Brexit matters

[reddragon]

Ukraine has substantial resources & Industrial skills ! I think the EU will benefit a lot from that!

https://oec.world/en/profile/country/ukr

The top exports of Ukraine are Seed Oils ($5.32B), Corn ($4.89B), Wheat ($4.61B), Iron Ore ($4.27B), and Semi-Finished Iron ($3.03B)

 

[najaB]

Ukraine has substantial resources & Industrial skills ! I think the EU will benefit a lot from that!

Not to mention vast amounts of oil and gas reserves, along with substantial deposits of industrially useful metals like nickel, magnesium and titanium. That's not to mention their large, highly skilled workforce in areas such as aerospace and electronics.

 

[duncanp]

And Ukraine wants to join the EU. Economic security is important as well as military security.

I wouldn't say that joining the EU guarantees economic security.

EU member states such as Germany are having the same problems with energy supplies as we are having in the UK and the Euro has recently dropped below parity with the US Dollar.

Many EU member states are far more dependent on Russian gas than the UK is, having ignored warnings that Putin could weaponise Russian gas, and putting too much faith in "renewable" supplies of energy.

And the Eurozone debt crisis hasn't gone away either.

 

[GS250]

I wouldn't say that joining the EU guarantees economic security.

EU member states such as Germany are having the same problems with energy supplies as we are having in the UK and the Euro has recently dropped below parity with the US Dollar.

Many EU member states are far more dependent on Russian gas than the UK is, having ignored warnings that Putin could weaponise Russian gas, and putting too much faith in "renewable" supplies of energy.

And the Eurozone debt crisis hasn't gone away either.

Money does tend to flow from the more wealthy EU countries to the less wealthy though.....

 

[duncanp]

Money does tend to flow from the more wealthy EU countries to the less wealthy though.....

...which is of course why many countries are keen to join the EU, in the hope of being a net beneficiary (ie. receiving more in EU funds than they pay into the EU budget)

 

[reddragon]

...which is of course why many countries are keen to join the EU, in the hope of being a net beneficiary (ie. receiving more in EU funds than they pay into the EU budget)

Of course there is no benefit to cheap labour & skills or produce from poorer EU countries at all.

 

[GS250]

Of course there is no benefit to cheap labour & skills or produce from poorer EU countries at all.

There are benefits and dis-benefits of the items you mention above.

 

[duncanp]

Another reason why, although I voted Remain in 2016, I am glad that the UK is out of the EU and does not use the Euro (which St Tony Blair would have had us doing if Gordon Brown hadn't stopped him)

Revenge of the Bundesbank spells serious trouble for Italy

The real danger for Italy is that it might be asphyxiated slowly by untenable borrowing costs

www.telegraph.co.uk

Revenge of the Bundesbank spells serious trouble for Italy​

The real danger for Italy is that it might be asphyxiated slowly by untenable borrowing costs

The European Central Bank can either bail out Italy or save its credibility in Germany. It will struggle to do both.

With inflation running at a fifty-year high in Germany, 14pc in the Netherlands, and 25pc in Estonia, it is politically impossible to keep mopping up Italy’s debt issuance under the guise of monetary policy. The euro’s crash to dollar parity has been the last straw. The Bundesbank has lost patience.

The ECB is in the worst internal disarray since the depths of the eurozone debt crisis. Hawks and doves are contradicting each other daily on fundamental strategy. Markets have no idea how the new ‘anti-spread’ tool (TPI) to protect Italy is supposed to work, or whether it is legal outside an emergency. “It is a complete shambles. Christine Lagarde has lost control and is not showing any leadership,” said one source close to the Bundesbank.

Mrs Lagarde did not attend the central bankers’ forum in Jackson Hole. The vacuum has been filled by Isabel Schnabel, Germany’s member of the executive council, who has returned to her Bundesbank roots after a fateful dalliance with ultra-loose money.

“Our currencies are stable because people trust that we will preserve their purchasing power. Failing to honour this trust may carry large political costs,” she said at Jackson Hole.

“History is full of examples of high and persistent inflation causing social unrest. Sudden and large losses in purchasing power can test even stable democracies,” she said.

Mrs Schnabel said the movers and shakers in finance no longer believe the ECB’s assurances. They suspect that it will always prefer to let inflation ratchet upwards rather than sacrificing growth, if forced to choose. “Determined action is needed to break these perceptions,” she said.

Her speech was a thunderclap. She said it was “largely irrelevant” whether the surge in inflation is caused by an external supply shock or internal demand. The institution must take pre-emptive action to head off the risk of self-feeding inflationary spiral as an insurance policy, even if this might mean monetary overkill.

It must engineer a recession now to avoid something worse later. This is the voice of the old Bundesbank.

It was an explicit warning that the ECB would no longer set policy to cap the bond yields of vulnerable states. Hedge funds could hardly receive a clearer invitation to revive the ‘short Italy’ trade.

“We’ve been short since the beginning of the year. It seemed like Italy’s problems had gone away but that was only because the ECB was buying more than 100pc of net debt supply. They can’t keep doing that now,” said Mark Dowding from BlueBay Asset Management.

The International Monetary Fund said in its latest ‘Article IV’ report that foreigners have pulled a net €70bn out of Italy over the last six months. It warned of a “vicious cycle between the sovereign and banks” as yields rise on Italian debt.

The risk is more concentrated than a decade ago, since QE actively encouraged Italian banks to play the carry trade and acquire even Italian sovereign debt. The infamous doom-loop of 2011-2012 is alive and well. The eurozone banking union that was supposed to eliminate this uniquely European disorder never happened.

Yields on Italian 10-year debt have rocketed to a nine-year high of almost 4pc. Risk spreads have hit 240 points, double the level when Mario Draghi was drafted to save the country last year.

The IMF described a possible chain-reaction where rising yields cause losses for banks, which then tighten loans, causing a credit crunch, which in turn leads to a deeper downturn in a pernicious spiral.

It is an awkward political moment for the ECB to be ripping away Italy’s debt shield. If the polls are right, the country will elect a hard-Right, free-spending, eurosceptic government on September 25, led by Italy’s “Marine Le Pen”.

Italy has emerged from the pandemic with a debt burden of 150pc of GDP, 15 points higher than pre-Covid and nearing the point of no return for a sub-sovereign borrower unable to control its own currency. It has further liabilities to the ECB’s Target2 payments nexus near 30pc GDP.

The circumstances today are unlike the earthquake election of early 2018, when the nationalist Lega and the utopian Five Star Movement swept into power - or what looked like power - in a primordial scream against the existing order, with a “minibot” parallel currency written into the coalition agreement.

That episode was never what it seemed of course. The pro-euro president used his broad constitutional authority to ensure that Italy’s capable mandarins kept all levers of control over the economy. The rebels were co-opted the Italian way.

The Meloni alliance has made its peace with the euro. It is at least putting on an act of good behaviour, careful not to jeopardise grants and loans from the EU’s €800bn pandemic Recovery Fund. Mrs Meloni is not a bomb-thrower. She has spurned Vladimir Putin, cajoling her party to stick to the Nato alliance.

“If people are shorting Italy expecting it to blow up soon, they are going to be disappointed. But eventually they’ll be trouble,” said Lorenzo Codogno, ex-chief economist at the Italian treasury and now at LC Macro.

It is a slow-burn drama this time, but arguably more perilous. Italy’s core problem is the toxic mix of high public debt intersecting with a trend growth rate near zero. One shocking detail in the IMF’s report is that total factor productivity has fallen by 13.5pc since 2000.

Mr Draghi has not had time to drive through the radical reforms needed to rescue Italy from this bad equilibrium. His planned shake up of the pension and tax systems has stalled. “At the margin Draghi is getting some reforms through, but many are still up in the air,” said Mr Codogno.

The Meloni alliance rails against EU rules and will not pay more than lip service to the 58 neo-liberal reforms demanded by Brussels. Her coalition wants to cut taxes and run a bigger primary budget deficit.

A half-populist government of this ilk in Rome makes it even less likely that Germany will agree to a Hamiltonian fiscal union, allowing the Recovery Fund to evolve an EU treasury. It greatly complicates use of the TPI anti-spread tool. “The ECB can’t give Rome a blank cheque, and it can’t keep pushing the envelope on monetary financing of debt,” said BlueBay’s Mr Dowding.

For now, the ECB is skewing redemptions of its bond portfolio away from Bunds and into Italian bonds, and on an eye-watering scale. This has technical limits and is a clear violation of the Maastricht Treaty’s no bail-out clause the longer it goes on.

The TPI was unveiled in early July but the details have yet to be ironed out. Nothing has yet appeared in the Journal Officiel and the instrument is not legally valid until it does so.

David Marsh, head of the Official Monetary and Financial Institutions Forum, said there are unresolved questions over who bears the financial risk of TPI interventions. It is unclear whether the tool constitutes a fiscal risk and therefore breaches the budgetary sovereignty of the German Bundestag, and whether it is compatible with past rulings by the German constitutional court.

“The TPI can be activated only if there is contagion and a whole lot of countries are under pressure,” said Peter Schaffrik from RBC Capital.

“If push comes to shove, the ECB will be there to buy Italian debt. But could the spreads go to 300 first? Yes they could,” he said.

The real danger for Italy is that it might be asphyxiated slowly by untenable borrowing costs that stay high and that expose the underlying pathologies of the economy over time, until something snaps.

The country has reserves of strength. Private debt is low and Italians own some €12 trillion of savings and assets. Italy could at any time break out of its sovereign debt-trap by confiscating a slice of private wealth and seizing bank deposits along the lines to the Amato haircut in the early 1990s, or the Argentine corralito.

The chances that the next Italian government will contemplate such a measure are zero. It would sooner default to foreign creditors.

 

[najaB]

Another reason why, although I voted Remain in 2016, I am glad that the UK is out of the EU and does not use the Euro...

Did I also miss where the ECB started setting our economic policy? And, as a reminder - inflation predicted to hit 18%, debt to GDP ratio of over 140%, recession expected to last 18 months - that people in glass houses should be careful where they throw stones.

 

[GS250]

Another reason why, although I voted Remain in 2016, I am glad that the UK is out of the EU and does not use the Euro (which St Tony Blair would have had us doing if Gordon Brown hadn't stopped him)

Revenge of the Bundesbank spells serious trouble for Italy

The real danger for Italy is that it might be asphyxiated slowly by untenable borrowing costs

www.telegraph.co.uk

Blair...for all of his faults knew he'd be toast if he even contemplated joining the ECU.

 

[Enthusiast]

...several prominent pro-Brexit voices stated - as fact - that there was no way we were going to leave the Single Market. It was stated that it wasn't even an option - e.g. Owen "Tractor Lover" Patterson said "only a madman would leave the market" and Daniel Hannan said "Absolutely nobody is talking about threatening our place in the Single Market".

They couldn't state it as a fact because it was an unknown, something to be decided, so therefore just an opinion. But you obviously didn't believe them and voted accordingly. I didn't believe them either and voted accordingly. Nothing that either side said in the referendum campaign altered the way I intended to vote (nor indeed would it have done so). Neither of us seem to be easily swayed by a bunch of "here today, gone tomorrow" chancers. The fact that some people are is scarcely a reason to question the validity of the vote.

 

[reddragon]

Still nobody come up with an real tangible benefits of Brexit, anyone on the Brexit camps (echo)

 

[Gloster]

It may be only tenuously connected but the ‘Festival of Brexit’, although they have become desperate not to call it that, has not been a success: mostly, people haven’t even noticed. Given an original budget of £28 million, it cost £120 million: I am not sure what that is in nurses’ salaries. It has had 238,000 visitors, just a tad short of the organisers’ ‘stretch’ target of 66 million: there are only so many times Mark Francois can go through the turnstiles. An unwanted, disorganised, ludicrously expensive mess. Do I detect a metaphor?

 

[JamesT]

Blair...for all of his faults knew he'd be toast if he even contemplated joining the ECU.

The perception has always been that Blair was very keen on joining the Euro and it was Brown stopping him. https://www.express.co.uk/news/uk/1...-eu-european-union-new-labour-blair-brown-spt (yes, it's the Express but the quotes appear accurate).

 

[DynamicSpirit]

Still nobody come up with an real tangible benefits of Brexit, anyone on the Brexit camps (echo)

That's utter rubbish. I for one have on several times listed some of the benefits that have happened from Brexit on this very thread.

 

[reddragon]

That's utter rubbish. I for one have on several times listed some of the benefits that have happened from Brexit on this very thread.

Really? I must have totally missed them or not considered them to be a 'benefit'

 

[najaB]

That's utter rubbish. I for one have on several times listed some of the benefits that have happened from Brexit on this very thread.

I must also have missed that. I did a search for your contributions to this thread and the only benefit that I can see you mentioning is higher wages (with the consequent higher prices).

 

[edwin_m]

There was also discussion of benefits of restricting immigration, in the context of reasons for certain people to vote for Brexit, but I wouldn't consider these to be tangible benefits. People such as HGV drivers suddenly found they had a scarce skill and could demand more money, and the government blew the trumpet on this as a Brexit benefit. But for nearly everyone it's likely to have been overtaken by higher inflation and lower economic activity, and the government has now reverted to telling people they shouldn't be asking for big increases...

 

[Doppelganger]

...which is of course why many countries are keen to join the EU, in the hope of being a net beneficiary (ie. receiving more in EU funds than they pay into the EU budget)

Plus a reduction to all the stupid cross border bureaucracy.

Even though the UK was a net contributor in money terms, the amount saved by business etc thanks to being in the Single Market, more than made up for it, so this view of who pay in more is far too simplistic and why that infamous red bus was so controversial.

 

[TwoYellas]

Just an observation, and if I can momentarily, slightly interrupt the current line of discussion. Aren't people a varied bunch. Some folk spend their energies feeding and heating the less fortunate - others take time out of their day to campaign about climate catastrophe or nuclear de-escalation.

Meanwhile there are others who feel a productive use of their time is to attend a party hustings holding placards such as:

'Keep Brexit Safe'
or
In Liz We Truss

 

[Gloster]

Just an observation, and if I can momentarily, slightly interrupt the current line of discussion. Aren't people a varied bunch. Some folk spend their energies feeding and heating the less fortunate - others take time out of their day to campaign about climate catastrophe or nuclear de-escalation.

Meanwhile there are others who feel a productive use of their time is to attend a party hustings holding placards such as:

'Keep Brexit Safe'
or
In Liz We Truss

Ah, but they they are doing good for the world and for other people by getting in to a position of power the person that they feel should have it. It is very generous and public-spirited of them and they should be congratulated for being so self-sacrificing. It is purely coincidental that it will be advantageous to their financial position or personal circumstances. Of course it is.

 

[Annetts key]

Brexit is done.

It’s not fully done. The U.K. government has not implemented everything yet…

Due to the oil / gas price shocks mainly, I think, which will probably affect European economies similarly.

If we were still part of the E.U. it’s possible that by the whole E.U. bulk purchasing gas, and sharing storage and costs, the price paid by both U.K. and mainland E.U. countries would have been less. Furthermore, it’s possible that the electricity market rate could have been set with out the current huge bias caused by the price of gas. But now, due to brexit, all of that is far more difficult.

if Brexit affects our economy even worse, so be it. We have gone through plenty of crises before and come out better (by at least some measure) the other side......

Yeah, right. Just like the lead character in a film or TV series getting shot and still continuing. In real life it’s very much different. Lots of people’s lives are affected.

The traditional, ‘We’re British. We survived the Blitz. We can take it.’ Usually followed with an increasing Churchillian voice and mutterings about Spitfires, the White Cliffs of Dover, seeing off Johnny Foreigner, etc. Too many people in this country are harking back to past glories achieved by others and somehow feel that that means they can meet any challenge with a stiff upper lip (and shouting louder at foreigners). There are plenty of things in our recent past for Brits to be proud of, but you must deal with new problems with new solutions, not saying, ‘Well, that’s how we beat the Luftwaffe’. End of rant.

Err, point of order, did we not rely on Johnny Foreigner during WWII. We had them flying Spitfires and Hurricanes, fighting on the front lines. And of course on the ships of the convoys and in the foreign ports where the ships were loaded. Oh, and we were also supplied with tanks and other military equipment…

 

[najaB]

It’s not fully done. The U.K. government has not implemented everything yet…

Not to mention that the whole thing needs to be renegotiated (again!) in 2026.

 

[Annetts key]

The only benefits of brexit, is that Nigel Farage is no longer getting paid by the European Parliament, is no longer spouting about the E.U., and UKIP has basically died a death.

 

[Doppelganger]

The only benefits of brexit, is that Nigel Farage is no longer getting paid by the European Parliament, is no longer spouting about the E.U., and UKIP has basically died a death.

And less pissed up Brits on stag dos.

Once upon a time the Brits were seen as gentleman and the ease of access to other countries quickly eroded away that illusion...

 

[birchesgreen]

The only benefits of brexit, is that Nigel Farage is no longer getting paid by the European Parliament, is no longer spouting about the E.U., and UKIP has basically died a death.

Is he getting a pension as as ex-MEP?

 

[RT4038]

It’s not fully done. The U.K. government has not implemented everything yet…

It is as far as no longer being a member of the EU is concerned.

If we were still part of the E.U. it’s possible that by the whole E.U. bulk purchasing gas, and sharing storage and costs, the price paid by both U.K. and mainland E.U. countries would have been less. Furthermore, it’s possible that the electricity market rate could have been set with out the current huge bias caused by the price of gas. But now, due to brexit, all of that is far more difficult.

It is possible, but other scenarios, not necessarily in the UK's interests, are also available

Yeah, right. Just like the lead character in a film or TV series getting shot and still continuing. In real life it’s very much different. Lots of people’s lives are affected.

Just pointing out that Brexit is not armageddon. Yes, some peoples lives are affected (they have to wait in line to have the passports stamped now, amongst other worse things), but then any change of this magnitude will result in that. If that is a real problem for so many, then so many shouldn't have voted for Brexit. [We only voted for Brexit - we didn't vote for affecting anyone's life? ]

Err, point of order, did we not rely on Johnny Foreigner during WWII. We had them flying Spitfires and Hurricanes, fighting on the front lines. And of course on the ships of the convoys and in the foreign ports where the ships were loaded. Oh, and we were also supplied with tanks and other military equipment…

Quite. I really don't know why this kind of silly caricaturing always comes up - The UK can help other countries, and they can help us this can be done without being in each others pockets. This doesn't take FoM, an ever closer union and imposition of Directives to achieve that.

The only benefits of brexit, is that Nigel Farage is no longer getting paid by the European Parliament, is no longer spouting about the E.U., and UKIP has basically died a death.

This is most certainly an advantage, not fully understood at the time of the vote.

And less pissed up Brits on stag dos.

Once upon a time the Brits were seen as gentleman and the ease of access to other countries quickly eroded away that illusion...

Of course this does depend on which angle you are looking - in years gone by the British harnessed these qualities to further their economic interests in places mostly far away from the current EU.....

I think the ease of access is more related to a better standard of living, and cheap transport links, rather than FoM per se.

== Doublepost prevention - post automatically merged: 3 Sep 2022 ==

Is he getting a pension as as ex-MEP?

Almost certainly.

 

[najaB]

If that is a real problem for so many, then so many shouldn't have voted for Brexit.

Again: the majority of the electorate did not vote for Brexit, and nobody specifically voted to leave the Single Market and Customs Union.

 

[duncanp]

Again: the majority of the electorate did not vote for Brexit, and nobody specifically voted to leave the Single Market and Customs Union.

Er, the majority of the electorate did not vote to stay in the European Union either.

 

[Gloster]

According to today’s Grauniad (sorry, I can’t do a link) Rees-Mogg is refusing to sign off the £800,000 budget of a campaign to attract foreign visitors, seemingly because he personally doesn’t have faith in such campaigns. Seeing that £800,000 is a minuscule sum by Whitehall standards, he seems to have a strange set of values.