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Week Ahead (24 Feb)

Tuesday, 25th February – Final Brexit negotiating mandate to be signed off on by EU member states

Michel Barnier, the EU's chief negotiator, presented a draft negotiating mandate to EU member states in early February. Since then, if anything, the input from the member states has toughened the EU’s position. For instance, Greece, supported by Italy and Cyprus, wants to add a condition requiring “the return and restitution of unlawfully removed cultural objects to their country of origin” – the return of the Parthenon marbles being a longstanding policy goal of successive Greek governments.

There will now be only seven to eight months in which to strike a deal, given that negotiations will only begin in earnest next month and that any agreement will be subject to unanimous approval and ratification in both Europe and Britain. While Johnson has insisted that he will not ask for an extension of the transition phase, and indeed has legislated to this effect, the EU has set a deadline of 30 June by which such an extension must be requested.

The tight timeframe within which to complete an all-encompassing trade deal and the sheer scale of the project means that, despite Johnson's pledge to the contrary, an extension to the transition period remains a possibility.

Tuesday 25th February, Caretaker Taoiseach Leo Varadkar to meet Fianna Fáil leader Michéal Martin for exploratory talks on government formation

As anticipated, efforts to elect a new Taoiseach fell well short of the 80 votes required in Dáil Éireann last Thursday. Sinn Féin (SF) leader Mary Lou McDonald won the most votes, with 45, followed by Fianna Fail’s Michéal Martin on 41, with Leo Varadkar third on 36 votes. The margin of defeat reinforces our view regarding the difficulty of government formation in the 33rdDáil.

The situation is, broadly speaking, as follows:

· Fianna Fáil (FF) would like to go into government with Fine Gael (and, at a minimum, the Green Party). However, after nine years in government, there is a strongly held view, particularly among the grassroots membership and also among elements of the FG parliamentary party, that FG needs to go into opposition for the medium term health of the party.

· SF would like to go into government with FF (and, at a minimum, the Green Party). However, the majority of the FF parliamentary party is strongly opposed to facilitating SF’s entry into government, amid accusations inter alia that it still takes instruction from the IRA Army Council. Its €22 billion election manifesto is also seen as unworkable for a programme for government. Testy exchanges between Michéal Martin and Mary Lou McDonald in Dáil Éireann last Thursday, plus an intervention by the Garda Commissioner Drew Harris showing his agreement with the PSNI that the IRA retains influence over SF, add to the obstacles facing this arrangement.

· The Green Party, likely essential to any form of stable government, wants to enter government but is currently feeling taken for granted by all sides. It will meet with SF today but its leader Eamon Ryan has also expressed reservations about the SF manifesto and its commitment to meeting climate change targets.

The leaders of FF and FG will meet tomorrow for exploratory talks on government formation. As noted in our previous analyses, the strength of grassroots and backbench opposition make such an arrangement far from inevitable, even if there is little to distinguish the economic policies of the two parties. This opposition is well demonstrated by reports of a meeting of ~120 party members in Wexford, where fewer than 10 members were supportive of FG entering government.

SF, perhaps recognising that its chance of entering government on this occasion continues to recede, has indicated that it will organise a series of public rallies throughout the country in order "to bring the conversation about a government for change to the people". While this unusual approach is unlikely to improve SF’s prospect of entering government, it may serve the party well should a second election be required.

All things considered, we retain our probabilities as follows:

“Grand coalition” - FF, FG, Greens, Social Democrats/Independents (40%)

Second election (35%)

SF/FF/Greens (13%) – This would require a change in leadership in FF

FF/Greens/Soc Dems/Labour/Independents (12%)

W/C Monday, 24th February - Adoption of "Milleproroghe" decree to be debated in Italian Senate

After two months of sensitive negotiations, this week will see intensive efforts to enshrine the Milleproroghe (1000 exemptions) decree into law. Given the importance of the matter for the stability of the executive, the government has announced that it will treat the passing of the Milleproroghe decree as a motion of confidence, as happened in the Chamber where the coalition, including Matteo Renzi’s Italia Viva, supported the text.

Despite Italia Viva’s leader Matteo Renzi threat to reject the decree, the attitude taken by his MPs in the Chamber of Deputies suggests a positive vote in the Senate. Indeed, even if Renzi is clearly unhappy with the current coalition, polls placing his party below 5% will be enough to discourage the creation of a crisis that would lead to new elections in 2020.

Wednesday, 26th February, Sanchez to meet with Catalan President Quim Torra

Spanish Prime Minister Pedro Sanchez has arranged to meet Quim Torra, the pro-separatist Catalan President, next week to discuss the current crisis in the region. Sanchez had initially proposed meeting on Monday but Torra criticised Sanchez for leaking details of this to the press, saying in a letter to Sanchez that this “was not the way to show that he wants honest and fruitful dialogue”. In his letter, Torra indicated that he would be looking to discuss “favourable conditions for negotiation … a validation system and proposal for international mediation”.

Any suggestion of agreeing to international mediation will leave Sanchez vulnerable to even more criticism from right-wing forces in Spain. He is already facing a backlash after allowing the Catalan government to reopen some of its foreign delegations, which were shut down by former foreign minister Josep Borrell, and proposing to review the crime of sedition which could result in reduced sentences for the jailed independence leaders.

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