Brexit Thread V - The Final Countdown?!?

[tjs282]

I wonder what the political effects will be when the people who wanted to Brexit realize that Brexit has fixed none of their problems and, in fact, provided an opportunity for the Tories to make most of those problems even worse.

Given that everyone with even half a brain knew already in 2016 that this was exactly what was going to happen if/when Brexit happened, and said so — but that this 'doomsaying' was dismissed as 'Project Fear' by the most publicly prominent (mostly Tory) Leave advocates (and repeated ad nauseum by their useful idiots/ troll-bots) — I could well imagine that at the next General Election, the UK might actually lurch further to the right than it already has, e.g. a landslide victory for the really right-wing Cons, and/or UKIP (aka the 'true believers' who'll do Brexit/trade deals properly — not like those BrINOs we've got in the Commons right now).

I reeeeeallly hope that doesn't happen, but the turkeys Leavers did vote for Christmas Brexit once already (or arguably, every time the UK electorate collectively returns a Conservative majority to Parliament...).

 

[Lexicus]

Given that everyone with even half a brain knew already in 2016 that this was exactly what was going to happen if/when Brexit happened, and said so — but that this 'doomsaying' was dismissed as 'Project Fear' by the most publicly prominent (mostly Tory) Leave advocates (and repeated ad nauseum by their useful idiots/ troll-bots) — I could well imagine that at the next General Election, the UK might actually lurch further to the right than it already has, e.g. a landslide victory for the really right-wing Cons, and/or UKIP (aka the 'true believers' who'll do Brexit/trade deals properly — not like those BrINOs we've got in the Commons right now).

I reeeeeallly hope that doesn't happen, but the turkeys Leavers did vote for Christmas Brexit once already (or arguably, every time the UK electorate collectively returns a Conservative majority to Parliament...).

I don't think this is entirely accurate. I mean, I saw plenty of people talking about this political angle - but most of the "Project Fear" stuff as far as I can tell was based on the genuine belief that simply leaving the EU would have catastrophic effects on the UK's economy. That has turned out to not really be the case so far; it's a useful demonstration that mainstream economics vastly overstates the economic gains (and understates the problems) from "free trade."

 

[Hrothbern]

I don't think this is entirely accurate. I mean, I saw plenty of people talking about this political angle - but most of the "Project Fear" stuff as far as I can tell was based on the genuine belief that simply leaving the EU would have catastrophic effects on the UK's economy. That has turned out to not really be the case so far; it's a useful demonstration that mainstream economics vastly overstates the economic gains (and understates the problems) from "free trade."

The UK is economically still 100% inside the EU... until March 29.
There has only be talking going on since the referendum date June 2016: nothing happened yet.

And when it would come to a May deal, a transition time deal.... we face another 2-4 years talking, without much of a change in the direct economical relation with the EU.
And because nobody knows what is going to happen, and Treasurer Hammond is still able to convince the business that the no-deal risk is somewhere 20-25%...
The only things that economically happened so far is a lower, but not dramatic lower, level of investments and the devaluation of the Pound immediately after the referendum.

A no-deal crash out would be "catastrophic" but would I think still "only" start to bite the country's economy after a year or so, depending a bit how low the Pound devaluates.
Most companies cannot react from one day on another. That effect could very well take 3 years or so to mature.
Longer term effects depend completely on how well a transformation plan is made, how broad politically supported, and consistent over time.
And ofc... "catastrophic" for who ?

 

[Lexicus]

The UK is economically still 100% inside the EU... until March 29.

Yes, that's true. But I seem to recall predictions that if Leave won it would destroy the confidence of businesses and cause a recession pretty much immediately. I suppose I could be mis-remembering.

 

[Hrothbern]

Yes, that's true. But I seem to recall predictions that if Leave won it would destroy the confidence of businesses and cause a recession pretty much immediately. I suppose I could be mis-remembering.

ahhh
ok
These fear arguments were imo nonsense.
The business results do not depend on their confidence !
Their investment planning does, and that goes much much slower.
When for example the GFC hit Germany fully in September 2008, the machine building sector, building the capital assets of ordered equipment, was still booming for a year at highest level ever.

 

[uppi]

Isn't that exciting? First, we had the PM openly admitting the longevity of the Tory party came before a Parliamentary majority for Brexit, and now we have evidence to suggest that the PM is not just incompetently running down the clock, but that she is doing it quite deliberately. If you want betrayal, it seems that Judas Iscariot is already sitting in Number 10.

I would have thought that her actions in the last few weeks should have been evidence enough that she is quite deliberately running down the clock. It has been getting harder and harder to classify her delays as incompetence. So far she has been actually quite competent at clock management (not that the UK Parliament put up much of a fight). No further evidence needed. But admitting it does have the advantage of making it much harder to deny, I guess.

 

[Takhisis]

Yes, that's true. But I seem to recall predictions that if Leave won it would destroy the confidence of businesses and cause a recession pretty much immediately. I suppose I could be mis-remembering.

That is certainly what it was painted as by some people. Generally the same people who had threatened Scotland with more or less the same if it left the UK (especially the threat of ‘you'll never be a member of the EU again!!!’) and then, when Brexit suddenly happened, moved their businesses to other EU member countries.

 

[Cheetah]

I don't think this is entirely accurate. I mean, I saw plenty of people talking about this political angle - but most of the "Project Fear" stuff as far as I can tell was based on the genuine belief that simply leaving the EU would have catastrophic effects on the UK's economy. That has turned out to not really be the case so far; it's a useful demonstration that mainstream economics vastly overstates the economic gains (and understates the problems) from "free trade."

For what it's worth, it's estimated that the cost of Brexit -- even as it hasn't happened yet! -- to the UK economy is already non-trivial:

That is the exercise that John Springfield at the Centre for European Reform is regularly doing, and he calculates that GDP was 2.3% lower in September 2018 as a result of the Brexit vote. That roughly translates into the average household losing almost £2000 worth of resources (mainly lower private consumption, but also lost public spending and investment). This number is broadly consistent with estimates the Governor of the Bank of England gave in May, using a different method.

To get a handle on how much public resources we are currently losing as a result of Brexit, Springfield calculates that GDP loss would amount to taxes being lower by £17 billion a year. Given the way this government runs its fiscal policy, that means we could have had tens of thousands more police officers and nurses if Brexit had not happened. This isn’t a forecast, but an estimate of what Brexit has already cost us.

Source

 

[Hrothbern]

For what it's worth, it's estimated that the cost of Brexit -- even as it hasn't happened yet! -- to the UK economy is already non-trivial:
Source

Nice articles
Yes... damage, but not biting, and the effect difficult to tag to Brexit for the ordinary people reading their newspapers.... boiling the frog.

The UK Doppelganger model used, based on a mix of several western economies, empiral grounded on the years since 2009. Practical.
The analysis of that empirical result trying to understand that 2.3% gap going for the GDP devaluation (inflation effect from import prices up) and the levelling of investments since the election where Cameron won.
I think the weight of the US in that UK Doppelganger mix is pretty high, because the US did quite well the last couple of years. I also do not see the relative effect of population growth adjusted for (in the US higher than the UK)
But a damage of 0.5%-1.0% GDP per year sounds very reasonable to me.

I like his remark on the risk of getting a May deal that can end up in a new cliff edge no-deal end at the end of the 2-4 year transition period, which can be fairly or completely mitigated with a customs union base agreed NOW in the political declaration appendix of the May deal. But some people believe that the UK is better of without it to have more power in the 2-4 year negotiation with the EU.
BUT at the cost of 2-4 years uncertainty for the business, with further postponing of investments. => from 2015 as start and 2021 up to 2023 as end, a stagnating investment period of 6-8 years !!!

Will investment bounce back once Brexit uncertainty has been resolved? Certainly not if we leave with no deal, because industry's worst fears will have been realised. Even if we leave on the terms of the current Withdrawal Agreement there are two reasons to think the investment bounce back will be small. First uncertainty does not disappear. Will the government manage to agree a new trade relationship before the transition period runs out, or will we go over another No Deal cliff edge?
https://mainlymacro.blogspot.com/2019/02/the-economic-cost-of-brexit-decision.html

I posted on that risk before.

A similar boiling the frog effect will happen during an extension of Art 50 and those 2-4 years transition period (when there would be a May deal).

In a no-deal Brexit in March 29 that public awareness on what happened will go faster. Starting with the UK GDP becoming much smaller in the international comparisons from the Pound devaluation.
No longer nr 5 in the world, but nr 7 behind France and India.
And when Italy does not go rogue, in 5 years or so nr 8 behind Italy.

Unless there is a broad parliamentary coalition building up the UK again.

 

[Mega Tsunami]

In a no-deal Brexit in March 29 that public awareness on what happened will go faster. Starting with the UK GDP becoming much smaller in the international comparisons from the Pound devaluation.
No longer nr 5 in the world, but nr 7 behind France and India.
And when Italy does not go rogue, in 5 years or so nr 8 behind Italy.

Or maybe not.

From the Telegraph today:
The eurozone’s coming recession will confirm Brexiteers’ warnings.

Remind me: what’s so great about the single market and the single currency again? The latest economic statistics from the eurozone are appalling, and point to a continent that is sleepwalking into a catastrophic recession. Our own establishment is too busy self-flagellating to have noticed, even though a eurozone meltdown would not only hurt British businesses and workers but could transform the Brexit negotiations.
<snip>
Between 1999, when the euro was launched, and the start of 2017, the latest period for which IMF data is available from Bloomberg, the eurozone’s GDP grew by 26 per cent, against the UK’s 44 per cent and 42 per cent in the United States. Italy is up by just 6.7 per cent and Greece by 1.3 per cent; both have suffered two wasted decades.

If being part of the single market and customs union mattered so much more than any other policy, the eurozone would have boomed. Yet it didn’t, and the voters know they have been sold a pup.
<snip>
Of course, the UK has underperformed these past two years; and yes, Brexit uncertainty, compounded by the Government’s incompetence, was one important reason. Yet this brief period of EU overperformance is ending. Eurozone industrial production was down a calamitous 4.2 per cent, year‑on-year in December, led by a 6.7 per cent collapse in Spain, 5.5 per cent in Italy and 3.9 per cent in Germany. French industry’s crisis was less pronounced at minus 1.7 per cent; Britain did slightly better again, by shrinking only 1.2 per cent.
The creation of the single market and its unified regulatory zone has delivered pathetically small results. A decade ago, the EU Commission calculated that it had only increased Europe’s economy by 2.1 per cent, a trivial number. It is likely that the UK will have gained even less: we don’t rely as much on EU markets, we specialise in services (where the single market is less complete), and we already had a more pro-competition environment.
The euro’s failure is even more disastrous. The huge boost to growth it was meant to generate by eliminating transaction costs and uncertainty never materialised. There was no free lunch, no spurt, no permanent upward shift in performance. The downsides have been cataclysmic – mad booms and busts in peripheral economies and the incompatibility between national social democracy and European fiscal policy exposed for all to see.

https://www.telegraph.co.uk/busines...g-recession-will-confirm-brexiteers-warnings/

 

[Hrothbern]

In a no-deal Brexit in March 29 that public awareness on what happened will go faster. Starting with the UK GDP becoming much smaller in the international comparisons from the Pound devaluation.
No longer nr 5 in the world, but nr 7 behind France and India.
And when Italy does not go rogue, in 5 years or so nr 8 behind Italy.

Unless there is a broad parliamentary coalition building up the UK again.

Or maybe not.

From the Telegraph today:
The eurozone’s coming recession will confirm Brexiteers’ warnings.

As you can see from the list below if the Pound devaluates with 0.51% from the average of 2018 ($1.32) to $1.31, the UK rank is nr 6. And if the Pound devaluates with 4.23% to $1.26, the UK rank is nr 7.
I think this is not really a discussion point. It just will happen: from nr 5 before Brexit to nr 7 directly after the no-deal March 29.
In a no-deal at March 29, the Pound is estimated to go down to $1.00 - $1.10, which is between 16.7% - 24.2%.
Italy is a bigger leap to "pass" because it is at a distance of 25.7%. And therefore depends on how deep a no-deal will bite in the UK economy, and ofc how Italy develops (and ofc the Euro-GBP rate).

Per the International Monetary Fund (2018)[17]
Rank Country GDP
(US$million)
World[20] 84,835,462
1

United States 20,513,000
2

China[n 1] 13,457,267
3

Japan 5,070,626
4

Germany 4,029,140
5

United Kingdom 2,808,899
6

France 2,794,696
7

India 2,689,992
8

Italy 2,086,911
9

Brazil 1,909,386
10

Canada 1,733,706

I used that ranking in my post not to offend people in the UK, but because such a simple ranking is what everybody, including readers from the Telegraph, the Spectator, etc or the Morning Star will experience as significant enough to get reality sinking in.
And Italy is a bit borderline because the growth of Italy is not that solid, but with Italy it would push on GDP terms, not the nukes, the UK out of the G-7.

Now... I come back in another post on that Eurozone story and the GDP growth comparisons suggesting that the UK is better off outside the EU.
But I would not like to withhold a recent article in the Guardian based on statements yesterday by the PM of the Netherlands on Brexit. The first time he really said something about Brexit, more in the way of our national politics culture: polarising is a sinn, but blunt and direct discussions are normal. Do mind that the Netherlands is as small country much more inclined to look around in the world than a bigger country, and therefore also used to see our relative smallness, especially with Asia growing.
(Mark Rutte is PM since 10 years and a slow moving neo-liberal. He would like to liberalise faster, but being forced to coalition cabinets, consensus, consensus... that goes slow)

Dutch PM on Brexit: UK is a waning country too small to stand alone
Mark Rutte gives withering verdict as he warns against ‘devastating’ no-deal scenario

Britain is a “waning country” and too small to stand alone on the world stage, the Dutch prime minister, Mark Rutte, has claimed in a withering assessment of the UK’s exit from the EU.
Rutte, who has emerged as a key player in the Brexit talks over the last two years, also warned in an interview that the UK looked to be sliding off the “precipice” towards a “devastating” no-deal scenario
“Who will be left weakened by Brexit is the United Kingdom,” he said. “It is already weakening, it is a waning country compared to two or three years ago. It is going to become an economy of middling size in the Atlantic Ocean. It is neither the US nor the EU. It is too small to appear on the world stage on its own.”
Rutte was speaking after a speech in Zurich on Wednesday in which he highlighted that the “chaos” of Brexit showed “there’s no such thing as splendid isolation”.
https://www.theguardian.com/world/2...ning-country-too-small-stand-alone-mark-rutte

 

[Kyriakos]

Well, that comment by rutte has roughly 0% chance to produce new remain supporters in england.

 

[Hrothbern]

Well, that comment by rutte has roughly 0% chance to produce new remain supporters in england.

That's what you get when people have the habit to give their blunt and direct opinion or say nothing at all.

Do you recognise the type ? The farmer, the craftsman worker, the no-nonsense type ?
As long as that is not polarising, not evil minded, etc, I prefer that very much over politicians that are champions in spinning.

 

[Kyriakos]

That's what you get when people have the habit to give their blunt and direct opinion or say nothing at all.

Do you recognise the type ? The farmer, the craftsman worker, the no-nonsense type ?
As long as that is not polarising, not evil minded, etc, I prefer that very much over politicians that are champions in spinning.

Are you sure he didnt aim to secure more voters for his own party?
Otherwise his statement seems just out of place atm; more fodder for the sun and the teletubgraph.

 

[really]

Well, that comment by rutte has roughly 0% chance to produce new remain supporters in england.

That ship sailed long ago.
A harsh dose of reality is all that will resolve this now.

 

[Hrothbern]

Are you sure he didnt aim to secure more voters for his own party?
Otherwise his statement seems just out of place atm; more fodder for the sun and the teletubgraph.

It is not a statement like Spain on Gibraltar, or France on the fishing industry...which BTW because of Dutch fishing industry could have been used as well if it was just for voters.
But what if other politicians of the other political parties were at that meeting in Zurich and had been asked ?... almost all of them would have said the same.

Ofc one can list up all possible reasons and pick one and amplify that, like:
* he said it against populist parties in NL that want out or prefer the northern EU countries to join in a new-Hanseatic League.
* he said it to protect the Dutch trade with the UK who will get a blow from a no-deal Brexit, he said it to protect the Dutch economy from the damage of Brexit
* he said it because he is afraid that Corbyn takes over the power in Westminster and when Corbyn visited him some months ago he was horrified by Corbyn's ideas how to move on.
* he said it to show how tough and important he is
* he said it because he is angry at Theresa May because she lied to him personally.
etc



But what about
* someone just saying how plain stupid it is, considering all the info he as PM has
* someone knowing in detail many of the lies of Theresa May (the "gap" between what May said in the EU council with all the other 27 PM's, and what she says in Westminster, including all the U-turns)
* someone fundamentally opposed to the polarised power abuse of Theresa May, effectively blocking a consensus solution of the UK Parliament.
* someone knowing quite a lot of the confidential statements because he is like so many PM's of the EU mostly involved through texts, telephone, small side-talks or visits



It is anyway, unlike in the UK, not on the Dutch national news of the NOS website, none of the 31 articles with picture or 42 topics listed in text only. => no voter effect.
not yet
Perhaps it becomes newsworthy because of the reactions in the UK.

Ohh... when I made that post... kind of anticipating this or a similar question (not from you actually )... I could not resists making screen shots of the national news website... time stamp 12.07 today.
Shall I post them under a spoiler ?

 

[Kyriakos]

Well, it wouldnt be a complicated trajectory to guess.

 

[Hrothbern]

Are you sure he didnt aim to secure more voters for his own party?
Otherwise his statement seems just out of place atm; more fodder for the sun and the teletubgraph.

I saw at last what this statement in Zurich was about.
You have apparently every year in Zurich the Churchill lecture on the EU. And this year Mark Rutte was invited to do that. Perhaps there were more as well. Churchill was the first one in 1946 to speak in Zurich on a new Europe.
Her is the link to the text of that lecture: https://www.government.nl/documents...e-europa-institut-at-the-university-of-zurich

He does not say really that much. Just a lot of consensus confirming around main stream thoughts on the future of the EU regarding some EU domestics and geopolitical positioning in the multi-polar world.
And he is not a federalist. That's for him something for much later if at all.
The part where he says something on Brexit is not even a punchy wake up line for an audience to pay attention again.

But first a few words on the basic principles that we should hold on to, no matter what. The importance of sticking together is obvious. The importance of a rules-based multilateral world order is equally self-evident. But today let me add a third principle, which is the centrepiece of my message today: the importance of being less naïve and more realistic.

First of all, we should stick together, now more than ever. Because if the chaos of Brexit teaches us anything, it’s that there’s no such thing as splendid isolation. I’ve often argued that the mere fact of being embedded in the EU framework makes us stronger and safer. I’ve taken a firm stance on an EU that is big on the big things, and small on the small things. And I’ve said many times before that I believe the EU is stronger when a deal is a deal. In the EU there can be no haggling over democracy and the rule of law. We must always draw the line when fundamental values come under pressure, as they have in countries like Poland and Hungary. But a deal is also a deal when it comes to the euro and the Stability and Growth Pact. Because here too, bending the rules can erode the entire system, and we cannot have that. To me the whole idea of the EU is a group of independent member states working together to bring each other to a higher level of prosperity, security and stability. Unity is the source of our capacity to act in the outside world. Let me emphasise that, for me, there’s no contradiction between strong member states and a strong EU. Quite the opposite, in fact. Without strong member states there cannot be a strong EU.

Other remarks were from questions from the Financial Times, the Zuricher Zeitung, El Pais, etc.
Including one question about populism in the EU elections. The voters

Rutte is not afraid of the emerging populist parties. In El País he says: "In fact all politicians are populist, what we have to fight against is the kind of politics that scares people and that refuses to make agreements, so that problems are not solved."
Rutte does not think populist parties will get a majority in the European Parliament after the coming elections. "There is still great support for the EU and, after the elections, there are several opportunities for forming coalitions in the EU."

 

[Arakhor]

The PM's latest strategy to wheedle a further compromise from the EU (without of course giving up anything in return) has backfired, with another defeat in the Commons (this time by 45 votes). The ERG abstained because the motion at hand, broadly supporting the earlier motion to replace the backstop with something else, could perhaps be interpreted to support the idea of ruling out a no-deal exit. More extremist boot-licking will be necessary, no doubt, because the PM certainly won't be reaching across the floor to Labour.

 

[Takhisis]

This means that she gets to stay in power for a couple more weeks, right?


There's always the alternative that she's keeping poker-faced and actually wants to scupper any crazy deal by ABdePfJo. &Co. so that the EU starts indefinitely postponing Brexit to save the UK from itself.
But Occam's razor still applies, doesn't it?