How CIB predicted in 2011 where Cameron would fail in 2016

In 2011, CIB’s John Harrison and Edward Spalton jointly authored an article entitled ‘Britain’s Exit from the EU (in its present form) is now almost certain.’ Looking back at that article now, not only were we right about Britain’s exit from the EU, we foresaw what David Cameron could not: that it was the impossibility of escaping the gravitational pull of ‘ever closer union’ from the dominant Eurozone countries that would bring about our exit.

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Q: Just say it is late 2018. Britain and the EU have just agreed a Withdrawal Agreement (WA) with us largely under EU control until 2021, losing existing voting power. The future relationship declaration is non-committal. Would there be a second referendum?

 

 

Sacked minister Justine Greening wants a complicated referendum with 3 options – accept the deal, leave with no deal or remain in the EU. Voters would also get a second choice! Sammy Wilson MP responded that voters had already had referendums to reject the EU and Alternative Voting!

BIRDS OF A FEATHER? Greening (Times) and Mandelson (Guardian) both urged a second referendum, but their articles made the same error on being unable to influence EU rules. As former Trade Commissioner Mandelson would know better – this points to their articles being orchestrated.

The government wouldn’t want a referendum. Apart from splitting the Conservative Party and reviving deep public tensions from 2016, it would take up precious Parliamentary time. Organising a poll and appointing official campaigns would be on impossibly tight timescales unless the Brexit date was put back.
The uncertainty might not actually appeal to the EU either! Bureaucrats in Brussels are overloaded with trying to get EU legislation through while the current European Parliament and Commission are still in place and would not relish the possible disruption to their preparations and extra work. However, it was noted that EU leaders quietly agreed to keep MEP seats for Britain in the event that we did not leave before July 2019!!! So, the possibility can’t be ruled out.

The EU (Withdrawal) Act doesn’t repeal the European Union Act 2011 until we leave the EU, but as current plans won’t give the EU new powers, no referendum should be triggered.

It’s a hard call how MPs would vote on the WA. Most Leaver MPs would probably vote for it to ensure Brexit, salving their consciences that it is only a temporary deal and their vote keeps Jeremy Corbyn out of power. Although Tory Remoaners will bawl “worse than EU membership”, they typically fall into line in practice.

With their 2017 manifesto preaching the benefits of the Single Market, Labour MPs might think twice about voting down legislation that kept Britain in it. On balance, a soft Brexit would probably get passed.

Greening’s line that “the final decision” should be for the people and “out of deadlocked politicians’ hands” is a joke. The deal being voted on is only interim (Transition) and the final deal should be ready towards the run up to the 2022 General Election.

Article produced by Brian Mooney of Resistance

How Britain Leaving the EU Could Affect the Single Currency

In 2016, the majority of UK voters opted to leave the EU. A lot of people, fuelled by the opinion of the mainstream media, seemed to be disappointed with the referendum vote due to this common sentiment: Brexit will bring nothing but tough times.

However, when you look at the numbers, it is clear that the UK is already at an unfair advantage, as Britain is one of the biggest contributors towards the EU budget. In an article by Full Fact it was recorded that the UK pays more into the EU budget than it gets back. The site says that in 2016, the UK government shelled out £13.1 billion to the EU budget, which was more than the forecasted £4.5 billion that the EU spent on the country. In short, the UK’s net contribution was around £8.6 billion, which was used to help develop other countries.

Uncertainty with the Euro

Without aid from the UK, and if a hard Brexit happens, the EU will have to find another country that will generously provide £8.6 billion in order to offset the budget losses. If the EU fails to compensate for the losses, the Euro will most likely become extremely volatile since the European Central Bank (ECB) would need to print more money to provide funding to member states.

Below is a chart that shows the balance of UK contributions, and public sector receipts from the EU budget, which was inflation-adjusted for 2016.

The Economist suggests that only a few British people have changed their mind about whether to stay or go. The polls discovered that should there be another vote, the result would be similar to the 52:48 split last June. The article also mentions that most leavers want a hard Brexit if possible.

A hard Brexit would most likely affect the Euro negatively due to investor sentiment regarding the risks. FXCM notes that global market participants frequently flock to riskier assets, in this case the GBP, in hopes that doing so will generate strong returns. There may be uncertainty within the UK market because of Brexit, but that doesn’t mean that the EU will benefit from it. After all, there is no direct evidence of an inverse correlation of the GBP/EUR, at least not until a final Brexit vote happens. If there’s anyone who would benefit from Brexit, it is the U.S., especially since the greenback has always been viewed as a safe haven against the Euro.

The European Commission is now looking to reduce regional spending by up to 30% in order to balance the budget and keep the Euro’s strength. If the European Commission doesn’t cut regional spending, its other option is to reactivate the EU’s aggressive bond buying program. Whether or not that may happen soon is moot, especially since the ECB’s stimulus weakened the Euro significantly. The EU had already under spent on regional funds before. That being said, it wouldn’t be surprising if this is the route that they will take once again.

The human cost of the Single Currency

The chart below is  a powerful rebuttal of the so-called blessings of being part of the EU – and the single currency in particular. Germany is doing very nicely from the €uro, but the human cost of the single currency in other countries is immense. Two in five young people are still out of work in Greece. At one point, the figure was more than three in five.

Although not a “Club Med” member, Finland has youth unemployment of over 20% and non-Eurozone Denmark and Sweden have higher overall and youth unemployment levels than non-EU Norway. The USA, also included for comparison, is doing better still, although Switzerland has even lower unemployment.

The UK comes out pretty well. Keeping control of our own currency has definitely helped us weather the Great Recession better than the major €urozone economies, Germany excepted. Had we never joined the EU, who knows, we may have had a better economy than Switzerland

Photo by Sinn Féin

Reopening a can of worms?

At the moment, the papers, especially those of a remoaner persuasion, are full of positive news about the Eurozone economy.  In spite of the European Central bank’s programme of quantitative easing, which tends to reduce the value of a given currency, the €uro hit its highest level against Sterling since 2009 on 23rd August. The Eurozone manufacturing sector is doing well, with even the French economy showing signs of improving after a rather stagnant period.

So all looks rather hunky-dory across the water – or does it? As we have pointed out before, a number of underlying tensions lurk beneath the seemingly calm EU waters. Emmanuel Macron, the EU’s new blue-eyed boy, has not only seen a sharp fall in his popularity ratings in his native France, but looks likely to stir up West-East tensions following an attack on “social dumping” – the reduction in wages caused by the arrival in the west of large numbers of migrants from the former Soviet Bloc countries.  This desire to control the level of East to West migration is viewed by these countries as a form of protectionism incompatible with the Single Market.

Then the North-South divide could be rekindled soon if a recent statement by Spain’s Prime Minister Mariano Rajoy is anything to go by.  The Spanish government is keen to press ahead with closer fiscal and monetary integration within the 19-nation single currency bloc, calling for  Eurobonds, a  European Monetary Fund and a common Eurozone budget.

This move has the support of Germany’s Chancellor Merkel but not of many of her countrymen, who fear they will end up subsidising the weaker economies of Club Med. Luis de Guindos, Spain’s Finance Minister, said that Brexit, along with the election of President Trump, has pushed the EU and the Eurozone closer together, but given that this proposed deepening of integration within the Eurozone would require treaty change and thus reopen a can of worms, the net result could be the opposite.

Besides the hostility among the German public to Eurobonds, there is also the issue of countries outside the Single Currency Area. Poland, which has historically looked to the UK to be the spokesman for the non-Eurozone group, is concerned that closer integration among single currency users would lead to the formalising of a two-speed EU, which it has long opposed. Technically, all member states apart from Denmark (and, of course, the UK) are required to adopt the €uro after meeting certain criteria, but there is no enthusiasm to adopt the Euro in Poland, Hungary or the Czech Republic and given the tensions between these countries and Brussels over migration quotas, amendments to existing treaties – or indeed, a successor to the Lisbon treaty – is likely further to fuel tensions.

So while the improved performance of the Eurozone may perhaps take something of the sting out of the North-South divide which, after all, is primarily about economics, we need to remind ourselves that the EU has always been a political project. A drive to closer integration which leaves some member states on the outside could have highly unpredictable consequences.

 

North v South, East v West

Cast your eyes no further east than Berlin, Vienna or Rome and all looks pretty rosy in the EU’s garden. Apart from the shock of Brexit, most of the critical votes during the past year have gone the Establishment’s way. Even before our referendum, the Austrians set the scene by choosing a former Green party leader as President rather than Norbert Hofer of strongly eurosceptic FPÖ (Freedom Party of Austria). Now this year, the Dutch and French elections have not seen any breakthrough for eurosceptic parties and looking to the future, Germany’s Alternative für Deutschland (AfD) is losing support, with Angela Merkel looking unassailable while Italy’s Five Star Movement does not now look likely to make any sort of breakthrough when the country goes to the polls. It too may have peaked.

Meanwhile, the economic news looks positive. The €urozone is enjoying a decent recovery with deflation beaten and business confidence returning. After almost a decade of one problem after another, the EU does appear on the surface to have turned a corner. Frexit, Iexit and other variations on the same theme don’t take up many column inches now.

In actual fact, one other country would vote to leave the EU if granted a referendum – the Czech Republic. At the beginning of July, the Spectator Magazine published an interesting report on the state EU in collaboration with Project 28, a polling organisation.  47% of Czechs would vote to leave as opposed to 43% who want to stay. The country  is very much an outlier, however, as the next most anti-EU country, Greece, would vote to stay in by 54% to 39%.

Scratch beneath the surface, however, and the picture isn’t so positive. Some 41% of Italians, 32% of French an 28% of Germans do not think that the EU in its present form will still exist in 10 years’ time. What is behind this sentiment? – or to put it another way, what are the most likely causes of conflict within the EU, causing it to splinter?

Firstly, the €urozone’s overall improved economic performance conceals real problems within individual countries. Youth unemployment is still over 40% in Spain and 45% in Greece. Italy recently bailed out two of its banks and, along with Spain, the overall indebtedness of its country’s banks increases while the net credit of German banks is also increasing. Such imbalances within the Single Currency area have the potential to cause problems if uncorrected. Furthermore, any push for closer political and economic integration within the €urozone would risk reopening old wounds when they have not had long to heal. Club Med is still resentful of Germany, whereas German taxpayers will not want to subsidise what they regard as the profligate and lazy southern countries.

More destabilising than the north-south divisions, however, are the east-west tensions. The Spectator claims that Hungarians have little appetite for “Hexit”, with only 15% of voters wanting to leave the EU. Viktor Orbán, the country’s leader, is a frequent critic of Brussels, however, He is no enthusiast of further integration and according to a piece in the Guardian, “he doesn’t want to leave the EU; he wants to subvert it, which is far more dangerous.”

The refugee crisis has inflamed East-West tensions. Hungary’s initial opposition to accepting large numbers of immigrants was worded roughly along the lines of “we’re not ready to accept immigrants; our country is still rebuilding itself after years of subjection to the Soviet Union. Come back in 20 years’ time and maybe we’ll be able to handle the sort of multicultural society you have in the West.” Now the rhetoric has hardened. Orbán doesn’t want multiculturalism now or ever and has announced that his country will offer a home  for “Germans, Dutch, French and Italians, terrified politicians and journalists who here in Hungary want to find the Europe they have lost in their homelands.” In the same speech, he also attacked political correctness while elsewhere, he claimed that Europe’s Christian identity was under threat from Moslem migration.

It is quite clear that there is a vast difference between his vision of the EU’s future and that of Macron and Merkel. “In 1990,  Europe was our future, now we are Europe’s future,” he said on another occasion. Meanwhile, according to one blog, in the Czech Republic, the country’s parliament has voted to enshrine in its Constitution (subject to Senate approval) the right for its citizens to carry arms. The reason for this seemingly drastic measure seems to be a concern about the possible problems which migrants might cause. The blogger wasn’t able to provide too many sources of information and any extra detail about this surprising development would be welcomed.

Such attitudes are light years away from the pathetic defeatism of Sweden’s former Prime Minister Fredrik Reinfeldt, who said that his countrymen were “boring”, going on to rubbish his own country to an incredible degree, claiming that “only barbarism is genuinely Swedish.” Well, the Swedish Vikings were a pretty rough lot a thousand years ago, but since then, European civilisation, including Sweden , has much of which to be proud. Is he unaware of the heroic efforts of Sweden’s king Gustav II Adolf who played a huge part in saving Europe from barbarism in the Thirty Years’ War? Or the great Swedish botanist Carl Linnaeus whose categorisation of plants into different genres is still the basis of botany today?

It is quite unbelievable for any western leader to be so dismissive of  his country, but although perhaps the worst, he is far from unique. Douglas Murray’s book The Strange Death of Europe claims that the entire continent is “weighed down with a guilt for its past.”  While his arguments are persuasive, they hardly apply to the former Soviet bloc countries like Hungary and Poland who are proudly patriotic and defensive of their culture after years of subjection to the sterile ideology of Marxism-Leninism. There doesn’t seem to be much evidence of guilt in the utterances of Mr Orbán nor indeed, in those of Poland’s most influential politician Jarosław Kaczyński.

Furthermore, we are not talking about a straight west-east split. I am sure that many people living in Western Europe probably sympathise far more with Hungary, Poland and the Czech Republic than with their own guilt-ridden political leaders. It is these leaders, however, who will be trying to drive European integration forward and if it is on their multicultural, self-loathing politically-correct terms, then Hexit, Czexit, Polexit may be on our lips sooner than you can say Jack Robinson.