Brexit: EU Tightens the Noose

It should come as no surprise that the European Council is getting hardnosed. What is surprising is that it has taken this long. Recall that the UK and EU were at loggerheads, with May looking terminally damaged via her inability to cow the EU with her Government’s bluster. Bizarrely, Barnier worked with May to craft an utterly unworkable fudge of Ireland that the UK press praised to the sky, as if she’d scored a tremendous victory. In fact, the European Council’s December guidelines said the Government needed to come back with a worked-out solution to Ireland by the March negotiating round, which is due to start in the next two weeks.

I was at a loss to understand why the EU, even minimally, reinforced the UK’s self-destrutive antics.
The UK is as always mule-y, refusing to advance at all after the EU rejected of some of its demands. That might be a viable tactic if the UK could afford to run out the clock, but it’s the side that has much more to lose in a “crash-out” Brexit.

I thought I would throw it out to readers what might happen later this month. Both Vlade and PlutoniumKun highlighted that the EU has drawn a line in the sand, and unlike December, when it blinked on Ireland, is sending much stronger signals than ever that the UK needs to get real. As we’ve pointed out, the deadline for getting both the exit agreement and a transition deal in final form is October. The EU27 have approval processes that are rigid. There may be some limited room to push back the date for both sides to send the text out for ratification, but it’s unwise for the UK to presume that there is much latitude. So

Specifically, as we’ve embedded at the end of the post, the General Secretariat of the European Council released its draft guidelines and European Council President Donald Tusk also made some statements to the press. The message was clear: the UK isn’t going to be cut any more slack.

Even though I am loath to resort to framing like “losing patience,” since it implies that the EU negotiators are getting emotional, if you read the draft text, it is striking how often in the first pages it underscores that the EU is having to reaffirm things the UK has already been told.

Tusk was similarly blunt. Not only did he say last week that Ireland had to be resolved first, but also that the UK’s financial services fantasies were a non-starter. We’ve said for quite a while that negotiating a pact around goods is far simpler, and could be done faster than one that included services, and therefore it was quite possible they’d be concluded separately. Tusk confirmed that reading. Per Politico:

Tusk said he had offered the U.K. a robust free-trade agreement covering goods in all sectors, with zero tariffs, but added: “Services are not about tariffs. Services are about common rules, common supervision and common enforcement to ensure a level playing field, to ensure the integrity of the single market and, ultimately, also to ensure financial stability. This is why we cannot offer the same in services as we can offer in goods. It’s also why FTAs don’t have detailed rules for financial services.”

“We should all be clear,” he said, summing up in blunt fashion: “When it comes to financial services, life will be different after Brexit.”

Tusk also pushed back hard, and directly, at U.K. Chancellor Philip Hammond, who gave a speech on Wednesday urging a deal on financial services and asserting it would also benefit the EU.

“I fully respect the chancellor’s competence in defining what’s in the U.K.’s interest,” Tusk shot back. “I would, however, ask to allow us to define what’s in the EU’s interest.”


Yet having again been told “no” in no uncertain terms to the UK’s “Of course you’ll protect the City” delusion, Hammond, on Andrew Marr’s show yesterday, prattled on about how the UK would secure a “trade deal” on financial services, with the only caveat apparently being “the question is how financial services are included.”

The question is whether the EU turning up the pressure on the UK will work, given the irreconcilable contradiction in the Tory party: neither the Remain nor Leave side is willing to give into the other, yet having Labour form a government is to be avoided at all cost. But they can’t hold on to both positions for much longer. The Government is having yet another go at its fairy tale technology solution to prevent a hard border in Ireland, even as the EU has fined the UK £2.4 billion for allowing Chinese gangs to smuggle goods in through UK ports at gross undervaluations, then move them into the EU and sell them at vastly higher market prices. The fine looks, and almost certainly is, meant to tell the UK that it doesn’t have much credibility as far as its customs practices are concerned, and any newfangled solutions will have to be demonstrably better.

That is a long-winded intro to the reader question: what will trigger the crunch, and what might happen next? As it stands, the EU isn’t willing to talk to the UK unless it presents a workable Ireland solution. The only option is the sea border which the DUP has rejected. Some readers argued in December that even with its Unionist hard line, the DUP would be unwilling to bring the Government down.

How do you game this out? Is anyone on the UK side going to blink? And if not, what happens next? Does everyone start hoarding tinned goods and dried beans in preparation for a crash out?

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    1. Yves Smith Post author

      I suppose we should be flattered that someone from the UK finds us so threatening that they found us and felt the need to try to shut us up

      Ad hominem, evidence free, no reasoning whatsoever.

      This site is a US site, had you bothered to do even the most basic homework, so your effort to put us in UK boxes is a big fail. And it also seems typical of Brexit fans to be uninterested in facts.

      We’ve seen this sort of thing when we ran pro-union pieces during the Scott Walker fight and on some other hot topics: newbie commentors who are both low information yet have a clear agenda show up in the first or second comment, way too early to be organic, and try to influence the conversation by getting in a dig early. Pretty much never works because those remarks (like the perfect illustration above) are way below the standard of conversation here and so don’t get any traction.

      Shorter: Better trolls, please.

    2. hemeantwell

      project fear methinks.

      Thanks for an example of the trite, irresponsible thinking that has gotten the UK into the mess it is in. I can imagine that occasionally the reality of the situation begins to dawn, but then the commenter engages in self-trolling to dispel it.

        1. Bukko Boomeranger

          “Better trolls, please” is one of those pithy phrases that sticks in my mind. I frequently find myself thinking that when I read comment threads online. (Which I do less often these days because on websites concerned with news, politics or finance, the discussion quickly devolves into left-vs-right flamespew. Not worth the electrons it requires to light the screen for that tripe.) I’ll have to figure out ways of working variations of Yves’ formulation into spoken communication in my meatworld life. I hope she can figure out a way to copyright and monetise the saying!

  1. Ignacio

    I have read (sorry, spanish) that English bureaucrats privately say that the real deadline for the agreement would be january 19 instead of october. That would result in too short time for both parliaments to approve the text. In this case, parlamentary approval ougth to be a mere procedural act at the risk of crash out brexit. It seems to me the january deadline is another fantasy.

    In the european side Barnier is quite busy. For instance, meeting with representatives of what is termed “ultraperipheric european regions” (spanish again) to hear their requirements for the agreement. This highligths the complexity in this side of the table.

    1. PlutoniumKun

      I think Barnier, Tusk and his staff are working very hard to ensure that all the remaining EU members are fully briefed and ‘on the same page’, which suggests that they are privately briefing that the crunch is coming and that no more significant concessions will be offered.

  2. Treve Geraty

    So the EU want a tariff free trade deal with the UK with whom they have a massive trade surplus but not in services where the UK has a trade surplus. EU “cherry picking” . Quite strange when they have been able to offer services as well as trade in other trade negotiations. Even stranger when the London Capital markets provide the funds for EU investments at the best rates.

    When will the EU 27 realise the EU negotiators have only the EU bureaucratic structures and their own futures in mind and not the individual member states.

    1. Yves Smith Post author

      I suggest you bone up on how services companies operate. Your remark, sad to say, reflects typical UK ignorance, thanks to a failure to do homework and the highly partisan reporting of your press.

      First, the UK wants a tariff free deal. You seem to have missed that UK exports to the EU are much higher % of UK exports that UK exports are to EU exports. The UK has more to lose from tariffs on its exports even with the EU having a trade surplus. Moreover, a significant percentage of those UK exports are part of extended supply chains (auto, truck, and Airbus manufacture) where the EU facilities involved in those supply chains have excess capacity and a fair bit of that UK production could be moved out. By contrast, a decent portion of the UK’s EU imports are food, and the UK has no ready substitutes.

      Even in services deals, foreign firms don’t get waivers from home country regs. The UK has been smoking something extremely strong to think that would happen. Foreign firms doing business in the US have to get US licenses (typically a New York branch if a bank) and regs (witness Standard Chartered being threatened with loss of its license and Paribas paying a +$9 billion fine).

      1. Patrick

        The point about UK exports(manufactured goods as part of specialized products) being more substitutable than UK imports(food) seems pretty dubious.(even exactly the opposite of correct)

        The UK can buy food from the US or China, the only real sacrifice might be EU protected speciality foods.(Luxury cheeses and wines)

        On the other hand, components in a manufactured good like an Airbus are far from easy to replace. Changing out for a functionally similar IC or bracket from another factory on an airplane can require a redesign, which could trigger the need for extended test and recertification, which would be extremely expensive.

        The fact that the EU will offer goods so easily supports this view. UK has leverage here, and now we’ve got the traditional posturing of a negotiation. The UK threatening to throw European supply chain into disarray, if EU doesn’t permit London to continue business as usual.

        1. MisterMr


          From wikipedia:

          “The company’s main civil aeroplane business is based in Blagnac, France, a suburb of Toulouse, with production and manufacturing facilities mainly in France, Germany, Spain, China, United Kingdom and the United States. Final assembly production is based at Toulouse, France; Hamburg, Germany; Seville, Spain; Tianjin, China, and Mobile, United States.[8] ”

          Again from Wikipedia, “Geographical logistics sequence for the A380, with final assembly in Toulouse”:

          It seems obvious that, in case brexit somehow impedes Airbus’s supply chain, they will move the (small) UK part of the chain to the continent and not the opposite!

          1. Patrick

            My point is that manufacturing for highly technical bits in aerospace and other related industries is not easily interchangeable. It is easy to think of the inputs to an airplane or a circuit board as generic widgets, but it is not uncommon, as an example, to have literally one company on the planet that makes a mil spec flash memory in a form factor that fits your circuit card.

            If you want to change it, yes it is possible, but it will require a redesign.
            (which can force a recertification and have impacts on parent subsystems)

            You might imagine that a factory in France can just start making the widget you need, in the form factor you need, but that actually takes years of effort. And then, because it isn’t actually the same factory, it will still need recertification. ( as an example you don’t know the process variance of a new manufacturing effort, prima facie)

            1. Tosn

              Moving production of a part to another country requires a redesign of this part? Seriously? Apart from that this is obviously Brexiter BS, the only thing produced in the UK which can not easily be produced on the continent is the money washing laundering machine called London.

            2. Karl


              The fact of the matter is that you don’t know what you’re talking about.

              China’s Xian Aircraft Industry has produced the wings for those A319s/A320s that are assembled at Airbus’ Final Assembly Line (FAL) in Tianjin (China), since 2014.


              After Brexit, wing manufacturing (FAL) for every new next generation Large Commercial Aircraft (LCA) from Airbus will probably be located in Germany. Broughton (Wales) already lost out to Germany and Spain for being the manufacturing site for the A350 composite wing covers — and future Airbus wings will be all composite.

              1. Patrick

                Your article proves my point. They started the process of migrating in 2009 and finished in 2014. It took five years. I’m not saying it is impossible to relocate supply chain, I’m saying it is a lengthy and expensive process. Whereas food substitution just requires a changed shipping route.

                1. Anonymous2

                  And the port facilities capable of unloading the goods in the necessary quantity. These do not necessarily exist and may take time to build. You appear to be ignoring this point.

                  1. Karl


                    The wings for the A32X-series, A330-ceo/neo, A350 and A400M are transported on Airbus Beluga aircraft* from Broughton and Filton (A400M) to Hamburg (A319, A320, A321), Toulouse (A320, A330 and A350) and Sevilla (A400m).

                    The A380 wings are moved from Broughton to Toulouse by way of barge, Ro-Ro vessel, barge — and finally, overland convoy.


                  2. Patrick

                    yeah, I just don’t have anything to add. If you think sufficient port facilities don’t exist, post up some data and we can do some back of the envelope calculations. Otherwise, I’ll agree, maybe they don’t. But maybe they do. Clearly, globalized business doesn’t have trouble with a lot of other elaborate shipping tasks.

        2. Anonymous2

          Currently Britain’s imported food comes largely from Europe through RoRo ports. Bringing Food from elsewhere would be possible but

          1) the food would be less fresh unless flown.

          2) getting it through LoLo ports may not be immediately feasible if the necessary infrastructure is currently inadequate.

          And what is the sense, when we are supposed to be concerned about the future of the planet, in replacing near-sourced foods by more distant suppliers?

          1. Patrick

            I’ll admit, I know a lot about aerospace manufacturing and not a lot about food distribution, but I’m pretty sure gigantic refrigerated container ships are a thing.

            Certainly the worst case scenario is a small decrease in quality or a slight increase in cost. Possibly substitution into food types with longer shelf lifes?

            On the other hand, the worst case scenario for UK exports is that major european manufacturers of technical products will face substantial delays while trying to source replacement parts possibly failing to meet contractually obligated production requirements and certainly facing the prospect of loss of business to american manufacturers that don’t suffer the same supply chain uncertainty.

            1. Anonymous2

              Yes container ships are a thing. The key question is whether the UK’s LoLo ports have the capacity to unload them in 2019 if much of the UK’s food supply comes through them. There are doubts they do. This can be remedied in time but not overnight.

            2. andy blatchford

              The mistake is thinking containerised traffic and RoRo are perfectly interchangeable.
              A container (yes even refrigerated) would have to be at the port around 2 to 3 days before it loads. A truck turns up at Dover or the tunnel an hour or so before. It isn’t going to help you with lettuce from Spain. It only works because of the single market.

              The closest would be to airfreight it but that isn’t cheap so would add hugely to costs.

          2. Lead Bow

            There was a time when New Zealand supplied the UK with many foodstuffs – meat (especially lamb), fruit and butter to which could now be added wine and seafood. However the UK’s peremptory ditching of NZ’s products when it joined the UK threw NZ into an economic crisis it took a decade to get out of as alternate markets in Asia were sought and developed.

            I’m sure NZ would be happy to supply the home country again, but without the dependency that once existed and with memories of its unkind jilting it would be at a price.

        3. jabawocky

          ‘the only real sacrifice might be EU protected speciality foods’

          Er no. For half the year the UK’s fresh produce comes from the EU, from farms owned by UK companies mainly in Spain and shipped in lorries. The main alternative is to fly in vegetables from California. Thats October to May with no reasonably-priced vegetables, or none at all. That’s a hard political sell. There must be similar examples in many sectors, this is just the one with which i am most familiar.

          1. Anke

            Very interesting, jabawocky.

            Could you kindly share some (open-source) primary resources where I could read more on the topic, as I am very interested in it.

        4. vidimi

          you seem to ignore the popular backlash that would result from importing food from the US or china. cf chlorinated chicken

      2. Tony Wright

        Yves, your analyses are generally impeccably researched and argued. However your recently repeated reference to ” must have been smoking something strong” are way off the mark; if Brexit proponents had been smoking something strong they would have voted Remain in droves, due to the fear/paranoia aspects of cannabis pharmacology.
        Instead the Brexiteers behaved more like a bunch of bombastic pissheads, all well into their second slab for the night.
        In otherwords they are behaving just like their former guru Farage, you know the idiot who lambasted an elected EU parliamentarian for ” never having had a real job in his life”, when the gentleman concerned was in fact a brain surgeon.
        So keep up the great posts, but please revise your substance abuse references.

    2. EoH

      Your last observation would seem consistent with the neoliberal idea of homo economicus scaled to the level of the state. That would mean the UK bureaucracy, which, if not as old as China’s is as rigid and byzantine (attributes displayed daily by the Home Office), has the same narrow self-interest as the supposedly predatory EU bureaucracy.

      The UK has much more to lose in being recalcitrant than the EU. What might be irritating and frustrating for EU member states and the companies they host a few years hence will be dire difficulties for an already overwhelmed UK. Its economy will take a hit for decades: companies and industries will leave or retrench, immigration hurdles will hamper staffing and productivity, politicians will squabble over who is to blame and over what can be privatized next. All that is before the UK engages in the work and groveling it will take to replace the many EU-foreign state treaties it now benefits from.

      The bureaucracy will struggle for as long to reinvent a portion of the EU rules and standards (and those treaties) that keep a modern society and economy functioning. The idea that those can handily be left behind in Brussels is among the many down-the-rabbit-hole stories broadcast by this government.

      The City stands to lose a great deal from a crash-out. Its threat that it might have to resort to tax haven-like behavior demonstrates the same lack of self-awareness displayed by this government. The City is already the world’s biggest tax haven.

      1. Which is worse - bankers or terrorists

        “What can be privatized next”

        Bankers and lawyers could make a lot of money here whilst doing God’s work.

        1. EoH

          Your moniker reminds me of the Woodie Guthrie line from Pretty Boy Floyd: “Some will rob you with a six-gun, And some with a fountain pen.”

  3. vlade

    I now believe that the crunch will not be brought on by the UK politicians. That is because:
    – as you say, Tory Remain and Leave both hate anything that would bring in Corbyn even more. Expect Tories to close their eyes, clap the hand over their ears, and sing lalalalalala, or equivalent thereof;
    – papers don’t seem to have a clue, and those who should nominally be able to do a proper analysis (FT) are kept strangely silent;
    – Labour would like a crisis, but I can’t see who they, but themselves, can bring it on. Moreover, not sure whether it would really solve anything as the Labour positions on Brexit are currently only marginaly better than Tories fairly land, as in they acknowledge Brash (as in British Crash) is worse than than a negotiated settlement, but harbour fantasies on what that can be.

    That leaves only two possible triggers for the crisis:
    – Business exodus
    – Market crash (sterling crisis).

    1. Andrew Dodds


      At the moment the markets are, mostly, in the mood of ‘There will be some sort of deal at the 11th hour and nothing substantial will change’. Because that’s what tends to happen. At some point the realization is going to dawn that it’s different this time, it’s not something that can go to a last minute deal (too many parties have to agree, for a start), and we will have already passed most deadlines for agreement.

    2. vidimi

      my take is that brexit is the only way for labour to be able to nationalise monopolies such as railways, water, energy so is worth the price.

      and they couldn’t care less about the city of london.

      1. vlade

        There are two problems with this.
        a) the myth of “EU is stopping us from nationalization”. It is not. There are national champions in EU. EDF is pretty much owned by French State, so is Deutsche Bahn. This is the problem of the UK politicians, who are not interested in how EU works, they are interested in building myths as to why they can’t do something.
        b) on a Brash, Labour – or any other government – will have their hands full with just keeping the country afloat, almost literally. Look at what weather disruption of two weeks back did to UK supermarkets. Brash would do the same, except there would be no thaw in sight. Not to mention all the car factories (and their suppliers) closing, horse racing industry (which supports like 85k people) closing down, NHS having troubles etc. etc.

        Calling for no-deal Brexit just to get Labour in power is like calling for a war to sort internal problems – because the country would have to move to a war-like setting, which the populace is not ready for at all. Look at how well it worked for US in 1860s, or Europe twice in 20th century.

          1. vlade

            in 2007, NR was nationalised, so was pretty much Lloyds and RBS.
            RBS is still majority state-owned. There were noises from EU around RBS, but they were resolved, and RBS is not required to sell its W&G division anymore as long as the UK takes steps “boost competition in the UK banking” – so called Alternative Remedies package.

            Similarly, one of the rail franchises was taken over by the state for a period IIRC, and EU had no issue with that – and it would have zero issue with a state company winning tenders for franchises either (as long as private companies were allowed to run in the tender, and it was a fair tender). I’d point out that the private UK rail companies are already receiving massive state aid, so having a state company there is nothing different.

            Ultimately, there are always exceptions that are available in the EU for a skilled negotiators – but the UK happily ignored EU and its inner workings for decades. For example, utilities in Germany were in some cases brought under municipal control, and EU didn’t say squat ( ). But Corbyn could happily nationalise Big6 utilities – as long as the small ones were still allowed to play on a reasonably level field. Moreover, if he say nationalised them with the view to move to renewables (as a national goal), I very much doubt ECJ would rule it unlawful.

            With railways, if the outcome to the users were demonstrably better than under private ownership, I believe Corbyn would have a very strong case in ECJ should anyone want to run the case there, pointing the case of French and German rails.

            Etc. etc. The issue to me is that EU in this is a complication, but not an unsurpassable hurdle – but Labour doesn’t want to deal even with that. But the cost of dealing with a potential ECJ challenge in this is IMO trivial compared to the costs of a hard (not to mention a no-deal) Brexit.

            And, incidentally, state aid is a reason for WTO fines and penalties even outside of EU.

            Lastly , unless Corbyn wants to institute one-party rule, any nationalization can be more readily overturned by the Tories than the EU. If the nationalised UK rail runs like the good-ole British Rail in 1980s, the public is not going to be pleased any more than they are with the current Southern Rail and I’m sure someone will be just so very happy to privatise it.

          2. PlutoniumKun

            Bill Mitchell is good on economics, but he completely loses his way when he writes about the EU. He really knows very little about how it works and far too often he simply sees what he wants to see.

            There are no EU rules – none – against nationalisation. Competition law does set up significant complications for setting up public ownership, as it can leave public companies open to court challenges if they are deemed to be setting up barriers to outsiders, and it can be difficult to reverse openly competitive markets within the contract periods. It means, in effect, that it would be very difficult to cancel existing franchises or contracts for a public service. But there is nothing to stop a government either buying them out or letting them run out.

  4. Ignacio

    Regarding Financial Services, the EU recently approved MiFID ii which settles financial services ruling and the framework for third country providers. If UK firms comply with these rules, and under the basis of “equivalence”, that should yet be approved by the EC, they could still offer these services to professional clients (not retail) after Brexit. That would also mean that UK firms would be under Brussels regulation framework whithout a say on it.

    Did I get it rigth?

    1. vlade

      Equivalence is on case by case basis. It also can cover some, but not all parts – for example, it may be possible for the UK to offer asset management services, but not insurance etc. etc.

      But, the worst of all, equivalence can be withrdrawn unilateraly – I can’t remember now whether on 60 or 90 or whatever. That means your business can lose access to clients at pretty much not notice, which is a killer for any long-running contracts.

      Equivalence is a favour EU may extend to third parties, but not an obligation. It has no reason to extend that favour to the UK based financial servies, unless they cover sectors not done by domestic (EU) ones.

      1. Ignacio

        Thank you Vlade!

        ( I hope a previous reply I sent with erroneus name is deleted since I used my email address instead)

      2. vidimi

        i think insurance will be an example of a service that will be equivalent between the two parties unless the UK decides to pull out of Solvency 2 and IFRS 9/17.

        beyond that, even within the EU each country requires its own licences.

        1. Ekatarina Velika

          Unfortunately, it seems that the UK is moving precisely in that direction… See, for example, the ABI press release from last October:
          Even though the changes proposed seem very technical, they would (if adopted) directly influence/”improve” the solvency position of firms. I wonder how this will influence the equivalence assessment. Cannot imagine it going down too easily.

    2. Yves Smith Post author

      I need to recheck (I should but I need to turn in) the equivalence rules are similar to the ones in place for Switzerland, and they aren’t very helpful to the City because they are limited to products where there is already a lot of cross border unregulated activity like commercial lending and many types of insurance.

      Well, I did go as far as checking my archives. This is from a Feb 1 post, UK Consternation Over EU Not Accommodating City of London in Brexit…Just As It Said It Would Not Do:

      Another fudge the UK had hoped to get was “equivalence,” which was if UK financial services regs were kinda sorta aligned sufficiently with EU financial services rules, UK firms in those products/services could operate freely in the EU. One can see why the EU wouldn’t go for that. Unless the foreign country hewed precisely to the EU’s rules, “equivalence” equals ceding some, potentially a lot, of control over your own regulations to an unaccountable foreign country. Now admittedly, the EU has done that, in a couple of areas, commercial lending and some insurance products. But neither of these are heavily regulated activities and companies already shop for them across borders. 1 The idea that they’d extend equivalence beyond narrow bounds was never on save in the fevered brains of Brexit boosters.

      I know I may sound like a broken record, but reading the English language press gives the impression that the EU rebuff is a new development. For a sanity check, below is a section of a post from February 27, 2017, almost a full year ago:

      The Financial Times obtained access to a European Commission document that puts paid to a pet proposal for how the City could have its cake and eat it too in a Brexit, that of the implementation of an “equivalence” regime. We had been skeptical that this arrangement would be approved by the European side. Our view appears to be correct.

      While this had not been fleshed out in any detail, the UK proponents argued that London could be permitted to service customers on the Continent more or less as before if UK regulations were deemed to be “equivalent,” since the EU had already allowed for that with some financial services.

      The idea had been bandied about before, with a recent sighting in January. Then, an “influential” banking industry lobbying group, TheCityUK, published its demands for Brexit talks. We wrote at the time that they showed how the British side was in a bubble, and that the document pressed for several ideas that had already been rejected by the EU.

      The only good thing that could be said about equivalence was that it at least had not been previously nixed. The equivalence proposal resulted from the fact that the industry did recognize that one of its pet asks, “passporting,” was a non-starter. Passporting would have allowed UK-based employees of UK firms to sell services to customers in the EU. It’s not hard to imagine why the EU would not be keen about that in a post-Brexit world.

      So shorter: as of eleven months ago, the UK had already been told no once on these pet issues, and was having to be told “no” yet again. Frankly, I am astonished that Michel Barnier and Jean-Claude Juncker can keep up a veneer of politeness with this sort of mind-boggling obtuseness operating on every front. The UK keeps acting as if it ignores clear and persistent rejections, somehow the EU will relent.

      The one difference with the EU’s latest “non” is that it stooped to tell the UK that it heard and was unmoved by its argument for being nice to the City: that somehow the Continent would suffer if British bankers were inconvenienced. As we’ve said, that idea is silly. The world is awash with bankers. The Continent had perfectly good ones that would be delighted to eat the lunch of their London competitors. Moreover, the firms that now do Continental business out of London (and that includes US as well as European players) are fully capable of moving staff to Europe (or hiring) and getting any needed licenses. The biggest impediment seems to be figuring out where to bulk up and securing more office space, but the large financial firms were scouting virtually from the day after the Brexit vote. They could read the handwriting on the wall.

      Note that Barnier was reported as making some accommodating noises but he’s gotten out ahead of his principals before and has been slapped down. The reality is that as we have said before, “equivalence” in any complex financial products (and the high margin ones are complex) would require the UK to stay strictly aligned with EU rules. That would also mean rapidly implementing any EU regulatory changes and accepting ECJ rulings, and almost certainly the ECJ as final arbiter. That’s a non-starter politically. As Reuters reported yesterday:

      As Britain was leaving the EU’s single market and rejecting its rules, including arbitration by EU courts, one EU diplomat said, “it’s clear that they will lose passporting rights as this is part of the internal market and our regulatory regime.”

      “When they do that, the only other alternative is what we have in some of our FTAs,” the person added, referring to free trade agreements the EU has with other countries.

      Barnier has said that free trade accords have in the past offered only limited access for financial service providers. He has said there was a willingness to look at the possibilities of equivalence.

      Some envoys expressed caution about how far that could be done. Others were more open to closer cooperation…

      “The key message was that given the UK’s red lines,” another diplomat said, “a free trade agreement is the only possible cooperation scheme.”

      So in light of the foregoing, consider the Financial Times’ account, EU rejects Brexit trade deal for UK financial services sector. Key sections:

      EU Brexit negotiators have set out a tough line on financial services, ruling out an ambitious trade deal for the lucrative sector and arguing that Europe would benefit from a smaller City of London, according to confidential discussions among the other 27 EU member states…

      “There was a strong commission message that there would be no special deal,” said an EU diplomat briefed on the discussions — a first attempt to thrash out the bloc’s position on the issue before negotiations with Britain start in March. “The UK is being told from the beginning what the situation is.”

      Another EU diplomat said: “They are out of the internal market, that’s it. There can only be a much less ambitious agreement.”

      1. wilroncanada

        Pardon the poor attempt at levity, but it seems the Conservative government and the UK press are still acting and talking as if they hold the Trump card. Negotiations: to stubbornly pretend not to have heard the bad news, but instead to keep bludgeoning the other side with (totally invented) strength until the other side gives in. It works in (some) real estate deals for some mil/billionaires.

    3. PlutoniumKun

      I assume that the old issue of ECJ oversight will sabotage any sort of ‘equivalence’ deal unless the hard Brexiters see sense.

  5. PlutoniumKun

    I think the EU will want the final break to be made by the UK. But the problem the EU face is that the London government is so chaotic and clueless that they can’t even see the negotiations have broken down. May will do anything to avoid making any sort of decision or confronting the DUP. So I think that despite the best efforts of the EU to push the final move onto the UK, Its the EU that may be forced to make the formal break.

    It is pretty clear that the UK is entirely boxed in, and the only way to preserve the transition period and some hope of progress towards a deal is a complete capitulation to the EU’s formal position (the EU will probably allow a few face-saving minor concessions if this happens). But this can only happen by either a complete volte-face on leaving the Single Market and Common Market – i.e. try to stay within the EEA – and its impossible to see this happening. The alternative is to sell out the DUP over Northern Ireland. Now there is no question that the London establishment couldn’t give a damn about the DUP or NI and would be perfectly willing to sell them out, but they do have those crucial votes in Parliament. If May had any political courage, she would simply face them down and tell them that either they vote with her, or they can deal with a Jeremy Corbyn government. But of course we know the answer to that. While the DUP have blown their position by overplaying their hand, they are likely to be equally delusional as to think they can still get their way by digging their heels in (probably supported by the 60 or so hard Brexiters in the Tory Parliamentary Party).

    So I don’t see any hope for a deal, but I do think that a little like Monty Pythons Dead Parrot, we’ll see a generalised refusal on the UK side to admit that the games up. The question is whether the EU will humour this, or will call a halt themselves. My feeling is that the Irish government will do their damnest to persuade the EU not to unilaterally call a halt, because politically that would be seen as a failure for Varadkar. The latter is probably planning for an autumn election, so will want to be seen to be still in the game for that. But I think the Irish are still holding out hope for a capitulation by May on the border issue (if it did, that would be seen as an enormous political victory for him).

    Incidentally, St. Patricks Day is coming up, and this is traditionally when Irish foreign policy goes into full overdrive, tapping up potentially sympathetic ears through the Hibernosphere for whatever it is they are seeking (usually money). Varadkar will be talking to Pence and other vaguely Irish American politicians over the weekend, so it may be that they have asked Tusk and Barnier to postpone anything until they can sound out the US, etc., to see if any useful pressure can be put on the UK.

    1. vlade

      Tories could do a deal with SNP (which has more MPs than DUP) – if they said they would push EU to do the same deal for Scotland as for NI (which in effect would mean semi-independent Scotland), or allow Scots second referendum post-Brexit. Plaid Cymru doesn’t have any Westminster MPs, so I thikn they could continue in the good old tradition of ignoring those.

      1. Andrew Dodds

        Slight correction: PC have 4 MPs.

        Technically, Conservatives plus PC are about 1 seat short of a majority, with Sinn Fein absent. Not many areas of agreement, though.

    2. vidimi

      if may were to call another election, it wouldn’t be beyond the realm of reason to think that she may win back a parliamentary majority. corbyn’s momentum has stalled, if not reversed.

      1. animalogic

        You may be quite correct…but imagine the “courage” required (in the Yes Minister sense) to call another snap election….

    3. ChrisPacific

      I’m not sure where chaotic Brexit would leave the Republic of Ireland on the border question. Nowhere good would seem to be the short answer. Presumably the EU (having the ability to consider alternatives and plan for different cases) are working with them on this and they will have some kind of private agreement in place on what to do, what kind of border to impose and how to do it. That’s assuming some kind of border would be necessary, which seems like it would be unavoidable if NI were to collapse into regulatory limbo along with the rest of the UK.

      The UK inability to make any kind of decision or recognize the worst case scenario for what it is looks like the biggest risk for Ireland at present. If the EU have their back on this (which seems to be the case so far) then I expect we will see a lot of blunt language and a serious effort to get the UK to face reality while there is still time for them to change course. Whether it will work remains to be seen, but we’d have to see something radically different from the current UK political process for it to have a chance.

    4. Anke

      Dear PK,

      I personally do not know the whole history of the Irish crises (there have been so many), so I cannot understand the political background and how this affects the political games between IE/UK and the EU.

      However, what I can share with you is the view of a continental European. Or at least this continental European’s perspective, which I think is shared by many other people on the continent. I, personally, do not think the RoI is Europe’s problem – it has never been, nor should it be. The history between the Irish and the English is very complicated and unless the Europeans are ever invited to mediate some peace agreement, continentals should never get involved in that too emotional conflict which is ridden with attrocities on both sides.

      It is clear though, that the border issue is being used (effectively in my view) by both sides to gain political/economic advantages. Of course, the UK would like to have weak border controls so that not only can they send products into the EU which are not according to EU standards, but also to import from the EU via RoI (see discussion about food imports above). This has been mentioned on NC multiple times already, so I do not claim credit for the idea. As for the RoI, my feeling is that they always go to either the US or the EU, whenever it suits them, to gain advantages over their much stronger neighbour, as they lack the internal resources. So from the perspective of the EU, I would ask myself: can you ever trust such a partner? And if the UK is not controlling its border properly, can the RoI do that?

      So, in my view, the EU is right to try and dump this responsibility into the UK’s camp, because it is rightly so. However, these elites want to escape responsibility, because most likely (as some other commentator has posted) they are incompetent but cannot admit it. And Tusk is simply doing what any sane person in his position should/would do: try to sort out the border issue in order to (1) minimize the probability of any future conflicts and (2) ensure that nothing comes into the EU via the backdoor. I am moving out of this country, precisely because I want to avoid bleached chicken.

      I think the political element of these negotiations is brought in exactly by the incompetent who cannot sort out the issue, so they need to hide their mistakes/incompetence and save face.


    5. Which is worse - bankers or terrorists

      Game theory here pretty much says that May’s best option is to shake up the negotiation. Best possible way to do this is call the DUP’s bluff, and if they don’t cave, call another election. Either way she wins: (a) she loses, and she is not fully responsible for going over the cliff, (b) she does not get a clear mandate, in which she resigns and others are blamed for going over the cliff, or (c) small chance she gets a clear mandate from which to begin anew. Besides, with all options the EU gets damaged because they brought down the U.K. government, which might shift some leverage back to the U.K. Also, you frustrate the EU by freezing the negotiations and giving them no one to negotiate with, and in the meantime the EU begins the necessary work of making public preparation for a hard Brexit (militarization of the Irish border, etc.), the reality of which also may push some sentiment to the U.K.

      Once the negotiations hit a hard wall and it is obvious it is stalled, and it becomes more clear to the leadership that going over a cliff is inevitable, the rats will start to find a way to leave the ship and protect what is left of their personal legacies. One can imagine that May might simply try to get out early. What is her motivation to stay?

      1. fajensen

        What is her motivation to stay?

        I have been wondering the same. I think what happened is that someone with a good handle on agit-prop cast Theresa May in the role of Margaret Thatcher Reincarnated. May, being always considered a lightweight and without most of the willpower and clout that Thatcher wielded, embraced and invested in so much of herself in that role that she cannot just let it go. The rest of The Tories dream so much of their Glory Days under The Iron Lady that they want the illusion to persist rather than follow their usual instincts and use the opportunity stick a fork in May and her supporters over the mess.

        Indeed, there have been hardly any back-stabbings and defenestrations through the entire farce. An unhealthy pressure is building up. After Brexit, the Tory Party will operate a lot like Rome of the Old Days or Venice in the times of the Borgia’s.

        1. PlutoniumKun

          I’m not sure she has the imagination or depth to think of why she would stay in power. She has obviously always aimed for the top, she is there, and she is clinging on for as long as she can, its just the way that sort of person thinks. No doubt in private she and her confidants talk about ‘duty’ and ‘light at the end of the tunnel’, but ultimately its about clinging on to what you have.

          From the Tory party point of view, everything I’ve read indicates that the Party see her as a convenient placeholder, someone to hold the bag (and take the blame) until one or other of the relevant factions feels strong enough to seize power for itself. So ironically, her weakness is her strength.

          It should also be pointed out that while from our NC perspective, she is a disaster, that’s not quite how the UK public sees it, mostly thanks to the grossly distorted media. I’ve seen polls that indicate that she is actually the most favoured PM over Corbyn, and if an election was held tomorrow there is a reasonable chance she would win again. In many respects this is down to luck – no centrist alternative thanks to the demise of the LibDems, and a deep suspicion among ‘middle England’ about Corbyn, but any politician takes what luck they are given.

          On that point, I think ‘which is worse’ above is right – according to game theory, she does have options, and a snap election (if stage managed correctly) may ironically not be the worst among them. Given that the economic news is almost certain to be grim for the forseeable future, now is as good a time as any.

          1. vlade

            On the Corbyn/Labour losing ground. I’m not surprised. TBH, I think it’s less about Corbyn as such, and more about a lot of remainers voting Labour last time, but now feeling betrayed by Labour as it’s Brexit strategy is really not that dissimilar from Tories (except for accepting that no deal is a car crash). There were consistent polls that showed a lot of “new” Labour voters last year were remainers, but this was repeatedly ignored by Corbyn and the new voters were taken for granted. Well, they are not. I’d not be surprised if third party candidates made a strong showing in the local elections, with a number of people disliking now both major parties (Tories a bit more). It would be an interesting outcome, as a sub-par showin for both Labour and Tories would shake both parties.

  6. doily

    From the links section of NC 3 March 2018 (from Clive IIRC), a Socialist Worker article summarizing how Northern Ireland came to be in the 1920s: “By 1921 the British were forced to concede that Ireland was ungovernable and entered into negotiations with Sinn Fein. . . . All agreed that the question of Ulster should be left to last when the treaty was almost complete.” Clearly this was a very bad idea, then as now. Have the EU negotiators December’s ridiculous fudge notwithstanding, learned from history?

    Here is a link to the 48 page “Smart Border 2.0” document put together by a Swedish border control expert.

    I have just skimmed it. With all due respect to the author’s expertise in these matters, I have to agree with Peter Hain’s comments in the Independent that “these ideas are more than just stupid, they are dangerous and, if we insisted on pre-registration for travellers, we would be risking immediate civil unrest.” The document claims there are some 200 odd roads crossing the border (some more than once!). Wikipedia says 300. That ambiguity should itself be warning enough about the nature of this proposed UK/EU border. Border 2.0 suggests that physical border checks on all but a handful of these roads will be unmanned. No worries though, because wifi drivers-licence detectors, photographic surveillance of license plates, databases of “approved” travellers, and whatnot, will deter anyone crossing the border illegally from choosing one of the hundreds of scenic routes across.

    Assuming for a moment that this science fiction solution technically works, how will it be made to work? The study reasonably suggests that Fantasy Border 2.0 will “require close collaboration both within and between Ireland and the UK” and specifically a “bilateral EU-UK agreement regulating advanced customs cooperation avoiding duplication and with possibility to carry out tasks on each other’s behalf.” Astoundingly however, the document never mentions the Good Friday Agreement of 1998. The 1998 arrangements have had and continue to have a bumpy ride, but among the many achievements has been the dismantling of the physical border. Now, on top of the technological fantasy, we have the political fantasy of the two parties to the 1998 Agreement rebuilding the border? By next year?

    I don’t get it.

    1. fajensen

      Here is a link to the 48 page “Smart Border 2.0” document put together by a Swedish border control expert.

      AhEm – From a decade of Personal Experience:

      The first problem with asking “Sweden” about anything not-swedish is cultural: Swedes cannot understand that people who are not Swedish can interpret a shared experience / situation differently than a Swedish person does. To them, “Everyone are equal*”. In addition Swedes, cannot comprehend how other people, who are not Swedes, can use the same words to mean something different than a Swedish person understands the words to mean. These situations interfere strongly with their extremely strong desire to label and categorise everything into clearly defined mental compartments so that the concepts can be operated on in a “structured process”**.

      The second problem is that they tried to sell this kind of concept already in the 1980’s, this time on the border between Norway and Sweden. This border is 2000 km of terrain with some interconnecting roads. Back in the day Ericsson proposed to place “smart” RADAR-based motion detection on the border, which of course sent the police after every elk, reindeer, swirl of snow and so on crossing the border leaving little time to go after the smugglers. They did get the Micro-link product from the wreckage so Ericsson gained some business.

      To summarise, this border “design” will only work if the smugglers, the customs, the police, the Irish and the paramilitaries are all Swedish and behave like the Swedish believe they should. And there be no roaming wildlife, not even the Swedish wildlife.

      *) The “Everyone are Equal” just means “… are of the same nature”, it does NOT mean “… deserving of an equal treatment” at all. There is a severe (and fiercely denied) inequality in Sweden between the “elite” and “the hands”; The Swedish elites are so “Louis XIV” that it is hard to fathom unless one sees it by ones own eyes. I have never anywhere else in the world heard an HR director of all people talk about “his” people as “meat” in front of others, in a meeting where the organisation were setting up workstations! I have never, anywhere, seen bratty kids shout abuse at the bus driver because “their dad pays so much tax that they should ride for free”.

      **) When one demonstrates that the world is, like different outside of Sweden to a Swedish person, they will just ignore it like they prefer to do with all unpleasant disorder, and carry right on regardless. My bank lady, who is obviously a professional, cannot comprehend that a “Credit Card” in the EU can be very different from a what is called a “Credit Card” in Sweden.

      The Swedish Credit Card is simply a Debit card with a credit account attached to it, which must be paid in full every 2 months. In the rest of the EU a Credit Card is a ledger where purchases are registered to be paid at leisure once approved by the cardholder. It doesn’t matter that one shoves the T&C’s of both under their nose, they *will* not understand why it is a bad idea to have a corporate “Credit Card”, where in reality, because it is a Debit Card, the International employees, assuming something else, will be fully liable for all card fraud, all the while we have business in “funny countries” know for CC-fraud.

  7. David

    I said in an earlier discussion that the EU’s willingness to fudge the issue in December was understandable, since it was essential that the EU should be seen to be as helpful and creative as possible, and the guilt fall on the UK. In addition, by introducing the subject of Northern Ireland prominently into the agenda, it signaled that the problem was for the UK to sort out, and began the process which has continued with Tusk’s speech last week. The requirement to deal with Northern Ireland first is, in fact, the crunch, and the government has no way of dealing with it for the political reasons that we’ve discussed before. So in many ways, the only remaining question is whether May can somehow manage to cobble together a position on the issue which the Cabinet can agree and that can be presented to the 27 (not that they are likely to be impressed by it).

    On the other hand, the government can’t simply walk away, blaming the EU. It will become progressively more difficult over the next few weeks to pretend that negotiations haven’t broken down, the more so since there is an EU proposal for Northern Ireland on the table. I don’t think the hard-core Brexiters care about, even if they understand, all the complex economic arguments. But like everybody else they can understand what a border is, and what a breakdown in the peace process would entail. Divisions on that issue, which run very deep, do not necessarily reflect positions on Brexit more widely.

    It’s sometimes useful to look at things counter-factually. Let’s assume everything just stops and the Tory Party sticks its fingers in its ears. We then have a year of increasingly frenetic debate, of international pressure by major trading partners, of posturing by Dublin, of external efforts at mediation, of sterling crises and stock-market crashes, of public warfare between government ministers, while the government itself just sits there and does nothing, waiting calmly for the clock to run out, whilst all the time staying united behind May’s leadership. If you believe that’s feasible, OK. if you don’t believe that’s feasible, then it can’t go on forever. And things that can’t go on for ever have a nasty habit of stopping. The question is when and how.

    1. Yves Smith Post author

      This makes sense. The Tories have been running a huge reality-distortion operation which reflects their need/desire not to admit they need to make a radical course change, along with the bizarre willful ignorance of just about everyone in the elites (even the ones who aren’t ideologically maddened like Hammond still say some astonishingly uninformed things, and it’s so off key that my sense is it isn’t feigned ignorance for domestic purposes).

      The US had this sort of sustained and effective propaganda campaign with WMD in Iraq, and we are having it now with RussiaRussia!. But this has what you’d call in trading an inevitable mark to market coming. I can’t imagine when or how that happens, but I infer you are right, they will continue to hold this together until well beyond what would normally be its conceivable sell-by date, which will be the breakdown of negotiations this month. How long can the Government and the media pretend that they aren’t on a “no deal at all” trajectory? And does the EU need to clear its throat and say that they’d rather not have it but they are not going to bend (they’ve been very insistent regarding their red lines but I don’t recall them every explicitly saying that they’ll take a crashout if that’s what the UK is trying to force).

      1. PlutoniumKun

        Assuming no ‘events dear boy, events‘ situation, then I think the government would be hoping to find some excuse to get into April, which leads to the big political event of the year, the local elections in early May. A reasonable performance would get the government through to the sleepy time of summer (and I think this is likely, as expectations are so low). A really bad performance could result in a putsch against May, which would undoubtedly trigger a political and economic crisis if a hard Brexiter won.

        Assuming the EU doesn’t actively intervene, I assume it will be after Easter that the financial markets suddenly stop fooling themselves and realise that a chaotic Brexit is looming. I assume this will first reflect itself in pressure on sterling. I think its anyones guess whether this would be a continued slow bleeding of the economy as has happened so far, or if there is a real possibility of panic setting in with an economic crisis.

        So what I’m suggesting is that if the economy doesn’t get really bad, if the EU doesn’t overtly declare the negotiations over, and if the Tories have a reasonable May local election, the crunch time may not be until the autumn months. That’s a lot of ‘ifs’ of course.

        1. David

          I don’t disagree if the crisis unfolds essentially according to economic and negotiating issues. On the other hand, my bet would be that things will blow up for reasons that have much more to do with the negotiations being stalled, and with the wider ramifications of the Northern Ireland problem. In that case, the crisis could come at any time, in any form, and with almost any outcome. I don’t think the EU will declare the negotiations over (except as a tactical move perhaps) because their concern now must be to limit the damage. A crash-out scenario may be bad for the UK, but it wouldn’t be a lot of fun for the EU either. The consequences would dominate every Council meeting for the next five years, as well as revealing all sorts of splits and conflicts within the 27. Their best hope at the moment is that the crunch arrives early and that, when the dust has settled and the blood has been mopped up, a government emerges in London, of any political persuasion, which at least knows what it wants.

  8. The Rev Kev

    Using the Sherlock Holmes maxim that “when you have eliminated the impossible, whatever remains, however improbable, must be the truth” I can be drawn to only one conclusion in trying to understand the shenanigans of the UK government over the past two years and it is this. The entire British political establishment Are Simply Not Up To The Challenge. By this I am including most members of the political parties, the remnants of the British bureaucracy, and the British media who after all are mostly drawn from the upper classes nowadays.
    When a government is under the gun with a crisis, what do they do? They prevaricate, they delay, they put off hard decisions that may be risky to make, they divert attention to sensational stories (the Russian’s did it!) and if need be, they have even been know to launch military campaigns. Yes I understand that May is boxed in by the results of the last election (which she called) and I know that her party is divided as to what to do. But Brexit is not going away and instead of all these factions compromising, all that happens is that valuable time is being frittered away. Ergo my conclusion that they, as a class, are just not up to the challenge
    May must hate going to the EU as they always expect something concrete but she comes of as a student that is late in turning in a major assignment but is trying to bluff their way past the teachers. The EU knows that time is on their side and they are not going to be put in the position of being the executioner. It is going to be rough for the British as I am expecting a hard Brexit without a treaty in place. I’m not saying that they should invest in cans of backed beans and shotguns but the only thing that comes to mind is to hope for the best and to prepare for the worst.

    1. Andrew Dodds

      Has to be said:

      The last election was really a clear signal – for a government of national unity, to negotiate Brexit if we have to. A Con/Lab coalition could have had enough of a majority to sideline the headbangers and incompetents and negotiate some sort of soft Brexit. Not ideal by any means, but no big disaster.

      Of course, that would have required sense and maturity from both sides of the house.

      1. Ape

        Yes. You face a constitutional crisis – you either form a unity government to form a new constitutional order or you play hardball and put in an authoritarian government.

        My impression is that the UK government doesn’t realize that they are facing a constitutional crisis.

    2. David

      The comment that things have gone steadily downhill is one I’ve made myself, and that repeating. But it’s worth reminding ourselves how the UK got into this mess. If you had to design a nightmare scenario for diplomats and civil servants, this is exactly what you would contrive. A government taken by surprise by the results of a referendum, with no contingency plans, plunging into the Article 50 process because waiting to get things organised would have risked the government exploding, with no coherent policy agreed by the cabinet, let alone the government let alone the party, and buffeted by political winds from all directions. You would have carefully ensured that the generation that negotiated EU treaties had retired, that expertise within government had been hollowed out to a frightening degree, and then refused to give your remaining officials any real guidance about what you wanted. If anything good comes out of this, it might just be the recognition that a functioning public service might be quite useful, especially when things get rough.

      1. PlutoniumKun

        Its certainly a perfect storm, but that doesn’t explain to me why it is that the current crop of senior politicians are so utterly useless. The occasional older head popping up, like Heseltine and Major does remind us I think that no matter what you thought of their politics, the Tory Party used to at least generate politicians of some substance. Even Major, who was widely mocked when he was PM, showed far more skill than any Tory politician at the moment. He at least kept ‘the bastards’ as he called them, under some control.

        1. Anonymous2

          I suggest one reason, PK, is that the newspapers groom candidates for higher office and nowadays prefer to support people of little genuine stature as they are more easily controlled by their supporters/masters in the press.

          Gove for example is clearly Murdoch’s puppet.

        2. David

          I think it has something to do with the transformation of politics into the pure obsession with being in positions of power, without any fixed beliefs or even objectives. This is a process that started under Blair, and has produced a generation of professional political hacks for whom politics is about image, always having the right opinions, not offending people, and crawling to whoever needs to be crawled to, to get into these positions of power. Politics has become content-free, with the universal beliefs that globalization rules, the market has all the answers and there’s nothing much governments can do anyway. This is OK until there is a major crisis, and it turns out that PR is not a sufficient answer, you actually have to do something. At that point, frankly mediocre figures from the past start to look like political giants by comparison. (It should be said that the UK is not alone: France, for example has elected as President an empty suit who thinks he’s Napoleon). I shudder to think how the current generation of western politicians is going to handle a combination of Brexit, the next financial crisis and the effects of global warming, to name but three.
          I think the media also bears some responsibility, in that it has been hollowed out itself, and is increasingly just fighting for cheap clicks. It was notable that Tusks’s speech last week was elbowed off the front pages and the tops of internet sites by International Women’s Day – not exactly news in itself, but a good opportunity to fill the screen with vaguely-related material written ages before, so avoiding having to do any actual journalism. In a few weeks time, France will go nuts over the 50th anniversary of May 1968, and for weeks there will be little serious news reported: May’s entire cabinet could commit ritual suicide and it would hardly rate a paragraph in the “Fancy That” (faits divers) section.
          Ironically, the Brexit vote itself showed that ordinary people are far more in touch with reality than politicians or the media.

          1. Ignacio

            Excellent commentary indeed.

            “This is OK until there is a major crisis, and it turns out that PR is not a sufficient answer, you actually have to do something”

            Quite true! Remember Belgium, more recently Spain. A functioning government is not needed unless there is a crisis. This year the conservative government in Spain, which is doing nothing except PR about Catalonia, was stalling budgets negotiations . Only now, when they see their party has been surpassed by the “New Conservatives” (Ciudadanos) in recent polls, want to accelerate negotiations. They were so happy doing nothing!

  9. m-ga

    I’d imagine that the EU27 will soon start implementing their plans for a crash-out Brexit. The only possibility to stave this off is if Theresa May will sign a transition agreement that makes sense of the NI border issue. But all indications are that she won’t sign, and that even if she sign did the transition would only delay the crash-out Brexit by 18 months.

    There’s been nearly two years for the EU27 to cherrypick much of Britain’s soft and hard power. So, for example, the European Medical Agency has already gone from London, along with well-developed relocation plans for the financial sector and multinationals. This might have been something of a windfall for the EU27. Pre-Brexit, Britain would have defended its interests in these areas vigorously. Post-Brexit, the British government has seemed almost nonchalant at its loss of power.

    It’s likely to get more painful for the EU27 though, since it has already taken the low-hanging fruit. Repatriating more of its business interests from the UK is likely to involve some pain. For example, the wings for the Airbus – it will be pricey to recreate such facilities on the continent.

    So, there’s likely to be a final push by the EU27 to get the UK to sign up to something coherent, and to ensure that the fall-out from the Brexit vote creates as few ripples throughout the continent as possible.

    It seems likely that final push will fail. The EU27 will then be faced with high costs for its businesses which will be affected by Brexit. It will also need to pay for new borders. Both of these are likely to be expensive. Because of the high cost, I expect that implementing the plans will make Brexit irreversible. For example, the person in charge of the Calais port has, in the last week, pointed out that major infrastructure upgrades will be necessary:

    If the French start to upgrade their infrastructure for a post-Brexit system, they are unlikely to be at all impressed by Britain later changing its mind about Brexit. This angle – the food rotting by the side of the road, and the empty supermarket shelves – is one which might finally get through to UK newspapers.

    There was a sign of the EU27 aiming to mitigate the Brexit impact in Donald Tusk’s comment last week. Tusk said that talks would avoid the “particularly absurd” scenario of flights being disrupted post-Brexit.

    Tusk’s desire to avoid flight disruption might not be for the benefit of the UK, but more to retain access to Heathrow (a major air hub) for EU27 countries post-Brexit. It’s possible that the EU27 airports don’t have the capacity to maintain their current international routings otherwise, at least not within the timescales involved in a crash-out Brexit. So, this may be a situation in which giving the UK something it desperately needs (the ability to run international flights) also benefits the EU27.

    The other border/customs hotpoint is, of course, Northern Ireland. If Theresa May won’t sign up to a sea border between NI and the UK (NI effectively remains in EEA), and the Republic of Ireland won’t sign up to a sea border between themselves and the rest of the EU27 (RI effectively out of EEA), then there has to be a hard border between Northern Ireland and the Republic of Ireland.

    I suspect that all the EU27 would have to do – acting in concert with the Republic of Ireland – is to scope out where the border posts and customs controls will appear, and publish plans for how they could become militarised by Brexit day in March 2019. There may be violence at the border during this scoping exercise – attacks on the builders measuring up for border post construction, and so on. This raises the possibility that the EU27 could present to the United Nations Security Council, and ask for UN peacekeepers on the NI border. Maybe this would make UK heads explode.

    If the UK is serious about a crash-out Brexit, we could see the EU27 acting on the NI border by the summer. I suspect this would focus UK minds more quickly than anything else the EU27 can do.

    1. Darn

      m-ga, I’m a Remainer from Northern Ireland. Yet again I cannot believe why anyone takes the prospect of border violence seriously. While dissident republicans attempt lots of attacks, they are small, weak and unpopular groups. Border posts would be in heavy use by civilians, the dissidents could not attack them unless they wanted civilian casualties and to IMPEDE, not restore, trade between north and south. Why would they do that?

      Oglaigh na hEireann is the second largest group and went on ceasefire in January. Clearly they do not consider Brexit a promising target. Can you name anyone who has even made a threat?

      The whole thing is an attempt by the UK’s Remainers and the Republic’s politicians and commentators to keep the UK in the single market and customs union by acting like leaving should be unthinkable. Why, in the Republic’s case? Since talking up renewed violence is bad for the community relations they ostensibly are trying to preserve? To protect frictionless trade between the RoI and GB of course since that is such an important export market. But what if this brinkmanship means no deal in time and a hard Brexit? Automatic hard border! Not that this matters much to NI, since protecting our far larger trade with GB should take priority.

      1. m-ga

        I hope you’re right, and that we don’t see violence on the NI border.

        I’m not quite as optimistic as you though. The peace agreement is only 20 years old, and is very much based on EU membership as a glue which sticks together NI and the Republic. That you don’t see violence on the border at the moment could be more of a testament to the success of the peace agreement, rather than evidence of no need for a peace agreement anymore.

        This murder by paramilitaries took place on the British mainland last year:

        It’s the UDA in this case (so, Northern Ireland terrorists). This was less than two hours drive from where I live. The murder was brutal – in a supermarket car park, and witnessed by the victim’s young child.

        From this, it appears the paramilitary groups are still active. Perhaps they have branched out into organised crime, rather than political violence – the link I posted seems more like a gangland killing than anything else.

        Giving such groups an obvious target, such as a militarised border, would seem foolhardy to say the least.

        1. Darn

          Paramilitary groups are still active, yes, and the IRA still exists in particular. The last time devolution collapsed it was because IRA men killed 2 ppl in 2015. Did the peace process come to an end? Did more violence break out? No. By my count, dissident republicans have killed 2 policemen, 2 soldiers and 2 prison officers in the last 20 yrs, and something like 15 civilians, and loyalist terrorists have killed a similar number of civilians.

          The thing is, since the republicans have such great difficulty killing anyone in the security forces, what chance of killing a customs officer? Since you can protect a police station, you can protect a customs post, especially since the small and unpopular terrorists would be hurting their own cause when they harm innocent civilians who are using the place when they attack it. They could try at night, but you could man and protect it 24/7 then. Such attacks are not gonna force the UK back into the EU, or create a united Ireland instead, so why bother. There is no lack of “obvious targets” for them already. They lack ability and public support. Ed Moloney has been writing about the IRA for decades and thinks the whole thing is laughable.

          1. m-ga

            This is unconvincing based on your own arguments.

            For example, you describe what you seem to believe is an insignificant amount of sectarian violence (only in the tens), at a time when there is no obvious target (i.e. no border control) for that violence. You then draw the conclusion that there would be no escalation in violence when there are border controls.

            The link you post contains this equivocation:

            Sinn Fein, who have … staged mock Border crossings for the media with controls of such severity that they resemble nothing that I can remember from my student days of trips to Dublin when the EU consisted of just six countries in a common market.

            The author asks us to compare anecdotal recollection of the NI border from a time when a nascent EEC was just six countries, to how a border should have to work when the EU is a highly integrated bloc of 27 countries. Obviously, there will be big differences between the two scenarios. But the author implies there shouldn’t be much of a difference at all.

            Despite the bizarre conclusion drawn by the author, it’s clear that Sinn Fein are concerned about the possibility of a border. Perhaps it would be advisable to take their actions as an indicator that all will not be peaches and cream if a hard border is constructed in NI.

      2. m-ga

        I’d add that the Republic of Ireland’s strategy is to prefer alignment with the EU over the UK. The clearest indication is that the RoI aren’t considering a sea border with the EU.

        As such, the RoI have two border choices. Their preferred solution is very likely to be a sea border between NI and Britain. This is actually the current default – the RoI, through the EU27, negotiated a sea border between NI and Britain as the backstop. Britain agreed, but immediately backtracked, and has yet to sign.

        The only other border possibility is the old border between RoI and NI.

        It’s not so much that RoI are doing a “project fear” about border violence to push the Brits. It’s more that the RoI have already achieved their preferred solution (sea border between NI and Britain) and, via the EU27, are making it clear that Britain should sign as agreed in December.

        1. Darn

          Since the UK hasn’t signed a treaty yet, the backstop isn’t a backstop yet. Once Article 50 day arrives, there’s a hard border if no other deal is in place. More importantly it takes the UK out of the SM and CU which will maximise the immediate harm to the economies of GB, NI and RoI. So I’m sure this is still pushing, to try and ensure an EU-UK customs union, to protect RoI. The “project fear” thing didn’t begin in December of course. My fear is they will fail to get a deal through the Commons if the UK tries to get a new customs union but the EU won’t give them immigration control along with it, because the Tories will be divided.

          1. m-ga

            If the UK don’t sign up to the backstop in the next month or so, I think the EU27 will have to prepare for a hard land border with NI.

            If the EU27 don’t prepare for a hard land border, and talks with the UK breakdown to the extent that there neither the backstop of a sea border between NI and UK, nor is there a transition period, then the EU27 will have to create a hard land border with NI.

            The land border may be needed as soon as March 2019. That’s not a lot of time to set up a border. With RoI agreement, I expect the EU27 would have to begin work this summer.

            1. PlutoniumKun

              My understanding is that Varadkar issued an instruction to the Irish Customs authority not to do any work on constructing a border, presumably on the basis that this could be portrayed as evidence of bad faith in negotiations.

              Even with 12 months to organise, it will be almost impossible to get a functioning border working without closing off most minor roads, and closing off minor roads would trigger numerous protests among border communities. There would be no chance of recruiting and training so many customs officers in the time needed. There is very little slack in the Irish police and army to provide back-up. I would reckon that at least 5,000 extra customs/police/army/general security staff would be required to keep the major crossing points monitored 24/7.

              The border area is a nightmare for security. There are actually more road crossings there than on the entire EU road frontier from Finland to Greece. There are maybe 20-30 major roads requiring full time monitoring, and possibly 10 times that number of minor paved roads (some of which cross the border numerous times). And this doesn’t count non-public roads such as farm tracks and bog roads and minor harbours on lakes and the bays facing each other.

              1. m-ga

                Even scoping out a border would send major ripples through the UK mainstream media.

                Whatever the implications of a hard NI border actually are will be superseded by the memories of UK citizens (and, this will skew to the older, Brexit-favouring voters with longer memories) of the ill-effects of disputes over the NI border spilling out into terror attacks on the UK mainland. Thus, pictures of prospective NI border posts are likely to be picked up by the UK media (they won’t be able to resist), and could foment anti-Brexit feeling amongst otherwise pro-Brexit UK voters.

                If negotiations continue as at present, he EU27 will need to scope out the border anyway. There isn’t enough time for them not to. That the act of scoping out the NI border will force the UK government’s hand might make doing so doubly appealing.

                I say “might” because the act of creating an NI border should, ultimately, rest with the RoI. As an EU27 member, the RoI might (from just this NI border perspective – many other moving pieces!) be the player who makes or breaks Brexit.

      3. PlutoniumKun

        I’m afraid you don’t understand border communities if you think its not going to lead to violence. Its not about the IRA reviving. Border violence was always based on localised conflicts and as much about local intercommunal issues as dedicated terrorist activities. Most of the low level attacks during the troubles against small border posts were not carried out by the IRA but mostly locals angered at restrictions (or in some cases, the perceived lack of restrictions). The impact of closing off or restricting border crossings is going to cause an enormous amount of local economic stress – thousands of people cross every day, often multiple times, for work and business. There will certainly be protests, marches, sit ins, etc., and these have a habit of spilling over into nastier violence. It may not involve armalites and culvert bombs, but it has the potential to be very nasty. And it is entirely unnecessary.

  10. Darn

    Yves, why have you said the UK is “having another go” at border technology? The proposal is from the European Parliament, not the UK govt, and this is mentioned three times in the article itself. If this is a fairy tale, it’s the EP’s fairy tale. If the EP proposes it, why shouldn’t the UK at least look at the proposal?

    1. Yves Smith Post author

      I apologize. I should have stated my thinking more clearly, which would have taken more unpacking.

      The UK, refusing to make any concrete proposals on Ireland, even consistent with their napkin-doodle sketches of technological fixes that would mean a frictionless border, is now having Brussels put forward proposals to fill the void. This is what the UK should have been done per its Joint Agreement in December. The reason I still depict this as UK driven despite Brussels being the agent is that the border technology scheme was a UK idea, not a Brussels idea. This was their way of squaring the circle of having a border that would be not violate the Good Friday Agreement yet somehow magically be acceptable to the EU27 as far as goods and people movements were concerned (as in preventing smuggling of non-EU complaint products like the famed chlorinated chicken).

      So I read this as what we call in consulting a “forcing device”: you throw something out to get the other side to react, improve it, or put forward something different. In this case, I don’t think it’s hard to infer that this was the EU’s way of making it clear to the UK that a workable “technology” scheme could not deliver what the UK said it would.

      1. doily

        Well this “forcing device” is working on me anyway, and it is making my head hurt. I’m not sure I agree with Darn’s statement “Not that this [a hard border] matters much to NI, since protecting our far larger trade with GB should take priority.” In trade terms, NI/EU trade matters significantly, and matters to people in proportion to their proximity to the border and their connection to the agricultural economy, and they voted remain accordingly. I can’t find the reference, but there has also been discussion of the significance of the NI/UK trade that flows through Dublin, another unexamined Brexit headache.

        My point was been, business calculations aside, the removal of the hard border has been of deep, one might say existential, political significance. I agree that the prospect of the immediate resumption of paramilitary-organised attacks on new border infrastructure is unlikely, and invoking this as a threat is just uninformed drum-beating. In any case it may take a lot less than that to disrupt, dismantle, vandalise, and otherwise circumvent 200 “unmanned” border stations. As with the robot burger flipper discussion here a few days ago, the question is, who is going to do the checks when cameras are broken? And the less flippant question is: What political party in Ireland other than the DUP could possibly survive at the polls having participated in the reconstruction of the border? How could Varadkar’s party possibly contemplate throwing away its Dail seats in the border counties (and perhaps elsewhere) to Fianna Fail or, horror of horrors, Sinn Fein? This could be a complete misjudgement on my part, but it is not required to invoke the spectre of dissident Republican bombers to argue that rebuilding the Irish border is politically impossible in the next year or two.

        1. Darn

          doily, a land border, like a sea border, ‘matters’ to NI, but a land border doesn’t matter ‘much’, as I said. The vast majority of NI’s sales are to GB, with sales to RoI and rEU being the remainder. So do we want to inhibit most of our trade, or just a fraction of it? Yes, it matters to border dwellers, but far larger numbers would be affected by a sea border. Either border would affect the NI economy as a whole, meaning it will affect people regardless of where in NI they live. The 3 border counties only contain 20% of the population and most of them don’t deal with it directly in their daily lives. The question is how many ppl we want to hurt and how much. How about concentrating on persuading the DUP that Brexit is bad for the economy, bad for unionism in NI and in GB, and Article 50 should be revoked, if legally possible?

          Who is going to do the vandalising when it will hurt trade to some extent, waste taxpayers’ money, and make both parts of Ireland poorer? Who has threatened to do so?

          The DUP may be hurt at the polls over this, losing votes to the UUP, or losing seats due to higher nationalist turnout. As above, Varadkar’s problem isn’t simply border constituencies, it’s the Republic as a whole, because more difficult trade with NI or GB means a worse economy. The political impossibility doesn’t come into it — it’s politically mandatory if no deal is reached before Article 50 takes effect.

          1. doily

            Thank you Darn, but I would counter that a land border does matter much. “North/South trade has doubled since 1995 and evidence suggests that about 56 per cent of Northern Ireland’s goods and services exports go to the EU – with two-thirds of that heading across the Border” according to this consultant last year.


            I confess that calculating how many more people we hurt and by how much with a sea versus a land border is above my pay grade and I will not argue that point. I also understand that there is nothing in the GFA regarding one particular border arrangement versus another. But it was the GFA which produced the conditions under which the border became practically non-existent, and, I would suggest, produced the conditions which helped along the doubling of North/South trade in the last 20 years.

            A land border may be economically less bad for NI. (There are people who hope NI will be the next Monaco post Brexit, somehow in the catbird seat vis a vis the UK and the EU.) It will surely be very good for smugglers, who do not care about macroeconomics or the burden they place on the taxpayer, and are not anxious to announce their principled opposition to Brexit by threatening to topple some cameras. The only effective response to the inevitable black chlorinated chicken (or whatever) economy will be more border infrastructure. It does seem to me that enough of the players realise that the symbolic/political aspects of rebuilding that infrastructure trumps the economic considerations, and that going down that road could be deeply destabilizing. I could be wrong. The EU might show up to rebuild the border next spring and the locals will just accept this as the mandatory result of the Tories/DUP driving their country off a cliff.

          2. PlutoniumKun

            You need to look carefully at the structure of northern Ireland industry if you think what you are saying is true. The dairy industry, to take one vitally important example, operates on a cross-border basis. Under any form of brexit (even EEA/EFTA does not include agriculture), there must be a hard border for dairy. As most processing is on the republic side, this completely shuts NI farmers out – even exports to Britain will be difficult as the UK as a whole lacks processing capacity. Its pretty obvious that what is left of manufacturing, in particular Bombadier, is doomed if there are border controls. An Irish Sea border would be a minor irritation in comparison. Its the difference between an administrative hassle, and a complete blockage to trade.

      2. Darn

        Thanks for clarifying. The border has nothing whatsoever to do with the Good Friday Agreement, which the UK Supreme Court has ruled on, is obvious from the text of the GFA, and even the Republic’s acceptance of the referendum result and keenness to get the Article 50 process underway. The GFA requires cross-border bodies to set up covering agriculture etc but does not require any particular trading relationship or border arrangements between the two. Unfortunately the UK has encouraged this belief by talking about “no hard border” etc.

        1. Yves Smith Post author

          Ahem, you don’t get it.

          Any border that stops goods has to stop people because people can bring in goods (in cars, in trucks, on their person). The hard border with respect to people is a GFA issue.

          1. Darn

            It isn’t a GFA issue, the GFA doesn’t deal with free movement of people any more than it deals with free movement of goods. It does give a right to British and/or Irish citizenship. Since Irish Revenue gave parliamentary evidence that they could just check 6-8% of freight, I can’t see how they would need to check each human body. The more checks there are the greater the controversy, but the GFA is not violated.

            1. PlutoniumKun

              The British government has conceded in writing that the EU framework is central to the GFA (paragraph 47 of the joint agreement).

                1. Darn

                  I think you mean para 47 here. Central is your wording, and free movement of people is not mentioned.

                  “North-South cooperation relies to a significant extent on a common European Union legal and policy framework. Therefore, the United
                  Kingdom’s departure from the European Union gives rise to substantial challenges to the maintenance and development of North-South cooperation”

                  Sure, because the GFA allows cross-border bodies to implement EU law which is within their remit. When EU law’s gone from the North the work will change. That doesn’t contradict anything I said i.e. leaving the EU doesn’t violate the GFA and neither would ending free movement of people or goods in Ireland.

                  1. PlutoniumKun

                    You are grasping at straws. Article 49 means exactly what it says. The British government have accepted that the EU was a signatory to the GFA and existing EU structures are central to its implementation. There are no legal authorities who maintain the fiction that Brexit leaves the GFA untouched.

            2. Yves Smith Post author

              You really are being obtuse. There has to be a hard border between the Republic of Ireland the UK unless the UK does a massive retreat in its negotiating position. The DUP rejects a sea border and the Brexiters aren’t keen about it either.

              That means a land border.

              To implement a land border, you will wind up needing to check people and their vehicles. You can’t separate the trade issues from the GFA issues.

        2. Anonymous2

          The GFA requires agriculture policies to be on an all-island and cross-border basis. I think a lot of people would argue that precludes tariff or other barriers.

          1. Darn

            No it requires cross-border cooperation at ministerial level and for cross-border bodies to exist to implement it. (And didn’t even require agriculture to be chosen as a topic in the first place, it said it “may” be chosen.) The NI administration does not have responsibility for international trade or foreign policy, because those matters are not devolved, and the GFA does not require them to be. Therefore, under the GFA, the UK retains the right to leave the EU, set tariffs, etc etc, even while cross-border agricultural cooperation exists.

            Edit, see Strand One section 3 (p7 of this PDF), Strand Two section 1 (on p14) and annex on p16.

            1. Yves Smith Post author

              You continue to demonstrate that you really don’t get i.

              There won’t be “ministerial cooperation” when the UK is out of the EU. Or to put it another way, the UK would have to submit to EU agricultural regs and the adminisphere that goes with it, including the jurisdiction of the ECJ. Na ga happen.

              This discusses the fallacy of “mutual recognition” which is a related but unworkableeffort to finesse the way that things work now won’t work once the UK is out of the EU:


              1. Ape

                Darn is being legalistic but this is a question of politics going 2 or 5 years forward. Do the political realities depend on the EU context? Probably. The agreement’s legal ambiguities were written assuming that the EU and ecj could fix it all. And once the meeting of the minds break down all kinds of awful things could happen…

  11. Jim A.

    Certainly, the unholy combination of Remain and Leave camps in the Tory party are responsible for much of the political dysfunction on the UK side. But I wonder how much is due to the traditional “muddle on through” attitude that still permeates the British upper classes. At it’s root, it is the idea that good breeding and a public school education are more important that any sort of technical “expertise.”

      1. David

        Johnson isn’t the first talent-free zone in British politics, though his appointment illustrates the point I made above: if politics is not about anything, any more, then competence is no longer required, just a balance between factions. The British government machine used to be good at coping with people like Johnson, from all kinds of backgrounds, and having someone stand next to them to help them pronounce difficult words. That’s no longer the case. It’s fair enough to criticize “muddling through”, though that was and is an English trait, not restricted to the upper classes. But I don’t think muddling through is what we’re seeing here. Indeed, political ideology taken to self-defeating extremes has suddenly become a factor in British politics, and is resulting in the kind of paralysis of the system that would never have happened in the past.

  12. Roquentin

    I appreciate the informative posts on this topic. I live in the US and don’t really have a dog in this fight, but I’ve also always been curious about what leaving the EU would look like in practice. Back during the Greek crisis, there was a lot of talk about how a Grexit, even given the extreme exploitation of the country by the EU, would have been even worse. As someone with pretty hard left political views I always had a soft spot, whether they deserved it or not, for Syriza. I always wondered if leaving the EU really would have been the disaster it was portrayed as or not. At least with the Greeks the whole situation appeared to be a situation where the only choices were bad and worse, something forced upon them. With the UK it’s primarily a self-inflicted trauma, for better or worse.

    1. PlutoniumKun

      I think the Greek situation is very different. The most obvious issue that it was not membership of the EU (which is still enormously popular in Greece), but being part of the Euro. And as Yves, Clive, etc., here so clearly set out, switching to your own currency in a modern economy without many years advance preparation is a recipe to completely destroy your economy.

      Brexit is, if anything, even more technically complicated, because among other things, there are likely to be many unforeseen problems that will only emerge when the particular form of Brexit becomes apparent. Who knows what future court cases will throw up, leaving entire sectors in the economy in chaos.

      I think the political context for the Greek and UK crises are also very difficult. Greece is a country that should certainly never have been permitted to join the euro, its economy is far too weak. And its politically very corrupt, with an bureaucratic structure that is more third world than European. A lot of European politicians simply couldn’t hide their distain for the country. With the UK, its more like a difficult marriage that has finally gone too far and so a brutal divorce is seen as the only sensible solution.

  13. guurst

    Why not stand back and enjoy the view? So much stupidity- Oxenstierna anyone?- in one place truly is a sight to behold. May goes fully Jeltsin on her own people…..And please stop whining about the EU/ politicians/ Rupert/ the Pope/ whatever: incompetence does not absolve anyone from his sins in the eyes of the Lord.

    1. Yves Smith Post author

      I have been trying to take that attitude….on one level, this is fascinating as a protracted laboratory exercise in extreme institutional pathology. But there are going to be serious consequences for lots of hapless bystanders, and as is so often the case, people low on the food chain will suffer the most.

      1. guurst

        Yes, I am more than fully aware of the dire consequences for those who can least/ not at all afford it, and I sure grief for them. But if, despite all warnings/ exclamation signs/ rending of shirts, the governing class is hell bent on destruction and implosion… is their show and there is nothing left for me but to go back to the peanut gallery. Leonard Woolf once remarked on a life spent fighting the good cause, that seen the results he might as well have played pingpong for all those years.

    2. makedoanmend

      Amen to that

      After December I said a naughty phrase and completely detached.

      Whilst it is fruitful (if one has data coupled insight to how the major power brokers are thinking) to establish a framework for personal action, the decision making is being done by others and their decisions, however detrimental, will reverberate far beyond one’s own soundings.

      I have a back up plan in place but dare not yet tell my beloved spouse that we may need a back up to our back up plan involving a move to the European mainland.

  14. jabawocky

    A very useful post and thread.

    The EU’s main problem is that the UK government is interpreting these statements as negotiating ploys, rather than as list of things that are not up for negotiation (e.g. the integrity of the single market). Thus Theresa May is not grasping the full reality of the situation, stating only vaguely that she is in a negotiation, without a real understanding of what she is negotiating, what is not under negotiation and what the range of possible outcomes are. Of course there are only 4 options:

    1. Reverse brexit. (Ruled out by Theresa May in Lancaster House speech).

    2. Stay in single market and customs union (Ruled out by Theresa May in Lancaster House speech).

    3. Leave with Canada-style trade deal and transition period (Ruled out by December agreement and DUP concessions). Anyhow, EU demands above make even this politically-challenging for Theresa May to deliver (especially fisheries).

    4. Crash out brexit. (only possible with support of all Tories and DUP).

    How I think this will play out: well I’m no political guru, but my guess is that the EU still aim for 1 or 2, but will take 3 if they have to. However, the EU have underestimated the British side’s incompetence and capacity for self harm. Theresa May seems to think she can make the EU blink by threatening to throw the UK on her own sword, but the Greeks tried that and we all know how that ended up.

    All Tories are going to have to choose between throwing the Conservative Party under a bus, or throwing the UK under a bus. Much depends on how this choice goes and i hesitate to call it. And I don’t know when they will have to choose, but choose they will. The UK is a country that lost an empire, and that was in more competent times, as many have pointed out more eloquently than I can. So buckle up.

    1. Darn

      “Of course”, though? Option 4 happens automatically on the Article 50 deadline if no deal is reached. It doesn’t need a vote in Parliament. Buckle up indeed!

  15. Burke

    The obvious answer seems to be something no-one here is taking seriously: Brexit isn’t going to happen. By this I mean some sort of face-saving deal for continued single-market membership, i.e. Brexit in Name Only or BINO.

    Assuming no change of UK government, this would require politicians to face the fact they screwed up. This is very rare, but does sometimes happen. Most often after a defeat in war – but it also happened in 1992, when Norman Lamont went on TV to explain how despite everything he had said all day, they just quit the ERM.

    It would play out via a game of chicken between the govt and the markets. The EU position is that the only options are BINO or crash-out, and the markets are currently pricing in BINO. The UK govt are so paralyzed they won’t do anything except mumble nonsense for as long as possible. But as time goes by without anything happening, the possibility of crash-out starts to seem more real.

    Eventually a company will announce factory closures, there will be a flash crash, or something else that gets people’s attention. The media and public will start to realize the economic consequences of a crash-out, together with the fact that the only options are a crash-out or BINO. Maybe there will be a change of govt, maybe there won’t, but someone will go on TV to announce a form of BINO and say how this is consistent with the referendum result. No-one will believe them, but it won’t matter. Leavers will be mad as hell but will find someone to blame. Then everything will go back to how it was before, just with a bit less money.

    1. Yves Smith Post author

      There isn’t enough time. A deal needs to be done by October. All that is possible now is a minimalist clean exit deal and a transition.

      And I would love to you to enlighten me as to how you think this could happen. The only way to have BINO is for the Tories to back down on immigration to stay in the Single Market The only way to achieve BINO is not to leave the Single Market. There aren’t any finesses.

      This would be a massive reversal for the Tories, plus the hard Brexiters are not backing down. They aren’t phased by the idea that Brexit might make the country much worse off economically. Go read Ambrose Evans-Pritchard, or any long-standing Euroskeptic. They went on about yes, sacrifices might be necessary, but it was all for the Greater Good of Taking the UK Back From Evil Europeans. Plus they all think they will somehow manage to come out ahead, that well-placed Brits will, like Russians after the USSR fell, be able to amass fortunes from picking up distressed assets on the cheap. What they don’t recognize is foreign players will be even better positioned to loot the UK.

      A Brexit reversal operationally is way easier and also has more runway (up to the end of March) but you’d have to have a significant number of prominent pols pushing hard to legitimate it (and reduce the risk, being in a herd is always safer). The only prominent advocate of a second referendum is Tony Blair, and he said about ten days ago that the window was closing and there were only a couple of more weeks left.

      You take is just another form of denialism, “Oh, everything will be all right.” It won’t be.

      1. Burke

        You may be right this just wishful thinking, and unfortunately most of the other situations where you said that, you were right. (This is why Naked Capitalism is so valuable but also so painful.)

        Agreed that BINO would mean backing down on immigration, and that either BINO or full Brexit reversal would be a huge climbdown for May, most Tories, the leave media, and many leave voters. Also true that AEP, Peter North, and many other euroskeptic intellectuals now say the economic pain will be worth it. But I doubt most leave voters feel that way. The ones I know at least didn’t think the referendum was a huge deal either way, and wouldn’t think leaving is worth paying a major price for. (Maybe a biased sample living in London – but maybe not.)

        A way to game out how this ends is to consider what happens on the day the pound or UK stock market crashes. May will go on TV and say that no really, everything is going to be fine, but it won’t help. After a few more days of continued market crashing, reality will sink in that we are headed for a very deep recession. The only thing then left for her to say is the AEP line that the pain will be worth it. This won’t go over very well, and there will be a challenge to her leadership of the Tory party. What happens next is hard to predict: the person who makes the challenge usually doesn’t win and it could be anyone (e.g. Heseltine didn’t win after challenging Thatcher, this time perhaps Rudd will challenge?). But it seems unlikely the Sun newspaper will back Johnson or Gove (or they would have done last time), nor Mogg – they are all just too much of a joke. Marginal Tory MPs will realize that a huge and avoidable recession is not great for their re-election chances, and will back someone prepared to make a climbdown.

        Maybe wishful thinking.

        PS why do you say the end of March is the last possible time for Brexit reversal? Is there no possible fudge where a reversal happens even during the transition period? (Maybe call it a re-joining).

      2. fajensen

        The only prominent advocate of a second referendum is Tony Blair,

        The only way that could possibly happen is if Tony Blair suddenly comes out supporting a hard Brexit.

        That man is almost universally reviled in the UK, to such a degree that most voters would not even care about the issue. They would only care to inform themselves that because the proposal came from “Bliar” they must take the opposing position as strongly as possible.

        1. Yves Smith Post author

          Haha, someone should have whispered it in his ear! Better yet, he could have tried pretending he was BoJo’s, Gove’s and Rees-Mogg’s new best friend. But Blair needs to think he’s liked.

      3. vlade

        A deal referendum has a strong popular support (IIRC 48 for vs 30somethign against), even amongst leavers. That is, any deal agreed on by the UK govt would be put to a popular vote.

        Of course, even something like that would have to be started now, and if the question gets phrased “well” (for example “do you believe the UK should accept the EU deal?”), it may just force a no-deal crashout Brexit.

        Despite the popular support, both of the major parties refuse the referendum.

        1. Yves Smith Post author

          It’s too late. It takes six months of study before the referendum is voted on just to test the exact phrasing of the referendum. The LibDems proposed a super-tight referendum timetable…assuming the language had been approved….of 8 months. Can’t have referendums during the winter, subject to legal challenges as discriminating against places like Scotland. And it is Parliament which is sovereign, so you also need to allow for time (still a couple weeks minimum) for both houses to pass the bill implementing the referendum results.

          Even if you assume heroics and the testing of referendum language can be shortened to 4 months, you still have:

          Preliminary wrangling and votes: at least a month

          Finalizing language: 4 months. I think that includes the approvals (this is Clive’s terrain, maybe he can pipe up)

          8 months for process

          Another 2 weeks minimum for Parliamentary implementation.

          You are up past a year on an unimaginably fast timetable. Na ga happen.

          1. vlade

            I believe it could happen if it had a strong bi-party support, as a DEAL referendum (where the question would be along the lines “ratify the deal or not” – the main problem would be whether to include an option on what to do if the answer is do not ratify) could be potentially run as late as March next year (after the EP approved it, and even UK parliament may issue an advisor on the answer).

            Of course, with both parties being solidly against it, it’s not going to happen.

  16. Erling

    Whether merely just an convenient excuse to to remain mired in the bog the tories seem most happily decamped, May has from the outset repeatedly stated that she would be unwilling to “show her negotiating hand” so as not to yield what she fancifully perceives to be some mystical, strategic high ground in negotiations with the EU.

    I initially read that as more a pragmatic defensive tactic to keep parliament from getting involved in steering terms and trying to enact conditions, but that never really materialized. It is indeed true that the UK press has been scandalous in its passivity to the droning mantra of “no news is good news” coming from no. 10 (not to mention all the air time they gave to Farage pre-vote!), but Brexit has certainly turned out to be the ultimate hot (jacket) potato that no one in the UK wants to handle beyond a few seconds of posturing for Murdoch’s cameras to show the masses that they have not budged (or been pushed) to lift their Wellingtons out of the thickening morass.

    The stagnation/inertia present in UK politics is intractable. I love reading these great threads and the fantastic analysis provided herein, but as someone pointed out… this really is the “Groundhog Day” topic if there ever was one! Why is May willing to keep hold of this poisoned chalice any longer? The only reason she is still around is that no one else is vaguely interested in ousting her. I’d think that by now the horror of the inevitable scathing historical judgement would be enough to force her to make a move, any move … And stoking a bust up with Putin over nerve poison is not going to cut it.

  17. Penny

    The pieces of a puzzle are emerging which explains at least some of the Brexit mess in terms of interests of those close to the Tory inner circles. There is the recently reported donations to the Tory party since Mrs Mays election as PM from Russian expats, investors and general all around cultivated by various establishment right wingers (see the NYT story of 13/03 on the players in this drama). There is the impending EC/EU regulations which make ‘off shore’ more difficult for UK banks and banks operating in the UK; there are the defence department co-dependents (Fox comes to min) for whom ‘global britain’ implies selling arms anywhere and everywhere with no constraints placed by EU/EC or UN humanitarian contraints. And on it goes; for each of the 40 hard core Brexiteers one can find interests that are completely detached from any version one gives of the public interest. They expect to become rich because they are connected to those they think will become rich once there is complete freedom of action within the UK. Its not the death rattle of a dying class; it is a ruling class that finds its interest lie elsewhere.

    1. PlutoniumKun

      There is no doubt I think that the same shadowy network of libertarian right wingers who profited so much from Russia in the 1990’s and other disaster capitalism events are primary drivers behind Brexit. They’ve kept it stoked up for years through the media and think tanks – its the only explanation for why such a fairly small single issue political movement has managed to cause such havoc for so many decades – remember John Major devoted nearly all his energies as PM to keeping them at bay. They are extremists who see dismantling rules on trade, finance and social protection as a form of ideological purity – the fact that many can profit from this is the cherry on the pie for them.

      This is what makes me so angry to see supposed left wing progressives buy into so many of the same arguments – they are really just useful idiots to these sociopaths.

  18. Kk

    Hi M/s Smith, just a quote from today’s Telegraph(!) (Wednesday), “With that in mind, the UK was always going to make as many concessions as were necessary to get a transition deal over the line. As Front Bench never tires of pointing out, transition was only ever meant to be a technical and non-political measure.” Now how many times do you need to be told that, in the U.K. the screaming by the newspapers and the backbenchers is as real as the screaming in the House of Commons I.e. just for show. Brexit will not happen in any meaningful way. The U.K. is more tied economically, politically and socially to the rest of Europe than your southern states were to the north in 1860 – and they were not allowed to go were they?

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