Is the end nigh for the Euro? [vol. 3]

[LongQ]

loafer123 said:

Welshbeef said:

stongle said:

Welshbeef said:

A share of the debt for a share of the assets.
No assets = no debt.

You a divorce lawyer, or something?

Hopefully those (enthusiastic amateurs I think was a cheeky joke) negotiating are a tad more pragmatic. FWIW, the 35bn to get shot of the place would be worth it (35 is where I think it'll land +\- 5). Happy to put in if they're having a whip round (or is it reacharound)?

Just using the SNP argument against rUK on taking on divorce settlement and share of assets they have paid for if not no payment.

I'm happy to make it £50bn if they'll take Scotland off our hands.

We could just offer them HS2. It would save them from having to buy it later.

[Andy Zarse]

stongle said:

Bit disappointing this has dropped down the pages….

Anyway, I was at an event at JP Morgan yesterday with Andrew Marr as the keynote speaker. Despite being a thoroughly all round top chap; he had some very interesting insights on Brexit (and other political skull doggery).

Being fairly in the loop with all matters political (and the people at the horses mouth), there was some really interesting insight. In no specific order….

• It’s a hard Brexit; but with frictionless access to the EU is looking to be the most likely outcome. Germany is heavily pushing for a low tariff access and as little trade barriers as possible. Although we will be out of the Free Market and customs union, a punishing deal is not being pursued regardless of the EC’s rhetoric. That saying the EU has several hundred hardened trade negotiators; we currently only have a few enthusiastic amateurs!. Opening up a second front with the UK is definitely not on the agenda given the economic problems within the Eurozone and problems they have in the Eastern Europe (very anti-EU) and that Bulgaria and others if not; could become proto-fascist states. Also very interesting was that many of the Brexiters in Govt do NOT want to slash immigration. Like many others, they view this as economic suicide (interesting parallel with the US and Trump; with Silicon valley taken him on viz immigration) …
• The most contentious issue on Brexit will be the divorce bill. The UK has signed up for various commitments that it will have to honour. Whether its the full EUR50bn, is another matter. We debated this quite a bit after. The consensus view is that 50bn is chump change in the scheme of things (especially if you look at the deficit). The problem will be selling that to the Daily Mail. This will become May’s biggest problem going forward. It really isn’t a lot of money to move on and get out of a protracted and damaging negotiation (its only about 7 times what RBS loses a year – if we settle at full whack). Selling a number that large to the JAMs etc is going to proper difficult especially when viewed against NHS funding. Its going to be quite a polarising debate. I wonder if the City might stump up some of it (and probably we should).
• Marine le Pen, is more anti-EU than the UK. She absolutely wants to break up the Eurozone, and Macron has a very difficult task to beat her in the upcoming election. Not impossible, but Le Pen can mobilise votes much more effectively. Brexit then Trump, she sees herself in the ascendency.
• Scotland come up, and that was interesting. Sturgeon has a real problem, as there will be no direct access deal she will have to call the referendum either this year or next. The problem being is that – economically Scotland cannot exist independently NOR would be eligible for EUR membership (and it takes lots of years to get membership). It’s quite likely that the referendum would be lost, thus finishing the SNP.
• Italy’s economy and looming constitutional crisis just adds to the EU woes.

Obviously a lot of this has been discussed already, but fascinating that these are Government discussions from insiders.

I was talking to Stephanie Flanders at a recent JPM do, and whilst she was broadly in agreement with these sentiments on the EU/Brexit, I think her insight was far less illuminating. This is probably partly because she is out of the political loop these days and partly because I insisted on asking her about her father and how he came to write the Hippopotamus Song. I am not she was impressed with me.

[paul789]

Andy Zarse said:

stongle said:

Bit disappointing this has dropped down the pages….

Anyway, I was at an event at JP Morgan yesterday with Andrew Marr as the keynote speaker. Despite being a thoroughly all round top chap; he had some very interesting insights on Brexit (and other political skull doggery).

Being fairly in the loop with all matters political (and the people at the horses mouth), there was some really interesting insight. In no specific order….

• It’s a hard Brexit; but with frictionless access to the EU is looking to be the most likely outcome. Germany is heavily pushing for a low tariff access and as little trade barriers as possible. Although we will be out of the Free Market and customs union, a punishing deal is not being pursued regardless of the EC’s rhetoric. That saying the EU has several hundred hardened trade negotiators; we currently only have a few enthusiastic amateurs!. Opening up a second front with the UK is definitely not on the agenda given the economic problems within the Eurozone and problems they have in the Eastern Europe (very anti-EU) and that Bulgaria and others if not; could become proto-fascist states. Also very interesting was that many of the Brexiters in Govt do NOT want to slash immigration. Like many others, they view this as economic suicide (interesting parallel with the US and Trump; with Silicon valley taken him on viz immigration) …
• The most contentious issue on Brexit will be the divorce bill. The UK has signed up for various commitments that it will have to honour. Whether its the full EUR50bn, is another matter. We debated this quite a bit after. The consensus view is that 50bn is chump change in the scheme of things (especially if you look at the deficit). The problem will be selling that to the Daily Mail. This will become May’s biggest problem going forward. It really isn’t a lot of money to move on and get out of a protracted and damaging negotiation (its only about 7 times what RBS loses a year – if we settle at full whack). Selling a number that large to the JAMs etc is going to proper difficult especially when viewed against NHS funding. Its going to be quite a polarising debate. I wonder if the City might stump up some of it (and probably we should).
• Marine le Pen, is more anti-EU than the UK. She absolutely wants to break up the Eurozone, and Macron has a very difficult task to beat her in the upcoming election. Not impossible, but Le Pen can mobilise votes much more effectively. Brexit then Trump, she sees herself in the ascendency.
• Scotland come up, and that was interesting. Sturgeon has a real problem, as there will be no direct access deal she will have to call the referendum either this year or next. The problem being is that – economically Scotland cannot exist independently NOR would be eligible for EUR membership (and it takes lots of years to get membership). It’s quite likely that the referendum would be lost, thus finishing the SNP.
• Italy’s economy and looming constitutional crisis just adds to the EU woes.

Obviously a lot of this has been discussed already, but fascinating that these are Government discussions from insiders.

I was talking to Stephanie Flanders at a recent JPM do, and whilst she was broadly in agreement with these sentiments on the EU/Brexit, I think her insight was far less illuminating. This is probably partly because she is out of the political loop these days and partly because I insisted on asking her about her father and how he came to write the Hippopotamus Song. I am not she was impressed with me.

Hmm, Flanders. Bit of a secret crush on her at some point.

[Murph7355]

fblm said:

Great post. With respect to the divorce bill one thing I'm not clear from the reporting is if the 50-100bn number is net or gross. It is only right that we pay into programmes that we have already committed to but obviously we are usually significant beneficiaries of the same, or are we expected to still pay whilst getting cut out of any remaining benefits?

Agree on the great post....

The "divorce bill" only becomes difficult to sell if we aren't expected to be able to benefit from those investments still. Just like closing down any complex piece of work "early", I very strongly suspect the 50bn will be able to be broken down into categories:

1. stuff that's barely out of the starting blocks and can be stopped (or at least we can be removed from it, including our funding)
2. stuff where the commitment needs to remain and that we can still benefit from
3. stuff where the commitment needs to remain but that we cannot logically get benefit from...but the stuff is not too far gone that budgets cannot be rebalanced
4. stuff where the commitment needs to remain but that we cannot logically get benefit from...but where budgets cannot be rebalanced

As with everything on Brexit, the EU will be starting with "everything" in pot 4. We'll be starting with it all in pot 1.

After not very long some things will be spread into 2 and 3. 50bn isn't much money for EU initiatives so I doubt there are that many discrete items to be discussed. And if our team do the job well enough, explaining it to the electorate should be relatively straightforward IMO (only pot 4 is a problem). But they MUST avoid trying to dumb down the message/soft soaping to appease to what will almost certainly be a minority who don't understand the word compromise. (Pensions are likely to be a big one IMO, and a thorny one for the govt bearing in mind the overly generous arrangements our own politicians get!).

I am assuming the 50bn includes "commitments" well beyond 2018. First bit of business on 31st March should be shutting off the tap for any commitments beyond 2018 (they should have been doing this since 24th June).

There's some interesting info in here:

https://www.cer.org.uk/sites/default/files/pb_bark...

With some of the other items noted in stongle's post I'm not convinced the closing statement will bear out, but it will be fun watching.

[NJH]

Agreed. Newsnight or This Week, I can't remember were trying to claim that the exit bill will be electoral suicide. I agree with you guys its a drop in the ocean really, and paying up say £10BN for 5 years followed by a few hundred £M PA for the cross border stuff we will continue to support is a price well worth paying compared to the £10BN or so PA net contribution at the moment. Of course with the caveat that a close to frictionless free trade deal is a realistic possibility.

[anonymous-user]

Murph7355 said:

https://www.cer.org.uk/sites/default/files/pb_bark...

Thank you, more good stuff.

"The cost of retirement benefits for EU officials may well be the most politically charged issue." - Er yes I think that's a fair comment given how few Brits work for the EU! The press is going to go apoplectic. More Romanians work for the EU than Brits!

[paulrockliffe]

That is interesting. What stands out is the argument that we should pay in line with our contribution rate. Presumably that means if a net recipient were to leave the EU would actually pay them to leave.

Of course they wouldn't and that's why that argument is bks.

[Blib]

Netherlands holds inquiry on whether it could ditch the euro

http://www.telegraph.co.uk/news/2017/02/25/netherl...

[Mrr T]

Blib said:

Netherlands holds inquiry on whether it could ditch the euro

http://www.telegraph.co.uk/news/2017/02/25/netherl...

At last a post about the euro.

Can I please ask the brexit posters either to revive one of the brexit threads or start a new one and not post on here. The UK is only effected by a euro break up via the IMF.

If you look back this thread was a sensible discussion on the euro crisis. I used to post on it and it changed my mind about whether grexit was a solution to Greece's problems.

[stongle]

Murph7355 said:

I am assuming the 50bn includes "commitments" well beyond 2018. First bit of business on 31st March should be shutting off the tap for any commitments beyond 2018 (they should have been doing this since 24th June).

There's some interesting info in here:

https://www.cer.org.uk/sites/default/files/pb_bark...

Thanks for the link. Interesting it quotes BoJo and the 350m per week for the NHS. That really might come round again and bite everyone in the conservative Brexit camp in the bum again. The conservatives say lots of things, but are ultimately pragmatists - I think they'll deal regardless (they can probably afford too with no real opposition).

How we pay the divorce bill will be interesting. The last budget does have the Chancellor building up a £20bn war chest, would have been nice to do some fiscal invest with that rather than paying into the gravy train but needs must. Personally, I still think they should do a corporate whip round (especially as I think London will win out on Euro clearing). Throw Ina few sweeteners on tax / regulations it becomes Mickey Mouse money.

Oh and Flanders? Minx. I'm a buyer.

[Andy Zarse]

stongle said:

Thanks for the link. Interesting it quotes BoJo and the 350m per week for the NHS. That really might come round again and bite everyone in the conservative Brexit camp in the bum again. The conservatives say lots of things, but are ultimately pragmatists - I think they'll deal regardless (they can probably afford too with no real opposition).

How we pay the divorce bill will be interesting. The last budget does have the Chancellor building up a £20bn war chest, would have been nice to do some fiscal invest with that rather than paying into the gravy train but needs must. Personally, I still think they should do a corporate whip round (especially as I think London will win out on Euro clearing). Throw Ina few sweeteners on tax / regulations it becomes Mickey Mouse money.

Oh and Flanders? Minx. I'm a buyer.

She's a bit too dour to be a minx IMO.

Fair point above mind, we should restrict this thread to the Eurozone, not really the place to discuss Brexit.

[stongle]

Andy Zarse said:

She's a bit too dour to be a minx IMO.

Fair point above mind, we should restrict this thread to the Eurozone, not really the place to discuss Brexit.

The dire state of the Eurozone and the ECBs inability to produce an EU wide workable economy are colouring the debate on Brexit. The likelihood of a messy divorce and impact to the EU economy are part and parcel of access discussions. The increasing bullishness on EUR clearing staying in London, particularly the BOE laying down the systemic risk card now suggest that the EUR is in deep trouble.

Furthermore the inability of the EC to deal effectively viz financial regulation and coordinate across Europe is a joke. The farce that was their approach to implementation of variation margin with a very public 180 on policy on Thursday (followed by even more muddled guidance) - are hardly indicative of a economic project running well (at any level - parochial or not).

Impacts to the UK are way beyond just the IMF, BRRD (which applies to the UK - currently) could become a real contagion point (or the additional powers of the BOE on winding up branches), but that IS a whole other topic.

The demise of not of the Euro will be significantly impacted by outside events, be it Brexit or Trump (in particular his looming trade war with China) or populist movements (LePen in particular).

[Blib]

More sober reading....

"The anti-EU revolt is fast gaining impetus." 

http://www.telegraph.co.uk/business/2017/02/25/ant...

[Murph7355]

fblm said:

Thank you, more good stuff.

"The cost of retirement benefits for EU officials may well be the most politically charged issue." - Er yes I think that's a fair comment given how few Brits work for the EU! The press is going to go apoplectic. More Romanians work for the EU than Brits!

As mentioned, I think pensions are the biggest problem to navigate in the divorce bill. Not least because of what you note, but also because it will shine a light on UK govt pensions. This is one of those areas that will likely cost little to just write off, but is a political minefield. Will be interesting to see how May handles it...

Paying for the UK employees would be fair enough, more or less. Beyond that I'm less sure. Perhaps state that we'll pay for nothing more unless the pension pot is properly funded. But that would be a bit hypocritical. Alternatively work them out of DB...hypocritical too, but I'd love for that to play out against our own mob!

Maybe this is something May just has to ride out.

stongle said:

Thanks for the link. Interesting it quotes BoJo and the 350m per week for the NHS. That really might come round again and bite everyone in the conservative Brexit camp in the bum again. The conservatives say lots of things, but are ultimately pragmatists - I think they'll deal regardless (they can probably afford too with no real opposition).
...

As stated in there I think the biggest flaw "Leave" made was allowing the 350m to be capitalised on as it was. If they'd have been fleeter of foot they could have taken the wind out of the sails of that one. Instead it will constantly be the thing that is brought up by those wanting to moan/think they're being clever.

It'll go away eventually. But will cause much discomfort until then.

[NJH]

Just to add to what you said Stongle it is always worthwhile remembering that fundamentally the Euro is an economic project created and driven for entirely political reasons. Thus one can not divide it from the political debate around the future of the EU as it was politics that created, politics that sustains it and ultimately political will will either end it or keep the project stumbling on in some form.

[steveT350C]

Mrr T said:

At last a post about the euro.

I agree, to a degree.

I have postulated on this thread some months ago that the failing of the EU, Brexit being the start, is going to be the likely cause of the end of the Euro rather than the economics associated with the Euro itself.

All the while the EU has control over the EZ member states they will do anything to keep the EU dream alive.

The EU is a false construct; a Government that looks for people to govern, rather than an organically created democracy.

[Gargamel]

NJH said:

Just to add to what you said Stongle it is always worthwhile remembering that fundamentally the Euro is an economic project created and driven for entirely political reasons. Thus one can not divide it from the political debate around the future of the EU as it was politics that created, politics that sustains it and ultimately political will will either end it or keep the project stumbling on in some form.

I entirely agree, indeed many detractors on this thread have repeatedly pointed out the the Euro as a currency CANNOT fail as it has the political will of the EU behind it, who had able demonstrated time and again that they will do anything to preserve it.

Hence politics has become a talking point in this thread, as indeed, by any economic measure the Euro has failed.

Brexit is one impact, Le Pen, Grillo or some other demagogue will eventually be elected in one of the failing states. The population will not go unheard forever. Post the Brexit vote, others are starting to see that change is possible and that more Europe isn't the only choice.

[LongQ]

Gargamel said:

NJH said:

Just to add to what you said Stongle it is always worthwhile remembering that fundamentally the Euro is an economic project created and driven for entirely political reasons. Thus one can not divide it from the political debate around the future of the EU as it was politics that created, politics that sustains it and ultimately political will will either end it or keep the project stumbling on in some form.

I entirely agree, indeed many detractors on this thread have repeatedly pointed out the the Euro as a currency CANNOT fail as it has the political will of the EU behind it, who had able demonstrated time and again that they will do anything to preserve it.

Hence politics has become a talking point in this thread, as indeed, by any economic measure the Euro has failed.

Brexit is one impact, Le Pen, Grillo or some other demagogue will eventually be elected in one of the failing states. The population will not go unheard forever. Post the Brexit vote, others are starting to see that change is possible and that more Europe isn't the only choice.

For the Euro more Europe may be the only rational option.

Whether people who see themselves as Europeans - and one has to assume that includes all of the countries currently holding membership of the EU - are ready and willing to meld into the single socio-political structure is another matter. Absent that transition to a true "Europe" the financial construct of both the EU and the Euro must be based on very shaky foundations.

So far as one can tell there is no plan B since the only game the originators of the plan could foresee was a single state - exactly the sort of command and control system various ruling elites has tried over previous centuries but this time with some claims of democracy wrapped around its socialist basis.

I'm not sure what might constitute a signal that the masses were ready to become "Europeans". (Maybe a single Football league?) but right now it appears that many are seeking their own clearly individual identities. Even the very confused like the SNP, parts of Spain, the hardly integrated nation of Belgium, the North/South differentiation of Germany and so on.

Even big happy families argue over money. The idea of using it as a cohesive catalyst seems to be, at best, brave. At worst, desperate but was possibly just another poorly thought though vanity project.

[Fastdruid]

https://mishtalk.com/2017/02/24/fuse-is-lit/

[Gargamel]

Fastdruid said:

https://mishtalk.com/2017/02/24/fuse-is-lit/

Great article, clearly explains something I have often heard about but never properly understood.