the EU ought to have discovered the secret to perpetual growth by now.

The reality is, it is still the weakest link in the developed world, a precarious, unsustainable, stagnant construct, its cultural and geopolitical power drained by its inability to grow its economy. No wonder Brexiteers just don’t accept leaving will make us permanently worse off. The two big economic experiments that underpin European integration have failed spectacularly. 

The creation of the single market and its unified regulatory zone has delivered pathetically small results. A decade ago, the EU Commission calculated that it had only increased Europe’s economy by 2.1 per cent, a trivial number. It is likely that the UK will have gained even less: we don’t rely as much on EU markets, we specialise in services (where the single market is less complete), and we already had a more pro-competition environment.

The euro’s failure is even more disastrous. The huge boost to growth it was meant to generate by eliminating transaction costs and uncertainty never materialised. There was no free lunch, no spurt, no permanent upward shift in performance. The downsides have been cataclysmic – mad booms and busts in peripheral economies and the incompatibility between national social democracy and European fiscal policy exposed for all to see. 

One thing is certain: another eurozone crisis would strengthen the Brexiteers’ resolve, even if Britain is also affected. As a tangible EU failure, it would more than cancel out the warnings of Project Fear. It would make Eurosceptics even more sanguine about a no-deal departure.

The inevitable short-term costs of leaving the EU would be attributed – in some cases unfairly – to the eurozone crisis. If French and German factories are shutting, then why blame Brexit for what is happening to Nissan or Airbus?  All of this would also make it harder for the likes of Emmanuel Macron to play hardball: it is one thing to deliberately hurt one’s own economy in order to impose a punishment beating on Britain when that economy is growing; it’s another thing to do so when unemployment is beginning to rise.

Time is actually on our side, for once, assuming that the eurozone doesn’t suddenly bounce back.  If we had a competent government, these are the sorts of discussions it would be having. The Treasury would be trying to mitigate the contagion from a eurozone recession; and No 10 would be seeking to strengthen its hand. Instead, there is nothing: no plan, no strategy, no reaction. But at some point, and soon, the British public will notice what is happening to the eurozone, and it will remember why it voted Leave.

Woe betide the Tories if they betray Brexit under such circumstances.

THE CHECKLIST

The ultimate No-Deal Brexit checklist for Brits in Spain

Maybe a withdrawal agreement maintaining European citizens rights will be struck. Maybe Britain will crash out of the EU and chaos will ensure. Maybe, Brexit will be cancelled all together. We can't predict the future but we can help you be best prepared for whatever comes next.

Here's our 12-point check list:

1.  Make sure that you’re legally resident in your host country.

This is the ONE thing that all Brits living in Spain should make sure they do and has been repeated incessantly by British Embassy and consular staff in the run up to Brexit.

This will provide evidence the date of your arrival in your host country and provides proof that you were legally resident on March 29th 2019, when Britain exits the EU.

This will streamline the process when it comes to applying for whatever residency arrangement is decided after Brexit, whether there is a Withdrawal Agreement or dreaded No Deal.

READ MORE: This is the ONE thing Brits in Spain need to do ahead of Brexit

If you don't have either the A4 green piece of paper or the credit card sized certificate then you may not be officially registered.

2. Register with the Hacienda

Make sure that you’ve submitted income and other tax returns if you’ve been there long enough to do so (even if all your income comes from the UK).

3. Check your healthcare

Make sure that you are registered with Spanish social security and that you have a health card. Your rights may change if there is a no-deal Brexit and the Spanish and UK authorities have vowed to strike a reciprocal agreement so will easier to prove that you were entitled to it if you are already in the system.

If you have health insurance, keep it updated and see if you can guarantee your current rate will be maintained for at least the next year. Premiums might well go up for Brits after Brexit.

READ ALSO: British Embassy ‘reassures’ Brits in Spain over healthcare post-Brexit

4. Exchange your British driving licence for a Spanish one

If you’re still using a UK driving licence, apply to change it for a Spanish one as soon as possible because on 30 March 2019 the EU rules under which UK licences are recognised in the EU27 will lapse if there is no deal. 

In the worst case scenario, you could be required to sit a Spanish driving test.

READ MORE Exchanging your British driving licence for a Spanish one: What you need to know

5. Check your passport

You’ll need to comply with different rules to enter and travel around the Schengen area post Brexit although we don’t yet know what they might be.

There are two important issues that may affect your right to travel or to live here legally after exit, so it’s really important to start thinking about this now.

Firstly, Schengen Border Code rules mean that existing passports which were renewed early and therefore have over 10 years validity will no longer be valid until the expiry date written on the passport, but will be limited to the 10 years immediately after their issue date. For example, if your passport was renewed (under the old rules) 6 months before its expiry date, it would show a valid period of 10 years and 6 months. After 29 March 2019, you will effectively ‘lose’ the last 6 months validity, as third country nationals’ passports must have been issued within the last 10 years. Note: this may affect you even if you don’t travel – in order to remain a legal resident in your host country you need to make sure that the issue date on your passport is later than 29 March 2009.

Secondly, your passport must have at least 6 months’ validity on arrival, after discounting the period above. More details HERE

We don’t yet know what rights, if any, we will have to cross the border to or from any EU27 country if there is No Deal, but dealing with these two issues now is a sensible precaution.

6. Get the paperwork ready

Make a dossier as if you’re applying for a proof of residence or permanent residence document.

Collate all your income, property and other tax returns and notifications since your arrival. You may need them to prove the length of your residence.

Put together a file of utility bills for at least 10 years if you can. This will prove your continued residence.

If your name is not on the income and property tax bills for your household or on any utility bills, get it added now. For anyone who has changed their name through marriage or otherwise: make sure that the name on bills, bank statements, pension statements, payslips etc. matches the name on your passport if possible.

Put together a file of bank statements, wage slips (if employed) or income and other tax declarations (if self-employed), proof of health cover and pension payments and/or pension statements for the last 5 years if you’ve lived in your host country that long. Longer is even better – 10 years is best. You may need these to prove the stability, sufficiency and regularity of your resources.

7. Prepare financially

The following is particularly relevant to those who derive their income or have savings in the UK in sterling, says the British in Europe Group, which campaigns for EU citizens rights post Brexit. 

If you have bank accounts, savings or investments in the UK, consider moving them to your host country now. Sterling may drop suddenly in the case of a no-deal exit; there may also be temporary problems moving money in and out of the EU. If most of your savings and income are in the UK, try and make sure you have access to enough cash in euros to see you through two or three months, especially if your income is transferred monthly.

If you have a personal pension in the UK (this doesn’t apply to state or public service/occupational pensions) and have not yet retired, think about getting advice about how to deal with this and cashing it in if you’re old enough, or moving it. There may be issues with the rights of UK insurers/financial services providers to operate in the EU without having a formal presence there after Brexit and these could cause problems e.g. with insurers making payments to those living outside the UK.  Write to your insurer/private pension company in the UK to ask them what plans they have put in place for post-Brexit scenarios. 

8. Put in place contingency plans to secure your income and minimise your expenses.

This applies particularly if the bulk of your income is in sterling, which may take a serious hit after a no-deal exit. Create a personal financial contingency plan. Look at ways you can cut your spending temporarily, and how you could create additional income, particularly in euros. Get any potentially expensive dental, optical and hearing work done now, in case you have to reduce the cover on your private health insurance (if you have one)!

If you have a business that relies on attracting people from the UK, think about changing your client base. If there is a no-deal Brexit, people may not want to travel to the EU next year and you’ll need to find new clients in the EU 27 if you’re to survive financially. Make sure you have a website in the language of your host country, if you haven’t already, and that you begin to advertise NOW to attract EU27 customers.

If you have a business that relies solely or partly on UK customers/clients, put contingency plans in place now to deal with potential issues with VAT, excise, billing, professional insurance cover, etc.

9. Prepare for applying for long-term residence and think about citizenship.

If you have lived here for more than five years you can apply for permanent residency and if you have been a resident for ten years, you are eligible for citizenship, although you have to pass a language and citizenship test.

READ MORE: Everything you need to know about getting Spanish citizenship 

10. Top up your medication before 29 March 2019.

If you currently rely on an S1 form for access to the local health service and you need regular medication, think about making sure you have a good supply of it on 29 March 2019 – if the worst happens and the reciprocal health care system stops on that date it might take several weeks to get an alternative system up and running and there may be short term chaos. Making sure that you have the permitted 3 months of long-term medication would mean that you’d avoid having to pay full whack for your meds while the situation was resolved.

11. Get your professional qualifications recognised now.

The European Commission has said that, whatever the outcome of the negotiations, Brexit does not affect decisions made pre-Brexit by EU27 countries recognising UK qualifications under the general EU directive on the recognition of professional qualifications (Directive 2005/36/EC).  For details of which qualifications are covered see HERE

So if you have a UK qualification covered by that Directive and you need to be able to use it, apply to get it recognised before 30 March 2019.

12. Make sure that you’re in your host country on 29 and 30 March 2019.

This is probably not the best time to make a family visit to the UK! Transport could be chaotic, with no agreements on air or other travel between the UK and EU.

Ideally it would be best to be in your host country on those dates but if not possible, try to be somewhere in the Schengen zone: 

13. Keep informed

Make regular check-ins to The Local Spain for updates about how Brexit might affect UK nationals. Become a member and sign up to our newsletter for updates straight to your inbox.

FCO website Living in Spain HERE and their Facebook page HERE

Spanish government dedicated Brexit information page HERE

READ ALSO: Brexit questions? Ask the British Ambassador in Madrid

ARTICLE 2. 

Europe will have to offer May a Brexit concession or risk a diplomatic and economic disaster: Ambrose Evans Pritchard.

At a chance encounter in Davos, Ireland’s Leo Varadkar asked Nick Clegg whether it was really conceivable that Britain’s Prime Minister would dare to go “over the cliff” and into a no-deal Brexit. “I’m afraid to say that she really might,” was the reply.

Days later the shaken Taoiseach felt the imperial fist of the European Parliament’s six-man steering group on Brexit. MEPs Elmar Brok and Philippe Lamberts declared Ireland will be forced to erect a hard border in the North in the event of a no-deal.

If the Irish state refused to police the frontiers of the EU single market with proper vigour, it would be ejected from the European trading system. “We would have to set up customs barriers against Ireland, otherwise we’d soon have American chlorinated chicken inside the EU,” said Mr Brok, a German Christian Democrat.

Mr Lamberts, a Belgian Green, was just as blunt. “If Ireland refuses to protect the Northern Irish border after a hard Brexit, we will have to erect a customs frontier on the Continent,” he said. The country could not expect Europe to uphold the Good Friday Agreement “at any cost”.

So after months of dramatising the threat to Irish peace, the issue is suddenly secondary. It confirms what we suspected, that EU negotiators have exploited the neuralgic issue of Ireland in order to pressure the UK into a customs union and therefore into the EU’s legal and regulatory orbit.

Yet threatening Ireland in this fashion is untenable statecraft. It is just eight years since the European Central Bank ordered Dublin to swallow the debts of Anglo-Irish Bank, at a cost of 30pc of GDP to Irish taxpayers. This was done to defend the European banking system from contagion at a moment when the eurozone – due to its own negligence – had no lender of last resort. The ECB threatened to cut off emergency liquidity unless Dublin complied. The anger in Ireland has subsided but the mistrust lingers.

I do not wish to rehearse the arguments for how one could manage intra-Irish trade with no visible border. If one takes a maximalist stance, all technological solutions can be dismissed as “magical thinking”.

The European Parliament itself issued a report “Smart Border 2.0” by Lars Karlsson, former head of the World Customs Organisation, suggesting how it could be done.

Suffice to say, one can exempt small traders and farmers (80pc of commerce) from rules of origin, tariffs and clearance procedures. The other 20pc can be cleared electronically through a trusted trader scheme away from the border.

If Brussels were to follow the Brok-Lamberts line and force Ireland to violate its treaty obligations under the 1998 Belfast Agreement, it would lose the moral high ground and face an explosive intra-EU crisis on the cusp of the European elections.

It is one reason why Brussels urgently needs to find some formula to extract itself from a Brexit impasse of its own making. There are many others.

Sigmar Gabriel, until recently Germany’s foreign minister, has advised the EU to rewrite the botched Withdrawal Agreement or risk consigning Europe to geostrategic oblivion. “Brexit will damage Europe’s role in the world in a way that we Europeans currently seem unable to grasp,” he wrote for Project Syndicate.

The EU is becoming a spectator struggling to hold its footing in a “G-2 world” run by the US and China. It must not resort to the fratricidal punishment of a nuclear-armed, military ally such Britain, with the world’s financial hub. The EU must seek to keep cordial ties with Britain.

“It may be factually correct to point out with a shrug of our shoulders that the UK put itself into this position, owing to the feckless behaviour of its political elite. But this stance helps no one. Europe as a whole will suffer the consequences of Brexit.

Sigmar Gabriel, until recently Germany’s foreign minister, has advised the EU to rewrite the botched Withdrawal Agreement or risk consigning Europe to geostrategic oblivion

“Europeans must ask themselves whether we can agree on a better treaty. Perhaps there are other ways to reassure Britain that there will be a follow-up treaty acceptable to both sides, under which no one is held hostage permanently. And perhaps there is room for manoeuvre on freedom of movement,” he wrote.

This is the voice of the national capitals, asserting rank over the commission priesthood with its own Jesuit agenda. “As Brexit moves towards its endgame, signals from leaders in Germany, France, Ireland and the Netherlands will provide a more accurate indication of where the EU27 are than the views of political figures in Brussels,” said Mujtaba Rahman from Eurasia Group.

I let others judge whether the nightcap ramblings of negotiator Olly Robbinstells us anything about Theresa May’s tactics, or if she is preparing an 11th-hour capitulation to Brussels on the backstop.

To the extent that EU leaders think she may indeed go to the wire, they are in an awkward position. The eurozone is suddenly in an industrial recession. One more shock will push the region into a deflation crisis at a time when it has no monetary or fiscal defences.

This is a radically different set of circumstances from Europe’s hubris in December 2017 when it set the trap of the Irish backstop. A no-deal Brexit has become more dangerous. This alters the negotiating equation.

At the end of the day, the UK at least has the sovereign policy instruments to fight a fresh slump. The Treasury can launch a fiscal blitz of 2pc of GDP or more if need be. The Bank of England can resort to “helicopter money” and outright financing of state spending in extremis. Europe’s dysfunctional currency union is prohibited by law from doing any such thing.

Germany’s IFO Institute says the EU has reason to be alarmed by Liam Fox’s suggestion that the UK might opt to tear down its tariff barriers and go for unilateral free trade in a no-deal scenario. This would bring the guillotine down on the EU’s £340bn exports to the UK. Clusters of goods would be rendered uncompetitive at a stroke. The EU might never regain markets lost to China.

My assumption is that the EU will be forced by diplomatic, political and economic pressure to come up with something plausible on the backstop to defuse the Brexit crisis, whatever the current rhetoric from Brussels today.

It will probably be some form of codicil that gives greater legal weight to the Political Declaration. This is double-edged since it locks supremacy of the European Court, the continuation of the acquis, and such details as fishing quotas, deeper into the relationship.

What is indisputable is that the poker stakes of a no-deal Brexit have risen to exorbitant levels for the EU itself.





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