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Portugal’s contingency plans for a hard Brexit

Published on 07/01/2019

Portugal’s post-Brexit contingency plans are to be made public late in January but some accuse the government of being behind on its planning, especially if the UK crashes out with no EU agreement in place.

Portuguese Foreign Minister, Augusto Santos Silva, said on December 23, last year, “We are prepared for the scenario of non-agreement, but not 100% because we can never be prepared at 100%.” ??

Silva said the Government is aware of the Brexit situation and it will try to “mitigate” any negative impact in case of a hard Brexit. The details of Portugal’s preparations remain unknown.

The vote on the proposed UK-EU deal will happen sometime in the week beginning January 14, preceded by a debate in Westminster.

Four days before Santos Silva’s remarks, Brussels announced a contingency plan for a non-agreement exit and called on EU member States to “accelerate preparatory work for all scenarios.”

On January 3, 2019, Augusto Santos Silva, said, “We have worked on a Brexit preparation plan, which has a component in the case of an orderly exit from the United Kingdom and a contingency component if the departure is made without agreement – absolutely undesirable from our point of view.”

The Irish, French and German governments have been making their own post-Brexit plans with the Dutch government delivering its options to MEPs last September.

In Lisbon, Santos Silva explained that he had not divulged the details of his plan until after the vote is taken in Westminster.

Between Portugal’s left and right wing political parties, there are concerns about the future of more than 400,000 Portuguese citizens living in the United Kingdom and doubts about Portuguese exporters whose trade may fall sharply.

The Ministry of Foreign Affairs clarified to Observador that the plans are being prepared in coordination with the various ministries and European partners, identifying matters to be safeguarded in various areas, taking into account all possible scenarios – including that of a no agreement exit.

This preparation, says an official source, has been going on, “since the beginning of the second half of 2018” and has intensified, “since November, when it became clear that the exit agreement ran the risk of not being approved by the British Parliament.”

“The 27 EU countries delayed publicising their contingency plans for non-agreement exactly so as not to appear to disbelieve the British Government’s ability to secure parliamentary approval of the agreement it had negotiated with the EU,” explained the same source. Or, as the minister himself explained, these plans were kept under wraps, “in order not to create the idea that we were already taking it for granted that the British Government’s effort to negotiate with us had been in vain.”

The Portuguese consulate in London has an email address to which questions about Brexit can be sent and has issued a series of recommendations to Portuguese citizens. In business, trade body AICEP has held several seminars in collaboration with representatives of the ministries of Finance, Economy and Foreign Affairs.

The General Directorate of Economic Activities has prepared a series of documents for companies about Brexit. The Government has created the ‘Portugal IN’ programme to attract foreign investment that was heading to the United Kingdom which, due to Brexit, could be lured to Portugal.

As a precaution, the French have a Senate approved decree-law that will give the Government strengthened powers to issue emergency decrees in matters related to Brexit. This same idea is being considered in other countries, such as Spain and the Netherlands.

In terms of concrete measures, the most common is the hiring of more Customs officials. This has been announced by France, Ireland, Germany, the Netherlands, Belgium and Denmark.

The border situation worries governments, which is why the Belgians are buying more surveillance material, such as drones, while the French and the Irish are studying reports on upgrading their ports infrastructure.

The rights of the citizens of the various European countries in the United Kingdom, and the rights of British passport holders in the other European countries, is another topic that has been worrying governments in the Member States.

Officially, EU countries say that the principle of reciprocity will apply after Brexit – that is, the British in their countries will have the same treatment as the UK gives to the citizens of their countries.

A bill is being prepared by France to protect the approximately 1,700 Britons working for the French State and Spain confirms that it is working on some plans, but does not make them entirely public for fear of “causing alarm.”

In the coming weeks, along with Portugal, Madrid will give more details. As time passes, more and more governments in Europe are beginning to state clearly what they are preparing.

The Portuguese Ministry of Foreign Affairs, optimistically, states that in case of hard Brexit, the situation is taken care of in Portugal. However, many of the problem areas only can be addressed through “solutions already being worked out at Community level in a number of areas, such as aviation and financial services.”

Brussels called on the Member States to, “Take measures to ensure that all British nationals residing in a Member State on 29 March 2019 continue to be considered as lawful residents in that Member State without any interruption.”

It is not known what measures the Portuguese State is preparing to ensure this smooth transition for its resident British citizens.

Another area where some parties insist that measures need to be taken is to protect Portuguese companies exporting to the British market – which has already led to political support for ideas such as the creation a credit line for companies and funds to help search for alternative markets.

The Portuguese economy’s exposure to the United Kingdom is not insignificant, since the UK is the fourth largest market for Portuguese exports and the third country from which emigrants send the most remittances.

A recent trade study showed that Portuguese exports to the United Kingdom could decline by 15% to 26% and a devaluation of the pound may also represent “a significant risk to Portugal, given the importance of tourism to services exports.”

In case of non-agreement, another study predicts a negative impact on Portuguese GDP of 0.3 percentage points between 2017 and 2019.

Those in the potentially most affected automotive, textiles, chemical and agri-foodstuffs sectors have many questions.

“The general opinion given to me by Portuguese companies is that, in the absence of an agreement, many of the importers are not even in a position to continue their activity,” said João Costa, vice president of the Textile and Clothing Association of Portugal.

Portugal is sort of prepared for a hard Brexit, with a range of measures being worked on to ensure British in Portugal and exports to the UK have as easy a time as possible, bearing in mind any EU legal constraints.