Monday, 20 March 2017

Collapse of EU - and UK and Thailand?

Khun Sutapa Amornvivat as always provides an interesting Ponderland on the potential breakup of the EU, and tremors spreading through the financial markets:

Certainly the feverish atmosphere in The City and UK must be difficult to translate into market policy anywhere from Bangkok to HCMC to Yangon. Indeed it's often difficult to translate even in UK as we head into unchartered waters and potentially the greatest UK policy disaster since Suez.

Parliament and the Queen have in effect cleared the way for Article 50 to be triggered for UK to negotiate leaving the EU to begin from around 29th March for the next two years. Brain-drain prevention measures such as guaranteeing the rights of the 3M existing EU citizens in UK are being ignored for the moment. Yet the rise in hate crime extending to all communities beyond Pole-bashing.

Surprisingly though no UK negotiating teams are yet in place and already there is debate on a transitional system with the EU after 2019. A huge bureacratic tango through the muddle of maintaining the existing EU systems and laws in all but name beckons for months and years.

Probably the UK-EU relationship after two years and one day would be the same as now with existing EU laws preserved and complying with future EU legislation on say the automotive industry. Indeed Honda has followed Nissan in gaining sweetheart deals from the UK government in guaranteeing and expanding their investments with, fortunately, at least two new cars now being built in the UK's already booming car factories.

It's surprising to see so few Thai efforts so far on integrating the UK and Thai automotive supply chains.

## Brexit beyond UK ##

So an increasingly likely option is UK essentially remaining in EU - and there are plenty of sectors beyond UK cars such as Life Sciences and Creative Industries urging that - then there is no breakup of the EU at all.

Certainly nations such as Eire and their new Ambassador to Washington from London -potentially with an EU land border with Northern Ireland/UK - have urged remaining in EU as the UK's best option.

While the latest Dutch election with a PM Mark Rutte win actually suggests continuity with the EU: the Dutch Farage, Geert Wilders - with even more ferevent anti-foreigner and anti-Moslem rhetoric - has gained seats but a lower share than 2010, but neither power nor influence being rejected from any coalition.

Indeed Hollande and Merkel hailed the result as pro-European in contrast to Brexit. Perhaps the high tide of European far-right populism hs been reached.
Indeed one quirk of Brexit is the collapse of UKIP with leader defeats and resignations, (many of them here in East Kent as the only UKIP council in UK limps to an end mired in corruption, racism and stagnation) as well as the resignations of the Conservative Leave teams.

A UK Pyrrhic victory in just a year since the original, less than riveting, PM Cameron EU negotiations and reforms, hardly suggests Brexit is forged in steel or on track anywhere except in the most cloth-eared Little England fanatical circles.

## East Kent and Brexit ##

The UK Budget last week has been scathingly judged as "financially illiterate" with not one mention of Brexit by the normally capable Chancellor Philip Hammond. And the core Budget policy of national inusrance tax increases, essentially a peculiar tax on entrepreneurship, was U-turned and cancelled within the week by a Government rebellion, but leaving a black hole of billions of dollars in the cancellation until the Autumn Budget.

And East Kent has been front and centre in the election expenses corruption now affecting upto 20 UK MP's and police investigations passed to the courts with the unheard-of possibility of almost two dozen by-elections removing any Brexit majority.

Plus calls for the unelected PM Theresa May to go to the polls - at least to solve the problem of inertia and nationak drift with an Empty Parliament obsessed with the minutiae and multiple what-ifs and maybes of Brexit. A mix of navel-gazing and how many angels can dance on the head of a pin.

The UK is lagging behind on key priorities such as:

* Climate Change
* Nuclear decommissioning and cleanup
* Pollution cleanup
* Education and Health improvements
* Space exploration

While basic reforms such as Victorian sewers and asbestos in schools are also ignored.

## Brexit and Belgium and France and Germany ##

The French elections later in the Spring suggests no real Article 50 negotiations until June, and probably not until the Autumn and the German elections - otherwise who would the UK and EU be negotiating with? The dynamic Guy Veerhofsdtat, former Belgian PM, as EU Chief Negotiator has been vocal on UK drift.

While UK could be left playing second fiddle not just to the immediaie crises in Syria and East Africa and Sahel, but also longer-term EU expansion to North Africa and Levant and the resulting Mediterranean port and rail infrastructure improvements such as Cape2Cairo, and Saudi/Gulf hispeed rail: Morocco now completing the first hispeed rail in Africa.

## Balkans guns and butter ###

While the quirk of UK leading a West Balkans Summit in 2018 actually means continuity on the necesary reforms for Serbia, Bosnia, Macedonia and Albania to join EU: Croatia joining as recently as 2013.

Plus Montenegro combating Russian election interfrence in October in joining EU and NATO raises wider security and investment issues. Certainly the flood of drugs in Europe originates through the Albanian cannabis gangs and Turkish pipeline of heroin to Helmand and Shan as well as Ndrangheta activity in key Italian container ports is a UK interest best met through EU cooperation, given the rise in heroin and cocaine deaths to the highest-ever in both UK and USA.

UK may be in the position of being one of the few European nations with Belarus, of neither being in the EU nor in the process of joining it. While an EU-27 without Britain would rapidly become an EU-32 and more.

Much is made of new Brexit markets such as USA in San Diego or Virginia or Carolinas.

Indeed in my KCC Leader candidacy I've urged those investment grouops and new EU regions such as Molise in Italy:

Commonwealth exports are viable but far smaller and later than expected, certainly India and Singapore in the latter are economic powerhouses but most of the other 52 nations in that bloc are poor or small or both. Australia's 20M people or Solomon Islands 500k are unlikley to replace the 500M EU bloc, the world's wealthiest, or the UK's reliance on Arabian arms deals.

Certainly too in the West Balkans there are wider EU issues on Russia and Turkey joining the EU - perhaps both a decade or two further away after the Putin and Erdogan military actions but almost inevitable.

As well as the Sarajevo Shift of EU investment and infrastructure to the Balkans, beyond merely Brussels and Strasbourg overbuild, plus key projects such as the Messina bridge being revived and Bari port, the main UN aid hub, and bridge-tunnel to link the Italy (beyond the Mafiosi banks Khun Sutapa cites) and peace and propserity for the Greater Balkans region through to the Caucasus nations of Georgia and Armenia.

Already the EU has passed the latest phase of the hispeed rail integration and in June EU-wide mobile phone roaming caps and town wifi by 2020. But Mayor Sadiq Khan cites the Crick Institute of Life Sciences and Pharma UK under siege from EU regional missions from Hesse or Paris or Berlin to court UK industry relocations.

## Spain and Brexit ##

But such EU policies are few and far between, and the need for substantial EU reform beyond mobile phone tweaks is clear. the PM Cameron tweaks a fumbled opportunity. If the lavishly-funded alphabet soup of EU and IMF insitutions failed to predict or prevent or ameliorate the 2008 recession or collapse of Syria and refugee deaths in the Mediterranean then clearly something is wrong.

But that aside, Brexit more realistically could reveal not the breakup of the EU - but rather the breakup of the UK, with a second Scottish Independence referendum announced, and for a Scotland in EU, not a Joxit. Plus the aforementioned hard border issue with Eire and Northern Ireland and fears of a Semtexit could be completely swept away in a United Ireland. The Ulster election earlier this month means the first nationalist majority and Sinn Fein's louder call for Ireland's unity under both the Eire and EU umbrella.

Thai tourists may even benefit from such a Brexit with no doubt Eire-Schengen discussions phased into a virtual visa for visits to UK from Eire.

While Spain's Brexit Unit forecasts major companies such as Banco Santander and at least two others suffering devaluation. Indeed Spain's GDP could fall by upto $6BN and hardship for the 800,000 UK residents in Spain.

While as Khun Sutapa notes, few are impressed by the Mafiosi performance of the Italian banks or State-riddled Chinese banks, Brexit means the financial markets will be a hotbed of speculation and uncertainty from London to Bangkok and beyond.

London and The City is the focal point of world financial services for the largest clearing banks, perhaps pipped only by Wall Street, but two-thirds of UK's 2.2M finance jobs are not based in London but spread around the regions and Europe.

So a Brexit tremor would shake the coffee cups on the boardroom table in skyscrapers around UK and Europe.

## EU centrifuge and The City ##

HSBC has been clear that passporting rights will benefit its Paris offices at the expense of Canary Wharf. While the EMA European Medicines Agency also headquartered in Docklands would relocate. While the banks of the Liffey have a rash of Euro-splodge skyscrapers in anticipation of further corporate relocations.

Bank of America has already moved its European HQ to Dublin and at least six other organisations including Chicago-based derivatives group CME and asset manager Legg Mason are reviewing sites in Dublin.

And the centrifugal forces of Europe, one moment greater integration to a United States of Europe, and the next moment the uber-Balkanisation of regions such as Catalonia or Almeria, is normal.

Here in East Kent, calls for greater separation from the rest of Kent or even Flanders and Calais links ebb and flow.

And it's not so long ago that Brussels, the heartland of the EU, was reduced to stasis with Flanders and Wallonia disputes and the latter potentially delaying the Canadian trade agreement. The terror attacks in Brussels and Bataclan Paris, a year ago are a mere pinprick in comparison and to the future of the EU and Europe.

Britain's worry is not the break up of the EU, but an increasingly disUnited Kingdom - and with other nations picking over the scraps. Reassuringly, the longer the debate goes on the more Britons' appetite for Brexit in any substantive way will surely fade into a hungry winter and a blizzard of higher prices and corporate relocations and job losses.

The bill for UK plc, and ASEAN, in missed or cancelled opportunities could be far higher though in the years ahead.


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