To think wrong …

To think wrong ...

said Andreotti, we often take it. And so what I wrote in the previous article happened: Boris Johnson has won, or rather have overturned Corbyn and the Liberal Socialists or Liberal Democrats, whatever absurd and contradictory this abbreviation indicates.

There are a lot of predictions about how this Brexit thing can proceed, and everyone says that Brexit will go faster now. I think it's one of the most likely options, but it's not entirely obvious.

First of all, we need to understand that Brexit has been broken into TWO operations: the first (the one we are discussing) is to discuss the conditions for abandonment. The second (which starts if the treaty is signed) serves to define future relationships. What we have so far is the first segment. Which is not the whole Brexit, for many reasons.

First, the first segment of the Brexit agreement requires that the British remain bound to the EU for as long as it takes (ideally, a couple of years) to negotiate and resolve all the technical issues related to the "divorce".

When Trump deludes himself that he will begin negotiating a trade deal with the British on January 1, he is actually dreaming. A time set by the agreement itself must first pass. Same thing for those who dreamed of evading the recent tax rules.

And this makes me think there is some surprise underneath. In the sense that Johnson could ask parliament to sign the treaty already discussed, or he could simply say "since I'm stronger, I can now negotiate a better treaty".

Having little time available to negotiate, and not being able to go beyond December 31st because he promised it, and having the pressure of the USA and the most notable tax evaders of the whole kingdom (nobles included), it is still very possible that Johnson go for the no-deal.

You will say that this scenario would be the most feared in Europe, but in reality things are not exactly this way. If the British sign the treaty, the EU will find itself dealing with future relations with a rather strong British government. And at that point, the risk is that internal divisions within the EU will emerge.

On the contrary, if a no-deal arrives, the EU would be there to resist the financial shock, and there would no longer be the problem of dealing with future relations from the perspective of a quasi-intra-European policy: it would become a matter for some European commissioner .

Thus, it is possible that the EU also seeks to obtain a no-deal, and that in some way it "cooperates" for the purpose.

Brexit no-deal, that is, is a better prospect for both parties. Economically it is more demanding, but politically it suits the EU and the British. I would not exclude, therefore, that Boris Johnson pulls a rabbit out of his hat to blow everything up, and the EU goes after him catching the ball.

There is also another reason for the dispute: EURO bond clearing houses. This is a tour of around ~ 900 MLD / year which takes place in London today. Obviously, now everyone in the EU would like this activity to move to the continent. They have received an extension of one year which is about to expire, and I say "extension" because in the case of securities in EURO the EU would have every right to request that the activity take place in Frankfurt, or in Paris.

As you can imagine there is a queue to take those pennies, and Lagarde is too pro-French to leave them overseas. Also because it is a strong enough argument to cause its resignation: 900 billion / year weigh more than the Lagarde's head, and also that of Macron if necessary.

In the case of a Brexit no-deal for the EU (and for the ECB) it would be very simple not to renew any extension and request a European license to work with European customers. In this case, even if operationally they could perhaps remain in London, in reality they would be under the control of the European regulator, with all the obligations (including fiscal and accounting) that this implies.

On this topic, Boris Johnson agrees with the Brexit Deal, while the EU agrees with the No-Deal: it is clear that dealing with such a thing at the EU is not convenient because there are TWO European contenders (the Paris and Frankfurt stock exchanges). ) against a single politically united government. No European negotiator would like to be in that situation, and they would much prefer a "drastic" solution: first impose that the clearing houses obey the European regulator (thanks to a "providential" Brexit No-deal), and then decide between Frankfurt and Paris .

Another important point is the military industry. France and Germany would like a continental one to feed their internal industry, while the British will press for keeping arms development alive. Also in this case, the British would agree on the Brexit + Deal because they could negotiate later, while France and Germany would find it easier to impose a "continental" position with the Brexit No-Deal.

In addition, the British have two questions to solve, and in a heavy way:

  • The Scottish question.
  • The Northern Irish issue.

The Scots could, in the next two years, shake the waters during the negotiation by clamoring for a referendum to remain in the EU, which implies secession from the UK. They could also limit themselves to less, asking the EU that different conditions apply to Scotland.

The Irish knot, on the other hand, will have to be resolved, and will hover throughout the post brexit trafficking (ie the second section, when discussing future relationships. Johnson would gladly do without it during future negotiations, so London would prefer the brexit with the no-deal.

So ultimately, we have a fairly complex situation. The strategy is about this:

Theme EU convenience UK convenience
Tax evasion and local interests of English nobles Brexit Deal Brexit No-Deal
Clearing House Brexit No-Deal Brexit Deal
Arms market. Brexit No-Deal Brexit Deal
Existing commercial treaties. Brexit No-Deal Brexit Deal
Internal politics. Brexit Deal Brexit No-Deal.
Territorial question. Brexit Deal Brexit No-Deal

The outcome, that is, is not at all obvious. Those who think that the path to the agreement has already been traced are wrong: on the contrary, today as today everything has become indistinct. Both parties have many advantages both in the case of No Deal and in the case of Deal.

So those who celebrate Johnson's victory in the elections as "the victory that solves the problem and leads him to a certain conclusion" are only deluding themselves.

The situation is now more confusing than ever.


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