Brexit Crunch: Is the EU Trying to Save the UK from Itself? Is That Even Possible?

The UK press is all over the map on the state of Brexit. That makes making sense of things even harder than usual.

At a minimum, it show that the EU’s thumping of May at last month’s Salzburg conference has led to an uptick in activity, as the EU27 leaders set an earlier deadline for the UK to serve up something realistic than the UK had previously thought it had (October versus November).

But it’s far from clear that all the thrashing around and messaging amounts to progress. As we’ll discuss, some press reports claim the EU is showing more flexibility, but the changes appear to be almost entirely cosmetic. If so, it would represent a cynical calculation that MPs are so illiterate about technical details that adept repackaging will get the dog to eat the dog food.

Another thing to keep in mind is that negotiators are always making progress until a deal is dead. The appearance of momentum can create actual momentum, or at least buy time. But here, time is running out, so the question is whether either side has made enough of a shift so as to allow for a breakthough.

One thing that may have happened, and again this is speculative, is that more key players in the EU are coming to realize that a crash out will inflict a lot of damage on the EU. A transition period is actually much more beneficial to the EU than the UK. It would not only allow the EU more time to prepare, but also enable it to better pick the UK clean of personnel and business activities that can move to the Continent in relatively short order.

By contrast (and not enough people in the UK appear to have worked this out), the UK will crash out with respect to the EU in either March 2019 or the end of December 2020. There’s no way the UK will have completed a trade deal with the EU by then, unless it accedes to every EU demand. Recall that the comparatively uncomplicated Canada trade agreement took seven years to negotiate and another year to obtain provisional approval. And Richard North points out another impediment to negotiations: “….the Commission has to be re-appointed next year and, after Brexit, it will not be fully in operation until the following November.” Now there are still some important advantages to securing a transition agreement, and they may be mainly political (who wants to be caught holding that bag?) but the differences may not be as significant for the EU as the UK. The UK will wind up having the dislocations somewhat spread out, first having to contend with falling out of all the trade deals with third countries that it now has through the EU in March 2019, and then losing its “single market” status with the EU at the end of 2020. But will the UK also be so preoccupied with trying to stitch up deals with the rest of the world that it loses its already not great focus on what to do with the EU?

That isn’t to say there won’t be meaningful benefits to the UK if it can conclude a Withdrawal Agreement with the EU and win a transition period. For instance, it has a dim hope of being able to get its border IT systems upgraded so as to handle much greater transaction volumes, a feat that seems pretty much unattainable by March 2019.

Two more cautionary note regarding these divergent news stories. The first is that we’ve seen this sort of thing before and generally, the optimistic reports have not panned out. However, they have generally ben from unnamed sources. While we do have a very thin BBC article with Jean-Claude Junkcer saying the odds of a deal had improved and Tusk making cautiously optimistic noises, Leo Vardarkar was more sober and the piece even admitted, “However, there is still no agreement on some issues, including how to avoid new checks on the Irish border.”

Second, they appear to be mainly about claimed progress or deadlocks on the trade front. Recall that Article 50 makes only a passing reference to “the future relationship,” which is only a non-binding political declaration. However, these issue seems to have assumed more importance than it should on the UK end, because it has become a forcing device for the coalition to settle on what sort of Brexit it wants….and it remains fundamentally divided, as demonstrated by last week’s Conservative Party conference. By contrast, there seems to be little news on the real sticking point, the Irish border.

So to the rumors:

The EU has offered the UK a “Canada plus plus plus” deal. Even if you take the Guardian story at face value, there is less there there than the breathless reactions in the UK would lead you to believe.

First, recall that “Canada plus plus plus” has long been derided by the EU as yet another way for the UK to try to cherry pick among the possible post-Brexit arrangements. Boris Johnson nevertheless talked it up as a preferred option to May’s too-soft Chequers scheme at the Tory conference….and May did not mention Chequers. Did EU pols take that to mean May had abandoned Chequers to appease the Ultras?

However, as we read things (and we need to watch our for our priors), Donald Tusk appears to be mouthing a pet UK expression to convey a different idea:

Tusk said the EU remained ready to offer the UK a “Canada-plus-plus-plus deal” – a far-reaching trade accord with extra agreements on security and foreign policy.

That reads as a Canada style free trade agreement plus additional pacts on non-trade matters. That is not what “Canada plus plus plus” signified on the UK side: it meant the UK getting a free trade deal with other (typically not specified) goodies so as to make it “special” and more important, reduce friction.

The Ultras were over the moon to have Tusk dignify Johnson’s blather, even as the very next paragraph of the Guardian story revealed the outtrade over what “Canada plus plus plus” stands for:

Boris Johnson and other hard Brexit Tories seized on Tusk’s remarks, arguing they showed it was time for May to immediately switch tack and abandon her Chequers proposals for remaining in a customs union for food and goods. “Tusk’s Canada-plus-plus-plus offer shows there is a superb way forward that can solve the Irish border problem and deliver a free-trade-based partnership that works well for both sides of the channel,” Johnson said.

If you managed to get further into the story, it sounded more cautionary notes:

Some Brexiters overlook that the EU’s version of a so-called Canada deal incorporates a guarantee to prevent a hard border on the island of Ireland, which would keep Northern Ireland in the EU customs union and single market. “Canada plus-plus-plus” is also a fuzzy concept that has no formal status in EU negotiating documents. Michel Barnier, the bloc’s chief negotiator, mentioned the idea in an interview with the Guardian and other papers last year.

“I don’t know what Canada-plus-plus-plus means, it is just a concept at this stage,” Varadkar said, adding that it did not negate the need for a “legally binding backstop” – a guarantee to avoid a hard border on the island of Ireland if there is no agreement on the future trading relationship.

EU to let UK super fudge on “future relationship.” Another Guardian story reported that the EU might let the UK sign an even less committal version of the “future relationship” section, allowing the UK to “evolve” [gah] its position during the transition period. Frankly, this seems to be allowing for a change in government. I don’t see this as that meaningful a concession, since this statement was never legally binding. However, given that Parliament must ratify the final agreement, formally registering that that section isn’t set in stone probably would facilitate passage as well as any future change in direction. And if you suspect this is a big dog whistle to Labour, you be right:

An EU source said: “The message to Labour is that the UK could move up Barnier’s stairs if the British government changes its position in the transition period. Voting in favour of the deal now would not be the last word on it.”

May whips Labour for Chequers. You thought May gave up on Chequers? Silly you! She just had the good sense to go into her famed submarine mode while Boris was having yet another turn in the limelight. From the Telegraph:

Ministers are in talks with as many as 25 Labour MPs to force through Theresa May’s Chequers Brexit deal risking open warfare with the party’s own MPs.

The Government’s whips’ office has spent recent months making contact with the MPs as a back-up option for when Theresa May’s Brexit deal is put to a vote in Parliament in early December, The Daily Telegraph has been told.

News of the wooing operation has infuriated Eurosceptic Tory MPs who are now threatening to vote against elements of the Budget and other “money bills” to force Mrs May to drop her Chequers plan.

If true, this is very high stakes poker. Brexit Central says there are 34 Tory MPs who have already declared they will oppose any “deal based on Chequers”. And, to change metaphors, they appear ready to go nuclear if they have to. From the Times:

Brexiteers have issued a last-ditch threat to vote down the budget and destroy the government unless Theresa May takes a tougher line with Brussels — amid signs that she is on course to secure a deal with the European Union.

Leading members of the hardline European Research Group (ERG) last night vowed to vote down government legislation after it was claimed the prime minister will use Labour MPs to push her plan through the Commons.

I turned to Richard North’s site after I had pretty much finished this post, and he finds the Telegraph story as peculiar as I do:

Reporting of the key issue of our times gets more bizarre by the day. The latest contribution to the cacophony is the Telegraph, telling us that Ministers are in talks with as many as 25 Labour MPs “to force through Theresa May’s Chequers Brexit deal”.

That approaches are being made to Labour MPs is not news, but the idea that attempts to sell them the Chequers deal confounds recent indications that the prime minister is preparing to roll out “Chequers II”, with enough concessions to all the Commission to conclude a withdrawal agreement.

If we are looking at such a new deal, then it cannot be the case that anyone is attempting to convince Labour MPs of the merits of the old deal. And, even if Ministers succeeded in such a task, it would be to no avail. Chequers, as such, will never come to parliament for approval because it will never form the basis of a deal that can be accepted by Brussels.

That should consign the Telegraph story to the dustbin now piled high with incoherent speculation, joining the steady flow of reports which are struggling – and failing – to bring sense to Brexit.

EU to announce “minimalist” no-deal emergency plans. Interestingly, the Financial Times has not had any articles in the last few days on the state of UK/EU negotiations. It instead depicted the EU as about to turn up the heat on the UK by publishing a set of “no deal” damage containment plans. I’ve never understood the line of thought, which seems to be taken seriously on both sides of the table, that acting like a responsible government and preparing for a worst-case scenario was somehow an underhanded negotiation ploy.1 The pink paper nevertheless pushes that notion:

Brussels is planning to rattle the UK by unveiling tough contingency measures for a no-deal Brexit that could force flight cancellations and leave exporters facing massive disruption if Britain departs the EU without an exit agreement in March.

Subtext: it’s the EU’s fault all those bad things could happen….when it is the UK that is suing for divorce. Back to the story:

Against expectations in London, the plan is likely to encompass a limited number of initiatives over a maximum of eight months, diplomats who have seen the document told the Financial Times.

Notably, the EU is not planning special arrangements for customs or road transport and only limited provisions for financial services — a decision that, if seen through, would cause long queues and operational difficulties at ports and airports.

The minimalist emergency plan, designed to be rolled out should there be no breakthrough in Brexit talks, would increase the pressure over already fraught negotiations between the UK and the EU ahead of a summit on 17 October. EU plans would then be firmed up by December….

The commission has thus far resisted outlining details of its plans for a no-deal Brexit for fear it would disrupt tense negotiations. But with just six months to go before Brexit, EU member states have pressed Brussels to speed up its preparations in case no deal is agreed in time.

Brussels will outline general principles for deciding the fields requiring special measures, which must only mitigate significant disruptions in areas of “vital union interest”. The measures would be applied by the EU until the end of 2019 on a unilateral basis. They could be revoked with no notice, according to diplomats.

The plans are intended to enable basic air services, allowing flights to land and fly straight back to the UK, and to extend air safety certificates and security exemptions for UK travellers in transit. Visa-free travel is envisaged for British citizens, as long as it is reciprocated…

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The commission has thus far resisted outlining details of its plans for a no-deal Brexit for fear it would disrupt tense negotiations. But with just six months to go before Brexit, EU member states have pressed Brussels to speed up its preparations in case no deal is agreed in time.

Brussels will outline general principles for deciding the fields requiring special measures, which must only mitigate significant disruptions in areas of “vital union interest”. The measures would be applied by the EU until the end of 2019 on a unilateral basis. They could be revoked with no notice, according to diplomats.

The plans are intended to enable basic air services, allowing flights to land and fly straight back to the UK, and to extend air safety certificates and security exemptions for UK travellers in transit. Visa-free travel is envisaged for British citizens, as long as it is reciprocated.

And then we have the stories that are head-scratchers. The Sun reports that Barnier says a deal is nigh….based on:

Hopes of progress have been fuelled by expectations that Theresa May has come forward with a compromise solution to the Irish border.

The PM will propose keeping the whole of the UK in a customs union as a final fallback but allowing Northern Ireland to stick to EU regulations.

The EU has rejected having the UK collect EU customs post Brexit. Moreover, a customs union, as we’ve said repeatedly, does not give the UK its keenly-sounght frictionless trade. Making Northern Ireland subject to EU regulations means accepting the jurisdiction of the ECJ, since compliance is not a matter of having a dusty rule book, but of being part of the same regulatory apparatus. Aside from the fact that this solution won’t be acceptable to the DUP, it would also result in a hard land border between the Republic of Ireland and Northern Ireland. So are we to take this as incomprehension on the part of the Sun’s reporters, or that the Government’s negotiators continue to be as thick as a brick? Sadly, the Guardian tells a similar tale:

Ministers expect to discuss Brexit in a week’s time when some hope that officials will have clarified how the UK proposes to handle cross-border regulatory checks if no progress is made on agreeing a free trade deal with the EU.

There has been speculation that this solution could involve the whole of the UK agreeing to be part of a common customs area with the EU in order to avoid the possibility of an invisible border separating Northern Ireland from Great Britain, in the event that no long-term deal is signed.

Richard North has the best take. He points the rumors from the UK side come from people who present themselves as being on the inside but probably aren’t, or not enough to have a good feel, and continues:

Yet nothing seems to be leaking from No.10, with officials saying merely that proposals would emerge “soon”. Says the Guardian, these are likely to form the basis of technical negotiations with Brussels “as officials scramble to find a form of words for the withdrawal agreement that the UK proposes to sign with the EU”.

Any such timing will, of necessity, rule out any formal consideration by the October European Council. Those who understand the detail will know that, before anything can be considered by the European Council, it must first be agreed by the General Affairs Council, meeting as 27.

Currently, this is scheduled for 16 October (Tuesday week) – a day before the Article 50 European Council which starts its two-day session on the 17th. On the face of it, there doesn’t seem to be enough time to factor in any last-minute proposals from London, especially as details must first be circulated to Member State capitals for comment.

This does nothing, though, but confirm that which we already know – that if there is to be a final showdown, then it is going to come at the special meeting in November (if this actually happens), or even the meeting scheduled for 13-14 December.

Even the rumor mills don’t give much reason to think there is a solution to the Irish border. If May really hasn’t abandoned Chequers, all the fudging to come up with a content-free “future relationship” section will be to the detriment of UK citizens, since the Government will keep holding on to a Brexit plan that the EU will never accept. But the best interests of ordinary people have gotten short shrift all along.


1 Then again, the hard core Brexiters regularly squeal that realistic talke

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  1. vlade

    “MPs are so illiterate about technical details” This is almost certainly true, so a good assumption.

  2. PlutoniumKun

    I think its a good call to say that the ‘leaks’ are coming from non-insiders, thats the most likely explanation for how incoherent they seem to be. Its not helped of course by people like Junkers coming out with seemingly fairly random statements, but he seems a bit of an attention junkie, even by politician standards.

    One of my many incorrect calls on this was that when the vote first happened, that the core European countries would immediately go into mercantilist mode, and go all out to attract business from the UK without bothering to concern themselves with British feelings. It seems that the belief that some sort of a deal, generally favourable to the EU, would be made prevented that.

    But certainly Macron is doing this now – he has hosted the CEO’s of all the major car companies, blatently marketing France as a destination, and no doubt a lot more of this is going on behind the scenes. I expect this is driven by the conclusion that there is no hope of a reversal or a ‘soft’ agreement. But I would also guess that there is a calculation that Europe needs the extra 18 months of a transition period in order to get the best out of this. Many UK based companies may simply opt to sit out the chaos and see what happens, rather than go for the enormous expense of a panicked last minute move. So this may be the driver behind the EU seemingly willing to offer an olive branch in order to get a fudged agreement through to allow the transition period to go forward. They would of course know that this would not change anything fundamentally about Brexit.

    But as we’ve repeatedly seen, one of the main obstacles in getting any sort of agreement is the technical illiteracy of so many of the key players. Its hard to agree with people who simply don’t understand the topic they are dealing with.

    1. Fazal Majid

      The auto companies will just scale down production for the UK market alone, along with whatever production capacity was used for non-EU exports. It’s not clear what May promised Ghosn, but I’m sure Nissan’s made contingency plans for the UK Government reneging (e.g. if May is pushed out) and they’ve probably started executing on the parts that are not too costly or disruptive.

    2. Ignacio

      This weekend I had a conversation with a Briton married with a Spanish cousin of mine, both living in Madrid. He was surprised to find someone with some knowledge on brexit– me– given that there is minimal coverage in Spain. I was thinking to myself god bless NC. He was:
      1) Confident that there would be some kind of late agreement. His main source of optimism were some positive remarks from Barnier.
      2) He was fed up with Macron and his increasingly mercantilistic approach.
      When I talked about disagreements inside the tory party and the DUP about the irish border he looked worried and could not rebate my worries that a deal was unlikely. Anyway I enjoyed the conversation with someone worried and with knowledge and interest on the issue.

      By the way, I concur with you on Junkers behaviour and motives. This guy should quit ASAP.

  3. Richard

    I think the EU also want to be seen to be making a sustained renewed effort to get a deal such that if the talks do eventually break down it will be harder for the UK to paint the EU as the bad guys. PR at this stage is very important!

  4. David

    Even allowing for the chaotic and uninformed way in which the UK media report these issues, I’m inclined to think that the different stories I’ve read about what the EU might do actually reflects an increasing actual incoherence in Brussels and in major national capitals.
    I don’t mean by that that EU unity is coming apart: it’s much more complicated than that. For as long as there seemed to be a chance of the UK developing a coherent position which it could then discuss with Barnier to organise a coherent withdrawal, most nations simply didn’t see Brexit as a major policy issue. Even the never-ending crisis in London was covered in Europe more as light relief than anything else. The problem is that, as some of us have been saying for months now, negotiations are effectively over, and any outcome is likely to be negative, not just for the UK but for others states as well. The latter point is one that most EU states have only just begun to grasp, and the key point is that a disorderly exit of any kind will affect different EU states in different ways.
    Multilateral negotiations in teams are always very problematic, but they can be made to work, in my experience, so long as there is a common interest (or at least an overlap) between the members of the tram; That was broadly true in the past but not necessarily so true now. As the real crisis approaches, the 27 are likely to find that their interests on certain questions are no longer aligned, but may even be opposed to each other. I suspect a bit of selective leaking and launching of trial balloons may even have started.
    I wouldn’t read too much into Macrons’s attempts to lure car manufactures to France. No doubt it’s part of the game, but It’s very much of a piece with his economic policy (inasmuch as he has one) over the last eighteen months, to try to bring Anglo-Saxon businesses to France by getting rid of tiresome things like employment regulations. He’s in a big hole politically at the moment, and needs all the help he can get.

  5. Anonymous2

    Thank you. Sensible analysis as usual.

    There are obviously two possible paths on the decision tree for Mrs May: agree a deal with the EU and try to get it through the UK system; or no-deal. The latter justifies no great commentary from me at present. It will be painful for a lot of people and could cause the next world crash.

    The big unknown IMO is how the Commons will vote on any deal, if one is agreed, once matters become absolutely critical and if they are given the chance. Will enough of the ultras and DUP be cowed by the prospect of a ‘crash-out’ or a general election leading to a Labour Government to back a May/EU agreement once the decisive moment comes? Will enough MPs from other parties decide to back what May comes back with (or at least abstain) if the alternative is to have a degree of responsibility for a ‘crash-out’? I do not think they will myself, as I think many want a General Election. But I am no prophet.

    I would not rule out May trying for another election as a last desperate throw of the dice. A lot of people think she only has a few more months in office as matters stand. If you are facing the firing squad shortly, why not make a dash for it and run the risk of a slightly earlier death if there is a glimmer of hope associated?

    The goal would be to obtain more seats in the Commons in order to force something through or pass the poisoned chalice to Corbyn. The danger of course is that she achieves neither, as last year.

    May you live in interesting times.

    1. vlade

      See, the outcome where the deal is voted down, May’s government crashes, and Corbyn gets elected, is the best outcome for Johnson, as he then can do what he does best – sniping lying journalism. That would very likely (together with “My plan would have worked!”) get him to be the Tory leader.

      It still might not get him to be the next PM after Corbyn, if Brexit proves to be as much of a change in the British politcs as I think

  6. JoeMac

    The problem with May’s letter to Ghosn is that he is an employee of the French State. It is reasonable to assume that the only people not to know the contents of the letter are the poor benighted Brits.

  7. Newton Finn

    Bill Mitchell and Tom Fazi, in “Reclaiming the State,” offer some crucial Brexit advice from the standpoint of MMT. “The mainstream viewpoint commonly associates the prospect of a unilateral exit…with predictions of devastation, catastrophe, hyperinflation, financial market lockout, etc.” Yet, “it is highly likely that the benefits of exit would outweigh the costs, if the exit decision is simultaneously accompanied by a decision to reject the current flawed neoliberal approach in favour of a fiscally active policy stance that seeks to maximise the well-being of the citizenry. If the exiting government refuses to free itself of the various self-imposed external constraints characteristic of neoliberal regimes and continues on the path of austerity, privatization and wage restraint, then the exit is likely to be even more costly than continued euro membership. If, on the other hand, the government chooses to use its regained currency and fiscal sovereignty to bring idle resources (including the unemployed) back into productive use–while at the same time re-establishing a degree of control over capital, trade and labour flows as well as over the national financial sector and other key sectors of the economy–full employment and economic growth could be achieved relatively swiftly….” Wise words IMHO, but is anyone listening?

    1. Paul O

      I don’t think many are listening, sadly.

      I bought this book some time ago but have not had time to get to it yet.

    2. larry

      Given the incredible incompetence accompanying this process, It is likely that the costs may well outweigh any benefits.

    3. Yves Smith Post author

      The UK has no interest in a “fiscally active state”. It would have implemented neoliberal policies on its own had it not been in the EU. And with a post-Brexit sterling crisis (very likely in a crash out), Mr. Market would see more spending as inflationary and push the currency lower.

    4. Grebo

      The Tories are even more extreme Neoliberals than most of the EU. The Blairites are only slightly more moderate. Corbyn and McDonnell lean in the right direction but show little evidence of any deep understanding of Neoliberalism or MMT. Someone should strap them to a chair and read Reclaiming the State and Blyth’s Austerity to them.

      So as things stand a negative outcome is by far the most likely.

      1. Colonel Smithers

        Thank you, Grebo.

        Speaking of Blairites, Chris Leslie was in the City yesterday lunchtime. He was walking by HSBC’s former HQ, Vintners’ Place. The building is now occupied by Northern & Shell. N&S is a strange beast. It publishes downmarket stuff like the Daily Express, the middle brow / market Jewish Chronicle and august material like Asian Babes, Men Only and Readers’ Wives. One wonders if Leslie fears not being selected to fight the next general election and is looking for a job.

    5. fajensen

      If the exiting government refuses to free itself of the various self-imposed external constraints characteristic of neoliberal regimes and continues on the path of austerity, privatization and wage restraint,

      Yes, but, These are policies that could be implemented far, far easier within the calm waters of the EU should the will be there in the first place, which it is absolutely not. In practice it is probably not so very easily to radically change an entrenched policy stance while cleaning up the various messes left after Brexit and being simultaneously and unceremoniously strapped over a barrel by the US negotiators on the “Free Trade Deals”.

      My bet is that after Brexit, the UK regime intends to slam the PKI-needles on privatisation, wage suppression and austerity right into the rails while blaming Europe for Everything, using a war-like rhetoric.

    6. vlade

      Mitchell should probably do some travel.

      Then he could find that UK still has sterling, and BoE hands in the EU were not tied anymore than it will be when it will be out, in regards of supporting private currency issuance (aka loans). It aint’ Greece. Mitchell very often (I’d like to know whether intentionally or not) confuses EU with the EURozone. They are not the same, by a long shot.

      Even the famous “must adopt EUR” is really, if you bother to read the relevant EU law, “must adopt EUR, but only if you feel ready”. I.e. a timetable of “never” works just as well – there’s no practical lever to force it, the country TELLS the EU when it wants to adopt EUR, not the other way around. This has been practically shown by Visegrad 4, of which only one (Slovakia) adopted EUR – and that adoption arguably makes sense, since it’s for all economic terms and purposes an outpost of German and French car manufacturers (guess the country manufacturing most cars per capita?), so lashing itself to a mast a bit more makes sense.

      Mitchell also repeatedly shown he does not understand practicalities of international trade. His approach to it is, to use Yves’s phrase, ‘assume can opener’.

      1. larry

        Vlade, could you supply a link the the legal euro passage you have in mind? Thanks.

        To be fair to Bill, he does travel a lot. While he does tend, unfortunately, to juxapose the EU and the Euro, he is aware that ‘EU’ and ‘Euro’ are not coterminous. One could completely agree with his criticisms of the EU elite and their machinations but come to opposite conclusions about Brexit. Indeed, one could view the UK elite as worse in a number of respects than the EU elite. For instance, just as there is a bully mentality operating in the EU approach to Greece, bullying by the UK elite could be said to be just as bad if not worse. Look what they are doing to the disabled and other vulnerable members of society. And the neoliberal crapification in the UK could also be said to be worse than that implemented by the EU, except possibly in the case of Greece. Would the Commission do to Germany or France or the Netherlands what they have been doing to Greece? There are many reasons to think, No.

        1. larry

          I perhaps should add that Bill may be comparing what happened in Australia when the UK dumped Australia when it entered the EEC to the present. I am doubtful that what happened to Australia in the 1970s and its ability to recuperate is comparable to the current situation. One difference between the UK and Australia is that the UK has few natural resources. For instance, steel is involved in most industrial processes, even, say, in processing wood, and Australia is rich in iron ore. The UK is not. Couple this with the egregious incompetence of the government — I am not certain that Labour would necessarily be a lot better, and you do not have a recipe for a happy outcome. In addition, manufacturing procedures have changed to just in time processes. Could adjustment be made to disruptions in this? I am not sure, but I doubt it given the government’s neoliberal attitudes.

          1. vlade

            It took more than decade for NZ (which had the same experience) to recover. And, as you say, they had export industry, if one where it was harder to adjust that Oz (dirt is a dirt, easier to export than butter and meat).

            ChrisPacific may comment more on what impact it had on NZ.

            Yves says, and I fully agree, that to deal with this in the UK would require war-like planning for the economy. That’s not obvious anywhere, for any of the political parties in the UK.

        2. vlade

          off the top of my head

          “The Treaty does not specify a particular timetable for joining the euro area, but leaves it to Member States to develop their own strategies for meeting the condition for euro adoption. ”

          If you then dig into convergence criteria, the main thing that allows a no-timescale opt out is that of the criteria is participation in ERMII – which is only on request of the new state. No request, no membership, no EUR.

          The other out is a legislation on legal compatibility, which again is not in the EU’s gift to enforce.

          TBH, what also gets my goat with him is that his hatred for EU makes him one of the “enemy of my enemy is my friend” brigade, giving your new “friends” a free pass.

          As you say, and as anyone who had looked at the UK politics recently would well know, the UK elite is worse than the EU elite (and I have no love lost there. I voted Remain – but I’m on record even here on NC that my reason for voting Remain was solely because the UK pols would screw up the leaving, and they are even worse than I thought possible). So, as bad as it sounds, EU was likely a positive for the UK by restraining the pols – which they are very quick to dump to achieve the free-for-us-not-for-thee-market paradise.

          And to understand that doesn’t take practical experience with international trade, which Bill is clearly missing but is happy to opine on.

          1. PlutoniumKun

            I agree with this – Mitchell was actually speaking last week in Dublin, I managed to miss it by getting the time of the event wrong.

            I like his blog and find his explanations on MMT invaluable. But he really does consistently misinterpret the workings of the EU/Eurozone. His arguments in favour consist of lots of ‘ifs’, i.e. ‘if’ the UK had a proper government and wasn’t entirely dominated by neoliberals… He seems blind to the reality that the UK was in fact one of the primary drivers behind the neoliberal direction of the EU, so the notion that somehow they are ‘freeing’ themselves from it is simply ridiculous. Plenty of progressives within the EU are relieved that the UK is gone for precisely this reason.

            1. fajensen

              Plenty of progressives within the EU are relieved that the UK is gone for precisely this reason.


              The show put on by the British over Brexit has also tempered most of the anti-EU agit-prop spewing politicians in Denmark; It is dawning on the people that:

              1) The Danish politicians would make an equal mess of the exit,
              2) It is probably a good thing that Bruxelles puts the brakes on and compensates for the worst of their gross stupidity, incompetence, looting and sloth,
              3) Many policies that the politicians cannot sell locally, they will instead push via Bruxelles, then turn around and blame the EU for the outcome.
              4) Most people don’t want to be locked up inside the same country as the anti-EU’er’s – since many are considered to be nutters and one just don’t know what they will do in the longer run once “unchained”.

              1. Ignacio

                3) Many policies that the politicians cannot sell locally, they will instead push via Bruxelles, then turn around and blame the EU for the outcome.

                That is true. But the opposite is true as well:
                5) Many policies that your home politicians wouldn’t take because they disrupt their peace on earth –for instance related with environmental protections– come and are assumed as if they were their own ideas so they can show off how progressive they are when needed.

                1. vlade

                  I’d much prefer to be ruled from Brussels than from Westminster, especially if we dropped the Westminster.

                  Keep Brussels and local-level (just give the ones in the UK comparable powers that a lot of continentals have, and no, you don’t need council taxes for that – there are countries which for example allocate part of the income/business tax to the local council based on residency).

                  Now that would be turkeys for Xmas vote.

        3. PlutoniumKun

          The original requirement was in the Maastricht Treaty, although I can’t find right now the exact wording.

          But (quite deliberately I believe) the Treaty never set out any obligation on States to achieve the convergence criteria required, by implication making it a non-binding requirement. Sweden, for example, does not have the opt out that Denmark and the UK negotiated, but simply never joined the ERM (Exchange Rate Mechanism), ensuring that it never fulfils the criteria.

  8. Quentin

    I’m of a conspiracy bent. The UK and the EU have an eventual, acceptable deal in mind. Now they’re only attacking each other from their most extreme poles with the final compromise ensuring they remain within predetermined limits of nastiness. In short, the information we get in the media is manipulated, incomplete, maybe even false. The whole charade reeks of the political mentality of the Russia hysteria. I can’t believe that the whole circus is anything more than a ruse for us proles. Has anyone heard in the mean time where the Skripals are?

    1. orange cats

      Now that you mention it I’m surprised this possibility hasn’t been considered before. The stakes in a crash out are actually the highest for the elites, not the working class– the people who voted Brexit and are suffering the most from the status quo. Not that the working classes, the left behinds, won’t suffer in a crash out, but the pain of Brussels and the City of London is more important. Conspiracy isn’t really necessary. There is an instinctive alliance of the well-to-do and the powerful.

      1. Yves Smith Post author

        Many of the elites think a hard Brexi and even a crash out are better than a deal. You need to read Brexit Central occasionally. My guess is some think they can become oligarchs in a plutocratic land grab, just like in Russia when the USSR fell. Others are wannabes and genuinely believe the UK can become a sort of Singapore or Hong Kong, and they’ll profit from that. In the Three Blokes video (one hour detailed discussion of some of the ways Brexit would be a train wreck), one said he and his firm would profit and explained why.

        The City of London will lose, but the individual banks can relocate activities to Dublin or the Continent or even the US. As multinationals, they and their executives have no loyalty to any country. There are individuals who will lose out because they can’t or won’t move if their job moves out of the UK.

        The UK press was full on for at least the first year after Brexit about how great it was, to the degree that any pol or sensible person who raised concerns about Brexit risked being pilloried.

        There are also. as Clive described long form based on conversations with his mother and having to go to some parties with heavy Conservative membership, that there are tons of people who are Small Englanders who are very much in favor of recovering a romanticized past. and others who genuinely believe all this talk of Brexit costs is false or at best wildly exaggerated. The UK can and will muddle through, and people who say otherwise aren’t very clever.

            1. vlade

              Fortunately, pretty much no-one in the EU has an army in workable state (i.e. being able to conduct more than a “policing operation”).

  9. Tom

    But the best interests of ordinary people have gotten short shrift all along.

    Not long ago you posted the doco The Spider’s Web: Britain’s Second Empire. May, Johnson, Gove, Campbell etc. are all members of the class whose interests will be protected no matter what.

    The power elite can always profit from a crisis. It wouldn’t be the first time that a crisis was created for that purpose.

  10. paul

    Meanwhile the bastards are quietly getting on with locking down Scotland.

    A bunch of clapped out hacks in the House of Lords are fronting a rewrite of the treaty of the union:

    “We have watched this saga with an increasing concern shared by many others who value the United Kingdom. It is a concern with a renewed sense of urgency since last week when Nicola Sturgeon talked of including the promise of another Scottish referendum in the SNP’s 2016 manifesto. We and others have therefore come together as the Constitution Reform Group to argue for a new Act of Union. We are retired cabinet ministers, practising politicians, former parliamentary officials and civil servants, lawyers, journalists and academics.”

    A New Act of Unionism Will Be Forced On You Tomorrow (9th October 2018)…

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