UK, EU Talk Past Each Other on Brexit Negotiations

David Cameron and Nigel Farage both spoke at a previously-schedued meeting of the European Parliament yesterday. On the one hand, public posturing is always more aggressive than what a negotiator is willing to accept. On the other hand, EU leaders seemed generally well unified on some key, high-level rules of the role for Brexit negotiations. And one of them is at odds with what Cameron and his most likely successor, Boris Johnson, say is an essential condition of any deal, namely, more restrictions on EU immigration.

It’s not surprising that there were more signs of hostility than is normal for a high-level meeting. All the parties are still reeling from the implications of last week’s vote. Cameron tried blaming the Europeans for the Brexit vote. From the Guardian:

The British prime minster used his last Brussels summit to tell Angela Merkel, François Hollande and other European heads of government that anxieties about unrestricted freedom of movement were at the heart of the decision by Britons to reject the EU.

This chart from the Telegraph shows that the “immigration problem” can hardly be called an EU-only problem. Admittedly, some of these non-EU immigrants were recruited, since the Britain has chronic shortages in some areas, like nursing.

Screen shot 2016-06-29 at 6.41.08 AM

Not surprisingly, Cameron’s assertion fell on deaf ears. EU leaders correctly regard the Brexit vote as the result of a disastrous miscalculation of the Tories in playing with what has turned out to be a political nuclear device. But the worst is that Cameron’s remarks don’t just seem to be fodder for good lines in the press back home; he and his fellow Conservatives seem to believe they really are entitled to a special deal, when they already had a particularly favorable arrangement with the EU. From a Guardian op-ed on Monday by Joris Luyendijk (hat tip vidimi):

The problem with Britain was not that it was critical of the EU. The problem was bad faith and delusional thinking. As the referendum debate has shown, the country has not come to terms with its own global irrelevance – hence its refusal to pool sovereignty. It continues to believe that as a sovereign nation it can get everything it had as an EU member, and more. When Europe’s democrats talk about “EU reform” they mean putting arrangements in place to make Europe’s pooling of sovereignty democratic. Britons mean the rollback of that very pooling of sovereignty. For this reason, Britain’s membership would have hit a wall sooner or later.

EU leaders quickly stamped out several lines of optimistic thinking. Both European Commission chief Jean-Claude Juncker and Angel Merkel said that there would be no negotiations before the UK invoked Article 50.* That is consistent with the insistence from the Eurocrats and the IMF that Britain needs to proceed so as to keep uncertainty from damaging the real economy. And if Cameron was floating a big fat trial balloon that a concession on immigration would allow the Government to have a second referendum and reverse the vote, it was quickly deflated.

Moreover several officials, most critically Merkel, made it crystal clear that a Brexit means having a lesser status, as in fewer rights than full members. Again from the Guardian:

Angela Merkel and other European leaders, meeting for the first EU summit since last Friday’s result, ruled out any special favours for Britain, insisting there would be no “cherry-picking exercise” in the exit negotiations. In a speech to the Bundestag ahead of the summit on Tuesday, the German chancellor said: “There must be, and there will be, a palpable difference between those countries who want to be members of the European family and those who don’t.”

These words have been echoed by other EU leaders including Italy’s prime minister, Matteo Renzi. Xavier Bettel, prime minister of Luxembourg, added that the UK could not have a Facebook-style “it’s complicated” status with the rest of the EU: Britain could have “marriage or divorce, but not something in between”.

And the Europeans are also taking aim at the City. From the Wall Street Journal:

For Britain to secure a close trading relationship with the bloc, the more obligations it will likely have to accept—including many that are unpopular with Britons who voted to leave.

“To access the internal market, [a country] must respect the four liberties: liberty of circulation of goods, of capital, of services and people,” Mr. Hollande said. It must also contribute to the EU budget, he said.
Trade After Brexit

Mr. Hollande also warned that after a U.K. exit, transactions in euros wouldn’t be able to be cleared in the City of London. The U.K.’s membership in the EU gives institutions based there the right to process financial transactions denominated in euros, an important source of business for London.

This should all seem perfectly straightforward, until you read that against what Boris Johnson, the most likely next Prime Minister, wrote over the weekend for what Brexit will deliver: everything the British have now, save being able to curtail immigration and ignore EU regulations and its courts.

Now it’s one thing for Johnson to be promise the electorate that everything will be just great when he is waging a leadership battle. But the Telegraph, which is presumably the preferred messaging outlet for the Conservatives, treated Cameron’s and Johnson’s fantasies as if they were perfectly reasonable expectations. From the story, David Cameron urges EU to reform freedom of movement rules to maintain Britain’s economic ties with Europe:

David Cameron has told the EU it must reform freedom of movement rules if Britain is to maintain close economic ties with the continent in the wake of the referendum…

Setting out the basis for a future British deal with the EU, he said Britain would only be able to maintain access to the single market if the bloc agreed to look again at its policy of open borders…

That could allow Britain to retain access to the single market without having to accept unlimited immigration from the EU.

If you read the story, you’ll see how one-sided it is. It is all about Cameron’s and Johnson’s demands. And it gives an unrealistic impression of their odds of being able to achieve them by citing the support of Poland, which is the black sheep of the EU right now for its intransigence in making wholesale judicial and governmental changes in violation of EU and even arguably Polish law, as well as its open defiance of EU environmental regulations.

So while the Torygraph is all over the internecine war in the Labor Party and its Brexit cheerleading, the Financial Times’ live blog yesterday and today is picking up on every tidbit that can feed the hope that a Brexit won’t go forward. And several readers called out its original headline for its lead story, that EU leaders were meeting to “plot” their Brexit response as descending to tabloid level. So the major papers are editorializing rather than reporting, which makes it difficult to sus out the state of play.

Nevertheless. the Conservative line, that the EU needs to reform its immigration policies for its own good, not just the UK’s benefit, sounds an awful lot like Yanis Varoufakis’s seen-as-presumptuous effort to get the Eurozone to abandon its failed austerity policies. The worst was that Varoufakis has the correct economic argument but no one wanted to hear him. In this case, the Tories are butting up against an equally fundamental principle that is under strain due to the refugee crisis. And the Europeans are not going to compromise it to accommodate the UK. As this video by Owen Jones (hat tip Uahsenaa) stresses, the EU will be tough with the UK, not out of pique, but because they regard Brexit negotiations as an existential crisis. They are not going to give the UK the special deal it wants The whole clip is worth watching, and covers many important issues. for instance that immigration will not fall post-Brexit and how that will exacerbate generational stresses, but in particular be sure to see the part staring at 5:25. Any new UK arrangement with the EU will need to reflect tradeoffs made by other countries that have some degree of access to its market.

And as you probably read elsewhere, the Tories have set a date for selecting a new party leader, September 2. That is a tad earlier than what Cameron had envisaged with his 90 day caretaker plan. Opponents of Boris Johnson tried to have a longer timetable and require a woman candidate, both of which were seen as lowering his odds of success, and they got no support.

It’s hard to see how Johnson backs out of a Brexit, and he’s such a fabulously reckless and dishonest politician that he may actually have convinced himself that the EU will go along with his barmy plan of giving the UK concessions and getting nothing back in return. And he may also persuade himself that the prize of further deregulating the UK economy is worth the cost of the (considerable) near-term economic damage and some loss of the City’s prerogatives. Or perhaps he believes he can somehow win party leadership campaigning for Leave yet renege once he is in charge. But the intense media focus on Brexit will cement it more and more in the public’s consciousness as a reality as time passes, making it even trickier to walk back.

Maybe Theresa May or another contender will be able to beat Johnson. Or perhaps some event allows Johnson to save face and extricate the UK from the colossal mess that he and Cameron cooked up. But in the meantime, the Conservatives seem stuck in their own private reality, which is not a good basis for navigating such turbulent times.

* This is almost certainly what Merkel meant with this remark: “We did not discuss the possibility that the UK will not invoke article 50, and I consider this an impossibility.” The Journal interpreted it otherwise but an expert in Eurocratese was pretty confident of this reading.

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  1. digi_owl

    As long as the technocrats in charge see people as just another production input to ship around as needed, the EU will continue to circle the drain.

  2. Deep Thought

    Thank you for this post, it eloquently sums up my reading of the situation, including Johnson’s delusional thinking.

    What is scaring me a great deal at the moment is that multiple opinion pieces I have read from various commentators, including Gordon Brown, either do not discuss the fundamental contradiction between staying in the single market and immigration restrictions, or seem to echo Johnson and Cameron in believing the UK can get some concessions. It. Won’t. Happen. And if these people don’t get that, what chance does the public have?

    1. Tom

      Sorry, but the EU will have to concede certain aspects. They are just trying to play hard-ball first up. That position will weaken as, if you care to look at the figures, Germany has a massive trade relationship with the UK that benefits them greatly. Not one they would want tariffs imposed upon and, as the bankroller of the EU it is not one they could afford to have weaken, hence Merkel’s early calming of calls for “out now”. She has had to temper this slightly to try and appease internal wranglings but I’m pretty sure she knows what will have to give in the end. There is simply no way that free movement could be conceded by the UK, it would simply be irreconcilable to the referendum result. Business as usual is not an option. The irony of all this is that if instead of freedom of movement they’d have had conceded freedom of movement of skilled labour the referendum result would likely have been far different. The EU chose to dig in their heels then and look where it got them.

      1. Yves Smith Post author

        You are behind the press. Merkel took a much firmer line today. She is becoming less, not more, accommodating. Plus Merkel is not calling the shots. She is the most important individual player but she is not a dictator.

        If this becomes a game of chicken, the UK takes bigger, harder hits first and they know this. Sterling falls, making food and fuel more costly, fueling discontent, particularly among Leave voters, who are the less educated and therefore on average lower income. The UK goes into a recession. Inbound investment stops and companies that manufacture in the UK to take advantage of access to the EU start moving production and jobs out. The City starts moving bodies to European centers (not many but these are high paid jobs and there will be shrinkage in the related service professions, like lawyers). By contrast, ex the lessening of imports due to the sterling impact, the Europeans will not feel the effects of whatever the new deal is until it is in effect, 2 years later.

        In general, it takes 5 years to get new trade deals in place. And the UK has hollowed out its bureaucracy and has no good negotiators, which will also put it at a disadvantage in coming to terms with the EU.

      2. Darthbobber

        Two problems with this line of reasoning.
        1) You seem to assume that the main line of thought has to be a purely pragmatic “let’s minimize the damage to our own economy”, but this is by no means the case. Uppermost in many European leaders’ minds is that the “blackmail” will have no end if they once give in. And that the deterrent effect of having it go as badly as possible for the UK could only have a salutary effect on anybody else considering the same route. (even if it DOES hurt them, too.)
        2) The British no more want those tariffs than the Germans, so there’s no imbalance here in Britain’s negotiating favor. And

        3) There are about three million UK citizens working and residing in other EU countries. Are they going to be anti-freedom-of-movement in only one direction, or are they prepared to reabsorb that rather large group?

      3. fajensen

        The EU Single Market is based on Four Freedoms:


        Chapter 1: Free Movement of Goods
        Chapter 2: Freedom of movement for workers
        Chapter 3: Right of establishment and freedom to provide services
        Chapter 4: Free movement of capital

        What are these things? The are courtesies between sovereign countries.

        – your goods are as good as mine and I shall treat them as well as my own,
        – your people are as good as mine and I shall treat them as well as my own,
        – your business and services are as good as mine and I shall treat them as well as my own,
        – your money are as good as mine and I shall treat them as well as my own,

        All the EU treaties and EU legal frameworks are protocols on how to exchange them.

        The British negotiating position is: “Actually, you(r) people are beneath us and we shall not treat them as well as out own, and, for this to work out you shall make Concessions!”.

        If you think this position will be easy to “sell” in the EU system and the other EU member states, then, you got another thing coming. This is straight-up fighting talk and the EU system, as well as the local parliaments, just happens to be very much in need of a common ideological enemy* to sharpen their own identities on – and look like they are “doing something”.

        Sure, we will lose out economically. But, rationally, there is a HUGE overhang of zombie investments that can all be written off/down over known externalities that couldn’t possibly be blamed on any individuals, like “Britain’s Unreasonable Intransigence creating uncertainty in The Market”. That’s a net WIN.

        And, irrationally, the sheer pleasure of punching some pompous git right in the nose is sometimes well worth the consequences.

        Can’t be Russia, we don’t want a hot war and we kinda like Russia, they are like that uncle who always drink too much at family gatherings and we try to avoid being cornered by – but still Family.

        “Muslims” / “Immigrants” are all used up. People are getting sick to their back teeth of always reading about some Muslim / Immigrant doing whatever stupidity and most national politicians (event the anti-immigration ones) are finally beginning to realize that if they keep this up we will have real xenophobia going on. With brown-shirts and all, who will see the anti-immigration politicians as “Egg-Heads” and beat them up too.

        The EU scapegoat is used up too, one can only absorb so many shots to one’s own foot. The truth is that, If the EU goes down, the national parliaments and the national civil servants will not be able to pick up the slack and handle their own affairs. All the talent is in Brussels, the clowns, dead-wood and free-wheelers are left behind.

      4. Ruben

        In many cases of high stakes state business political considerations trump economic reasoning. Germany will take a hit in trade with the UK in order to strengthen the European Union just as it took a hit in trade with Russia in order to fall in line with the USA.

        1. Tom

          If Germany takes a trade hit the EU gets weaker financially. Check the numbers out, they simply cannot afford to do that as the EU will crumble. Their rating has now also been dropped.

          1. fajensen

            “Afford?” As I said, I (and countless people through history), will be willing to pay quite a large price over the issue of “My people are finer than you people … ” that Britain is intent on pursuing.

            Essentially what got Britain kicked out from everywhere in the end. But do carry on.

  3. William C

    UK Tabloid watch today

    The Sun (owned by Murdoch) supports Johnson for Premier.

    I think the plan is for Gove to be his deputy (former Murdoch employee).

    So the future is: Murdoch gives his orders, Johnson is expected to do as he is told and Gove keeps an eye on him.

    Who said there is no post-Brexit plan? There will be when Murdoch tells them what it is..

  4. Ishmael

    As I read all of the politics going on in Europe, I think how the original thinking of the EU was totally wrong.

    Originally, the thinking seems to have been to lower the reliance on Democracy because Hitler and Mussolini were elected through a democratic process. Instead it was going to rely upon technocrats (who knows how these people are selected) to run things. I guess the thinking being that these people would make unemotional decisions on how to run things. However, as with any aristocracy the decision processes ended up being what is in it for them.

    It appears to me the miscalculation was not that it was the democratic process that lead to nationalism, it was the suppression of the population by outsiders. Germany was deceived by Wilson thinking the 14 points of peace would be the roadmap of negotiations for peace and instead had harsh reparations and other harsh conditions imposed upon them. Keynes who I am no fan of saw this would only lead to more conflict and correctly walked out of the meetings.

    I look upon how the EU is dealing with the UK and wonder, is the EU going to impose a Versailles type of arrangement on the UK and where will this lead.

    1. Jim Haygood

      George Friedman (whom I don’t much care for, anymore than you like Keynes) claims that Germany, as an export-oriented state, needs to at least preserve the free trade aspect of the EU.

      As for Versailles, the harsh peace was imposed under military occupation. Today NATO (U.S. controlled, with a European puppet front man) occupies Europe. Given the US-UK “special relationship,” NATO isn’t going to help impose a Versailles-style settlement on Britain.

      But to the extent that British and continental interests diverge, NATO is going to feel that strain too. One hopes that NATO will crack like Humpty Dumpty, never to be reassembled.

      1. Paul Greenwood

        In fact I read Kerry is going to have the USA involved in any BreXit-EU conversations

    2. washunate

      …lower the reliance on Democracy because Hitler and Mussolini were elected through a democratic process…

      Obviously none of us were there, but for what it’s worth, I would disagree with that framing. Supranationalism isn’t a concept meant to lower democracy. Rather, it’s a concept to integrate national decisions into supranational ones. The issue is federalism, not democracy. It is loosely analogous to our Continental Congress, Articles of Confederation, and US Constitution. If you define the progression of those governance mechanisms as lowering reliance on democracy, that’s fine. But that’s not because of something inherently undemocratic; it’s because of the way you have defined democracy to exclude closer union. The original participants in the ECSC viewed integration not as an attack on democracy, but rather as the creation of a single entity – Europe – whose chief characteristics would be liberty, democracy, and rule of law.

      Now of course we can dispute what has actually transpired, but if we’re talking the original intent, I think it does a disservice to the idea and the people backing it to make it out to be an assault on democracy. The mechanism for restraining war was not undermining democracy but rather ensuring commercial integration to such an extent that neither Germany, nor France, nor Italy had national possession of the resources of war (coal and steel at that time) to such an extent that they could invade the others.

      1. Yves Smith Post author

        Jean Monnet, who was the intellectual architect of the EU, was explicit about the need to suppress democracy in favor of rule by technocrats:

        From a recent article in the Express:

        Just after the war a group of men, politicians, thinkers, intellectuals and theorists, formed around Frenchman Jean Monnet, became convinced that what they had witnessed at close quarters – the utter destruction of their continent in a vicious war – must never, ever, happen again. It was not a bad viewpoint, indeed it was a noble one.

        They then analysed the problem and came up with two solutions. The first was that the various and disparate nations of Europe west of the Iron Curtain must somehow be unified into one under a single government. They accepted that this might take two, even three generations but must be done. This was not an ignoble vision.

        It was their second conclusion to which I take exception. The whole group was mesmerised by one fact. In 1933 the Germans, seized by rabid nationalism, voted Adolf Hitler into power. Their conclusion: the people, any people, were too obtuse, too gullible, too dim ever to be safely entrusted with the power to elect their government.

        People’s democracy was flawed and should never be permitted to decide government again if war was to be avoided. Real power would have to be confined to a non-elective body of enlightened minds like theirs.

        1. sunny129

          You mean those wanted ‘remain’ preferred PLUTOCRACY headed by utopian like Junker, who is on record for saying 1. When it becomes serious, one can lie 2. European treaties cannot be negated national elections?

          Is self determination, a cardinal sin?

          I am confused!

          1. washunate

            Yeah, that is where we seem to be talking past each other, so to speak. The core issue at play here is self-determination at a nation-state level, not the concept of representative democracy. From that article:

            In fact the final destination of the EU is entirely political. It is the complete political, legal and constitutional unification of the continent of Europe into a single entity: the State of Europe.

            And at any rate, that’s a link to a guy advocating leave. If I had to make a decision personally, I agree with the leave decision, and more generally, to quote a leave guy clearly demonstrates that Brexit must not be a terrible thing. Europe as an idea was primarily about Paris and Bonn/Berlin. London never really fully wanted to be on board with that. Quoting someone in England about continental democracy is a bit like quoting an American Indian on US treaties or an African slave on Constitutional rights or a woman on the Declaration of Independence. They’re not wrong (indeed, they all have rather important observations); rather, the key thing is that it’s a different perspective. We Americans can celebrate the democratic enlightenment of our own Founding Fathers while still being critical of some glaring specific faults in the approach.

            Going back to the 1950s, supranational integration, not lack of public accountability, was the fundamental design. The High Authority of the European Coal and Steel Community was composed of appointed, not elected, officials for example. But they were appointed not by some independently self-perpetuating body, but rather, by the national governments of the member nations. To say that this is not democracy is to say that France, West Germany, Italy, Belgium, The Netherlands, and Luxembourg were not democracies.

            The precursor to today’s EU’s primary fault wasn’t anti-democracy, but rather, anti-transparency. They knew supranational integration would be even more difficult in 20th century Europe than it was in 18th century America. So they played down their long-term political desire in some contexts so as not to arouse too much push back against integration from those who favored nationalism over a united Europe. Those idealizing British parliamentary democracy (while conveniently ignoring the fact that the monarchy and aristocracy have survived to this day…) have legitimate grievance about this sleight of hand. I have no problem with complaining about attempts to undermine states’ rights. But it doesn’t make the fundamental appeal anything more than an appeal to states’ rights, and it doesn’t make the origin story of the EU any inherently less democratic than the origin story of our own Constitution. If representative democracy isn’t democracy, then there are no democracies in the major nations of the Western world, and the US design is the most oppressive of them all since the individual states have far less power than today’s EU states or even than Scotland in the UK or Canada in the Commonwealth. Here’s British parliamentary democracy in action: the Queen even has a French title.

            Elizabeth Deux, par la grâce de Dieu Reine du Royaume-Uni, du Canada et de ses autres royaumes et territoires, Chef du Commonwealth, Défenseur de la Foi.

            Defender of the faith indeed! If we’re getting all high and mighty, that sounds a bit like theocracy, me thinks :)

        2. Jabawocky

          Only how prescient does that sound after the uk voted like turkeys for Christmas. In an age of media control by right wing elements and low educational levels any vote can be won by Trump-style politicians with populist right wing slogans.

          Johnson is as clueless as Trump and as reckless as Trump. If Trump wins and NATO disintegrates we surely are in for a wild time in Europe.

          1. Yves Smith Post author

            More reckless than Trump. Even though Trump shoots his mouth off on Twittef, he was only of only 2 major NYC developers not to give up meaningful chunks of their portfolios to banks in the early 1990s recession. And his recent deals are virtually all licensing, where he takes little or no risk and gets fee income.

            Trump may be brash and a loudmouth but he got where he is by getting other people to absorb risk on his behalf.

            1. aab

              Is there any actual evidence — not Clintonian talking points regurgitated by her baby chicks in the corporate media, but actual evidence — that Trump would be reckless with the military? Even his verbiage is less extreme than Clinton’s, isn’t it?

              I’m not suggesting he’s a peacenik, but the whole “we have to elect Clinton because Trump will cause WWIII!” is invented out of projected whole cloth, isn’t it?

          2. fajensen

            NATO should have been euthanized when the wall came down. Society missed a huge opportunity there. It should have been replaced by a European army of conscripts, with a core of professionals, modeled after Switzerland.

            Nothing dampens imperial overreach like the knowledge that your son or daughter may be drafted and send off to some shit-hole no one cares about to help fulfill some politicians personal ambitions.

            The NATO we have now is not a peace project, that’s for certain. It’s not even independent so it cannot serve national interests. It serves others, itself and the US. Why would we want to support this?

        3. vidimi

          the sad thing about their second conclusion is that they chose to ignore completely the lessons of the first world war – the mother of all that followed in europe over the next 30 years – that undemocratic governments were just as dangerous.

    3. ginnie nyc

      For the record, neither Hitler nor Mussolini were ‘democratically elected’. Hitler came to power using blackmail against the ancient President Hindenburg (his son was involved in money laundering scandal), forcing him to remove Chancellor von Papen and substitute Hitler instead. The Nazis (through Reichstag seats) already had several key cabinet posts (Ministry of Justice, Police, etc.).

      As for Mussolini, you seem to forget the “March on Rome” which created a state of crisis and emergency in the capitol. Constitutionally (at that time), the King could remove the Prime Minister under certain circumstances. The King caved under the intimidation of Black Shirts at large, and after a meeting w/Benito appointed him chief.

      In neither case were either leader elected, democratically or otherwise. Therefore the base of your argument is void.

      1. Yves Smith Post author

        That is not how Europeans perceive it. See the Jean Monnet comment above. Also see this. Despite the typos, the argument is sound:

        People who say that Hitler wasn’t really elected are usually germanophiles who search for excuses for crimes of the german people in the “Third Reich” (the argument is that a small undemocratic minority oppressed the good people of germany). But since Pharyngula is an american blog the case here might be a lot less sinister. The idea that Hitler wasn’t elected democratically is probably an allusion to the fact that he[2] never got more than 50% of the votes (th e best result was some 44%). Americans, with their “the winner takes it all”-system tend to forget that you can win a german election without winning a majority.

        The problem with this is that, without a majority, you have to form either a coalition with other parties, or form a minority goverment, or both, and in fact that was the problem that had plagued the Republic from the beginning. To put the results into perspective, the 43,9% for the NSDAP in the 1933 election was the best result any party had ever had in the Republic of Weimar from 1919 to 1933[3] (second best was 37,8% for the Social Democrats immediately after WWI)[4]. Governments were habitually formed without any democratic basis at all, so the result of the 1933 election might have looked like a step forward.

        1. Paul Greenwood

          It is true and so today. The SPD is in Government in Berlin having LOST the election to Merkel who could not form a government without combining 3 parties and 80% seats in the Bundestag.

          Germans call it GroKo and it is anti-democratic. In some states they now have 4 or 5 parties in coalition so splintered is the party system.

        2. Darthbobber

          This leaves out that the 1933 election was AFTER the seizure of power, after the appointment of Hitler as Chancellor, after the Reichstag fire, and after Goering was given the one other cabinet post the Nazis demanded (the ministry of the Interior, putting him in charge of the police.) The November ’32 election, the last one not conducted under a reign of terror, had seen the Nazi wave crest and break. Dropping from 37 to 33 percent, and losing 34 seats. Between that election and the one in 33 massive measures had been taken to suppress the public activities of the rival parties.

          The belief that this didn’t count as “winning” an election in any meaningful sense is absolutely not confined to Germanophiles, but is pretty uniformly held by historians of all stripes.

  5. youngguy


    As much as I resisted your take on the likely path of Syriza’s stumbling and Greece’s descent into the maelstrom, it was spot on from the beginning. This post lays out a description similarly unappetizing, but, I fear, just as prescient.

  6. PlutoniumKun

    Given the insane civil war inside the Labour party (proving that just like the Dems, the ‘liberal’ wing of the Labour Party sees the Left as a bigger enemy than the Conservatives), I suspect the Conservatives will be very tempted to go for a quick election, especially if they elect someone moderately sensible like May (I still find it hard to believe they would be so idiotic as to pick Boris, but in a world gone mad…). But if Boris gets elected, he will cling on like dear life, this is his life dream. And in the hands of such a thoroughly manipulative incompetent, its impossible to see Brexit going smoothly.

    There seems to be a general consensus now among ‘the elite’ (judging by what I read in the FT and todays recovery in the stock market) that the most likely, and most sensible, outcome is a ‘go slow’ exit, with Britain exiting in name, but dragging out all negotiations so that it won’t actually mean anything practical for businesses or individuals for years to come. However this assumes that Europe (and Scotland) co-operates. I’m not so sure they will.

    1. RabidGandhi

      Only on Planet Tory can Theresa “I stripped 33 Britons of their citizenship” May be classified as “Moderately Sensible”.

      1. PlutoniumKun

        Its all relative. When compared to Boris and Gove and Nigel, she seems almost reasonable. Sort of in the way some people see Hilary as a reasonable alternative to Trump.

    2. Yves Smith Post author

      The Tories do not need or want a “quick election”. And it is difficult to pull off now. As Clive wrote via e-mail:

      Until fixed-term parliament legislation was passed during the previous coalition administration (I think it was in 2012 or thereabouts) a UK prime minister had absolute discretion as to when they could call an election. All they had to do was drive a mile or two and get an audience with the Queen and she would give permission to dissolve parliament. In theory the monarch could refuse, but that would just plunge the country into a constitutional crisis so that was never going to happen in reality. Then there’d be elections.

      But not now. The legislation for fixed term parliaments isn’t tested, but it’s fairly water-tight. Parliaments run for 5 years. Of course, all legislation can be repealed. However, only parliament can repeal the legislation so as a minimum it would have to get a majority. And would the conservative MPs vote for it ? Those who are on the Remain side, perhaps; those who are on the Leave side would see it for what it was — an attempt to refute and overturn the referendum result. Some Labour MPs may vote for it for the same reason as the Remain conservatives but some would join the Leave conservatives in opposing overturning fixed term parliaments because not all Labour MPs support Remain. The SNP would be tempted to do whatever causes England the most misery, which would be to end the fixed term parliament and pave the way for elections, but then again, if there was an election and if the referendum result was overturned by a new parliament then the SNP would no longer have any ammunition for another Scottish independence referendum there. So the SNP may end up abstaining. In conclusion — there’s no certainty that a bill getting rid of the fixed term parliament legislation would get through the House of Commons.

      And then (agh!) it would have to go through the upper house (the House of Lords). Even more unpredictable, there’s a lot more independent members there. Plus even less party loyalty. Okay, the Parliament Act could be used to force it through if the Lords voted down repeal of fixed term parliaments but now you’re talking a year or more of political wrangling before there’s even the possibility of an election.

      It’s sort-a possible that some lawyerly parsing of the fixed term parliament legislation could be used to allow the current parliament to be dissolved. But the legislation is like I mentioned untested. Any attempt to call an early election would be subject to a legal challenge by those who opposed it. This would have to go through the High Court, an appeal regardless of who won or lost and would inevitably end up in the Supreme Court. It could even — oh, the irony of ironies! — end up getting leave to be heard in the European Court of Justice. I am not making this stuff up. Even best-case, you’re looking at a similar year or more of legal shenanigans.

      So, no election is imminent. Because there is no method of calling an election. Even if the government is stupendously dumb (and this is quite possible, a lot of the Tories are total crazypants), there’s still not clear route to have an election, you just get a different government.

      I *hate* deciphering the parliamentary language used (in my day-job at the TBTF, we have to try to unpick what parliament intended and it is not always easy) but if I read it correctly, the following conditions apply:


      1) an early election can be called by the House of Commons passing a motion (“That there shall be an early parliamentary general election.”) by — and this is important — a 2/3rds majority


      2) an early election can be called following a no-confidence motion (“That this House has no confidence in Her Majesty’s Government.”) by a straight majority. This early election can be cancelled if within the proceeding 14-day period there is a “confidence” motion passed.

      There’s no other obvious wriggle-room. Apart from the Queen who (and I didn’t know this, this must date back from ancient royal prerogatives) can still dissolve parliament. But she won’t ev-ah do that.

      That 2/3rds majority is a big hurdle. Labour and Tory Leavers could easily muster the 1/3rd of MPs needed to block an early election motion.

      This would give the only options being either a no-confidence motion (in which the conservatives would have to vote down their own government, you could not envisage that happening) or else repealing the fixed-term legislation. The latter is as I mentioned possible, but a very lengthy procedure with its own risks.

      And you’re so right to point out that the rest of the EU is not going to stand idly by while the UK tries to work out if it really did vote to leave and if it did, did it mean it or not. If we’re still talking like this in 6 month’s time, the European Parliament or the Commission (or both) will be discussing passing a Directive on how to get rid of errant member states who’ve violated whatever trumped-up reasons they see fit to cite. Or else existing treaties will be scrutinised for mechanisms to achieve the same thing. I’d not rule out the Eurocrats doing that right now, just in case.

      Both Labour and Conservative party discipline is in complete disarray. Each individual sitting MP is having to evaluate their chances of reelection *in their own particular constituency* based on the factors in play.

      Some “Blairite” MPs might deduce they would not get reelected because they have thin majorities and would fall victim to Labour’s current turmoil. Others are under direct threat from UKIP and would judge that the electorate in their area could tell a mile off that another election was a re-run of the referendum by the back-door. Another class of Blairites would, again, correctly, guess that if they have a Corbyn-loyalist local party they face the imminent wrath of activists and the consequence inability to organise a local campaign. There’s plenty of reasons why a Blairite MP wants to avoid an election at all costs.

      And then you have the states of the parties. Leave Conservative MPs do not want to face their voters now either because Remainer voters will take their revenge. Or Leave voters would see a new election — especially if another Conservative government might back-track on the Leave result — as th perfect excuse to defect to UKIP.

      Often forgotten too is that neither the Conservative party nor Labour have any money to fight another election so soon. Even a no-frills campaign costs money and no party has got any reserve funding. The fundraising cycle for the next election has not even begun for the party Chairmen and after the animosity of the referendum, they cannot guarantee to be able to tap previous donors. Another election so soon after the last one will cripple both parties financially.

      As you say, a second referendum is more plausible. But even that is like a field littered with landmines. If I had to gauge the consensus of public opinion, regardless of whether people voted Leave or Remain, a second referendum has the whiff of being an affront to democracy. The usual metaphor employed is that of a soccer match. As in, England lost against Iceland in the European Cup last night. We don’t get to play the match again just because one side didn’t realise what they were up against. Or that the losers didn’t like the result. Or that England thinks it could now put up a better side. Or because of some other unintended consequence. The moral high ground doesn’t count for a lot these days, but it can’t simply be ignored either.

    3. Paul Greenwood

      How does the Fixed Term Parliament Act jive with your approach to early election ? Do Conservatives simply hold an unconstitutional election ?

  7. dandaniel

    What exactly is this “access to single market”? Would eu impose tariffs? What about USA, Canada, or other non-eu countries access to the so-praised single market? Please help me with some more details, maybe technical details. Thank you.

    1. Paul Greenwood

      Yes The EU will impose a 50% tariff on BMWs and Mercedes and 100% tariff on Renault and VW and the UK would find its Trade Deficit had vanished.

  8. BruceK

    Tory leadership election is in two rounds
    1. MPs only
    2. Tory party members choose between top two candidates.
    (there is a Wikipedia page,_2016)

    Allegedly 70% of Tory party members supported Brexit, and most regard control over immigration as a red line issue.

    So no candidate for leader will admit to being prepared to give it up until after the leadership election (now to be announced on 9th September)

    Until then all public statements are posturing.

    Afterwards, job losses and spending cuts will bring a cruel reality to the foreground.

    Plus Scottish independence would blow away some national delusions.

    1. Tom

      Scottish independence won’t happen as they cannot get into the EU – too many countries with breakaway regions have the power of veto.

  9. Bimbo

    So the populace is starting to understands the real deal: UK irrelevance.

    Doesn’t matter how you hate or love the EU, the cold facts are these. The Brexit means the end of the British blackmail towards the Continentals and UK doesn’t have any significant allies inside the EU.

    The UK doesn’t have so much power to bargain a special treatment by the Continentals and it became more irrelevant. As the British blackmailed and bashed the Continentals for years and never had solidarity towards them during the last sovereign crisis, today the UK doesn’t have sympathy in the Continental hearts.

    Compound the fact that the recent immigration crisis was triggered by the mess created by Russia in one side, and Americans and British in the other side, in Syria. This mess and the war created an astonishing humanitarian crisis that the British refused to help and even today the Continentals are paying hard to Turkey to avoid more refugees in the European borders. At the same time British helped to ignite the war in Syria they refused to afford the burden of helping those poor human beings, victims of the war, the economic catastrophe and even the drought.

    Today the Continentals are happy to see the British leaving through the back-door and exiting the EU. Also they are happy as they will use it to show how populism and demagogy hurts the common people and specially the young generation. You can add another interesting thing: with the Brexit, UK can not veto any more treaty and lobbying inside the EU for the USA, like a poodle.

    This crisis will evolve and the British will pay dearly the Brexit. It will become like a 51st American state but irrelevant in the World and even in Europe. The Brexit is the final stage of the split and divorce between the plutocratic capitalism and the “Renanian capitalism” which is the basis for the Euro and the currency union. The Brexit is the natural process of this split between the Western capitalisms.

    People outside the Europe are more deceived about this divorce in Europe. They tend to think that this Brexit is a final stage of the European Union but it is the opposite. It is the natural process of expelling the capitalism created by the British some centuries ago and exported to the USA. This capitalism is well known as Plutonomy by some City analysts, some years ago.

    You can chose and pick sides but doesn’t matter how you deceive yourself with your own ideology. It is the Realpolitik and the British are only victims of themselves. No allies in the Continent, no sympathy and more like an American poodle messing with the Continentals, as happened during the Second Iraq Invasion. Another British and American mess.

    To the Americans I let here one forecast. The USA will not survive until the end of this century and it will split. Trump is only the first symptom of one American deep malaise and disease. I know this, more people know this and this is why the Brexit means less American influence in Europe too.


    1. Ranger Rick

      I think you ought to lay off the bold tags when spreading that doom and gloom. If the UK is truly irrelevant, then why is the EU (and the world) throwing such a tantrum about their decision to leave?

      The rest of this comment is word salad.

      1. Bimbo

        I do not see so sadness with the Brexit outside the UK. Who is in tears outside the UK with the Brexit? Nobody.

        UK is irrelevant today and doesn’t matter how much do you like or not.

        The current diplomacy in Europe seems the vulture around the prey. If the UK doesn’t invoke the Article 50 of Lisbon Treaty quickly, the economy starts to depress so much and later the formal Brexit will cause more pain inside the UK. If invokes the Article triggers the clock and UK is unable to find a good diplomatic solution to the British side.

        The UK is a prey and it is imploding. The opposite of what was promised by the activists pro-Brexit, like Farage. It is not the EU who is at stake but the UK with Northern Ireland, Scotland and even Gibraltar claiming to stay inside the EU and menacing to leave the Union.

        These are the facts, and do not kill the messenger.

        You can add more problems to compute. About one million of British are living in the EU who never paid taxes for the social services than benefit in those countries. They are seniors who are living abroad their deserved retirement. But they never paid social contributions to benefit from the national health systems like they do in France, Spain, Portugal, Italy, etc. Is the UK ready to pay for their return and give them the social services needed as they benefit abroad? With the current British NHS? Really?

        With the Brexit almost two million of British living in the Continent can be expelled if the UK doesn’t agree with the free movement of people with the EU. Reciprocity is a value and a principle in Diplomacy and International Politics. With the Brexit we have five million of citizens with theirs lives at stake. At least five million. Another unindented consequence of the Brexit.

        The truth is: UK doesn’t have allies in the Continent after years and years of bashing, blackmailing and spiting in the others countries, people and even minorities. And to increase more problems to the British side, we are seeing racist and xenophobic behaviour on the British streets against foreigners, resembling the Twenties. Today the UK looks the Germany of the Twenties. And Farage is the British leader in these days.

        It is hard, it is bold, but those are the facts. Do not kill the messenger.


        1. sunny129

          By your arguments (most, very valid, cannot disagree) UK is going to the ‘dogs’! But Isn’t self determination has some merits over plutocracy in Brussels and Plutonomy of London Banking district?

          UK existed for centuries before EU came into existence. They can sit on ‘Article 50’ at least several months, till the cry for referendum in 8 of remaining 27 Countries picks up! Next year is election time in Germany & France. They trigger article 50 in Dec and wait for next 2 years unless negotiations their way!

          Mean while instability, uncertanty and volatility will affect Global Banks, whey they can inflict more pain on UK

          1. Yves Smith Post author

            Juncker put a stake in the ground: a new PM who favors Leave should invoke Article 50 his first day in office, one who favors Remain should do it in 2 weeks.

            Now I don’t know what the other leaders think, but even Merkel has said the Brits can’t crap around for too long. I think they will start thinking of ways to punish the UK if this is still in play a month after the new Government comes in. Which means October. The preferred month for financial crises! What brilliant timing.

            1. vlade

              the question is, what can Juncker & co realistically do to the uk if they don’t invoke A50. Unless UK breaks some treaty aspects (possible, but not fast, as it may require acts of parliament), UK can sue for any serious retaliation attemtpt. That would be fun…

              not invoking is the only lever UK has. Once invoked, its ENTIRELY at eu’s mercy due to the 2yr timeout. of course eu wants uk to invoke…

              basically, the only reasonable uk strategy I can see, is not invoke, try to build some allies on the continent (with the smaller eu states, plus maybe germany’s self interest), so as to put some internal pressure on eu. as i wrote, uk doesn’t have the skills to do it, and its a question whether the leave votrs would have the patience for this process.

              1. vlade

                Just to add to the strategy – there’s a clear rift between Tusk (representing the Council) and Juncker (representing Commission), which could – assuming UK is willing to carry the economic costs of postponing the invocation – be used. It’s actually very much the rift between EU governments (which feel the pressure of their voters, especially now in Central and Eastern Europe – and I include Austria here, not just the ex-USSR block), and the not-really-elected Commission.

          2. fajensen

            UK existed for centuries before EU came into existence.

            Sure, but, would the UK people of today be happy with the simpler society of their grandparents?

            There are a lot of resources tied up within the EU system because these are in fact needed to run states and international affairs at their present levels of complexity and speed. Reversal to national levels require a shedding of complexity to match the capabilities of the national bureaucracies.

            … till the cry for referendum in 8 of remaining 27 Countries picks up!

            I think that those cries are already being tempered by the sights of barbarians and bullies of all persuasions interpreting Brexit as their license to be running amuck on immigrants.

            I sure has my own share of prejudices and complaints – but I find it sickening that someone will live them out on what is essentially random people they don’t even know. This has got to stop. We have to start treating and discussing about people as People, individuals. Some good, some less so.

            I blame the oh-so-tolerant left (a lot) too here. There is this overbearing attitude of: “You immigrant people can’t fully have all of the things that we white people have achieved for ourselves because some of that is against your culture / religion”.

            So, where can a young “brown” person really go? To the gangs or the Salafists probably, they at least treat all newcomers equally.

            That’s the “immigration problem”, as I perceive it.

        2. Darthbobber

          “Britain looks like Germany in the 20s.”
          If there were a constant stream of assassinations, if every party had a large paramilitary wing to protect its own demonstrations and break up those of other parties, if the leader of one of the parties had attempted the violent overthrow of the government, if the leftmost party had twice attempted to launch armed insurrections in an adventurous bid to take power, then there might be a vague resemblance to the political environment of the Weimar era(and we’re leaving out background elements like Versailles, the kazillion-percent inflation, etc). But its nowhere near that.
          “Farage is the British leader in these days.” Hardly

          Differences of degree matter. Especially when the difference is several orders of magnitude.

          “We are seeing racist and xenophobic behavior on the British streets against foreigners.”
          True, but
          1) A long, long way from being kristallnacht, and
          2) Scarcely unique to Britain. (actually downright mild compared to what we’ve seen in France, Germany, parts of the United States, and never mind Hungary. Or Poland or Banderastan if you speak of Russians.) Even now, the Brits by no means lead the pack in this department.

          They are by no means irrelevant. Hence the EU hissy fit. There’s a difference between being irrelevant and having a lot less leverage than you think you have.

          Semi-point about the health services, but this is one of the items covered by shipping the 350 million pounds a week in one direction and getting some back in rebates and specific grants in the other.

    2. a different chris

      > The USA will not survive until the end of this century and it will split.

      So you figure it will outlast the EU by like 80 years, huh? Damn, I was hoping I would live long enough to see it.

    3. so

      I’m pretty sure the good ole US of A is responsible for the immigration crisis. Google before and after images of any country in the middle east and you’ll get the idea. Regime change =genocide

    4. Paul Greenwood

      Quite a positive assessment ! You should have a drink to celebrate your unburdening. I bet you aired all day to write that.

      Life is never as it appears.

      I think things will be very different.

      You have little idea just how dangerous matters are in Germany or France or Italy.

      Britain has jumped off a moving train because it does not like the journey up ahead

    5. DarkMatters

      So Russia triggered the Syrian crisis? When they started air strikes in September of last year? Seriously?

      That dastardly Putin! I can see him twirling his Hitlerian moustache even now!

  10. That Which Sees

    The UK will demonstrate its strength over a over a feckless and powerless EU by:

    . 1) Refusing to file “Article 50” which would start clock that will be used against UK Citizens.
    . 2) Challenging Merkel and Schauble by unilaterally “picking and choosing” in a visible way that they cannot stop. Most likely, refusing to accept economic migrants that claim they are from Syria. Another option would be reduction of benefits to non-UK citizens.
    . 3) Encouraging other nations to hold referendums to exit the EU.

    Here is the key quote to understand how much German elites despise democracy.

    German President Joachim Gauck recently said: “The elites are not the problem, the population is at the moment the problem.”

    Real negotiations are impossible until Germany’s 2017 elections vote out current leadership. UK Citizens will have quick and constructive negotiations with the next German government that will be led by (or in a strong coalition with) the Alternative für Deutschland [AfD] party.

    Apologies if this posts multiple times. I am experience failures trying to interact with the NC web server.

    1. Dr. Roberts

      It’s extremely unlikely that the AfD will be in government. The only conceivable governing coalition in Germany in the near future is the current one. AfD is only making this more certain by preventing the possibility of the CDU forming a coalition with any of the parties smaller than the SPD. The AfD are anathema to the other parties, especially the CDU, who view their monopoly on right- and center-right politics as essential to their position. The CDU would sooner form a coalition with the SPD, Greens, and Liberals than the AfD.

      1. That Which Sees

        How would an “All parties but AfD” government function?
        And, how long would it last?

        I doubt such a structure could form. Even if it did it’s duration would be measured in days not weeks. While, the anti-citizen euro-elitists of the CDU and SPD may try such a thing… Effectively Germany would exit the negotiating process in a cycle of no-confidence and no-government elections.

    2. Yves Smith Post author

      This is delusional.

      The UK is not an autarky. It depends on European imports. Tell me exactly what leverage the UK has?

      The Europeans are not going to negotiate without an Article 50 filing. So your first statement is already wrong. The EU leaders were mad at Donald Tusk for even forming a team to get up to speed.

      Moreover, the delay in resolving the Brexit matter hits the UK worse than the Europeans. It is bad for financial markets (the City) and suppresses the pound (making UK citizens poorer via more costly imports). And it not only deters investment, but foreign companies with manufacturing ops there solely to get access to the EU will not make new investments in the UK unless this is resolved.

      In addition, once Article 50 starts. it’s 2 years. It can be extended but it requires UNANIMOUS approval of all 27 member states. Not likely to get its, since Donald Tusk also said for the UK to exit can be accomplished in 2 years. But setting up new trade deals normally takes more like 5 years, and that assumes they get done..

      Wake up and smell the coffee. The Conservatives have created a disaster for the UK. Their best option is to find a way to beat a retreat.

      1. That Which Sees

        I hate to disagree with the host, but this is factual. No delusion here.

        The fact that an “Article 50” filing gives strength to Germany guarantees that it will not happen. As a thought experiment:

        When the police are negotiating with hostage takers do they provide the hostage taker with “Article 50” guns and ammo?

        The UK knows that the current German government is a bad faith negotiating party. The UK would be foolish to concede anything prematurely, especially a doomsday time certain clock to parties with publicly stated desires to exacerbate the problems.

        For structural issues on the balance of strength between the two parties:

        Germany is more dependant on UK trade than the UK is on German trade. Autos are particularly bad as a fungible asset class. Ferrari, Bentley, Rolls Royce, even Corvette and the awesome “Godzilla” Nissan GT-R are available substitutes.
        If the Merkel government drives UK-German physical goods trade to zero:
        — The German people will be hurt much worse than UK Citizens.

        Let’s talk local financial markets. What is the swap loss potential on the books for German banks (most notably DB) subject to UK contract jurisdiction? These are contracts with “live” collateral requirements. Any attempt to block new business is likely to breach contract provision triggers on the existing contracts. DB would fail and EU law would prevent Germany from being able to credibly rescue the firm.
        — Germany has no viable path to excluding UK financial institutions without risking its local banks.

        Let’s talk EU Financial markets. Germany has huge currency problems in the TARGET2 system. Starting a Financial conflagration with the UK guarantees that both EUR and GBP will degrade versus USD, JPY, and other basket currencies.
        — How many Portuguese, Spanish, and Italian banks will fail due to EUR slide?
        — Can the EU survive that many failures?
        — Can Germany survive a 50%+ write-off of TARGET2 amounts due?

        Germany has so weakened itself an implosion is possible with *NO* intentional, external fights. If rates had ticked up 75-100 bps in the next 12 months they would have gained immense breathing room. Now, those rate cuts are not going to arrive.

        The tragedy in all of this is Germany had the opportunity to change unworkable EuroZone rules years/decades ago. When the Cyprus problems happened or even earlier related to Ireland. Instead Germany’s elites chose strict rules over rational policy. Now that decision has resulted in a hole is so deep, I do not see any good options for them.

        My apologies for any language or typographical issues in this response. It is far too long to be written on a mobile device, but the least I can do is respond immediately to Yves.

        Yves, despite this disagreement, I have great respect for you. I still to this day direct people to your work exposing the MERS train wreck in US residential securitization.

        1. Yves Smith Post author

          Your comment is very poorly informed as to what you present as “facts”.

          First, you don’t being to understand how swap agreements, or apparently any sort of legal agreement, works. A well-drafted agreement specifies which jurisdiction’s law governs the agreement. Most swaps are under English law or New York law. A Brexit will not impact how the contracts are interpreted.

          As for your remark about collateral, it does not even make sense. And that is not just my opinion but also that of derivatives expert Satyait Das. By e-mail:

          If the contract has collateral requirements then the first question is what triggers payment requirements. So the volatility in Sterling and global interest rates affects the MTM and therefor payment claims. So any bank long Sterling or short bonds (or its equivalent in derivatives) may have losses but it would depend on their portfolio structure. In my experience, banks run matched books to a substantial degree. Proprietary positioning is lower if you look at reported market risk due to a variety of factors.

          As far as collateral goes in matched trades, if both counterparties have collateralisation positions then there is no issue. If one party doesn’t have collateral requirements in the contract, then it is conceivable that there may be cash flow or liquidity issue.

          It is only if they can’t meet these then we have any application of the legal remedies.

          Brexit does not affect the legal position but market movements may affect the collateral requirements. BTW this risk is there without Brexit.

          As for whether Germany would bail out DB, EU rules or not, it would be difficult to see Germany and the ECB not taking steps to support the bank because of systemic risk issue. As we have seen in Italy, the concept of no State support for financial institutions can be flexible.

          As for cars, you similarly do not understand the high end car market. I am not an expert but I know many people on Wall Street. The boys like cars that fit their fantasy of race car driving: a status car but one that also accelerates quickly, takes turns well at high speeds, and has very responsive steering and brakes. A Rolls or Bentley is not a substitute for a BMW. And a Ferrari is Italian, lest you forget, and is affected similarly by a Brexit. People in finance would never be caught dead in a Corvette. German auto imports will not go to zero under any scenario. The Germans will lose more low-end car sales to the Japanese. On the high end, the way they will take a hit is by Brits buying less expensive models in the same line, and not buying new cars as often.

          Your scenario on banks is also pretty off. Smaller banks are not going to be running any big foreign currency exposures. The bigger banks might have more dollar borrowings than assets, but we ran that movie in the crisis. The ECB has dollar swap lines with the Fed. The ECB will provide emergency (cheap) dollar funding. So they won’t have a funding problem. They might have an underlying solvency issue if the currency mismatch is big enough and the wrong way, but banks have been managed by supervisers much more tightly than pre-crisis.

          If anyone is likely to be on the wrong side of this, it is UK institutions, since sterling has and will continue to fall further than the euro and the UK has massive external borowings. Per Ambrose Evans-Pritchard:

          More worrying is what S&P also said: that debt coming due over the next 12 months is 755pc of Britain’s external receipts and large sums have to be rolled over continuously. This is the highest for all 131 rated states, thanks to London’s role as a global financial hub. We will not know whether there is any mismatch, either in currencies or maturities, until the repayment deadlines hit and the skeletons come out of the closet. The test lies ahead.

          And the Germans do not negotiate in bad faith. The Germans repeatedly told Greece in very clear terms what the German position was and the Greeks refused to believe them. As we said repeatedly last year, it was Greece that was negotiating in bad faith. They repeatedly reneged on commitments they had made. I chronicled this at length. Using your bargaining leverage to the max when there is a big power imbalance is brutal but it is not bad faith. Greece went to war with Germany armed with swords when the Germans had Panzers. The results were predictable.

          I have repeatedly said that the Germans have wanted things that are contradictory and it would inevitably break the Eurozone. But this is not the Eurozone. This is the EU. Britain was not subject to the punitive Eurozone budget rules and it had a very favorable deal with the EU. It overplayed its hand and has created a huge mess. Everyone will suffer, but the Brits will suffer more if they do not retreat from a Brexit.

          1. That Which Sees

            Sorry if I was not clear. I am projecting forward the almost inevitable chain of events based on what Merkel-Schauble have said they *will* do. The official German scenario is that they will attack UK banks by “de-passporting” (a terrible term) them. The event chain would be:
            — Germany pulls the switch and declares UK Banks illegitimate in Germany
            — The only rational UK response will be to make German banks illegitimate in the UK.
            — Swap contracts requiring parties to be legal in UK jurisdiction will immediately resolve per the terms of those contracts.

            DeutscheBank/DB, Bayerische/Bayern, and WestLB/Portigen will have to pay out in full immediately. …. They will fail. If you think the International Swaps and Derivatives Association [ISDA] will try to save German banks, you are kidding yourself. It is an association that wants to avoid direct conflicts with governments.

            I have no doubt that Germany will try to evade the consequences of their aggression by trying to transfer contracts from Deutsche Bank, A.G. to a theoretically UK based DB PLC. Unfortunately for Germany such efforts are based on the failed concept that “German Rules” will hold hold in foreign nations and those nations will obey “German Rules” as if they are their own.

            You are correct that the ECB could “Openly Break the Rules” to save German Banks. The key question is would Germans find “Breaking the Rules” an acceptable solution.

            May I propose simplifying this conversation can by bringing the German position down to a simple concept? “Live by the Rules. Die by the Rules”:

            “Germans generally, and their elites specifically, are FIXATED on Obeying Rules. ” This fixation builds into their policy irrational assumptions, most notably:
            — Rules cannot be changed without German consent
            — Rules cannot be breached
            — International legal systems will effectively enforce Rules

            The UK can, and hopefully will, change rules unilaterally. They will do so in a way that has immediate benefits to French and Italian workers (especially union auto workers). These will be targeted tactics designed to split Germany from the rest of Europe.

            The goal of the UK will be to separate Germany, from the substantial number of sane European countries including, but not limited to: Portugal, Spain, Italy, Austria, Poland, Czech Republic, Hungry, Slovakia, Cyprus, and Greece.

      2. Jabawocky

        Brexit clearly equals chaos. However, 51.9% of the population preferred chaos. NC readers were in general backing chaos prior to the vote, stirred by left wing anti EU sentiment. You are right that the uk needs to find a way to back off but this will be challenging with the media remaining in favour of brexit.

      3. Tom

        This is delusional.

        The UK is not an autarky. It depends on European imports. Tell me exactly what leverage the UK has?

        Errr, those exact European imports. Chances are most are goods that could be imported from elsewhere. If we are a net importer then they need us more than we need them by definition.

        1. Yves Smith Post author

          Get over yourself. No one “needs” the UK. The biggest export to the UK is German autos. Even Merkel is taking a tough line. And if anything, her willingness to let the British have some (but not too much) time to sort themselves out is more generous than that of most of her fellow MPs.

          Some of those cars (including Japanese cars, Nissan has a plant) have UK final assembly to lower some costs of production while getting the advantage of being in the UK. Those operations will be closed.

          The Germans have been perfectly willing to do things that are economically detrimental to themselves and Eurozone to maintain Germany’s advantage in the Eurozone. This has been the case for decades. They don’t revere capitalism or businessmen they was Americans do. The Germans also have a very strong cultural fixation with respecting the rules, and the British are proposing to flout them.

          And on top of that, a Brexit is perceived to be an existential threat to the EU. They do not want to encourage separatists. And there is no justification for giving the UK a better deal when it already had an extremely favorable deal.

          The Europeans took an even firmer stand today in telling the Brits that they are not getting a special deal if they leave the EU, and no change in their arrangement if they stay in.

          1. Russell

            What caught my eye was Varoufakis was right. Brexit at the thinking & emotional level is for that.
            The young and old of the UK were glad to have a check coming from either work or retirement to live in Spain or where they had good paying work on the continent. Now it is they who have to decide, and then what other nation will accept them individually, or charge them individually.
            (Last I looked Canada wanted you to have 100K to take you in.)
            I suspect many will decide home is still better.
            The City, well what was it good for? All of the City is Finance and the islands will still be good for hiding fortunes, better than Panama, or even the Cooks.
            Every time there has been a war and the UK had to be bailed out, the US has done it.
            As I said it wouldn’t surprise me if the UK was to the US what North Korea is to China. Both militaries have worked together often and MI6 & the CIA definitely do.
            On that basis we may see some cracks in the C.S.A. & GOP austerity movement in the US.
            The option really could be the UK for those reasons, the covert set up revolving from Malaysia gets through the adjustments, with money and shared militaries, especially the sub forces the US wants them to co-ordinate that US & UK relations economically get a bit closer.
            I do regard you all as much my betters, but this is what crossed through my mind. It is definitely for the goals of the Finance Banking powers that all working people suffer. Typically their power is inarticulate, a fearful thing.

          2. vlade

            “giving the UK a better deal when it already had an extremely favorable deal.”

            Absolutely. Basically, UK had as good a deal as it could hope for, given it came to the party late and wasn’t able/willing to negotiate few more sovereignty clauses like Germany/Ireland.

  11. vlade

    UK’s negotiation suffer from a massive problem, that UK has no-one who has any idea how to negotiatiate – in the technical terms, as in good professional diplomatic corps that would have a lot of practice negotiating large deals subject to political boundaries defined by No 10 Downing Street.

    I said that before the referendum, including the fact that no referendum will magically restore UK diplomatic abilities from the low point that they have been for a long time.

    Given the fact that few, if any, politicians in the EU also know how to run a real negotiations, it’s not going to end well.

    1. a different chris

      Agree totally in that neither side seems to have a clue about negotiation. But I would say both will suffer. Yeah the EU is bigger but it’s pretty much Germany and the French elites, the rest of the continent seems to be about ready to start screaming. It won’t be the EU against just Britain.

      It will be more like the classical Stern Father figure suddenly beset with large problems both at work and at home.

    2. Yves Smith Post author

      This is a critical point. I’m a fan of Talleyrand (have read several biographies) and the critical and difficult role he repeatedly played shows what a difference having a good negotiator makes. And he often enough had good or at least adequate negotiators at some of the other key players to allow for very complex issues to be worked though (the re-establishement of nations after Napoleon lost. Who got the spoils was not trivial, and Talleyrand’s vision and his top priority of maintaining peace is arguably why the Continent was free of major wars for the next 100 years).

      There is no one with remotely the right skills on hand. Merkel is as good as it gets.

    3. Tom

      I agree with a different chris that this will not be the EU negotiating but pretty much solely Germany. The French may be paid lip service during the process but let’s not forget that the Germans bankroll the project off of their economic might and hence it’ll be the deal that suits them that happens.

      1. Yves Smith Post author

        No, the EU is not the Eurozone. Germany funds the EU (effectively) because all member states are very large player in funding the periphery country debts and Germany is the biggest funding source. And it also speaks on behalf of the other (smaller) trade surplus countries. And even though the Bundesbank often fights with the ECB, they are aligned in their belief that periphery countries should be subjected to austerity, and the ECB is the real stealth muscle in discipling them, much more so than Germany. It was the ECB that brought Greece to its knees by effectively shuttering its banking system last July.

        With the EU, the 28 countries all fund the budget. Even though Germany pays the most, its role is not near as predominant. And the EU operates in a very “by the rulebook” kind of way, with some matters requiring a mere majority, some 2/3, and some unanimity (like extending an Article 50 negotiation beyond 2 years). They will abide by the strict terms of written agreements. They don’t do creative lawyering the way the Anglos do.

        1. DarkMatters

          A question I ponder is who holds the reigns of power, Germany or the EU? (Or more nuanced, in what proportion)? I see no clear answer at the moment, but I think that balance will determine a good part of the final outcome, and, conversely, the outcome will indicate who does.

  12. John k

    I’m far more optimistic regarding Brit options and negotiating power. Starting with autos. Brit can switch from German autos to higher reliability jap ones… Threat of this will rapidly bring merkle to table. Plus other Eu imports all easily replaced.
    Plus no German car imports mean more locally produced… Just show modest growth in local factory jobs will make Boris wildly popular, and relatively few will complain if some high paid Fire jobs disappear… Far too many best brightest in no value added industries now.
    iMo the world is at a tipping point, peak neo-lib has passed, Keynes will make a comeback.
    Recession already coming, downturn won’t do shill any good.

    Corbin trump are on the right side, shill and blairites not. Globalization costs not shared, are crushing the bottom half, now everybody wants a wall, luckily Brit has the channel. Naturally Eu wants Brit to share the burden encouraged by crazy merkle.
    I doubt Scotland wants a wave of refugees, but England would do fine without them, in fact fewer subsidies.

    This site both moans about neo-lib Eu policies that continually worsen but moans even more about the cost of any member leaving. No matter the cost of change, if you’re in a hole, stop digging. Varoufakis was delusional, not possible to reform it, logic and evidence of no account. The Eu is not sustainable, first one out has lowest costs.

    Most people will look back on this, as I assume they do of the decision to retain the pound, as a brilliant and timely decision, with even Cameron getting some credit. Never, of course, from the banks.

    1. Yves Smith Post author

      He’s got multiple errors in his analysis. He assumes the cheaper pound will give the UK an export boost. In fact, it didn’t the last time the pound got weak. The UK has too little in the way of exports to get much lift.

      Moreover, in the event of Brexit, the UK will lose a chuck of what little exporting it has. European and Japanese car-makers have some final assembly plants in the UK so as to take advantage of the UK’s looser labor laws but still ship into the EU on favorable terms. Those plants will be shuttered in a Brexit.

      In addition, Keen’s cheery assumptions about the WTO are misplaced.:

      The World Trade Organisation’s former director-general has warned that the UK economy risks a “huge blow” if it relies on the agency’s global trading rules in the case of an EU leave vote.

      The UK’s services would be particularly vulnerable, while manufacturers would face “appalling complexity”, Peter Sutherland told BBC Radio 5 Live…

      s a European Commissioner during the 1980s, Mr Sutherland helped lay the groundwork for the EU Single Market free trade area in goods and services.

      He was director-general of the World Trade Organisation (WTO) between 1993-1995.

      Mr Sutherland told Wake Up to Money the WTO could not be depended upon by those who favoured leaving the EU.

      “The WTO would not give the right to provide services,” he warned.

      “At the moment the banking system of Britain provides services all over Europe because by being part of the European Union they have what’s called a single passport and they can operate everywhere.

      “If Britain left the European Union it would not have a single passport and many financial services companies might say ‘we can’t have our headquarters in a country that is outside the European Union’ and they might well move.

      “This would be a huge blow to the British economy,” …

      Mr Sutherland has also warned that manufacturers could be hit if the UK votes to leave the EU, saying they will face more regulation than currently.

      “If you sell manufactured goods into the European Union under WTO rules, you have to be able to prove – and this means inspections at borders – that the component parts are from Britain.

      “If, for example, you are exporting cars and the engines are made in another country, that will all have to be checked and different tariff rates might be applicable to some of the components.

      “You’re in a new ball game of appalling complexity and the prospect of that should be extremely worrying to everyone in Britain.”

      1. Tom

        Jesus, you people are hard of thinking some times. Given all those banks EU headquartered in London (UK banks, American etc) have offices in other parts of the EU it is extremely simple to push trades through linked entities in the EU whilst actually being out of the EU. Christ, we used to do trades in off-shore tax havens all the time from our London office. All you need is a presence on the ground and not a substantial one.

        1. Yves Smith Post author

          I see you’ve never dealt with bank regulators before, and are not reading the press either.

          The Europeans can require either EU or even local country licenses as a condition of selling products to companies in their markets. They can deny Euro clearing to any banks that refuse to comply. Not being able to clear in one of the major global currencies is fatal to a TBTF bank. Recall the howling when the New York banking regulator threatened Standard Chartered (not even one of the really big international players) with yanking its New York banking license? It needed that license to clear in the US in dollars. Same deal.

          Banks with major UK operations are already scrambling to get licenses in Europe just in case. This was reported on the front page of the FT the day after the Brexit vote. The Europeans can set whatever rules they want for licenses. Given the influx of applications, they can also set priorities. Thus they can also make clear that applications by banks that have shown they are making or have made a real commitment (moving staff and operations there) will be given preference over ones that have not make a similar commitment.

  13. Jim A

    Hmm….the “we’re not going to negotiate until you invoke article 50” stance really does seem to indicate the important members of the EU are just tired of the UK’s shit. ISTM that if everybody was being rational, pre-negotiations to establish a “framework” would be the normal course. I guess “Airstrip One,” won’t be part of Eurasia.

    1. Yves Smith Post author

      Agreed 100% . But remember, the Europeans have conflicting objectives. The economic objectives say “Start pre-negotiaitons so the whole trade side, which is a bloody nightmare, gets ironed out” versus the existential issue, “We need to make sure separatists suffer visibly to prevent further fracture.”

      1. Jim A

        The economic objectives are rational ones. At least at this early point I don’t think they’re being rational. In a few months they may well have calmed down enough to be rational. Right now, however they seem to be in spurned-lover “I won’t negotiate with terrorists” mode.

  14. Seb

    Farage is disconcertingly popular with right wing elements in the Netherlands, which are already calling for a similar referendum after just having instigated and ‘won’ a plebiscite on the EU association treaty with Ukraine.

    I voted against, and I’m undecided as to an EU referendum. But I’m worried. I support the initial idea of a Single Market and even a single currency and all that entails. But the democratic deficit and the (over-)extension of authority now proposed by the European Council points clearly towards superpower – not to say superstate – ambitions.

    Look, the European Union right now is set on a wrong course, but not for the reasons Brexit says it is, and we would have needed the British to reset its course towards a more trade-oriented, less imperially ambitious entity.

    Thus Brexit has of necessity made me more of a Eurosceptic. To most Dutch people as well as many other Europeans, we’ve just lost a major source of curtailment to overbearing EU ambitions.
    That’s bad, and may well lead to a vicious circle that ends either in break up or further undermining of member state democracies.

    1. fajensen

      Look, the European Union right now is set on a wrong course, but not for the reasons Brexit says it is, and we would have needed the British to reset its course towards a more trade-oriented, less imperially ambitious entity.
      I believe that for EU to survive we in fact need a lot of: “less trade” and more “humanity”. We agree on the imperial thing. I my opinion, this is a bastard child of neo-liberalism’s fetich with destroying wages.

      I works like this: The EU adopts a new member, business moves there because it’s low cost, then conditions improve and wages go up, so, a new underdeveloped place has to be dredged up – ideally faster than the EU economy can adjust to – or wages would go up, “hurting competitiveness”.

      The benefits evaporates to the top, the disadvantages stick with the bottom. The people at the bottom get fed up with all things EU and justifiably so too and start smashing things or voting for people who will smash things on their behalf.

      Brexit has made me more pro-EU.

      First, I seriously fear that we have missed that it was not exactly the abstract ideas of nationalism that kicked off Hitler and Mussolini, it was real poverty and lack of opportunities for most people.

      Second, I have come to realize that the talent required to run a nation state properly does not exists any longer and have to be rebuilt. This means that an exit will not solve anything, probably make everything worse for decades. I don’t have decades to waste.

      Third, I believe that a lot of the flak that the EU justifiably gets, is in fact for crooked schemes designed by national parliaments and “outsourced” to the EU so that the EU can be conveniently blamed by the very same parliaments. It is even possible that the fanatical keeping of secrecy in all workings within the EU is *in fact* the wishes of parliaments, who don’t want the skulduggery exposed.

      Based on this, I have decided to will give the EU the benefit of my doubts.

  15. John k

    One problem Brit has is 100b trade deficit with Eu, which is funded with incoming financial investments.

    Boris, as Pm, should say to merkle:
    So no free trade deal if we don’t allow free movement? Fine, the referendum means to me we must restrict movement, so let’s segue to the issue of how high tariffs should be. Shall we say 20% on cars to start? Say the same on all AG products?

    As an aside, which of these cannot be replaced in an instant by a combination of commonwealth, Us, and Asian countries? Plus, of course, some would be made locally, boosting Brit jobs.

    1. That Which Sees

      You are right. Germany needs the UK far more than the UK needs Germany. And that is the essential framing that the UK has to pull of. This is not 1 vs. 27 (UK vs. EU). It is 1 vs. 1 (UK vs. Germany).

      The EU legal system is broken. The UK needs to take targeted, unilateral steps designed to isolate Germany from the rest of the EU pack. Then run Germany in circles while they try to counter the disobedience within the glacially slow EU court system. The goal is not to insult the German people, it is to show those voters that the current German leadership is impotent.

      Given that Merkel is largely responsible for the current faux-refugee problem (actually economic migrants) this is a viable plan both functionally and politically. Once the current German government falls to one that wants to restrain migration, every EU and UK citizen will benefit from the resulting “Win-Win” negotiations.

      1. Bimbo

        The real problem of the UK is hating Germany. It was the emergence of Germany who triggered the WWI, it was the current economic power of Germany that spread hate against the EU.

        The old British generations never thought to see the “enemy” becoming more powerful that the UK in theirs lives. They live with in the past when UK was The Empire. No empire, no economic mighty, only hate and envy towards Germany.

        The Brexit has some roots in this hate towards Germany.


        1. Tom

          Please, try to think harder. If the people of Britain hate one country in particular it would be the French not the Germans. Germans, rightly or wrongly, are seen as efficient and industrious. The French are portrayed as lazy (amongst those that do “despise foreigners” or hate the EU) and desiring to rule EU with zero justification to support them. They are seen as the true cherry-pickers of EU rules swinging off of Germany’s coat tails.

    2. Tim

      By wto rules the UK must raise tariffs equally on ALL wto members so if the UK raises car tariffs to 20% they have to do it equally for all wto members. If the uk breaks wto rules the EU can basically retaliate against the uk however they want. Merkel can impose 100 percent tariffs on UK autos.

      1. That Which Sees


        I think you are unintentionally reinforcing my point. The crux of the power demonstration is that Germany (working withing the rules) is vastly weaker than the the UK (working outside the rules that Germany wishes to impose).

        The UK can easily impose very high tariffs on German cars as an ’emergency’ measure while keeping tariffs low on French cars. This would cut German industry from the EU herd as Peugeot, Citroen, and others all benefit at Germany’s expense. Germany could theoretically make a WTO case out of it. However, they would have to go through the entire lengthy WTO legal process to obtain relief. The political matter will be decided in 2017, a WTO judgement landing in 2019-2020 doesn’t help Merkel stay in power.

        Also, Merkel brutalizing UK and German Citizens in an attempt to ‘punish the Brexit vote’ would hand leverage to the UK position. It would have to be phrased *much* more politely, but the gist of the offer to German voters would be:
        A) Keep Merkel and 100% tariffs on German cars.
        B) Or, Get rid of Merkel and have mutually agreed “Win-Win” tariffs on German cars, probably less than 5%.

        1. gordon

          The UK may have another shot in its locker; the implicit threat to appeal to the populations of EU countries (France, Italy, Spain, Greece in particular) over the heads of their Governments as the leader of a Reform the EU Movement. Such a campaign could play merry hell with Brussels and possibly cause the Govts. of the aforementioned countries to think again.

          Such a strategy would probably take more nerve than any current UK politician can muster, however.

          1. Yves Smith Post author

            Oh, come on. You are REALLY grasping at straws.

            First, you assume the UK government could get a sympathetic hearing in the media of the various European states.

            Second, you are assuming that the public would take well to being told what to do by foreigners. You seem to have forgotten that Obama and Schauble telling the UK to vote Remain backfired.

            Third, even in the highly unlikely event some members of the public were sympathetic, they have no mechanism for having those views influence the negotiations with the UK.

            Fourth, did you forget Greece? Greece similarly though it could get the European left to ride into its rescue, that it would mobilize opponents to austerity in other countries. This was a case where the citizens of periphery countries really did have common cause with Greece. Tell me how that worked out. There were only a few teeny rallies and Podemos actually went to some lengths to distance itself from Greece

            Your comment is an indicator of how out of touch with reality people in the UK are, thanks to the misinformation you’ve been fed by the Leave campaign and its allies in the media. And mind you, I’m no fan of the EU, but embarking on departing with delusion in place of a plan is a sure-fire path to disaster.

            1. That Which Sees

              First, nationalist movements can obtain favorable treatment in national media. Italy’s Five Star doesn’t need the UK intervention. However, the UK humiliating German leadership is a media goldmine for existing movements.

              Also, look at Sanders achievements in the US almost exclusively via non-MSM channels. The MSM may not be dead, but it is moribund.

              Second, the national movements would be driven by national leaders, not UK leaders. UK leaders would be held up as “First Into The Breech” inspirational and motivational, but not functional leaders of other nations.

              Third, each nation that exits the EU via referendum multiplies the power of all leaving nations, including the UK.

              Fourth, Greece is economically tiny and crippled by membership in the currency EuroZone. Germany was openly able to abuse the citizens of Greece. Germany cannot use the same malicious, anti-democratic techniques against nations that are in the same economic size class as Germany.

            2. gordon

              “Think not the struggle naught availeth…”

              “Land of ho-ope and glo-o-ry…!”

              “Come the three corners of the world in arms,
              And we shall shock them,
              Naught shall make us rue
              If England to herself do rest but true.”

              “London calling…London calling…”

            3. DarkMatters

              Your example of Greece is illustrative. It was a lack of solidarity that caused that particular outreach to fizzle. While I don’t think that euroscepticism has even now reached a critical mass, I do think it’s much stronger in the present situation, both regarding the strength of the protesting parties as well as the fact that this rebellious spirit is arising in the more prosperous and powerful northern countries. I could imagine a charismatic leader having a major impact, but as you said, neither Robespierre nor Talleyrand seem to be responding to their pagers. But because of this very power vacuum, the situation is pregnant.

  16. Jesper

    global irrelevance?

    Some (most?) people don’t care if their government is irrelevant internationally as long as their government is relevant nationally.
    But I suppose priorities can differ, is the greatness of the US its military or is it about being a land of opportunity? If it is about military, as most ‘liberal’ journalists seem to believe then the US is still great. But what if it is about something else?
    How is global relevance achieved? Military might and military operations? Or what is it?
    Is the struggle for ‘global relevance’ newspeak for nationalism?

    The EU-commission is not elected, it is supposed to be composed of detached technocrats -> Any and all EU-commissioner(s) who responded emotionally in public to the result of the vote is unfit for office.

    As for the free movement of people: It is a nice freedom to have, I’ve used it and am currently using it myself but I am in a minority. The vast majority of people will not move abroad so while it is nice for the minority who does move, if the majority objects then what will/should the outcome be in a democracy?
    Oh, and lets not conflate freedom of travel with right of residence.

  17. JustAnObserver

    If being internationally “relevant” = being G.W. Bush’s (or the NSA’s) lapdog or Airstrip-1 then I, for one, give a warm and hearty welcome to irrelevancy. It really is about time that Brits, collectively, gave up on the idea that somehow they might get the Raj back.

    I think this nostalgia for the 60-70 years gone Empire may lie at the base of the generational split on Brexit/Remain.

    1. BruceK

      I am not so sure. Punk is 40 years old next year. Well before it came out the empire was a joke with young people.

  18. JustAnObserver

    To amplify the immigration chart from the Telegraph see this current status report from the Office of National Statistics.

    Summary: Net immigration for 2015 was ~333,000. Approx 0.5% of the UK population. Of course this needs a drill down into how the changes affected different demographics. But on the face of it it would not appear that the UK is being in any way “swamped”.

  19. washunate

    Another great read at NC.

    For this reason, Britain’s membership would have hit a wall sooner or later.

    This has long been my thinking on the Brexit vote as well. The vote itself is not that big a deal; the UK and the EU were already in different places with different aspirations and different trajectories. A lot of overlap, which is why there’s a lot of support to be part of the EU, but also a lot of dissent, which is why it was possible for leave to win a referendum despite complete unity amongst the elite (publicly) for remain. (we all know there must have been private dissent amongst the political class or it never could have gotten this close). In 20 years (give or take), England can petition for full entry as a new member, an application that will be heard without securing a unique opt-out exemption to EMU.

    The UK made its choice to leave, or perhaps more accurately, never fully wanted integration in the first place, a quarter century ago when the pound left the currency peg in the European Monetary System. This is before ‘the EU’ even officially came into existence. Paris had long pushed for fixed exchange rates. London decided it wanted sovereignty rather than integration. Nothing wrong with either approach; both are valid. They’re just different, inherently contradictory, mutually exclusive propositions.

  20. ThePaper

    Some people are underestimating the UK oligarchy negotiation strength and overestimating the EU (continental branch) oligarchy negotiation strength. The UK is not Greece and it isn’t as isolated as some are implying. And the EU (continental) doesn’t have the internal cohesion to go against UK too aggressively. The UK oligarchy probably didn’t like the result of the referendum, but if threatened it will fight back and it has enough weapons to handle the most sanguine idiots in the EU.

    A reasonable deal will brokered, with the required arm-twisting from the Western Empire Metropolis (the US), or the EU will implode. And then Brexit will not even need to really happen because whatever is left won’t be or resemble the current EU.

  21. The Rev Kev

    No doubt the UK is going to be in the hurt locker for quite a long time. The technocrats will try to punish the UK to make it an example to avoid and these people have a history of viciousness as has been seen in Greece, Cyprus, etc. They literally do not care how much suffering they cause as they know that they are doing this for the greater good – as they see it.

    The thing is, if we can look down the road to see where the EU is heading, it may be that the UK bailed at the right time. Coming to a Europe Union near you will be the following features:

    All member’s budgets will have to be vetted in Brussels after going through those country’s parliaments. If Brussels rejects it, it will have to redone until they ‘get it right’. Thus if Brussels thinks that a country is spending to much on poverty and welfare, it will have to be cut. If the US bribes the European Commission to order all budgets have their military component raised to 5%, then that is that and no argument. Guess who gets to sell them this weaponry then!

    Something else being set up is an EU border force. Greece may find that Turkish personnel may man their border control points. I bet that one will go down well. Italy may have their coastline patrolled by ships from Spain, Lithuania or god knows where. The EU members will have no say in who patrols their borders.

    A European Army is being set up and all countries will have to contribute troops and material. But if the EU decides that they want to send this Army to Africa or the Middle East or even the West Bank the member countries will not be able to decide if their troops will take part or not. How many of those troops will want to die for the glorious EU?

    None of these examples are made up. All are being organized right now. The last item, for example, can be seen at These are the only examples that come to mind but I bet that there is a helluva lot more planned for the Europeans. I can see this ending well for all those member states.

  22. JerseyJeffersonian

    A very interesting, jointly-crafted article by Jean-Marc Ayrault (Prime Minister of France [2012-2014], Foreign Minister since 2015), and Frank-Walter Steinmeier (Chief of German Intelligence [1996-99], head of the office of the Chancellor [1999-2005], Foreign minister [2005-09], Parliamentary opposition leader [2009-13], Foreign minister since December 2013).

    They come out swinging, don’t they? But I pose this challenge to anyone reading it; can you identify all of the NeoLiberal/Authoritarian shibboleths in the article that will raise the hackles not only of the Brexit supporters in the UK, but also EuroSceptics throughout the EU? They are many, indeed. If this is the considered response of the Wise Men of France and Germany, the central duopoly of the EU, ya just gotta wonder what it will take to penetrate the bubble that surrounds them. The unrepresentative, politically deaf and blind elite-governed structure that is the EU is increasingly being seen as alien to the aspirations of the citizens of its constituent nation states. So, doubling down on the centralized, bureaucracy-empowering, unaccountable Brussels autocracy is seen as the way forward? I rather think that this shambling would-be colossus has feet of clay.

    1. sunny129

      “The unrepresentative, politically deaf and blind elite-governed structure that is the EU is increasingly being seen as alien to the aspirations of the citizens of its constituent nation states”

      well said! This is the essence problem of EU from the very beginning. More punishment they want to inflict on UK, there is equally of the same coming at them, not just from UK but within EU!

      ‘More and more, the destiny of the European Union resembles the destiny of the Soviet Union, which died from its own contradictions.’ – Marine Le pen

    1. BruceK

      So would breaking up the UK be a game changer in terms of how British people perceive themselves/their countries?

  23. RBHoughton

    The chances of UK getting a favorable exit deal from the EU are poor imo. There’s nothing in trade that they don’t already have; we provide important accounting and legal services but those firms will push off tomorrow; we have the City’s grip on finance and insurance which is worth something but our bankers and insurers are employed internationally these days and have no secrets..

    There are some (in Denmark, Netherlands, France and Italy in fact most members) who also occasionally publish a wish to leave when things go bad. This may mean that UK has to be shown its a loser otherwise all the others will be holding referenda in that familiar if despicable way of politics.

    We cannot send a gunboat as they are all dry-docked in Portsmouth, don’t work well and no-one wants to pay for servicing; our aircraft carriers are unbuilt and may never be built now and our submarines are unsuitable for flag-waving. What’s to be done?

    1. Tom

      We have an economy they’d like to tap into as they slowly become more and more bankrupt and the periphery needs ever more expensive bailouts.

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