Wednesday, March 29, 2017

Theresa May Signs the UK's Economic Suicide Note

Earlier today, the UK's diplomatic representative to the European Union, hand delivered a letter signed by British Prime Minister Theresa May formally invoking Article 50 of the EU treaty. Article 50 handles the terms by which a member state of the EU can leave the Union.

The letter is six pages long and is a very diplomatically worded mixture of flattery and threats. Politico has an excellent interactive guide the letter and what the various passages may or may not mean. You can check it out for yourself by clicking here.

The UK media has predictably fallen to three different camps in terms of their coverage of today's events. More right leaning outlets have hailed a return to British Sovereignty, more left leaning media have sounded dire warnings about threats the National Health Service, Social Care programs, Worker and Environmental protections, and the as of yet unresolved issues surrounding the rights and status of EU Citizens currently living in the UK.

The more centrist media have chosen the hedge their bets. Sounding "concerned" about potential impact this will have on the UK economy and Britain's standing the world. While simultaneously making pointed commentary of how the EU and the UK both need each other. so .... somebody better figure out how to make this thing actually work.

The fact that nobody wants to point out is, the current Tory government of Theresa May has no plan   They have never had a plan for making this work.   They are making this up as they go along. The reasons for that are not hard to understand.   The previous government under David Cameron had a master plan.  Call for a referendum,  then back  a Leave campaign that would narrowly lose.  Then call a general election  and win under a platform of  "Healing  the rift" in the country they made.  All while promising that the near miss of almost leaving  would give them leverage to negotiate new and better terms  for the UK with the rest of the EU.

It was going to be great! they could still whine and moan about "the overreach of the EU" but not have to actually leave it.  Thus having their Euro-cake and getting  to  complain while eating it.   It was a cunning plan Black Adder!, The Tories would get to stay in power, steal the thunder and  the key issue of right wing parties like the UK Independence Party, (UKIP)  all while keeping their faux Anti- EU bona fides intact.

 Ah... the best laid plans of Mice and ... well morons. When the dust settled after the vote, it turned out that the same anti-migrant hordes the leave campaign  had spent weeks stirring up into a rabid racist frenzy, went and actually voted, and voted to leave.

That result torpedoed the Tory master plan. Not wanting to be the one to clean up the mess he and his party made,   David Cameron beat a very hasty resignation retreat.

 His accomplice in this farce,  former London Mayor and now  MP Boris Johnson, also quickly figured out that if he was Prime Minister, he would either have to admit to the grand pandering lie, and stop Brexit , or be the one who gets the blame when it wreaks economic havoc on the UK economy.

Enter,  Theresa May. 

As the UK Home Secretary, May was all for the " Let's pretend we want to leave, but then don't" plan. So much so that she was seen wishy washy and even too pro-remain by many Brexit campaigners.    But when both David Con Man and BoJo the Clown, exited stage far right,  May saw her chance for Thatcher-esque greatness, and well.... here we are.   It is interesting to note, that hard core "Brexiteers" have more in common with hard core Donald Trump voters than just their blatant racism, sexism and xenophobia. They also share a similar level of sheer stupidity.

The Brexit  cheerleaders both in and out of government, love to  claim that  the EU needs the UK much more than vice-versa,  and how  like Thatcher reborn,  Prime Minister May will ride her Brexit tank into the Article 50  negotiations.  There she will dictate to the trebling, feeble EU the terms by which the UK gets to enjoy the trade and economic benefits of the common market, and at the same time  keep all those icky immigrants out. 

Like Trump voters claiming he won the popular vote,  Brexiteers have also decided to blissfully ignore one huge bit of reality.   It is not in the EU's interest to strike a deal with the UK.   Quite the contrary in fact.  It is far more in the interest of the EU to make leaving  the union as painful as possible.   Thus sending a clear message to fledgling right wing anti EU movements in other member states, that leaving would  be hard,  painful and  ultimately economically self destructive.

Would a "Hard Brexit" (one with out an amicable trade deal) hurt the EU? Yes, a bit. German automakers would likely end up facing UK tariffs as would other industries based on the continent. But there is unanimity in the EU Leadership that the costs of lost trade deals with the UK is a small, even an inconsequential price to pay, to keep the rest of the EU intact.

As if to underscore that point, German Chancellor Angela Merkel dealt an instant blow to Theresa May by rejecting the PM's bid for trade talks to take place at the same time as Article 50 secession negotiations. Britain will be put into the slow lane for discussions about any future trade deal with the EU following actions by the German Chancellor, who intervened just hours after the UK invoked Article 50.

One of the lasting legacies of the Thatcher era is transformation  of the UK from a manufacturing economy into a services economy.   The Iron Lady crushed the trade unions by pushing forward the process that eliminated the factories, mines and mills that employed their members, while enacting tax and banking de-regulation that turned London into a global financial services hub, second only to,  (and some would say even surpassing)  New York.

Underneath all the  cautiously optimistic  statements by the likes of  HSBC,  Merrill Lynch, Citigroup, Credit Suisse, etc.,   are quiet plans behind the scenes to move  operations, and  with it, massive numbers of jobs to places like Frankfurt,  Paris,  Geneva,  Hong Kong, Singapore and the UAE.   All of whom are eager to welcome Canary Wharf's  "Brexit refugees"  with open arms.   The Banking  goose that lays the biggest golden egg keeping the British Pound not only afloat, but relevant,  is  getting ready to the fly to coop.

And yes,  I could be  totally wrong.  Brexit may turn out to be a big nothing burger and the UK after a brief period of adjustment related economic instability  emerges  triumphant and resurgent.    I wonder how many people would truly be willing to bet their jobs, their livelihoods,  their short, mid and long term financial security on that?

Because that is exactly what  Theresa May did today.

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