Our mini-fundraiser for Water Cooler is on! As of this hour, 157 donors — our goal is 275 –have already invested to support Water Cooler, which provides both economic and political coverage, to help us all keep our footing in today’s torrent of propaganda and sheer bullsh*t. Independent funding is key to having an independent editorial point of view. Please join us and participate via Lambert’s Water Cooler Tip Jar, which shows how to give via check, credit card, debit card, PayPal, or even the US mail. To give more, click on the arrow heads to the right of the amount. Thanks to all!
The Telegraph and other Brexit loyalists are up in arms over what should have come as no surprise: the EU has finally cleared its throat and told the UK that its fuzzy-headed ideas for a frictionless border between the Republic of Ireland and Northern Ireland were unworkable. As we’ve said repeatedly, the UK leaving the Single Market meant there would be a hard border somewhere.1 The least disruptive option is the one that the EU has cleverly called a backstop and has fleshed out, that of a sea border. As UK readers know well, that is anathema to the DUP and quite a few Tories, since it will mean for practical purposes that Northern Ireland is more a member of the EU than the UK. Oopsie!
According to the Telegraph, the UK’s two clearly unworkable ideas, which it had tried to make seem viable, were slapped down hard by the EU. It’s hard to tell how seriously to take this, since the Government desperately needs to shift blame for having conned itself and the electorate into thinking there was an viable way to have a land border without causing any hassle to people on either side.
However, a legitimate reason for the ire is that the EU quite deliberately strung the UK along. Recall that the Ireland border matter was earlier on a short list of three items that the EU had singled out as required to be resolved early, before other matters like the transition deal could be addressed. Then when Theresa May was looking particularly wobbly in December and the UK press was talking up the cretin Rees Mogg as a possible PM, Barnier allowed the Government to negotiate the flabby and often internally inconsistent “Joint Agreement” that was a short-term punt on Ireland and sketched out some options on the border matter. May was hailed in the UK press as having achieved some sort of great negotiating win when nothing of the sort had happened.
Since then, the EU has been fleshing out a “backstop,” which is basically the sea border option, with the argument being that there had to be an approach in place in case the UK could not deliver. The Government’s allies kept making incensed noises about this EU move, as if it were underhanded. In fact, given the difficulty the UK has had from the get go in producing position papers or indeed any documents worked out in adequate detail, while the EU move may have seemed insulting, the UK’s shambolic behavior called for it.
But one could argue that the EU indulging the UK on Ireland and finally pulling the rug out from under them now, particularly right after the House of Lords has broken ranks and made clear it want a soft Brexit, was conniving. But the UK has been so consistently unwilling to hear what the EU has had to say about its red lines, such as “No cherry picking,” that the EU was going to have to be brutal for the message to sink in. And as the Torygraph presents it, the EU was pretty rough, erm, blunt. But the unnamed EU leaker also displays an unseemly amount of schadenfreude at the shellacking of the UK’s wooly-headed ideas. This is awfully reminiscent of the unflattering leaks from dinners between Jean-Claude Juncker and Theresa May. Is Martin Selmayr at it again?
From the Telegraph’s exclusive story:
Senior EU diplomatic sources said that Mrs May’s plan for avoiding a hard border in Northern Ireland was subjected to a “systematic and forensic annihilation” this week at a meeting between senior EU officials and Olly Robbins, the UK’s lead Brexit negotiator.
“It was a detailed and forensic rebuttal,” added the source who was directly briefed on the meeting in Brussels on Wednesday. “It was made clear that none of the UK’s customs options will work. None of them.”
The demolition of the UK’s Brexit customs policy, set out by Mrs May in her Mansion House speech last month, came after five rounds of technical negotiations in Brussels…..
Although British negotiators were fully aware of EU scepticism towards the British plans, the complete inflexibility on the part of the European Commission and EU member states is understood to have left them shocked….
With talks at an “impasse”, The Telegraph understands that Mr Barnier has told EU ambassadors that he has suspended the EU’s own internal discussions on the future EU-UK trade deal, putting further pressure on the UK to make concessions.
The Telegraph and the rest of the press and punditcracy keep depicting “being in a customs union” as meaning not having border checks. As Richard North explained long form yesterday, that is another huge misapprehension.
North tears his hair today, since this confusion has now moved front and center in the frantic effort to regroup. Forgive me for quoting at length, but he sets the problem out very clearly:
As late as yesterday, Tusk was saying that, if there was no deal on Ireland, there would be no Withdrawal Agreement and no transition.
It follows that, according to Article 50, we drop out of the treaties on 29 March 2019. The customs union is not a fallback position – and neither is it a solution which will allow us to avoid a hard border…
This is to be the subject of a debate next Thursday where the assembled cretins will consider a motion which notes the importance of frictionless trade with the EU for British manufactures and “further notes that the free circulation of goods on the island of Ireland is a consequence of the UK and Republic of Ireland’s membership of the EU customs union”.
Not one of them, it seems, is capable of reading the consolidated treaties, but if any of them had the wit to do so, Article 28 would tell them that:
The Union shall comprise a customs union which shall cover all trade in goods and which shall involve the prohibition between Member States of customs duties on imports and exports and of all charges having equivalent effect, and the adoption of a common customs tariff in their relations with third countries.
On the other hand, Article 26(2) gives them the definition of the “internal market” (aka Single Market), which “shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties”.
From this, it could not be clearer that the free movement of goods which depends on the absence of “internal frontiers” stems from the internal market, and not the customs union…
Politico.eu was on the case, and it is adding that EU negotiators “have made clear that they are willing to discuss terms by which Britain remains inside the bloc’s customs union, or to negotiate a separate customs union like the EU’s deal with Turkey, which would entail agreed-upon, common tariffs on imported goods”.
Bluntly, this looks confused. A customs union on the style of Turkey clearly doesn’t address the issue of a frictionless border and, unless people have suddenly taken to living in a parallel universe, there can’t be anyone with a claim to sentience who believes this is a solution – or even getting close to one.
As to remaining inside the EU’s customs union, this simply is not legally possible within the terms of the treaty. The European Union itself is the customs union – as per Article 28. The two are inseparable, which means you cannot be inside the customs union and outside the European Union.
Politico’s daily European e-mail engaged in liberal application of porcine maquillage:
Quite simply, time is running out for Britain to find a workable solution to the Irish border issue. The EU wants this resolved by the next European Council summit at the end of June — which means a breakthrough is needed and the details resolved within two months. Lest we forget, the “backstop” Theresa May has signed up to if a solution cannot be found is to effectively keep Northern Ireland inside the customs union — which would be seen by her own Brexiteer MPs and ministers as a betrayal. The PM is stuck between a rock and a hard place, and urgently needs a way out.
North’s conclusion looks correct, that the UK is now on track for a crash-out Brexit. There is astonishingly still no comprehension of what leaving the EU entails among, it seems, both houses of the legislature, all of the ministers, and virtually all of the UK punditry. That means they will not come up with solutions to the problems they are trying to remedy. It also implies yet more incomprehension as the UK will pose approaches to the EU that are non-starters in light of how the EU operates, which the EU will reject them for what ought to understood as perfectly logical reasons. But that will elicit more outrage and upset from the UK, which will instead regard yet more EU rebuffs as proof that the EU wants to punish them by forcing them into the worst possible Brexit, when it will be the UK that has gotten itself in that mess due to unprecedented incompetence.
Shorter: assume the brace position.
_____
1 In fairness, Richard North regularly and in great detail points out that the UK has ignored the option of using its membership in the EEA/Efta to create the sort of very low friction border that exists between Norway and Sweden. But since that isn’t on the table, we’ll stick with the simplified but accurate for our purposes point that leaving the Single Market = hard border.
2 Readers in Ireland point out that if the DUP weren’t such a bunch of doctrinaires, they’d have to admit this is a great economic deal for Northern Ireland, which is a bit of a basket case dependent on subsidies from the UK. Those are almost certain to be cut in post-Brexit austerity.
38 comments
Comments are closed.
Pound got shellacked too, so maybe markets are finally waking up to this.. am not going to hold my breath though.
There are only two explanations that allow some semblance of rationality in the UK govt. It starts with that they actually know they are on mission impossible, so want to push it to the line – next March.
That will let them either
– to get the hardest of hard brexits, with EU as the scapegoat (we fought till the last minute, but EU just wasn’t willing to move!).
– or to ask EU for revocation of A50 at the last minute, when next March with no deal a large, visible, panic sets in, pound gets killed, BoE may have to intervene, and people start to realise that they were sold a fantasy.
Anything else relies heavily on kidness of strangers – EU or DUP. I’ve my doubts either’s going to blink.
Well, this is obviously speculative, but I disagree with your predictions of likely outcomes.
I think there will be a 21 month transition agreement post Brexit. The reason is, that as well too many companies within the EU are not sufficiently prepared, so a gradual Brexit is beneficial to the EU as well. Therefore hardest-possible-Brexit = not even a transition deal seems unlikely to me.
Formal Brexit is less than a year away and the full longterm negative impact of Brexit will not be felt immediately (given the assumption of a transition deal) not giving the gov’t a sufficiently good cover to cancel Brexit without another vote – for which there is no time as previously declared on this blog. Therefore no-Brexit seems extremely unlikely to me. Undoing Brexit in the transition period is much more difficult than revoking Article 5. As well I expect negotiations to become increasingly ugly in the transition period including potentially violence once it is clear, either physical infrastructure is needed on the inner-Irish border or NI stays effectively in the EU and the ‘hard’ border is in the sea. Once there are dead people, UK public opinion will harden and any form of rejoining the EU will become impossible. This would mean a sliding into an increasingly hard Brexit over time.
Ahem, there is no undoing of Brexit after the end of March 2019. The only option for the UK to rejoin the EU, which is a huge process and it would also be required to eventually adopt the Euro.
This is a negotiation. The EU has made clear it is not going to give ground on quite a few key issues and has reiterated that position consistently, often because the UK acts as if it can somehow steamroll the EU
More important, the EU has also made clear that it regards the political imperative of preserving the EU as far more important than the economics. The EU resigned itself from the outset to the fact that there would be significant economic costs as a result of Brexit. It’s the UK that has entertained bizarre fantasies that it would come out ahead.
The EU has also made extremely clear that while it would prefer not to have a crash-out Brexit, it is prepared to accept that. Powerful business constituencies like the German automakers are on board. Unlike in the UK, Brexit gets virtually no coverage in Europe. People have moved on.
Eurozone banks are also preparing for a crash out:
https://www.express.co.uk/news/politics/934825/brexit-news-transition-period-hard-brexit-eurozone-banks-financial
If, one day after Brexit, the UK suddenly sees the light and asks to rejoin immediately, would it really be such a huge process ? Politically it’s true that such a U-turn would be unprecedented (the Tory party would explode) but legally isn’t that the perfect example of something that you can easily fudge ?
For example, as far as I know only France has an important threshold for new accession (a referendum must be organised) but it can be overcome with a 3/5 vote in Parliament. There would be much glee but I doubt any EU states would oppose an ultra-fast track for the UK. In the end, couldn’t it end be like the Greek situation of 2015, one or two weeks of chaos then back to normal ?
On the other hand, yes the UK would have to accept to join the euro (but as many countries have shown, that’s nothing more than an empty promise) and the rebate would be gone (though if the pound goes down the toilet, the contribution will go down, hard to say where it would end up in the end).
There is a ‘sort of’ precedent for that with East Germany, which was absorbed without anyone asking too many questions of its legality.
In a hypothetical situation where a new government said ‘can we please forget about it?’, I’m sure Merkel and Macron would be only too delighted to try to fudge things to allow a quick re-entry – but I think the problem would emerge with gaining consensus on it – all you would need is one of the EU27 to object (or, for that matter, a disgruntled other party going to the ECJ) and it could be scuttled, leaving everyone with egg on their faces. The UK has lost a lot of friends and allies over the last two years, to succeed with something like that, everyone has to like you.
That supposes that UK would become first in the queue, while other countries have to keep on waiting. Not sure either EU or those countries would be happy with that.
And even if that were true, enormous harm would be done anyhow. Supply chain links are already being rerouted to avoid UK, lots of businesses are moving out of UK in preparation of Brexit… and what foreigners would be happy to come (back) to a UK that has become quite racist and hating all others?
I agree with you that a transition period is in the EU’s interest, the problem is that they are boxing themselves in too.
If the EU explicitly rules out any solution to the Irish border except the Irish Sea option (and they seem to have done that), then a deal depends on the UK blinking over this. I think May will want to blink on this – neither she nor most of her colleagues could give a flying *family blog* about Northern Ireland and its status so would happily sell out the DUP without a second thought. But she could decide that its impossible to save the government if this happens. And she’s proven so far that all she cares about is political survival, sacrificing herself for her country is not on her agenda.
In which case, it seems the gap can’t be bridged. The EU seems to have decided not to allow a fudge on the Irish border. So the UK backs down, or all bets are off and its a hard, chaotic, no deal Brexit.
OK, I have to admit I thought the Irish border thing could be fudged until after the Brexit in case of a transition deal. If the Irish border situation has to be settled for the longterm even for the EU to accept the transition deal, a crash-out Brexit in 2019 looks more likely.
As Yves has regularly pointed out, this has always been on the cards.
I think one reason why the EU was willing to sign off on the impossible in December was as a favour to the Irish government – it was seen as a ‘win’ for the Irish. But the glee with which the UK’s proposals have been thrashed would seem to indicate that Brussels is no longer even bothering with pretending that this is a negotiation between equals.
It is likely that Varadkar (Irish PM) will go for an autumn election – polls are good, the economy is booming, and his handling of Brexit is broadly popular. If there is a crisis meaning it is likely that Britain will crash out, all bets are off – so Varadkar will be pleading behind the scenes for the EU to hold off a final guillotine until the autumn.
The only obvious solution to May’s problem is the Irish Sea border – that is the only workable solution on the table. The DUP will walk out if this is on the agenda but – and this is purely speculative – Labour and the Lib Dems may well support any deal with this as a ‘backstop’. Corbyn would actually quite enjoy giving the DUP a good political kicking. The SNP may also see it as a wedge in the door for Scotland. So May could certainly get that past Parliament. The problem for her is whether she could survive as Tory leader. It would also make her a minority head of government.
It is hard though to see how the government can get through this without an election, in which case I have no idea what would pan out.
The leader of the Irish opposition complained earlier this month of strategic error by Varadkar: https://www.irishtimes.com/news/politics/miche%C3%A1l-martin-government-has-made-strategic-error-on-brexit-1.3447365
In the UK, at least we haven’t yet had the tabloid wall-of-propaganda on this issue (last sighting was after the Ghouta strike).
(Irish Times)
Yes, I think he may have been proven right about that. Although having said that, if things had collapsed in December the UK establishment would have been able to point the finger at the Irish government as the culprits. Its harder for them to do this now.
But as the Phoenix Magazine pointed out this week, one of the more amusing things about how politics has turned out due to Brexit is that we now have the odd sight of a FG government getting all cosy with Sinn Fein, while FF is complaining that we are not being nice enough to the British government.
I think I mentioned a while ago (at least I thought it) :) that a hard Brexit was inevitable. The UK politicians had to make a pretense of negotiation so that they could blame the EU for failure to reach agreement. (Reality doesn’t matter in our fake news environment). PR will win over most of the UK population to support our politicians in the face of EU intransigence.
At least UK fishermen will be cheering when the EU lose access to UK fishing grounds.
There is a big difference between a hard Brexit (which is what May is pursuing) and a crash out (no deal with the EU as of the Brexit date). The latter is a train wreck of unmitigated proportions. The former is merely nasty bad.
I think that’s only accurate if you take the ‘men’ out of ‘fishermen’. Its not clear at all that fishermen will do well. The FT summarised the issues, and there is more information here.
In the absence of a deal, most UK fishermen will have more access to fish (but they will be shut out of other waters, in particular Irish waters in the Irish Sea and Norwegian waters), but they will also lose their markets as an aggressive stance would undoubtedly lead to tarrifs on fish exports to Europe. The big winners would be the Spanish operators who were farsighted enough to register their fishing boats in the UK.
In any event, it would be almost certain that the fishing communities would be sold out in any future deals to try to protect the City, or the UK car industry, etc.
The fishing industry representatives seem to disagree with you. :)
Taking back control of UK fishing grounds would enable the UK to maintain fishing stocks by monitoring the quantity of fish landed. Spanish vessels registered in the UK would be required to land their catch in the UK. EU tariffs don’t matter if the pound depreciates by the same percentage.
But the fishing industry is still a tiny part of UK GDP.
Selling them out would have little effect elsewhere.
North had a go at this, and basically, EU would have to approve for the UK fishermen to keep selling fish to the EU (there’s no doing bilaterall agreement on this) – not just tarrifs, but any exports and landing. Given the UK fishermen’s largest market is EU, EU could well ask continuation of current situation. In the UK, the fishermen are a relatively small industry, and also a relatively few votes depend on it. So they are likely to end up like a by-catch.
There are also some complications under international law to do with “customary rights”. I can’t remember exacly where it was, but the gist was it would be actually pretty hard to keep EU fleet out of the UK (extended) waters if they decided to take it to an international court. Can’t remember where it was, so don’t know how much this argument holds water.
Waterford Whispers thinks its all performance art.
Methinks ’tis a shame that this item was not delayed until 5/1
With Brexit, every day is April Fools Day.
I was thinking in terms of a new meaning for “May Day”.
This also came to mind:
“Jape of the decade”
https://www.youtube.com/watch?v=cWB63Wiltxk
I’m not sure that the government ever had a “strategy” in the ordinary sense of the term. They began the Art 50 process with no coherent plan and no real idea of what they were doing, and it’s been downhill from there. The only Tory “strategy” is the one classically attributed to the French Radical Party (“to be in power”). That being so, May will accept literally any outcome which she and her government can survive, blaming everyone else except themselves for the inevitable chaos. If it requires her to meekly accept the backstop plan, then I think she will do that. Equally, if by some completely unforeseeable train of circumstances, reversing Brexit were to become the favored option, she would accept that too. The key is that British politics is so chaotic and divided at the moment that, whilst there will be a lot of opposition to whatever option is eventually decided upon, that opposition is unlikely, in any particular case, to have the same ideas about an alternative outcome. In British politics, at least, governments have survived fairly awesome political damage when opposition (not The Opposition, which has its own problems) is fragmented. Theoretically, a majority could be assembled against virtually any outcome to the negotiations, but in the absence of any agreed alternative, bringing down the government would make things worse, not better.
I wouldn’t be too hard on the EU. This is not a “negotiation” process, where Brussels has said “what ideas do you have for an economic border?” but the (attempted) fulfillment of a commitment the UK made to produce an alternative viable proposal to the backstop solution. Everybody knew that this was impossible, and there will no doubt have been a list of objective criteria against which UK proposals were measured and found wanting. The EU was prepared to give the UK more rope and more time, as I suggested last year, to demonstrate to all that it had done its best to negotiate in good faith, and allow time for a solution to emerge. It’s very clear, as it always was, that this isn’t going to happen.
Barnier has said that ‘25%’ of the deal isn’t settled, so a no-deal is a possibility. That’s quite a change of tune. I think they are preparing the ground for a failure.
On the other hand, the Guardian has this interesting tidbit:
Its not clear what its implying, but it does seem to suggest that May actually wants a firm rejection, in order to make a clear decision. Presumably, this is either the abrupt Brexit the hardliners want, or alternatively she wants to do the Irish Sea border deal, knowing its the only workable one.
See my opening comment ;)
Some thought about that from Tony Connelly who has done a pretty good job so far covering the Brexit talks:
https://twitter.com/tconnellyRTE/status/987288896441593856
The conclusion is that the Telegraph paper seems more intended for domestic consumption: “From another angle, the Telegraph splash will certainly fuel the internal UK debate on whether Britain should stay on the (or a) customs union.” (“customs union” I know…)
A very simple-and ultimately inexpensive-solution to all this nonsense is to revisit the fundamental cause of the problem. The issue is rooted in what was, from the first instance, a criminal project; the illegal and undemocratic Partition of the Island Kingdom of Ireland by the Kingdom of England. So, anyone who wishes to REMAIN in a future United Ireland can do so-anyone who does not should be free to LEAVE and return, with bags and baggage, to the Kingdom of England- with the benefit of a modest financial compensation from the EU and the UK. This is the only historically correct solution to the present, utterly fraudulent situation where you have not one but two ‘banana’ statelets on the island of Ireland. Of course, Varadkar’s fifth-column handlers would not like that solution, as it would finally propel their West Brit agenda of keeping Ireland as a Parish Council of Westminster out of its historical closet and into the light of day for all the world to see.
I’ll have to steel myself against the shallow jingoism of the comment and try to read between the lines of invective. Which I’ll do because lurking in all that incipient sectarianism there is a valid point.
Which is: it is always difficult to look back on events of 50 or a hundred years ago from the perspective of standards which we’d apply today. You can, if you’re inclined, substitute Northern Ireland with the partition of modern-day India and Pakistan or the creation of the state of Israel (to name but two) situations where the imperial power of the day (Britain in these cases; yes, we’ve got fairly dirty hands when it comes to messing about with volatile nationalism) decided on some not always entirely altruistic basis what a “good” solution to the problem of fundamental societal divisions was. At the time, some form of segregation was deemed to be the best, or at least less-worse, outcome.
With the benefit of 20-20 hindsight, it merely stored up problems for later on as those who thought — not without justification — that their right to live on their land had been jettisoned without much care about the impacts on those at the sharp end. Intergenerational conflicts ensued. Apart from colonial might, there wasn’t much of what you’d call a basis in international law to support these new borders and states, the dividing lines of which were usually little more than napkin doodles.
And the unresolved issues are then merely bolts of lightning looking for a handy lightning rod, such as Brexit, to ground themselves on. Definitely not the UK government, nor I suspect did the EU entirely, realise what they were wandering into in their handling of Brexit where the island of Ireland is concerned. Both unionists and nationalists in NI and the people of the Republic, did, of course, understand all too well. “Beir Bua” is merely a hardliner trenchant voice from (I’m pretty sure) the Republic itself or NI republicanism. But you can hear this sort of stuff all day long from unionists (in reverse), too. While the language isn’t what I’d use, it doesn’t make it any less heartfelt or even completely wrong.
As a comment, though, I think for my own opinion, if the ethos of Naked Capitalism is above all to encourage critical thinking, this comment miserably fails to hit that benchmark. It’s merely an overly-reduced, simple minded and unilateral view of a complex question. Expressed better, there’s a valid point to be made in what the writer says. Unfortunately, the commentator is expressing it in a confrontational and even mildly offensive fashion, so their point is lost unless one takes the time to see through the issues the writer creates for themselves in their choice of words.
I’m being very charitable here in the hope any other comments play the ball — there is a relevant ball in play — not the one-sided nationalism nonsense.
Beir Bua’s opinion, which decries the gerrrymandered origins of the six county statelet, does not in itself constitute a “…merely hardline trenchant voice…” but rather a viewpoint shared by a large portion of the Irish population and the aspirations of many more of the population who use less strident language. The stridency of the statements might offend those who do not hold such views, but so be it. Those who hold Beir Bua’s viewpoint often put up with as much, if not more from those with opposite opinions.
One invoking critical thinking does not turn opinion into critical thinking; no matter how one wants to define critical thinking.
Having said that, I really can’t see what Beir Bua’s viewpoint adds any insightful views into the current debacle of Brexit – no more than the trenchant statements from English nationalists have done now or in the past.
Curious. After Brexit the EU will have not one but two contested outer borders: between Cyprus and Turkey, and between Ireland and the UK. Maybe even more bizarre the country whose language is for all intents and purposes the lingua franca of the EU will somehow be on the outside. Or is historically, financially and culturally more correct to call it American English. Whatever.
UK always had contested borders even when inside the EU: Gibraltar. Just that up to now, everyone told Spain to shut up about it.
After Brexit this might change, depending how well Spain does diplomacy. Looking at how Spain acts in the Catalonia crisis, this doesn’t look likely of course. So I guess there is no real UK concern right now.
As for the lingua franca, the EU better holds on Ireland and makes sure they don’t flee their embrace :)
And of course, the french now have you personally on a hit-list after this “english is the lingua franca of the EU” terrorist treason talk.
It will require more creativity than these Tories possess
To get any positive outcome to this mess.
A rerun of the referendum might be the only way forward but the government would fall (or split at best with Labor help) IMO trying to get it to pass. Whether May has the stomach to do it and be done (may even be appealing) is the question. She should pick up the phone and call Jeremy and make a deal.
I think the EU initially took the position it was not the UK’s parent and so was not obligated to tell the UK that Santa and the Easter Bunny aren’t real. The EU changed its position when it became apparent there was no parental supervision of the UK and that it was essential to step in before the child burned the house down or tried driving the car through the Channel Tunnel.
Nothing is agreed until the fat lady sings!!
The basis for the UK negotiations is to see what will be on offer in trade terms once we leave. All other talks up until now, are just an exercise in getting to the trade stage.
Shortly the UK Government will table what they want from the EU in trade terms. The EU Commission will reject the UK terms and at that point the UK PM will tell the EU that we leave on the date specified in the UK Act of Parliament which is UK law. Should the EU still not accept what the UK wants, then it is goodbye to £40 billion in exit payments etc etc. The loss of £40bn in income for the EU, in addition to another £30bn in transition payments will precipitate a major financial shock to the EU coffers at which point the EU Council, made up of the leaders of all EU countries will take over the negotiations from the Commission, and a suitable trade deal will emerge.
It was ever thus!! Brexit means Brexit said our PM!
Even with a ultra-hard, total crash out Brexit, the UK would have to pay substantial sums for things they agreed to finance with binding legal acts. E.g. pensions, etc.
The only difference would be a years long legislation before some court like the WTO.
It would basically make those payments more expensive but not cheaper. Even if they pay less than the now agreed 39 billion euros in the end, it would still be more expensive for the UK due to the years long uncertainty which will hamper trade and economics over time not only with the EU but pretty much world wide for the UK.
The trade argument goes both ways, the UK and the EU want to trade, want the trade to continue. A good treaty is important for both of them to make money, but it’s much more urgent for the UK since they are the vastly smaller party in these talks. It’s like the EU-Africa trade treaties: it always goes worse for the smaller party, like any african country, there. This is one if not the main reason for the EU’s existence: to be a big enough block when doing a treaty with someone, either to be the party with a big advantage (Africa) or at least be an equal (US).
There is a school of thought that all the financial commitments made by a Member of the EU are done so as a condition of membership, and there is nothing in the treaties which stipulates that EU members can only leave the EU having paid everything the EU dreams up as owing.
The EU pension scheme has a Defined Benefit Obligation of Euro 67.7 BILLION and assets of Euro 432 MILLION as at 31st Dec 2016 which are the last published accounts. There are 28 Members of the EU at present, but the EU say that “our share” of the obligation is Euro 10 Billion. I recently sold a block of shares in a company, trousered the proceeds and walked away. I did not have to contribute to the staff pension fund in order to sell my shares!!
EU has made very very clear that it’s willing to accept economic damage – which the UK govt is still pretending will be in ALL cases between negligible to non-existent (or even beneficial).
40bln here or there is something EU would be willing to eat I believe, especially since it would have a good case in any international arbitration/court to get a significant chunk of it, and since doing this would damage the UK significantly diplomatically, as it would cast it as an untrustworthy (i.e. not adhering to treaties it signed) and bad-willed actor.
Sorry, UK has now little goodwill worldwide, never mind the Brexiters propaganda.
As an aside, I’d point out that the hole in the EU budget caused by the UK leaving may be substantially smaller than expected, as it’s not counting with any of the businesses relocating to the EU (which is alredy happening and will happen more), hence increasing the rEU economies/tax takes etc. Very unlikely above what it’s now, there will be damage, but the damage to some regions – Dutch ports for example – is likely to be offset by gains in other regions where the businesses relocate from the UK.
A few thoughts from a dual citizen living at a (maybe) safe distance:
German economic success is largely, but not entirely , a consequence of the lower Euro exchange rate resulting from its economically disfunctional ‘Club Med’ siblings,
‘ Shadenfreude’ is a German word,
Application of and adherence to Eurozone rules can be somewhat ,shall we say ,discretionary. For example Italian banks and Greece generally. It will be interesting to see what happens to said banks when their Minder Mario Draghi moves on…..
The Brexit vote appears to have been narrowly (52/48) passed on the basis of jingoism, a tinge of racism and substantial ignorance of detail or consequences.
Conclusion: either the UK Government will deliberately sabotage Brexit, or the Germans will (economically) hammer the UK into oblivion out of naked self interest, i.e. To dissuade any other EU members from similar EU exit aspirations.
Given the utter ineptitude of UK negotiators thus far, as so eloquently detailed on repeated occasions by Yves and others within this forum, the former seems more likely.
Many financial pundits are now forecasting a serious ‘market correction’ sometime between now and early 2020, thus lobbing a financial MOAB into the whole process.
“German economic success is largely, but not entirely , a consequence of the lower Euro exchange rate resulting from its economically disfunctional ‘Club Med’ siblings”
This is based on the idea that the exchange rate would naturally tend to a level consistent to balanced trade.
Before 2007 the EU trade balance was more or less neutral, but this neutrality was the sum of German (and other countries) net exports plus the net import of some other EU countries, most famously Spain, Italy and Greece.
This did lead to the idea that the internal exchange rate of the EU was wrong, so that Germany became a permanent net exporter and Club Med permanent net importers.
But today, while Spain and Greece are still net importers, Italy is a net exporter, and the EU as a whole is a net exporter:
https://fred.stlouisfed.org/series/XTNTVA01EZM667S
so the idea that German net exports are caused by Club Med net imports looks dubious.
In my opinion, the problem is in the assumption that a floating exchange rate will naturally lead to balanced trade: this is implicitly based on the assumption that countries cannot simply build up debt forever, so trade will necessarily tend to balance someway, hence influencing the exchange rate.
But in reality governments and countries can actually build up a lot of debt, so that if, for example, USA government runs a fiscal deficit, while EU governments run austerity, this will shift the trade balance “in favour” of EU countries (this “favour” is paid by EU countries in terms of a lower standard of living and austerity induced unemployment).
So I think that the idea that the Germans are trying to force people to stay in the EU is based on false premises: Germans in fact mostly fear that they will have to pay for the “prolifigate” other countries, and probably would have welcomed a Grexit (or Spainxit or Itexit) on purely economical grounds, though they (like other Europeans) like the idea of an EU on political grounds.
Furthermore, the UK wasn’t in the euro area anyway, and still managed to be a big net importer:
https://fred.stlouisfed.org/series/TDUKA
that in my opinion is the real root of the malaise that ultimately did lead to Brexit.
“EU has made very very clear that it’s willing to accept economic damage – which the UK govt is still pretending will be in ALL cases between negligible to non-existent (or even beneficial). ”
It depends if one is talking about the EU Commission or the EU Council. The EU Commission is essentially the civil service and the Council are the 28 Leaders of the EU.
The Commission is the heart of the EU philosophy of a European Superstate, but the Leaders of the Member nations have often demonstrated that their own national interests cut across the superstate plan. The Commission may well be willing to accept economic damage, but that damage is paid for by the Members and their political leaders will be far less enthusiastic on explaining to their electorate why the economic damage of a hard Brexit is good for them.