A ‘no deal’ Brexit?

I haven’t discussed the Brexit for a while … mainly, I guess, because, like almost everyone else, I’m not quite sure about what’s happening.

Britain and the EU negotiated something that seemed, to some, like a deal; it included a ‘soft’ border between the UK (Ulster) and Ireland and a €45 Billion financial settlement. According to an article in the Financial Times, “Whatever political misfortunes may befall it, the EU’s negotiators see one part of the Brexit deal as all but sacrosanct: the withdrawal treaty.” But many in Britain’s “withdraw” community see the terms of the withdrawal treaty as either punitive or impractical and the UK’s governing Conservative  Party appears to be split right down the middle and, according to The Economist, the Labour “party is profoundly divided over Brexit. The Labour Party is as much an unwieldy alliance as the Tories: this time between the middle-class intelligentsia and the manual working-class. Or what Sidney and Beatrice Webb called “workers by brain” and “workers by hand”.” This mirrors the split in Tory ranks between an “alliance of what might be called the City and the Country. The City consists of big business and big finance. It believes (for the most part) in global markets and liberal economic policies. The Country consists of country squires and the provincial bourgeoisie. It believes in conserving all that is best in Britain from country estates to market towns.

The fear is that Britain will exit the EU on 29 March 2019 without any deal at all … This terrifies the EU, according to the Financial Times, because “A House of Commons defeat for the exit treaty could also be used by both sides to engage in brinkmanship. Some Brexiters would want the UK’s €45bn financial settlement withheld unless the EU offered better terms on a free trade deal … [and] … The EU is preparing for a no-deal scenario so that it could push through contingency measures rapidly. The commission thinks it could pass the necessary rule changes in as little as five days and has also warned member states that special arrangements on the EU budget — which will lose a big net contributor — may be necessary.

The EU hates Brexit for two reasons:

  • The fifth largest economy in the world (after the USA, China, Japan and Germany) is leaving what is, arguably, the most successful trading block since the Hanseatic League; and
  • If Britain can leave without too much pain and suffering then what is to stop others?

Britain dislikes the EU for two reasons, also:

  • It, like many (most) nations states, is unwilling to concede as much sovereignty as the Euro-federalists want; and
  • european-union-flag-ce-marking-symbol_fa32581948The EU is not working for all of its members ~ the Union notion is too much for many, including the British, while the old Economic Community model was too little for many others. Europe is not monolithic, the differences ~ social, cultural, economic, political and historical ~ between, say, Ireland and Romania or Portugal and Finland are too vast to be bridges by a free trade zone or even by a freedom of movement treaty.

My current guess, and it’s really just a wild guess, is that Prime Minister May can cobble together a Conservative majority for a “hard Brexit,” even though that almost certainly would trigger a recession, perhaps a major one, for Britain and some serious national unity challenges. My suspicion, however, is that she might have to agree on a “no deal Brexit” which is what some Eurosceptics really want. I think a ‘no deal Brexit‘ would be more costly, in the short term, than a ‘hard Brexit.’ A no deal Brexit might seem to leave Britain in a better negotiating position than any deal at all but I believe it would have the opposite effect, even a very hard Brexit would leave many trade and business arrangement with the EU in good shape, which would make Britain an attractive trading partners for, say, China and India and America, but a no deal Brexit would make Britain a much less powerful economy, probably still in the top ten but maybe even just displacing Canada in tenth spot.

Tempus fugit.

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