Wednesday, 29 June 2016

Cautious optimism

Ambrose Evans Pritchard in the Telegraph today notes how the temporary blip in the markets was enough to push weak Italian banks over the cliff. And while the markets have shrugged off the Brexit vote, with the scribblers in the city realising that little changes for a while yet, this will serve as a reminder to the EU that a bungled Brexit, putting a gun to our heads causes problems for them too. For instance, should they choose to withhold banking passporting rights that is a potential threat to 1% of our GDP. Just the very idea of this rippling through the markets could seriously hurt the Eurozone.

This pretty much confirms what I have been saying for quite some time. We will get an amicable deal and that we are not without leverage. We will be able to secure some concessions on freedom of movement out of good will but not without some concessions in kind. Chances are we will take whatever is on offer. The bottom line is that nobody is served by dicking around. The French and Spanish seem to have worked this out already by refusing to engage with Nicola Sturgeon, which would actually be a hostile act on their part to intervene in the sovereign affairs of the UK.

It seems the mood music is one of cooperation out of enlightened self interest. Talks of punishment beatings always were entirely a bogus suggestion. Though the last thing we need in these proceedings is idiotic grandstanding which is why we do not need Boris Johnson anywhere near it. Having a man-child like him around could prove very damaging.

Meanwhile the media is waking up to the EEA as a solution but have still not grasped the concept of it being an interim measure. We need to be extra clear this is only an interim measure so we do not end up in a cul-de-sac. In any case, in terms of resources committed, we are looking at a diplomatic Berlin Airlift.

We should take the market recovery as a good sign but I warn against complacency as there will be further surprises along the way. We still have to renegotiate agricultural subsidy quotas which could very easily stall the process unless we can agree them separately. Such minutia can cause talks to stall. Any hint of that could see market jitters as the consequence of failed talks is ejection from the EU without an agreement. That would be devastating.

The real world effects in the meantime will still be significant though. Some of which will be sheer petulance from the likes of Richard Branson, in which case that is entirely his loss in the long run - and then there is the announcement by Siemens to suspend plans to manufacture wind turbines. I think this is more to do with them detecting a swing to the right in UK politics whereby such frivolities will be first on the chopping block as we regain control of policymaking. Just as well in any case. Siemens are one of the most corrupt companies on earth and wind turbines are a waste of money.

There is still every reason to believe Brexit is the right path and we have every right to be optimistic but we should proceed with caution. A lot can go wrong - especially if our government does not have adult supervision. Handing such proceedings to Boris Johnson would be like handing a Ming vase to a chimpanzee. Amusing to watch - but not if it's your vase.

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