No end in sight to Brexit stalemate following Salzburg showdown

Business Week: also in the news – Budget 2019; a Denis O’Brien bid; and Ryanair’s agm

Britain’s Prime Minister Theresa May during the European Union leaders informal summit in Salzburg. Photograph: Lisi Niesner/Reuters

Britain’s Prime Minister Theresa May during the European Union leaders informal summit in Salzburg. Photograph: Lisi Niesner/Reuters

 

It looks like it’s checkmate for Chequers after EU leaders roundly rejected Theresa May’s proposals at a key summit in Salzburg this week, reiterating support for the Border backstop, and further isolating the embattled prime minister.

For all the talk last week of a deal being within reach, nothing could be further from the truth on reflection, with D-Day pushed out to mid-November when a special Brexit summit is expected to take place.

European Council president Donald Tusk closed the summit on the foothills of the Alps with the sage words that it is time for both sides to make compromises, but all in all it was more of the same with no real roadmap to plot a path towards a bloodless Brexit.

If May was looking forward to more friendly faces on her return to London, she will have been sadly disappointed. The Salzburg summit was seized upon by hardline Brexiteers and much of the media as a “humiliation” for the prime minister.

If that wasn’t bad enough, she has a Conservative Party conference at the end of the month, at which her premiership seems certain to come under threat. After all, she kicked off her week by warning rebels that it was Chequers or bust.

So where does all that leave us? Taoiseach Leo Varadkar said the Government is preparing for a no-deal outcome by hiring hundreds of staff at the ports and approving infrastructural upgrades, but it is a scenario, he suggested, “nobody wants to contemplate”.

Indeed, the umbrella group for European airports warned that it would cause havoc in airports all over Europe, cost hundreds of millions of euro in upgrades to infrastructure, compromise security, and lead to a “highly degraded” service.

The British economy will shrink, the International Monetary Fund said, and while managing director Christine Lagarde described herself as a “desperate optimist”, the substance of her words sounded more desperate than optimistic.

“Let me be clear,” she said. “Compared with today’s smooth single market, all the likely Brexit scenarios will have costs for the [British] economy and to a lesser extent as well for the EU. The larger the impediments to trade in the new relationship, the costlier it will be. This should be fairly obvious, but it seems that sometimes it is not.”

Earlier in the week, former UK foreign secretary Boris Johnson said that if talks continue on this path, things will end in a “spectacular political car crash”, and, let’s face it, he should know.

Pressure on Donohoe

The state of the international landscape these days means we need a steady hand on the tiller, but, with just weeks to go now until Budget 2019, each passing day will heap more pressure on Minister for Finance Paschal Donohoe to loosen the purse strings.

Donohoe gave his clearest signal yet this week that tax cuts will be targeted at raising the level at which workers start to pay the top rate of tax, something he suggested the Government will continue in future budgets, should it remain in power.

Earlier in the week, the Irish Tax Institute published separate reports in which, firstly, it said workers in the Republic are paying more tax than they did 10 years ago when the economy crashed.

It said the assertion applied across all income levels when income tax, universal social charge and PRSI are combined.

Its other report said the Republic was one of the best places in the developed world for a low income worker to pay taxes, with someone earning €18,000 a year paying an effective rate of less than 3 per cent.

There were more cautious words from the Irish Fiscal Advisory Council – the Government’s budgetary watchdog – which warned that a slowdown in the economy is “inevitable at some stage”.

The council’s chairman Seamus Coffey said the State had dined out on an unexpected €6 billion windfall between 2015 and 2018, courtesy of stronger-than-expected corporation tax receipts and a lower interest rate bill on the national debt.

Indeed, our corporate tax practices came under attack again this week, as an Oxfam report pointed out that it helps some of the world’s largest drug companies deprive emerging economies of almost €100 million a year.

At the same time, €14.3 billion now sits in an escrow fund as US tech giant Apple continues to pay back the cash that the European Commission has condemned as illegal state aid extended by the Republic.

O’Brien joins broadband consortium

Telecoms tycoon Denis O’Brien and close associate Leslie Buckley, apparently keen not to miss a step despite ongoing turmoil at Independent News and Media (INM), have joined a consortium bidding for the national broadband plan.

O’Brien’s Actavo, which was formerly known as Siteserv, has Buckley as a board member, and is part of a group led by private investment company Granahan McCourt.

Other partners in the consortium include Enet and Nokia. The partners for the construction phase include Actavo, the Kelly Group and the KN Group.

Buckley is currently involved in a legal action launched by INM for damage allegedly caused to the company by his conduct. He is alleged to have been involved in a suspected “data breach” in which outsiders were granted secret access to INM’s emails. Mr Buckley has consistently said he would “fully and robustly” defend himself regarding the INM investigation.

Elsewhere, Ryanair chief executive will be glad to have this year’s agm over and done with. The key takeaways were that more strikes are likely, and that the airline has lobbied the Government for a change to tax laws that would allow it to tackle the issue.

Lastly, details emerged of a €5.75 million pay day last year for departing Irish Stock Exchange chief executive Deirdre Somers following the group’s sale to Euronext. Not a bad day’s work.

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