Brexit means dog’s breakfast, says my esteemed Reaction colleague the great Walter Ellis (who I am delighted to say takes over the Reaction daily email as of this week.) In his latest piece he rightly points out that all the focus on social care and the weak and wobbly aspects of the Tory campaign obscures the reality that it is all about Brexit, ultimately. Tough talks lie ahead and we need them to go well.
There, on the prospects, I diverge from my friend Walter, a Reaction Remainer to my Brexiteer. Of course the talks will be difficult, and if they fail it will be messy, although hardly the end of civilisation or Britain.
Not only that, there are plenty of reasons to be sceptical about the supposed strategic superiority of an alliance of Berlin and Paris. The last time they were this close, and over-confident with it, under Mitterrand and Kohl, it led to the creation of the euro, that wicked machine for German economic dominance and epic misery and turmoil in southern Europe. The UK tried to warn about the inadvisability of that grand scheme, stayed out, and was as a result mocked by many of the same bed-wetting Europhile Remain campaign grandees declaring now that we are doomed and have no cards to play.
On the contrary, there is plenty of scope for a deal once all the pre-negotiation strutting about has concluded.
Britain would like to trade with the EU and be friends. Helpfully, the EU’s currency – the eurozone, a giant debt machine – runs powered by London’s giant capital markets. A currency is much more than a note with a number on it. It is a vehicle for gigantic amounts of government, corporate and personal debt, transactions which are then transmogrified into all manner of associated products and mechanisms for moving money. Over the counter derivatives, swaps, and so on, and so on. All on an almost terrifying scale powered by technology, a hub of human expertise, the legal system and luck on the timezone. London is where the majority of this multi-trillion trade happens, underpinning the stability of the eurozone system.
Can it move without major disruption and damage to the eurozone economy? Some of it, perhaps. Where to? Frankfurt? Be serious. Have you been there? Paris is in France. And Dublin is far too small.
There’s a deal to be done. That doesn’t mean it will happen. But with calm heads and a few compromises there is a sensible Brexit deal to be done.
Are the British more broadly vulnerable as the diplomatic plates shift? The FT’s Tony Barber writes that the UK is forming some strange alliances while France and Germany form a potent new version of their old 1980s and 1990s partnership. The Brits are out of the picture that matters, he says.
Fine, but only up to a point. There’s a lot of this talk about now that Marine le Pen is a distant memory and Macron in France is the man, playing a character that is a post-modern cross between Tony Blair and Napoleon (which for a strand of modernising progressive opinion is about as close to perfect as it is possible to get.)
In Germany Merkel is smashing Schulz ahead of this autumn’s general election. Against the backdrop of a recovering eurozone economy (extremely good news for everyone) Merkel and Macron are where it’s at right now. But there is no evidence beyond warm words that they are really prepared to enact the kind of reforms to the eurozone – deeper integration, transfers, banking reform – that might strengthen the euro and EU project. Macron must also begin a programme of domestic economic reforms in France which usually elicits something close to a revolution on the streets whenever anyone tries.
And the EU driven by Merkel and Macron has other problems coming down the line. Simon Nixon in his latest insightful column for the WSJ highlights the new defining split between those countries in the EU that respect the rule of law and those that do not.
“The next phase of EU evolution may not follow the previous pattern. A new fault line has emerged in European politics since the last time major questions about the structure of the EU were being discussed. This new fault line runs along Europe’s other great transnational river: the Danube.”
Germany and France do not have their problems to seek.
