Merkel: I didn’t mean 30 days as a fixed Brexit deadline

BERLIN — When Angela Merkel said a no-deal Brexit could be averted within 30 days, she didn’t actually mean 30 days.

The German chancellor told Boris Johnson on Wednesday she sees “possibilities” to solve the Irish backstop problem and avoid a no-deal Brexit but it is up to the U.K. to come up with a workable plan. “We can maybe find it in the next 30 days,” the chancellor said, standing alongside Johnson in Berlin.

A day later and Merkel clarified what she meant. “I said that what one can achieve in three or two years can also be achieved in 30 days,” she said during a visit to The Hague, according to Reuters.

“The 30 days were meant as an example to highlight the fact that we need to achieve it in a short time because Britain had said they want to leave the European Union on October 31,” Merkel said.

French President Emmanuel Macron said Thursday that the U.K. and EU will not be able to find a new Brexit agreement that’s different to the existing one in 30 days.

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Merkel to Johnson: Let’s find a Brexit plan in 30 days

BERLIN — Angela Merkel told Boris Johnson on Wednesday she saw “possibilities” to solve the Irish backstop problem and avoid a no-deal Brexit but said it was up to the U.K. to come up with a workable plan.

“I see possibilities, shaping the future relationship to address this point,” said Merkel of the contentious backstop — meant to ensure there is no return to a hard border on the island of Ireland — in the Withdrawal Agreement negotiated between the EU and the U.K. under Johnson’s predecessor, Theresa May.

“We can maybe find it in the next 30 days,” the chancellor said, standing alongside Johnson at a brief press conference before the two leaders held talks over dinner.

Despite such hopeful rhetoric, Merkel’s comments indicated she continues to oppose re-opening the Withdrawal Agreement and is sticking to the EU line that any changes should come in the political declaration that sets out the future relationship between Britain and the bloc.

Hosting Johnson for talks on his first overseas visit as prime minister at her Berlin chancellery, she put the responsibility on Westminster to come up with a solution.

“Britain should tell us what kind of ideas it has. It is not the core task of a German chancellor to understand [the relationship of Ireland and Northern Ireland],” she said. “We have shown imagination and creativity in the past as the EU.”

Johnson was given military honors on arrival at the chancellery, during which both the two leaders were seated following Merkel’s recent health troubles. While the Bundeswehr band played the national anthems, a small group of protesters shouted “stop Brexit!” during interludes.

“Of course I think there’s ample scope to do a deal,” said Johnson alongside the chancellor, before offering a mangled “wir schaffen das” — a reference to a phrase used by Merkel during the 2015 migration crisis.

The chancellor offered a wry smirk in response.

Merkel gave no indication she was about to make a big concession on the backstop to avoid a no-deal Brexit. “We have said time and again that we are prepared for a no deal,” she said.

Johnson is scheduled to travel on to Paris for talks with French President Emmanuel Macron over lunch on Thursday. But officials in the French capital warn the position will be the same on the other side of the Rhine.

“There is not the thickness of a cigarette paper between [the German and French positions],” an Élysée official said.

Rym Momtaz contributed reporting.

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British railways reverse exit from Interrail

Passenger railway operators in the U.K. have struck a deal to stay inside the Interrail pan-European ticketing scheme just a day after announcing they would leave following a dispute with the company that runs the system.

“We are pleased to be able to tell passengers that we have reached agreement and will be remaining part of both the Interrail and Eurail passes,” the Rail Delivery Group (RDG), which represents British operators, tweeted on Thursday.

Interrail, which today offers tickets for 31 countries to European residents, has been running since the 1970s. The Eurail pass is available to those not based in Europe. Both are managed by the Dutch-based Eurail Group.

The split between the RDG and Eurail came after U.K. companies stopped taking part in a trial program for the Eurail ticket. British companies wanted to “secure a competitive position for their BritRail Pass,” which offers travellers tickets for the U.K. network, according to Eurail’s General Manager Carlo Boselli. RDG claimed it had been pushed out by Eurail.

The U-turn came minutes after recently-appointed British Transport Minister Grant Shapps called the move “counterproductive” and urged the RDG to to “reverse their decision.”

“Britain’s train companies never wanted to leave Interrail,” the RDG said just before announcing a deal had been reached. “Following the strong reaction to news of our departure we and Eurail, the company which runs Interrail, renewed talks.”

Eurail said it sold more than 300,000 Interrail tickets in 2018.

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British train companies quit Interrail

U.K. rail firms will no longer participate in the Interrail system of pan-European ticketing, ending the prospect of cheap summer jaunts through Britain for young travellers from the Continent.

Tickets bought up until the end of December will still be valid for trains in the U.K. this year, the Eurail company which runs the system said in a statement Wednesday, but British participation will cease from January.

Young Brits will still be able to buy an Interrail pass and travel across Europe.

Eurostar tickets will still be included in the scheme, offering travellers connections from Paris, Brussels and Amsterdam into London. Discounts on ferry services to the U.K. will also continue, Eurail said. But operators of trains running on the U.K.’s privately-run passenger network have opted to stop accepting Interrail tickets, which typically offer free rides on a certain number of days and discount tickets to those under the age of 27.

The decision will apply to Interrail and the Eurail ticket, which is available to travellers from outside the 31 European countries that participate in Interrail.

The U.K. has been a part of Interrail since 1973, the same year it joined the EU. However, despite the timing the scheme is an arrangement between companies rather than formal EU policy so is not connected to Brexit, said Mark Smith, who runs train travel website The Man in Seat 61.

“This is a decision of the British train operators, it’s on them,” said Smith. “It’s as if they see the grass-roots [flight shame] movement towards rail, and instead of welcoming it, deliberately go out of their way to stop it.”

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BMW to accelerate through Brexit crunch at electric Mini plant

BERLIN — German automaker BMW will move ahead with plans to produce an electric version of its iconic Mini at a factory in Oxford from November, despite potential post-Brexit chaos in importing key components from the Continent.

While the e-Mini will be put together at the Cowley site, which employs around 4,500 people and already builds the conventionally fuelled Mini, the drivetrain — a crucial part transferring power to the car’s wheels — will still be imported from southern Germany.

That means any problems with shipping parts from the Continent after a possible no-deal Brexit on October 31 could impact BMW’s ability to deliver the vehicle in large numbers. Company officials have previously hinted at plans to move some production of the conventional Mini to the Netherlands depending on the terms of Brexit, but for now executives are sticking with the e-Mini Oxford plan.

“The November start of production date [has] been in the plan for years and from long before the Brexit deadline reset, so this is no more than a coincidence,” Graham Biggs, a U.K.-based BMW director, told POLITICO, adding that BMW would “have to work around” any potential disruption caused by a disorderly Brexit on October 31.

The e-Mini is a key component of BMW’s broader electric shift, which was recently ramped up to include at least 25 new models by 2023. Around 45,000 customers have registered interest in buying the car, according to Germany’s Frankfurter Allgemeine Zeitung, almost half of whom are in the U.K.

At present, BMW imports about €2 billion worth of car parts into the U.K. from the EU every year to feed its production. In advance of the previously expected Brexit date of March 29, BMW scheduled an annual maintenance shutdown to mitigate any expected disruption at major import terminals around April 1, a feat it doesn’t plan to repeat this time.

BMW Customs Manager Stephan Freismuth said earlier this year that stockpiling beyond just a few days would not be feasible either. “We are producing ‘just in time,’ and just in sequence,” Freismuth said.

BMW’s outgoing CEO Harald Krüger has called for a meeting with U.K. Prime Minister Boris Johnson to discuss Brexit and to mitigate any risk, while his incoming replacement, Oliver Zipse, is a former plant manager in Oxford.

Matthias Schmidt, a Berlin-based automotive analyst, reckons BMW might benefit from any loss of value of the pound and if things get really bad, it may choose to start “clandestinely shifting more production to the EU” and maintain just a modest output in the U.K. to serve the local market.

“The problem for BMW is that [the Mini’s] heritage and DNA belongs well and truly to the U.K.,” said Schmidt. “So the option to up sticks and shift the facility to mainland Europe doesn’t necessarily come into question.”

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From ‘Blade Runner’ to Brexit in England’s industrial north

MIDDLESBROUGH, England — Boris Johnson has a plan to turn the U.K.’s old industrial port towns into freewheeling outposts of “global Britain.”

The plan means setting up so-called free economic zones offering lower import taxes and looser regulation to lure investment in up to 10 ports. It chimes with the swashbuckling Brexiteer vision of an outward-facing British economy restored to its glory days, and also spins a positive view of the country’s future outside the EU.

“Let us begin work now to create free ports that will drive growth and thousands of high-skilled jobs in left-behind areas,” Johnson pledged outside 10 Downing Street after becoming prime minister. In one of the candidate areas, Teesside, on Friday, International Trade Secretary Liz Truss will announce the appointment of a panel of ministers and experts to figure out the “world’s most advanced free port model” that will generate “thousands of jobs.”

But will it work?

Ben Houchen, the 32-year-old Conservative mayor of Tees Valley, a cluster of deprived cities in the northeast of England, wants to get the green light to start a pilot project around the mouth of the River Tees. He reckons free ports offer a “physical representation” of how Brexit can “deliver more control and say over international trade policy.”

The 20-minute train ride from Thornaby to cheery seaside town Redcar trundles past the skeletons of shuttered factories and steel plants.

“I get extremely frustrated as people talk about this very dismissively,” Houchen said in his office overlooking the river just days before Truss’ visit. “One of the reasons we came up with the concept 18 months ago is that there was such a negativity about Brexit.”

He’s pushing to make a free economic zone out of a 4,500-acre site around a shuttered steel works, six times the size of London’s City banking district. The goal is to transform the region by attracting new clean energy companies and manufacturing at the deepest port complex on England’s east coast, he said.

The plan may be novel for the Tees, but it isn’t new. A U.S. Congress report estimated there were more than 3,000 free economic zones worldwide in 2013. Britain closed its last free port in 2012, although there’s one on the Isle of Man, a U.K. crown dependency outside the EU. There are more than 80 across the EU offering various kinds of relief from taxes and tariffs to spur growth.

The top of Eston Nab in North Yorkshire, which looks down at the view over the industrial area of Teesside and Middlesbrough | Dan Kitwood/Getty Images

But the U.K. is dreaming bigger.

“What I’m talking about is not comparable to those in the EU,” said Houchen. “What they consider a free zone is basically a large warehouse.” Instead, outside the single market, customs union and the EU’s state aid restrictions, he’s aiming for zones similar to those that have helped supercharge growth in the United Arab Emirates and the United States.

The plan

Whatever Brexit brings, the Tees Valley, which in 2016 voted heavily in favor of the U.K. exiting the EU, will feel the impact. Once a heavy industry jewel in the British economy, its horizon of furnaces, chemical works and docks inspired the opening cityscape scene in the 1980s dystopian thriller “Blade Runner.”

But its days of industrial glory are long gone. The 20-minute train ride from Houchen’s office in a newbuild complex at Thornaby, through Middlesbrough’s dilapidated central station, to cheery seaside town Redcar trundles past the skeletons of shuttered factories and steel plants.

In 2015, a steelworks overlooking the beach was closed at Redcar, costing 3,000 jobs. That delivered a body blow to the local economy, although chemicals processing and oil rig-scrappage plants still dot the landscape.

If Johnson’s team gives the go-ahead for the free port project, Houchen thinks 37,000 jobs can be generated within 20 years and around £2 billion added to the local economy. He argues that at least half of that will come along anyway owing to a shift to wind energy and hydrogen production in the region, but will be “turbocharged” by a free port zone bringing new manufacturing to the area.

The tanker Louise Knutsen is moored alongside an oil facility on the banks of the River Tees | Ian Forsyth/Getty Images

“This site is chemicals, processing, clean energy and energy production, it’s manufacturing and it’s heavy industry,” said Houchen. “We’re not trying to store goods in the zone [but] the reintroduction of the kind of jobs we haven’t seen in this area for decades.”

To do that Houchen talks of abolishing corporation tax, employee national insurance contributions and business tax rates for companies moving in, in addition to offering direct subsidies for research projects that will help foster innovation. The Department for International Trade said in a statement that the zones can relieve businesses of “unnecessary checks and paperwork, and include customs and tax benefits” while noting that some of the most successful areas mandate “liberalized planning laws.”

Around the Tees, it’s all about investing in industries that fit the region, he said, rather than trying to attract tech firms.

“We know we’re not going to become the next Silicon Valley,” said Houchen. “So we’re quite happy to exclude consumer tech; the Amazons and the Googles of this world. Stop them relocating to this area just to get tax breaks.”

The catch

But not everyone is as starry-eyed about the prospects for a free zone on the Tees.

“I think there are so many flaws in it that it’s unlikely to get a lot of traction,” said Peter Holmes, an expert on trade at the University of Sussex. “None of this is going to develop high-skilled jobs. They would be jobs in warehouses and assembly plants. These are not the kind of things that transform a region.”

Despite recent improvements, unemployment sits at just over 6 percent across the region — 2 percentage points higher than the national average. In Hartlepool, the furthest north of the conurbations covered by the Tees Authority, it’s close to 10 percent. Locals complain that while the number of jobs may be up, they aren’t the high-paying ones lost in the steel plants.

Slashing environmental and labor rules offers one option, but that’s something the Tees authorities insist they won’t do.

Comparisons to U.S. special economic zones aren’t entirely valid either, as companies there take advantage of higher tax on components than on finished goods. For example, car assembly plants benefit from importing parts to a customs-free zone and only pay taxes on the finished vehicle, which is taxed at a lower rate than the individual parts.

“This has absolutely no relevance with the EU tariff system,” Holmes said.

That pours cold water on the insistence that the 250 zones employing 420,000 people in the U.S. offer a model for Britain. “If the U.K. model is implemented as successfully, it could have a significant economic impact,” the Department of International Trade said.

It will also be a struggle to persuade the U.K. Treasury that the plan won’t displace investment from elsewhere in the country, and just siphon tax revenues through Teeside that would otherwise head straight for the public purse. Houchen insists that’s not the case, and incentives offered would attract new investment.

In addition, the move comes just as Brussels takes a keen look at free ports and their potential for crime and deregulation. The European Commission this month labeled such sites an “emerging threat” that offer crooks a way to launder cash and shift counterfeit goods, but this isn’t the model Teesside is looking at.

Stanley, one of the cheapest places in the U.K. to buy a house. Much of the North East of the United Kingdom voted to leave the European Union | Dan Kitwood/Getty Images

Depending on how hard the U.K. crashes out of the EU, the plan wouldn’t be covered by watchdogs in Brussels anyway.

Regardless, Houchen counters he’s got legal advice that is clear there won’t be a problem. “The one thing free zones don’t do is turn a completely useless site into a brilliant site,” said Houchen. “You can’t turn a site in the Sahara into an amazing free port.”

The quick take on special economic zones is pretty alluring — look at the transformation of sleepy towns in China and the Middle East into forests of glass skyscrapers and factory complexes. But the reality is trickier, especially in developed countries. Shannon, a once vital Irish refueling stop for transatlantic aviation but otherwise a provincial backwater, was turned into a hub for big business thanks to its free zone. Despite that success, Shannon has created only 7,000 jobs, a fraction of what Houchen is proposing.

Slashing environmental and labor rules offers one option, but that’s something the Tees authorities insist they won’t do, ruling out making the port a haven for migrant labor.

A British Steel manufacturing site in Skinningrove in 2017 | Ian Forsyth/Getty Images

But that may hobble the dreams of creating an economic powerhouse, Holmes said. “You’re not going to make much difference to this region unless you give a substantial change in the cost [for business]. The cost saving from the free zone itself is going to be minimal.”

Keeping locals onside with the plan is key to satisfying one of the underlying causes of Brexit — a feeling of disenfranchisement outside the country’s rich southeast. While lawmakers argue over multibillion pound new infrastructure schemes around London such as a third runway at Heathrow and a rail scheme to Birmingham, the north has been relatively starved of public investment.

“The north is just all rusted up,” one local on Redcar’s high street said, declining to offer a name given the febrile political climate. “It’s a brilliant idea if it actually emerges.”

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