More Brexit Delusion: City Issues Wish List That the EU Already Rejected

Apparently no one in the UK has gotten the memo that they lost their empire in the middle of the last century and are no longer in the position to push anyone around.

The Telegraph has written up what could easily be misread as a perfectly sensible move by the UK financial services industry: a pointed set of demand now that Prime Minister Theresa May’s promised Brexit trigger date of no later than the end of March is getting closer. Admittedly, that could slip if the Government loses its appeal of a high court ruling that Parliament must approve the Government’s Brexit plan. But as we’ll see soon, the real issue isn’t timing but continued British fantasies about the Brexit process and their degree of influence over it.

Here are the key sections from the Torygraph piece:

The City has ratcheted up the pressure on the Government by issuing a series of demands that banks and other financial firms want from a Brexit deal with Brussels, including a transition period to stop markets from falling into a tailspin.

An influential lobby group chaired by veteran banker John McFarlane, the chairman of Barclays, has published a list of what it calls “key priorities” for ministers to consider in looming negotiations with the EU over the UK’s future relationship with Europe.

The list from TheCityUK includes calls to “maximise access to EU markets”, a two-stage transition arrangement, and a plea to allow the clearing of euro-denominated derivatives – a £470bn-a-day industry- to stay in the UK….

To avert the potential chaos, the CityUK wants an agreement on a staged transition to be struck at the start of Article 50. This would involve an initial “bridging period” spanning the UK’s exit to the ratification of the country’s deal with the EU, and then an “adaption period” that would allow companies to adjust to the new rules.

Yes, and I’d like a pony.

One wonders if the trigger for this peculiar wish list is the well-publicized departure of Britian’s most senior EU diplomat, Ivan Rogers, who issued a not-all-that-coded attack on the Government’s “muddled thinking”. But demands like the ones that the banking industry is making are prime examples of the behavior that led Rogers to quit.

Let’s review, yet again, why the procedural demand is not going to happen (and do not forget, “shape of the table” issues are often impact substance):

European officials have said from the very outset they are not negotiating before the UK starts the Article 50 process. Numerous EU officials, from Merkel on down, have consistently delivered this message. There has been only the occasional pro-UK whinge from secondary players like Poland, and even those have been few and far between.

And these leaders have kept their ranks closed. They’ve given her and her sidekicks the cold shoulder when they’ve tried to initiate discussions.

That means no transition deal. Read the language carefully: “…a staged transition to be struck at the start of Article 50.” “Struck” means agreed to. That means it has to be settled before the Article 50 two year clock starts ticking.

The Europeans have made clear that the UK will get no special breaks. Again, Merkel and anyone in any position of authority has said “no cherry picking” and stressed that any UK arrangement needs to fit within the parameters set by other existing arrangements.

May has committed the UK to a “hard Brexit”. Again, from the get-go, European leaders said for the UK to preserve access to the single market, it needs to accept the “four freedoms,” and one of those is freedom of movement, meaning immigration. But May has made restricting immigration one of her boundary conditions. There’s no overlap of negotiating position.

The British have no friends across the Channel. The UK has repeatedly been high-handed and abrasive in its dealings with the EU and UK leaders have repeatedly dissed the EU. Making Boris Johnson Foreign Minister was yet another provocation. There’s no good will, and little in the way of friendly backchannels.

The EU has good political reasons to make Brexit painful: pour decourager les autres.

The Financial Times account places more emphasis on the content of the banking industry’s request. Notice the British bankers are now pushing for demands they see as more modest:

The City of London has retreated from demanding continued access to the single market in any post-Brexit deal with the EU, according to its principal lobbying group.

In a list setting out its priorities for the forthcoming EU negotiations that was published on Thursday, TheCityUK abandoned the idea of fighting to retain the financial “passport”, which allows companies to sell their services throughout the single market from a single location.

Previously its desired outcome was for the UK either to remain in the EU’s single market, or to strike a special agreement preserving existing passporting rights. But Theresa May’s administration has shown little interest in pursuing such a deal.

TheCityUK is now pinning its hopes on building a deal around “equivalence”, a relatively new legal concept embedded in some but not all EU financial regulation.

This allows companies from markets that are deemed to have “equivalent” regulatory standards to trade freely across borders with each others’ customers under their home country’s laws and regulations.

Miles Celic, the group’s new chief executive, said that a “bespoke deal” tailored to the needs of the UK should be achievable. “It would protect London as a market and those European customers using it,” he said. “That’s an advantage not only for the UK, but for the EU too.”

Yves here. Recall we had said passporting would never happen because the EU would not grant it.

There are two astonishing assumptions in this little spiel, one explicit, one implicit.

The first is the idea that the EU is on board with preserving the City of London. Huh? All advanced economies regard promoting their banks as a strategic priority. The Continent would love nothing better than to take a piece out of the City. It means more jobs, not just banking but new office construction, and relocation of the related support professionals, like lawyers and accountants.

Here is another remark that reveals how much the Brits are stuck in their own echo chamber:

It also said that the UK should not surrender the right to clear euro denominated derivatives, a demand that some fear Brussels may level.

“It’s a critical part of the broader ecosystem, and one that makes it efficient,” said Mr Celic. “It is in everyone’s interests to leave it in place.”

The ECB already had determined that Euroclearing had to take place in the Continent. The only reason the UK was able to beat that threat off was the European Court of Justice ruled against the ECB, on the basis that it could not discriminate against an EU member. With the UK out of the EU, the ECB can forge ahead.

And does the lobbying group think that no one in the Government or public remembers that less than a month ago, the ECB made clear it is going to play hardball on Euroclearing? As we wrote on December 16:

A raft of stories at the Financial Times verges on funny, in that they affect consternation that EU bureaucrats are intent on taking a big chunk out of the City’s business. It was obvious that this would happen and we said so repeatedly over the summer. Yet it’s been astonishing to see Brexit boosters, the few that wander into Naked Capitalism and the ones who are well represented in Fleet Street, act as if the UK somehow has the upper hand. As we’ve written, Brexit fans have chosen to ignore repeated, crystal clear, and surprisingly unified warnings from EU leaders that they will give the UK no quarter if it really does go through with a Brexit.

The current cause celebre is that France and the ECB are working to expedite a plan to move Euroclearing from the UK to the Continent in the event of a Brexit….And the new wrinkle is the Europeans plan to set the process in motion more or less contemporaneously with the UK’s planned date for invoking Article 50.

So the only way for the Brits to keep Euroclearing is to trade something the Eurocrats regard as valuable, yet we see nothing of the kind in their thinking.

The implicit assumption in the banking lobbyist thinking is that the EU and UK could agree on an equivalence deal when the EU doesn’t have all its financial service regs on that basis. The Financial Times article mentions that commercial lending and insurance are not covered, for instance. Moreover, this would be tantamount to the UK giving up sovereignity, since the EU retains the upper hand. The EU can withdraw the right to operate under equivalence rules with a mere month’s notice if they deem the other country’s regs to be not equivalent. Bank of England governor Mark Carney is making less than happy noises about the idea because it could result in, per the Financial Times, “Britain losing influence and even control over its own markets.”

So what is the lobbyist” proposal? Again from the pink paper:

TheCityUK argues that issue can be dealt with by the UK negotiating a long term deal that would establish the principles on which equivalence was founded and also creating a mechanism to resolve disputes.

This is tantamount to asking the EU to overturn its legal system to accommodate British bankers. Na ga happen.

The EU is a civil law system. Rules and regulations are set forth in great detail. Judges will interpret them but in theory, their rulings don’t have precedential value (in practice they do but not remotely to the degree they do in the Anglo common law system). The idea of having only some rough and ready guidelines and winging it is not even remotely how the EU does things. We’ve commented repeatedly that Eurocrats are rigid, literal-minded, and procedural. That’s actually served as a plus for them since it produces the predictability they’ve needed to keep a now 27 member nation group functioning at all.

There are some smaller discussion items that are just as barmy but we won’t belabor them.

And in case you think that Theresa May is just posturing so as to force the Brexit camp to come to its senses, that’s a major misreading. She’s consistently taken an aggressive posture that has emboldened the hard-liners and created wildly unrealistic expectation in the general public. As Janan Ganesh wrote in the Financial Times yesterday in Theresa May is decisive over Brexit but we choose not to listen:

Mrs May has been as plain as any prudent prime minister could be about her favoured model of exit. Only the dedicatedly obtuse could not infer her priorities from the speech she gave to Conservative party conference in October. Cross-reference it with her earlier interviews and her work as home secretary, and it is clear that she craves the restoration of national control over immigration more than she craves anything else. She also resents the jurisdiction of the European Court of Justice. These imperatives do not imply so much as demand withdrawal from the single market, and make a place in the customs union tricky to retain, too.

None of this amounts to a strategy or a guarantee of success and her remarks have preserved some latitude at the edges. She might try to buy preferential market access for sectors of the British economy and to smooth the transition to exit with interim arrangements. She will certainly pursue a trade deal with Europe upon departure. But the core of the matter is a prime minister set on a hard not soft exit, even as she rejects these terms like a precious musician miffed at their brute pigeonholing as rock or soul.

The Brexit preliminaries are already showing troubling parallels to the Greece-Trokia talks of the first half of 2015: two sides with little trust in or liking of each other, the smaller party with a grossly inadequate negotiating team, both in skill level and staffing, yet grossly overconfident about its bargaining leverage. Yanis Varoufakis did at least have the right economic assessment, even if he had the politics all wrong, and he also understood he was playing a game of chicken. The Tories don’t even seem to recognize that they are also adopting that strategy. Nor do they recognize, as the Greeks learned, when the other side refuses to steer away, the weaker party bears the brunt of the impact.

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  1. Jason

    I keep wondering what effect Britain’s unrealistic demands have on EU decision-makers. Clearly the EU holds all the cards here. But do they JUST think that May and the other Brexiters are idiots, or do the demands have some more complicated effect, as nagging often does?

    1. Yves Smith Post author

      If this were new to them, it’s not hard to imagine that they’d find it annoying and have to watch to make sure they didn’t wind up making an occasional own goal out of acting out of pique. But they’ve been on the receiving end of this sort of Oxbridge twattery for decades. I have to think they might still get riled up or gobsmacked once in a while (Nigel Farage and Boris Johnson are pretty extreme) but they have to have developed reasonably thick skins.

      1. dontknowitall

        Speculating here so feel free to shoot it down…Concern about Russian interference in the forthcoming European elections to sow discord and gain a strategic advantage is now widespread in the euro media but what if an additional immediate problem is underhanded British interference to strengthen the anti-EU forces in the core EU countries. The UK would gain well-placed friends able to pressure the EU executive and increase the odds of obtaining a favorable outcome at the cost of further destabilizing the EU…after all there’s at least half a trillion dollars of business to be saved and (not surprisingly) May’s background is in supervising the intelligence agencies. The US is not the only country with a history of election interference. The UK can play by the rules and lose a lot or kick the table and rule over the wreckage…

        Upcoming general elections: France April 2017, Czech Republic October 2017, Germany September 2017, Netherlands March 2017, Luxembourg October 2017. The outcome of these elections may be decisive to the Brexit negotiations by weakening or strengthening the resolve the EU executives.

        1. vlade

          France – LP is unlikely to win. Not impossible, but unlikely. But even if she wins the presidency, LP may not win majority in the parliament, which would make ruling, well, interesting. Don’t know enough about French law to know whether for example she could call an EU referendum w/o parliamentary approval.

          Czechs – most likely winner is ANO, which is pro EU (the owner of ANO runs a large agri business which is heavily dependent on EU subsidies). Anti-EU parties will most of the time be lucky to get in.

          Germany – while AfD may get growing share of the vote, it’s unlikely that it gets enough to get to be in the government. That is, unless there’s some massive terror campaign before the election (but that would push even the mainstream parties towards anti-immigration, so the benefit to AfD is debatable)

          Netherlands – the one where an anti-EU party is the most likely to win. But still may not be able to form a gov’t and get an out-of-EU referendum going. Watch this space.

          Luxembourg – trivial from the EU perspective. If leaves EU, it would lose all of the finance/services stuff it has, and was bankrupted overnight (UK on steroids in this).

          1. dontknowitall


            Thank you for your input. This is the nice thing about NC, you can test your ideas and find out pretty quick if they measure up…so my bit of speculation is plainly wrong. The UK government better wake up, as Yves has been saying.

    2. PlutoniumKun

      Margaret Thatcher famously used her handbag to browbeat reluctant EU leaders to grant her concessions (in reality, she got less than people think). The thing is of course that being in the EU, with the ability to be an irritant gave her an advantage May does not have.

      Its very hard to know exactly what is being said over coffee in various EU capitals and Brussels, but it long been known that Britain has suffered badly from never deigning to build personal relationship across the EU. The Conservatives are particularly disliked because of their idiotic refusal to join up with the mainstream centre-right in the European Parliament. So they don’t even have friends among their supposed ideological colleagues. The UK’s only friends are in the fringe ultra conservative parties from Eastern Europe, and they have little or no influence.

      My guess is that the mainstream view across Europe among people who matter is that the Brexiters are indeed idiots and there is no political benefit whatever in playing softball with them.

      1. vlade

        I kept saying this before the referendum – why the hell do you think you can get a better deal alone than in EU? To get any deals, you need to build relationships, to build alliances. UK shown itself entirely unable to do so in the last couple of decades, and there is no realistic reason to believe they would be able to do so in the near future.

        Part of the reason for that is that both major UK political parties are fundamentally broken (not only in respect to the EU, but that’s where it’s most visible), and I don’t believe any progress can be made in the country until this is resolved. And it may take another economic depression and/or losing Scotland and N. Ireland to do so.

    3. fajensen

      I imagine that there are several trains of thoughts:

      Ignore: The “All Bad Things Will Pass if Only We Totally Ignore Them”-crowd is a big and powerful chunk, maybe even the Homeobox of the EU’s institutional “DNA”. These people will just shout “LALALA … ” at every opportunity given to show their worth, which they are then doing – proving it to be less than Zero – without realizing it.

      Annoy: Some of the pro-active EU leaders must be wondering if there isn’t a way to fire Article 50 from their side of the channel and maybe thinking that there should be, so “we can get one with it”. The UK to them is well known for sabotaging and obstructing everything that could make the EU work better.

      Hopeful: The “unity-at-all-costs”-crowd will see the incessant demands and the appointment of Boris Johnson as a clever delaying tactic to run out the clock. The next UK parliament will come in and say: “Brexit? Nothing to do with us mate, that was that last lot. ”

      Me, I am with the “Annoyed” crowd. I say Get ON With it you stupid buggers! The “Ignore” group is the main reason that the EU is failing, the second reason is national parliaments outsourcing unpopular moves to the EU and then whining “The EU is making ud do this!”. The “Hopeful” crowd hasn’t worked with any Brits, that’s for sure.

      1. Synoia

        The UK to them is well known for sabotaging and obstructing everything that could make the EU work better.

        Really! Better for whom precisely? The PIIGS?

        This is the kind of woolly thinking that turned the EU into a total mess. aka: The Euro and German dominance behavior for the 4th time in 600 years.

        Let me be specific:

        30 Years War
        Franco Prussian War of 1870
        WW 1
        WW 2

        although some historians now see WW 1 and WW 2 as a single war separated by a temporary armistice.

        1. fajensen

          Better for Everyone, which includes the PIIGS (maybe not the PIGS from Fraud Central a.k.a. The City of London).

          Which ways should we sort out the German Dominance Issue?

          Yet another war or by allowing good laws and strong institutions capable of enforcement within the EU that are controlling the powers of *every* nation state in the union, thus limiting the realistic German options for dominance to the kind one pays good money for in Amsterdam or Copenhagen?

          The British never gave one rats arse about the EU since Thatcher – as long as no “German” or “French” limits are placed upon them, their work was done.

          Following that inspired lead, the EU has weak borders, pathetically obtuse legislation catering to every whim and view of every interest involved, with very little in the way of enforcing anything and of course Germany will be able to “dominate” just by their negotiators being in the room and not drooling, leaving them able to speak ;)

          Perpetuating this state of affairs, is “woolly thinking” to me.

        2. DJG

          Synoia: Ahhh, yes, the PIIGS. See Yves’s reference to Oxbridge too-clever-by-half-ness above. You know, sniffy Anglo fantasies of racial superiority: Guaranteed to be a big hit during negotiations.

    4. jabawocky

      I think the brexiteers begun as delusional, with the possible exception of Theresa May. They blamed Cameron for his failed negotiation with the EU ahead of the referendum, and believe that Cameron’s problem was his lack of BATNA: that Cameron was unprepared to leave the EU even if he didnt get what he wanted, and that the EU knew this and hence gave him nothing.

      Of course the departing Ivan Rogers (UK ambassador to the EU) was a key part of Cameron’s ‘failed negotiation’ team, and so when he is telling the brexiteers they still wont get any concessions now the UK is leaving the EU, the brexiteers are interpreting this as Rogers refusing to take the blame for the previous negotiation failure.

  2. Jeff

    This is mostly the City talking its book.
    But if this hard Brexit goes forward, all bets are off: Scotland might leave UK to remain/re-enter EU, and I don’t believe anybody will be able to raise a border between Eire and N. Ireland.
    While the hassle goes on, the economy will tank, and then all bets are off. UK has no manufacturing or agricultural base anymore to sustain its population.
    The only question is how brutal the ensuing civil war will be.

    1. Synoia

      The Brexit people believe they signed up for a free trade areas, not to become a part of a German led empire.

      And they are not blind to the treatment of the PIIGS by Brussels, nor of the stubborn and wrongheaded economic policies embedded in the EU’s governance.

      It has been said that he Europeans always arrive at the wrong answer through the use a flawless logic, and the British arrive at the the correct answer without the use of logic.

      The shining example of the is Britain’s retention of the Pound, in the face of the Euro campaign.MMT has placed a spotlight on the power of a fiat currency.

      Here’s the dichotomy:

      You can have sovereignty (and a representative democracy,) and power over your own future, or you can loose all sovereignty to the EU, and become a victim of a distant central government.

      It is the same dichotomy which spurs rejection of Global Trade deals.

      If to maintain sovereignty the country has to “manufacture its own stuff and grow its own food” I see that as a benefit. I also see a benefit in the City being a much smaller part of the UK economy.

      Is it an easy adjustment? No.

      Please spell out the alternative, given Europe’s complete inability to recycle surpluses, and the German stubborn (habitual) stance over its surpluses.

      1. vlade

        Of course there is a dichotomy. But “retaining sovereignty” may be also the North Korean model – which I don’t think anyone in the UK would want.

        The reality is, unless you’re a very very large nation like US, Russia, China and possibly some South American/African countries, you can’t be an autarchy these days, it’s just physically impossible.

        Look at Swiss – who pretend they have sovereignty, but in reality are less sovereign than UK in EU was – as long as they want to maintain their economic wellbeing, anyways.

        Brexiters believe that they can be more sovereign and more rich at the same time – but the world doesn’t work like that, and the last time it did for the UK was when it still had the Empire. I keep saying there is no “innate” sovereignty. You can have only as much of it as the more powerful in the world give you. And the UK is by far not the most powerful (and I don’t mean militarily powerful either).

      2. Adamski

        “The Brexit people” are a mixture since it’s 52% of those who voted. Consider: middle class people who think deregulation will increase their wealth, or immigration controls will cut their taxes. Working class people who think immigration controls will lead to more jobs or higher pay. Right wingers who love Britaaaaiiiiin. Left wingers who want to avoid EU laws preventing socialist policies or who hate what the EU did to the PIIGS.

        Right-wing Brexiters would tend to agree with austerity for Greece for example.

    2. Adamski

      I live in Northern Ireland. Freedom of movement of people across the border dates to 1925 so it precedes EEC membership by nearly 50 years. Customs checks, if any, will be another matter. While Gerry Adams said “the peace process is in danger” over the Tory plans for “welfare reform” (benefit cuts), Sinn Féin accepted this after the Tories won a majority in 2015. The IRA is not going to come back over this issue. And while republicans have criticised Brexit and nationalists mostly voted Remain, republicans are anti-EU ideologically because it’s capitalist, imperialist, etc etc.

      While nobody should rule out a second Scot indy referendum leading to independence, the polls (subject to big changes like last time of course) aren’t enthusiastic for either independence or even for the referendum.

      On agriculture and manufacturing, maybe you think leaving the EU means zero trade with the continent overnight. Untrue. Under WTO rules the max tariffs are 10%. So what. Rules and regs are more of a barrier afterwards. We import half our food, but only need to employ 2% for what we grow. We’re a net contributor to the EU budget and thus to the Common Agricultural Policy. The CAP costs households about £500 each per year. Now switch it round, outside the EU will can still import food but save on subsidising other countries’ farmers, and can subsidise our own farmers the same or more than at present.

      I think leaving the EU was a bad idea but your observations are bad

      1. Jeff

        I’d love to be wrong. But currently UK is exporting (financial) services and a net importer of everything else – including oil, with already a growing trade deficit.
        After Brexit, you can say goodbye to passporting rights and hence most of the financial services. How is UK going to pay for everything it needs to import?

  3. Jason

    Very interesting replies to my question. Thanks.

    (I can’t see a way to indent this so that it looks like a reply to both Yves Smith and PlutoniumKun. These comments are presented as a tree when they’re actually a directed acyclic graph!)

      1. Jason

        Yes, but there were two relevant comments, and I wanted one reply to serve for both of them.

        This is the worst thing about this blog. If I can’t have a directed acyclic graph of comments, I’ll be tempted to flounce.

  4. Expat

    Britons generally and the media, unlike the City and Parliament, seem to believe that Brexit has already happened and that Britain will keep all the good stuff and stop having to do any of the unpleasant things (like pay money for the EU or accept refugees). There is non-stop reporting that Britain is doing great despite Brexit. FFS! Brexit has not happened yet!

    The City is on drugs (cocaine mainly but that and money in large doses leads to unclear thinking and outright hallucinations). Europe (Germany and Belgium mainly) are extremely annoyed with Britain. The Brits have played the “one foot in, one foot out” game with the EU since inception. The Brits believe their “special relationship” with the US means they are special vis-à-vis the Continent.

    Spain cannot afford to make any concessions to the Brits or risk having to make the same to Catalonia. Greece is angry with the City for having raped them before, during and after their crisis (ok, Greece probably took the roofies voluntarily…but).
    France is terrified of a Le Pen win and her desire for a Frexit.
    Germany is simply fed up with British attitudes about Europe and would be happy to see them go away entirely.

    The City is doomed under Brexit and thank God for that. What is appalling is how France and Germany are trying to woo the banks to Paris or Frankfurt. The best place to woo the banks would be to the middle of the Atlantic and then chain them with lead weights! (disclaimer: ex investment banker myself).

    1. RicRadio

      January 12, 2017 at 6:52 am

      You articulate it well for me. A bit like trying to leave a crime family with your life intact. I would only offer the soundtrack – “Hotel California”, The Eagles.

      1. larry

        Agree with you both. But, RicRadio, don’t forget that the final verse of Hotel California is: you can check out any time you like/ but you can never leave. Hmmm.

        1. RicRadio

          Yup, that’s my message.

          I’d just like to add that Yves is so right, we are facing a very difficult few years with few easy options. We have let our talented civil servants go with reliance on Brussels to negotiate everything on our behalves. Some of our old industrial towns are hollowed out with the loss of manufacturing, and we have allowed The City’s contribution (?) to GDP to hoodwink ourselves into thinking all is well.

          Well it’s not, and some of the population have woken up to the fact. There’s work to do, yet I have faith that we on these little isles are up to the tasks ahead, against all the odds.

          What next? “No One Knows” – Queens of The Stone Age.

  5. rusti

    There has been only the occasional pro-UK whinge from secondary players like Poland, and even those have been few and far between.

    Why are there “whinges” from Poland? What’s in it for them?

    1. PlutoniumKun

      The Poles have historically been very pro-British within the EU, and the current Polish government is quite anti-EU (although not as far as actually proposing to leave). But the publicity given to anti-Polish attacks in England post-Brexit vote seems to have soured this support.

      1. vlade

        In general, most of the newly acceded countries (from CE/EE) had worldviews closer to the UK than even say Germany. But UK never really even tried to build any alliances there.

        Especially Poles would see it as a problem if their UK community was sent packing home – it would be a substantial hit to their unemployment rate (even assuming that some of the returnees would start new businesses hiring new people) – in general, it would likely be an economic hit to the country, so it’s another reason why they would like to keep the current state.

  6. David

    Curiously, given the kind of society Britain is, this may be a case where the City isn’t going to have much influence, because there’s no political transmission mechanism by which these sorts of demands can actually be implemented, or even seriously discussed. In turn, that’s because there’s nobody really in charge of the whole Brexit mess, or able to work out a coherent consensus position.
    In any event, it’s hard to believe that, however people voted last year, these sorts of technical issues were uppermost in their minds. On the other hand, the reasons why many people voted to leave have a lot to do with a level of dissatisfaction with Europe, and demands for fundamental change, by ordinary people all over the continent , that you never hear from the elites (who are the ones quoted in most of these stories). In France, foe example, though everyone is going nuts about Le Pen, she’s actually part of a much wider “souverainiste” tendency in French politics, which has the support of perhaps 35-40% of the electorate across the spectrum. The demands are relatively consistent: out of the Euro (which some would keep as a parallel currency) and repatriation of control of frontiers and certain aspects of legislation. It’s entirely possible that this will become the default mindset among ordinary voters in most of Europe, if things continue to get worse over the next year or two, and that governments will be elected on its basis. That would entail the continuation of the EU, but substantial remodeling from inside – something that puts the fear of God into the ECB (which would be out of a job) and parts of the Brussels bureaucracy.

  7. Syzygy

    Any idea as to how the City’s special relationship with the twelve British Protectorate Tax Havens might play out in the EU, or on Wall St. for that matter? Is it irrelevant and easily substituted? As I understand it from Bill Black, the criminogenicity of the CoL has made it a most desirable link for tax avoidance, for the EU, US and non-EU markets.

    1. RicRadio

      They were ours before we joined, and they’ll leave with us. The City, somewhat deminished, will want to play with its old familiar toys.

      1. bob

        The city pre-dates any modern “state”.

        they are their toys.

        That’s what I find most interesting about this whole mess. The city is finally admitting that they aren’t part of the UK. They’ve held that belief for a very long time, but never aired it.

        Now they might (que horror!) have to admit it.

  8. George Phillies

    “EU law will apply in Britain after Brexit as an essential part of any transition deal, Malta’s prime minister has said.” That’s from today’s Guardian.

    Non-overlapping red lines.

    Looks like a hard exit, perhaps to the WTO, and perhaps blowing up the UK WTO membership.

    However, the UK uses its own money, so those issues that challenged the Greeks do not arise here (on the other hand, the Indian decision to blow up a fair piece of their currency supply and only gradually restore ti may convince future governments that the world is more stable than might have been expected, so they should no worry about cash cease.).

  9. Edward

    British banks seem to have more to worry about with the Brexit then they do with penalties from scandals such as Libor.

    1. bob

      LIBOR was a great example of how the city isn’t part of the UK.

      LIBOR is a gentleman’s agreement, completely removed from any force of UK law.

  10. ChrisPacific

    On the plus side, the UK has its own currency and doesn’t have the kind of problem with debt and externally-imposed austerity that Greece did. On the other hand, UK expectations look considerably more delusional than Greece’s (which were plenty delusional already) and they are taking the process further than Greece ever did – I don’t think an EU exit for Greece was ever seriously considered, even though the idea surfaced from time to time.

    I suppose the real question is whether enduring the economic chaos that will follow a hard Brexit is worse than the prospect of returning cap in hand to the EU, asking for readmission, and having it granted provisionally and on punitive terms. The second choice would be pretty bad but would probably not be Biblical, while the first option very well might be (if Greece is any indication).

  11. Anonymous 2

    It really is a mess.

    You have Murdoch (Sun and Times of London owner) and Dacre (Daily Mail edtor) pushing May towards a hard Brexit while the falling pound will put the squeeze on living standards during 2017 and 2018 if sustained. The pensioners (who voted Leave) are protected by government guarantees for state pensions so the pain will be taken by the working age population who voted to Remain. With demographic pressures tightening as the boomers retire, the UK looks to be facing 15 bad years. The workers have suffered falls in living standards since 2007 already so are not going to be happy as the squeeze tightens.

    This could of course cause a change in public opinion as it becomes clear Hard Brexit will hurt (and maybe destroy the Union). Quite what the Government does then – with the tabloids blaming Europe and insisting the people’s will as reflected in the referendum be obeyed – is far from clear.

    If Brexit is not aborted there could be intergenerational hatred in the UK for decades to come. There have already been reports of young assistants taking their revenge on the residents of retirement homes though these could be apocryphal (anyone who believes the contents of English newspapers without checking with other more reliable sources is in danger of being hoodwinked).

  12. Winston

    Even with EU, UK went in red because oil floated its boat temporarily!
    North Sea oil is dragging us into the red
    Oil wealth was the secret saviour of the economy, but no longer, says Edmund Conway
    Britain gained £300billion in tax on North Sea oil – and blew it like a reckless lottery winner says expert

    Oil and EU floated UK’s boat from the 1980s…
    Book Review: Industry insider Mike Shepherd charts the crucial part North Sea oil played in Scottish history

  13. Winston

    UK failed to learn from successful EU countries. Unwilling to introduce urban regional governance for too long. It also has the local governments with least autonomy among 28 European countries along with Ireland, Malta and Cyprus! At same time nothing like Fraunhofer to boost SMEs. British are just poorly led!

  14. Winston

    Only good news out of UK is Osborne’s commitment to his plan for Northern Powerhouse. There is no one in US with his sensibility! Obama had chance but he wimped out:
    Detroit is America
    by Bruce Fisher speeches/chancellor-we-need-a- northern-powerhouse
    Chancellor: ‘We need a Northern powerhouse’

    I think structure alone will not be sufficient despite investments, if they do not also create something like Fraunhofer to help boost SME’s and their products. German economy started suffering despite Fraunhofer. In 1990s they established metropolitan regions. They appreciate their value as now also supporting metropolitan governance for developing countries, as demonstrated by their support in the Habitat III event. They have come late to the party; but are now fully converted!

    But, I commend George Osborne. First Northern powerhouse established under Labour Govt (Greater Manchester). They have since expanded number to 11. This is a bipartisan initiative. I think whether UK does well after Brexit will depend on how well this initiative succeeds. /news/north-east-news/northern -powerhouse-george-osborne- fights-11895205
    Northern Powerhouse – George Osborne fights to save his pet project
    Former Chancellor launches the Northern Powerhouse Partnership to promote his devolution initiative

    This is because anything allowed to fester requires a lot to remedy: politics/obstacles-making- northern-powerhouse-work-are- huge-and-data-proves-it-2689

    The obstacles to making the Northern Powerhouse work are huge – and the data proves it

  15. RBHoughton

    What we are seeing over Euro clearing and the rest is today’s version of the London newspaper headline “Fog in Channel, continent isolated.” Its just the media misleading Poms in the usual way.

  16. alex morfesis

    A bit late on this liveries of the city of london discussion…but not sure what the financial district is thinking “asking”…certainly had the opportunity to wrestle pre skirmish with the italian 5 billion need for monte paschi bank…for a 2.8 trillion dollar economy even a total loss would be a rounding error…

    spain greece and italy are natural allies for the liveries…spain feeds on british tourism as does greece…Italy needs outside capital to shore up its banking system…even throwing away 150 billion to aggressively counter berlin and Frankfurt with threadneedle pounds would buy negotiating power…

    Talk is not going to cut it…the only power in negotiations is the potential counter weight of the bank of england against the stasi…oops…schauble kyffhauser wing of northern europe

    If things go badly with a crazed hard brexit…losing 150 billion will have been a good day…

    Buying up and syndicating all the current capital needs of the Italian banking industry will buy some good will…

    working with the greek government to arrange for swaps to allow the british pound to be (nod wink) unofficially “currency” with merchants and businesses being encouraged to accept the pound…currently, the liveries can passport into greece and set up atm networks with existing uk equipment brought into greece…

    The implication being if berlin and frankfurt push too hard, the uk might take greece with it…with the pound being the transition currency if the greeks decide to leave or if they make wolfgang the bribe taker happy and leave the euro

    There is no nice way to get a divorce…tried twice…there is always someone whispering evil thoughts in your former loves ears…

    If it is war frankfurt and berlin want, then as the little man from ithaki with the rimmed glasses conveyed to Mussolini…

    Alors, c’est la guerre
    (he didnt actually say oxi…)

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