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Jumping off the Brexit Cliff

by Frank Schnittger Mon Oct 16th, 2017 at 10:26:38 AM EST

Many here at the European Tribune have been predicting a hard Brexit almost from day one, convinced that the UK government was being almost totally unrealistic in what it expected to achieve out of the negotiations.  Ministers seemed to be negotiating with themselves and each other as to what they really wanted, with any consideration of why the EU might actually want to concede such things barely an afterthought, if that.

Conscious that the Brexit negotiations were going to be difficult and complex, Theresa May quickly came up with another cliche to rival her famous "Brexit means Brexit" mantra.  Now it was "No deal is better than a bad deal" in an effort to put the wind up the EU negotiators and force concessions. Apparently Germany was supposed to act as the adult in the room and bring both sides to their senses and force a deal at the denouement.

But the gradual hardening of the UK negotiating position has had the opposite effect to what was perhaps intended. Instead of softening their position the EU side has looked on with increasing incredulity at the shifting sands across the Dover straits. Could the UK really be serious? Trade talks before a financial settlement is reached? An invisible Irish border despite the UK leaving the Single Market and Customs Union? EU citizens in the UK being used as bargaining chips and threatened with deportation despite their importance to the UK economy? A Transition deal with no quid pro quo?

But what perhaps no-one has anticipated was that a hard Brexit might actually become the UK policy objective. Political commentators have moved slowly from an initial position where a deal was seen as inevitable to one where the risks of a 'no deal' Brexit were seen to increase, if only because of the incompetence of the negotiators. Now Chris Johns in the Irish Times has come to the conclusion that far from being a result of a negotiating failure, a "Cliff Edge" Brexit is becoming the desired outcome for many on the UK side. Far from falling off a cliff, the UK may be getting ready to jump.

His analysis is well worth reading in full. Central to his thesis is the conclusion that "Brexitism" has become almost a cult, similar to Trumpism or climate change denial which is largely immune to factual intervention. All attempts at realism are portrayed as betrayal or even treason. Raising the implications of a hard Brexit is seen as defeatism or a lack of faith in what a "free" UK can achieve outside the constraints of the EU.

Judges are portrayed as traitors for upholding the primacy of parliament. The wholly independent office for budget responsibility, which is the Government's official economic forecasting body, is supposed to be forced to upgrade its gloomy forecasts into line with Boris Johnson's sunny vision of a post Brexit Britain trading with the "free" world. It's like the "Battle of Britain" all over again, with Boris Johnson auditioning for the role of Churchill. Perhaps it's all nostalgia for a time when Britannia ruled the waves, but a serious engagement with the EU it is not.

In response the EU Council is poised to declare that "insufficient progress" has been made in the Brexit talks to enable them to move on to the issue of most concern to the UK side - trade. Theresa May is flying over to meet Commission President Juncker today in a bid to kick start the stalled talks. But ultimately it isn't within Juncker's gift to move onto trade - or even a transition arrangement. That is entirely within the remit of the European Council, and here there has been a notable lack of success.

Attempts by May to go over the Commssion's head and appeal directly to Merkel and Macron have met with an almost indifferent response. They have other fish to fry. When Boris Johnson offered EU foreign ministers a trip in his rowing boat on the lake at his Chevening House retreat only Czech deputy Ivo Sramek took him up on his offer. "This is going to be a tremendous success" Johnson said, even as his wife warned him not to drown EU foreign Ministers...

The Labour party is insisting there is no majority within Parliament for a "no deal" Brexit but this rather misses the point. Brexit is happening in March 2019 whether there is a deal or not, and to date there has been no substantive discussions even on the possibility of a transition deal. The Brexiteers' fall back position - that WTO rules will apply - rather misses the point that the WTO only provides a framework for agreement: you still have to negotiate a deal on precise tariffs and quotas and on mutual regulatory recognition. In addition, WTO rules do not cover financial services, aviation landing rights, atomic energy regulation and are way out of date on medicines regulation. In other words, they will not avert chaos.

I have long harboured a suspicion that the Brexiteers' "no deal" scenario has been little more than a negotiating ploy: a way to force the EU to make concessions because of the sheer unthinkability of flights no longer being able to take place between the UK and EU, of many miles of tail-backs on roads approaching Dover and Calais Customs check points, of hundreds of thousands of ex-patriot workers having to return home. But I am no longer so sure. Events have a way of creating a dynamic all of their own.

Ever since the referendum, UK politics have been spiralling out of control in an ever more right-wing and xenophobic direction, and once Brexit actually happens, unanimity among the EU27 is required to put in place any fixes that may be required, however urgent. That creates an entirely new dynamic on the EU side: A Spain in need of a patriotic upsurge may play hard ball on Gibraltar. Eastern European Countries whose ex-pats have been turned away may want to exact some revenge. There is no telling how bad this could get unless the adults in the room take control again, and it seems there are hardly any left.

Paradoxically, a negotiator's worst nightmare is not having an intransigent opponent, but having one who doesn't appear to know what they want and who probably can't deliver on any deal even if one is agreed. Labour is probably correct in saying there is no majority in Parliament for a "no deal" Brexit, but is there a majority for any deal the EU could possibly concede? Expectations as to what a deal should contain seem to diverge more and more by the day.

The DUP will not countenance the only sensible solution to the Irish Border - that Customs controls should take place at air and sea ports, effectively turning N. Ireland into a Special Economic Zone - one of 4,500 in the world, the first of which was in Shannon - and which could largely shield N. Ireland from the fall-out from Brexit. But can May risk jilting them without risking a general election which would effectively be a Tory suicide mission?

So we are left caught between a rock and a hard place, between a rule bound EU and a UK elite rapidly losing control of its own polity. The EU cannot offer a deal the current UK Parliament can accept and even the competence of negotiators is no longer the issue. Soon the only question which may remain to be answered is whether the UK will fall off the Brexit cliff or whether it will decide to make a virtue out of necessity and actually jump off first to the cheers of many Brexiteers. Reality can wait...

Good grief Frank, take a chill pill. I think the Irish Times is getting a bit hysterical.

It's all very well for IT to warn that a former Cabinet Minister and journalist are screaming for Hammond to be tried for treason, but when it's revealed that the people involved are Nadine Dorries (MP-Batshit cray-zee) and Nigel Lawson, ex-Chancellor, climate change denier and long term resident in the South of France, we're not exactly talking about mainstream opinion.

Yes, you're right to say that there is no majority in the Commons for "No deal" and May couldn't bring that to the Commons for a vote because she'd lose. And that would triger an election, at which point all bets would be off cos the negotiations would have to start again with a Labour govt that might just say "fuck it, the UK can't afford to leave".

And it's noticeable that the rabid leavers break down into 2 camps;-
1) wealthy tories who know that, come hell and high water, they'll be alright Jack, so pull the ladder up.

2)the left behind, the ones vividly described Giles Fraser.

Blakenall Heath seethed with the anger of the unheard. And that anger found its way into my bones. It wasn't just about the poverty. It was deeper than that. As the months went by, I began to get some sense of what it felt like when nobody listened to or cared in the slightest about what you said. It felt like no one gave a shit. Every now and again the place would show up on some list of crap towns for posh people to snigger at. Other than that, you weren't noticed.
A remain campaigner told me about a doorstep encounter he had on a bombsite of a council estate in the Midlands. "You have a lot to lose financially if we leave the EU," he explained, rationally.

"Oh, yes," she gestured to her run-down surroundings, sarcastically. "I could lose all of this?"

Of course, we should remember that he's a keen brexiter, so he's going to lean that way. Nevertheless, what he paints is picture of why Labour are caught a dilemma with their EU sypathies. They can't really afford to offend these people who would otherwise vote tory for brexit. I would still contend there are the people who are mostly the left behind of the neoliberal economic catastrophe of the last 40 years, that a Corbyn govt will hopefully roll back.

But he may have to betray them first and they may never forgive him for saving them.

But he cannot get elected unless it is with at least the acceptance of people above.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Mon Oct 16th, 2017 at 11:59:54 AM EST
Chris Johns is not some wacko leftwinger or hard line remainer:
Chris Johns

Chris Johns was most recently Chief Investment Officer for global fundamental equities, State Street Global Advisers (SSgA). Previously he was CEO of Bank of Ireland Asset Management until the sale of that business to SSgA. He has worked in financial services, mostly asset management and investment banking, since April Fool's day 1986. Prior to that he was an economist, working in the UK Treasury and the National Institute of Economic & Social Research in London. He also taught economics in London and Cambridge Universities.

During the period 2002 - 2012 he was an appointed member of the Welsh Assmbly Government's Economic Research Advisory panel. (He grew up in Cardiff).

He wrote the columns 'London Briefing' and 'Serious Money' for this newspaper over the period 2002 - 2006.

I think you can take it it that he is pretty much in touch with City thinking, and perhaps big business thinking more generally.  And if what he says is their opinion also, you can be sure that contingency plans for a hard Brexit are rapidly being finalized and implemented. This is not just an academic debate... a hard Brexit is happening as we speak.  What is happening in the negotiations in Brussels is little more than window dressing: why negotiate seriously with someone who can't deliver on a deal anyway?

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Oct 16th, 2017 at 02:19:40 PM EST
[ Parent ]
well yea but no but yea.

I have no doubt that in the upper echelons of the City they have to put plans in place to deal with "no deal", ie default to WTO. But I think that they're already planning to skedaddle anyway; parasites have to feed and they've grown so fat over the years that they're not likely to appreciate the slim pickings soon to be on offer from tory-brexit. However, invoking the concerns of non-entities like Dorries and demonstrated serial failures like Lawson detracts from any argument rather than adding weight.

I still don't think "no deal" is what is going to happen. I think the government would fall if it tried. All along I have suspected that brexit must be attempted by the Tories alone and only the Tories can stop it. The more the 3 stooges make a mess of negotiations, the more the sensible wing (yes, there is one) of the party will take fright. How it will finally play out I don't know, maybe I'm hoping for a miracle. But I cannot believe that MPs will vote for such blatant self harm.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Mon Oct 16th, 2017 at 02:57:42 PM EST
[ Parent ]
A reply I wrote to Oui at Booman seems apt in this context:
I have always expected another election once the outcome of the negotiations is known - so disastrous will they seem compared to the status quo. Ireland, for one, is unlikely to accept any deal involving a hard border the DUP position will make unavoidable.  

However the problem is that any such outcome is unlikely to be clear until the very last minute before March 2019 meaning that an extension of the A50 period would be required to facilitate further negotiations with any new government that emerges.  

As any such extension requires the unanimous approval of the Council, it is anyone's guess whether the EU will agree to this. Many will be so fed up with the whole process by that stage they will just want it to end to enable the EU to move on to more urgent business like Eurozone reform.

Given that Corbyn's politics is so out of sympathy with the increasingly rigtward leaning EU body politic, it is unlikely an agreement with the new government will be achievable even if an extension of the negotiating period is agreed.

Increasingly, a good outcome for anyone requires the equivalent of a political miracle, and I don't count a belief in Unicorns is indicative OF A GOOD OUTCOME.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Oct 16th, 2017 at 03:20:27 PM EST
[ Parent ]
The above was written in something of a hurry in an internet cafe as my battery was running out, but you get the gist. There are headbangers on the EU side as well, and EU politics, in general is not moving in a good direction if it is a rational and mutually optimal solution you are looking for.

If you can't see the current UK Parliament approving any likely negotiation outcome - even if one is eventually agreed - the only possible outcomes are a hard "no deal" Brexit or a general election to elect a government that can agree a deal. If the new government is Corbyn led and without the DUP, at least a solution to the Irish border issue becomes possible, but I doubt most EU leaders (leading centre right and right wing governments) would cut him much slack on all other issues. They screwed Tsipras for less.

It gives me no pleasure to say this, and it is totally against Ireland's national interest, but I can see the UK and EU spiralling out of control in different antagonistic directions post a no deal Brexit creating problems which will take the best part of a generation to fix. The political dynamics are all wrong and what was fringe headbanger stuff a few years ago is become mainstream now.

I sincerely hope I am wrong, but I don't believe the Brexiteers have a clue how much fire they are playing with, and how difficult it will be to put Humpty Dumpty together again.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Oct 16th, 2017 at 03:39:56 PM EST
[ Parent ]
on that I can only agree

keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Mon Oct 16th, 2017 at 04:09:15 PM EST
[ Parent ]
"Once you eliminate the politically impossible, whatever remains, no matter how improbable or insane, must be the truth." - Not Sherlock Holmes
by fjallstrom on Mon Oct 16th, 2017 at 05:17:16 PM EST
[ Parent ]
"I still don't think "no deal" is what is going to happen." - You damn well better be right on this for the sake of everyone in the UK. But, in any case, May will likely go down in history as the worst PM ever in terms of the consequences of what her government's policies and actions produced. And, unlike Thatcher, this is likely to be the judgement of most of the political spectrum. Talk about sacrificing substance for the sake of appearance!

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Oct 17th, 2017 at 04:19:00 PM EST
[ Parent ]
Although as I posted on FB;-

Brexiteers are now saying "No deal is better than a bad deal"

What the fuck are they talking about?? There's no such thing as "no deal" because no deal means falling onto WTO rules (they hope). It's just that WTO rules are the default worst case option. They're what we  make deals in order to to evade.

So ANY negotiated deal is going to be better than no deal, which is really the worst deal.

These free trade fundamentalists are fucking insane.

And the problem is that we have enjoyed a period of such long term stability, gifted to us by those who learned hard painful lessons from more turbulent times, that we now have leaders who are too careless of what they break because they never learned any better.

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Mon Oct 16th, 2017 at 12:18:36 PM EST
Well, yes, this would make sense except you're giving them credit for having thought anything through and for living in a world that consists of something other than soundbites.
by rifek on Mon Oct 16th, 2017 at 04:35:54 PM EST
[ Parent ]
GATT (1948) ascension to WTO membership saves the bacon from "Fourth World" status with Somalia, Sudan, and ... NORTH KOREA.

Shame on Mr Brown!

Diversity is the key to economic and political evolution.

by Cat on Mon Oct 16th, 2017 at 04:45:01 PM EST
[ Parent ]
Rupert Murdock was once asked by a journalist as to why his papers were so rabidly anti-EU.  "That's easy" he said: "when I want something done all I have to do is call 10 Downing street and it gets done. When I call Brussels they may listen politely, but ultimately take no notice."

This is what "taking back control" means to the Rupert Murdocks of this world. For your average rube, not so much...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Oct 16th, 2017 at 06:23:47 PM EST
Same with "Making America Great Again".
by rifek on Tue Oct 17th, 2017 at 06:17:26 PM EST
[ Parent ]
Matthew d'Ancona: Hammond pilloried for daring to look at the Brexit small print

As it happens, I believe that May's public readiness to countenance a "no-deal" outcome reflects a strategy rather than a secret yearning. She calculates that the EU will not negotiate fairly unless its 27 other member states believe we are ready to walk away without an agreement. But, as the months pass and the talks stall, I also sense that a growing number of Brexiteers see "no deal" not as a threat but as an objective. Before the election one cabinet minister close to the talks told me that "life under WTO rules would be perfectly OK, you know." Really?

At the same time, to take a specific example, there is serious talk of shifting from the jurisdiction of the European Medicines Agency to that of the US Food and Drug Administration: the FDA may be in Maryland, but at least it is not subject to the European court of justice. Again: is this truly what Britons were voting for in last year's referendum?

For daring to look at the small print of Brexit and failing to declare the whole process "doubleplusgood", Hammond is now pilloried by the faction within his party that, whatever its numerical strength, shouts loudest. A senior Tory told me recently that what the country needed was not a new centre party but a proper Conservative party. His point was that the Tory movement, once remorselessly committed to the business of government and the hard realities of office, had sailed off into the seas of ideology, captured by a gang of pirates seeking the imagined treasure of Brexit Island.

[Emphasis mine]

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Oct 16th, 2017 at 10:08:12 PM EST
This is why a No Deal is guaranteed until the UK government gets a grip.

... the EU will not negotiate fairly unless its 27 other member states believe we are ready to walk away without an agreement.

First, to the Brexiters, "negotiate fairly" means "giving us what we want and we give you want we want."  They lack any trace of Cognitive Empathy, or in other words, they don't see The Other having valid dreams, desires, wants, needs, and ideas.  

Second, most of the members of the EU could give a flying fuck about the UK.  Of the minority that does one or two ... Poland? ... Spain ... might be willing to shove the shiv in just because they can.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Tue Oct 17th, 2017 at 03:58:29 PM EST
[ Parent ]
Ireland, Holland, Belgium, Germany etc. are quite dependent on trade with the UK, mostly running up big trade surpluses. European businesses are also quite dependent on the City for financial services.  All of these dependencies can be reduced with time, but the initial disruption could be considerable. Nothing on the scale f the disruption to the UK however.  "Fog in the Channel, Continent cut off" comes to mind...

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Oct 17th, 2017 at 04:49:45 PM EST
[ Parent ]
In the short run the EU economy will take on nose.  How badly depends on economic policy.  The EU economy needs a dose of Keynesian Stimulus and Brexit is the perfect excuse?

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Tue Oct 17th, 2017 at 09:37:18 PM EST
[ Parent ]
The EU economy has being growing at quite a health rate recently (by it's own low standards) and can afford to take something of a Brexit hit if need be.

The UK less so...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Oct 17th, 2017 at 10:04:08 PM EST
[ Parent ]
the directly comparable annual growth rate is as follows:

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Oct 17th, 2017 at 10:07:52 PM EST
[ Parent ]
His point was that the Tory movement, once remorselessly committed to the business of government and the hard realities of office, had sailed off into the seas of ideology, captured by a gang of pirates seeking the imagined treasure of Brexit Island.

that is the best description of the behaviour of the Tory party I've seen in ages

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Tue Oct 17th, 2017 at 08:34:00 PM EST
[ Parent ]
His point was that the Tory Republican movement, once remorselessly committed to the business of government and the hard realities of office austere fiscal policy, had sailed off into the seas of ideology, captured by a gang of pirates seeking the imagined treasure of Brexit Island fucking over everyone not already wealthy and capable of bribing them..

Welcome to America. Now if only California would wake up, use their brains, and grow a pair.

They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Thu Oct 19th, 2017 at 07:37:44 PM EST
[ Parent ]
but having one who doesn't appear to know what they want and who probably can't deliver on any deal even if one is agreed.

We are into Dunning-Kreuger country now, where nonsense like May's reverberates through Europe with the tinny fear that being America's ex-favourite puppy dog and quaffing deep the dregs of their kool-aide cocktail of exceptionalism is looking bleak at best.
May is showing get true brit grit by hewing so tenaciously to a suicidally stupid decision.

Hopefully this will leave the Tory party in rags, just as Trump's probable impending demise (Go Larry Flynt!) Will do the same to the Republicans over the water.

The EU will have its hands full enough these coming years dealing with the Kurzes, Wilders and Orbans popping up like continental Farages, further illustrating the neoliberal bent the EU has taken up to now.
Two failing, dated institutions wasting time talking past and at each other while huge nigh-insurmountable problems like climate change and mass economic migrations pile up semi-attended to.

Teresa is whistling past the graveyard with her plummy posh pretentions thinking the EU will bow to her irresistible gravitas and consummate political skills,m when all she's doing is enacting the cliché of Britain being a nation of shopkeepers, completely cynical about anything decent the EU stood for while slimply and vigorously undermining it by inferring all its members were as grubbily beholden to austerity and bankster enabling as Britain's attitude to the EU has been, reeking of bad faith for so long now.
Now it's on parade for even the blindest to to see, Dunning meets Kreuger. Strong and stable.
That's the Wimpy's happy meal awaiting us, oh joy!

(Full of mushy peas, sweeds, rutabagas and malt vinegar, yum. Won't have the pesky EU telling us not to feed brains to our cows or fish our seas to death.)

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue Oct 17th, 2017 at 01:07:13 AM EST
The Brief: Banks, not streets, call the shots - Euractiv
It has always been like that. There is the power of the street, and there is the power of the banks. In Catalonia, it looks like the silent message from the banks speaks more loudly that the boisterous streets.

Caixabank's decision to move its legal headquarters out of Catalonia to calm investors is only the top of the iceberg. More than 1,300 companies have transferred their legal headquarters out of Catalonia due to the current uncertainty, according to the national companies' registry. The message is clear. Those who want independence, but also those who don't, need to prepare for utmost economic hardship. Separatists, of course, assume independence will have a price, but how big the price? That is the question.

UK is not Catalonia and Catalonia's independence drive is not Brexit. But a similar migration of banks is taking place there, if not much bigger. Around 40 banks and financial institutions are planning to relocate from the UK to Frankfurt because of Brexit. Britain's departure from the EU "won't be a piece of cake", top German bankers warn, with consequences which need to be taken into account and prepared for. Moreover, the banks currently stationed in the UK have been warned that they cannot "fly and drive" (park and ride?) by establishing letterbox companies in the EU and keeping their infrastructure on the British isles.

by Bernard on Thu Oct 26th, 2017 at 06:46:24 PM EST
Commission launches probe into UK tax exemption for multinationals - Euractiv
The European Commission decided on Thursday (26 October) to open an in-depth investigation into the UK exemptions granted to multinationals to protect them from tax avoidance rules.

This is the latest effort by Competition Commissioner Margrethe Vestager against tax erosion and tax avoidance practices, one of the Commission's top priorities since 2014.

The executive will look into whether the UK allowed corporations to pay less taxes in their territory by protecting them from anti-tax avoidance rules.

"Rules targeting tax avoidance cannot go against their purpose and treat some companies better than others," Vestager said.

"This is why we will carefully look at an exemption to the UK's anti-tax avoidance rules for certain transactions by multinationals," she added in a statement.

Around 19 member states have Controlled Foreign Company (CFC) rules, which allow authorities to prevent companies from using subsidiaries in tax havens to avoid paying taxes in their territory.

In the UK, the rules permit the tax authorities to reallocate all profits shifted to these offshore jurisdictions back to their UK parent company to comply with the tax regime.

This will have a few people foaming at the mouth.

by Bernard on Thu Oct 26th, 2017 at 06:52:39 PM EST
Ha, I'm sure the UK will respond something along the lines of "sauce for the goose is sauce for the gander too" pointing at Luxemburg, Ireland and others.

either the EU cleans house completely or it's a laughing stock with this tack

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Thu Oct 26th, 2017 at 08:11:34 PM EST
[ Parent ]
The article mentions "a long list" of Margrethe Vestager going after Luxembourg, Ireland (Apple), "and a Belgian tax scheme." And concludes with:
The Commission has two ongoing in-depth investigations into tax rulings issued by Luxembourg to McDonald's and GDF Suez.
by Bernard on Thu Oct 26th, 2017 at 08:23:11 PM EST
[ Parent ]

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