Michel Barnier Nixes Theresa May’s Customs Union Scheme as Bad Brexit Dynamics Worsen

Not surprisingly, the EU’s chief negotiator Michel Barnier has rejected Theresa May’s customs plan. But what was striking was that despite Richard North seeing Barnier as having candy-coated some issues, on the whole Barnier seemed to take a sharper tone with the UK than before. Barnier is enough of a pro that it is unlikely to be a display of pique; I take it as being that he is making every effort to penetrate the UK’s fog of self delusion and the only tool he has is his verbal register.

Barnier stressed that the EU will never accept any country not subject to the EU oversight and ECJ jurisdiction to collect customs duties on its behalf. From the press conference:

Maintaining control of our money, law and borders also applies to the EU customs policy. The EU cannot and will not delegate the application of its customs policy and rules, VAT and duty collection to a non-member who would not be subject to the EU governance structures.

Any customs arrangements or customs union – and I have always said that the EU is open to a customs union – must respect this principle.

Barnier’s counterparty, Dominic Raab, true to form, refused to process what he was being told and blathered about how the UK had provided a good faith, innovative proposal.

The fundamental source of this mess is the UK refuses to get over itself. It is unwilling to abandon the notion that it deserves and will get a “special bespoke close” relationship with the EU. By contrast, the EU has said from the very morning after the Brexit vote that the UK’s options were limited to the parameters of existing arrangements the EU has with third countries. As a result, the UK keeps getting in a huff that the EU will not negotiate terms that were never negotiable.

But far worse as a sign of where things stand is that the UK is trying to retrade settled deal points. The UK and the EU are already visibly getting nowhere. But reneging on resolved issues is toxic. In a functioning negotiation, the party who asks for the waiver knows its a huge no-no and grovels and offers a concession.

But Raab acted as if the UK could simply bulldoze the EU on two large issues. One was the backstop, which May had committed to in the Joint Agreement of last December. Recall that even resorting to the device of the Joint Agreement was a big procedural concession by Barnier, and enabled May, who looked on the verge of having her Government collapse, to get a huge boost with the appearance of a big win.

Raab’s tried to rewrite the Joint Agreement by asserting it needed only to be an interim phase until the EU and UK had entered into an overall deal (presumably a trade and services agreement).

Raab also tried the cheeky move of trying to reopen the so-called Brexit tab. Barnier slapped both ideas down. :

Mr Raab said that any backstop to prevent the Irish border should be “time-limited”. But that was contradicted by Mr Barnier, who said any backstop must be “all weather”.

“It is Brexit that has created this problem between Ireland and Northern Ireland which does risk the Good Friday Agreement,” he added.

Mr Barnier also ruled out the EU accepting any British efforts to make payment of the £39billion Brexit bill conditional on a future free trade agreement at a press conference alongside Mr Raab, who doubled down on his call for the two issues to be linked.

Mr Barnier said that it was “perfectly clear” to the EU27 and European Parliament that the financial settlement agreed in December and March was “agreed for good”.

On top of that, May plans to go over Barnier’s head to get him overruled. Barnier saw fit to clear his throat about that:

Anyone who wants to find a sliver of difference between my mandate and what the heads of government say they want are wasting their time, quite frankly.

Now in fairness, the UK does have a few allies, like Poland, but not enough to make any difference.

And in a confirmation of sorts of Barnier’s declaration, France’s minister of European affairs, Nathalie Loiseau, discussed that France is preparing a no-deal Brexit and expects it to be ugly. From the Express:

Speaking to BBC Radio 4’s Today programme, the minister depicted a devastating scenario for Europe in case of a no-deal Brexit, speaking of traffic jams in Calais, new tariffs and a decrease in trade with the UK.

Ms Loiseau said: “We would all suffer. The worst would be for the United Kingdom.

“On the day of the United Kingdom leaving the European Union with no deal we should start with new tariffs, controls and that means of course traffic jams in Calais and in each and every European port welcoming goods and people coming from the United Kingdom.

“It would slow down the trade relations between our country and the United Kingdom, as well it would be the same thing for Belgium, for the Netherlands and every entry point to the European Union.”

Despite the minister’s hopes for Brussels and London securing a deal, Ms Loiseau argued being prepared for the worst possible outcome of Brexit talks is “what we owe to our fellow citizens”.

She said: ”But we get prepared for a no-deal because also now we have seen no significant progress regarding the withdrawal agreement which would relieve us from this concern.

“All our ministries are working on what has to be done in the case where there is no deal between the United Kingdom and the European Union.

In other words, the French are under no illusions as to how catastrophic a crash-out Brexit, but they are preparing for it, as opposed to relying on a capitulation escape hatch.

Do listen to this section of the BBC segment (or you can ). It is remarkable that the interviewer does not comprehend that a customs union agreement would not mean the UK is in the single market and therefore achieves “frictionless borders” nor understands the order of battle in the negotiation process.

More UK groups are sounding alarms. From (hat tip guurst):

The National Farmers’ Union said a ‘no deal’ Brexit would lead to an “Armageddon scenario” for the British agricultural industry. NFU president Minette Batters warned that “crashing out of the EU” with no trade deals in place must be avoided, and previously said Brexit could well leave the farming sector on the “brink of collapse”….

First minister for Wales, Carwyn Jones, told FW farmers must be given full access to the market post-Brexit.

“Ninety per cent of our food and drink exports go to Europe,” he said. “If we can’t get our relationship right with Europe, we have nowhere else to sell at the right price.

“If we can’t get our relationship right with our closest and biggest market, what hope have we of getting a free-trade agreement with any other country?”

The food issues extend well beyond preserving farmers’ exports. The Government appears to have no comprehension of what a no-deal Brexit would mean for ing its citizens. :

Dominic Raab, Brexit secretary, said this week he would ensure the UK had “adequate food supplies”, but implied it was the responsibility of the industry: “It would be wrong to describe it as the government doing the stockpiling,” he told MPs.

But one supermarket chief said the government’s position was “ridiculous” and demonstrated “complete naivety” about the way the sector worked….

Ministers are already drawing up plans to close the M26 motorway in Kent to turn it into a vast lorry park in the event of a no-deal Brexit, raising questions about the availability of food: some 40 per cent of the UK’s foodstuffs are imported.

“Stockpiling of food is not a practical response to a no-deal on Brexit and industry has not been approached by government to begin planning for this,” the British Retail Consortium said in a statement.

“Retailers do not have the facilities to house stockpiled goods and in the case of fresh produce it is simply not possible to do so. Our food supply chains are extremely fragile.”….

Supermarkets say they operate a sophisticated “just in time” supply model. Fresh food could not be stockpiled for more than a few days, while there was not enough warehouse space to hold large quantities of non-perishable “ambient” goods

Government officials said there had been tense meetings in Whitehall to work out how to answer questions about the “stockpiling” question, before alighting on a line which asserts simply that Britain will not run out of food.

Richard North has recommended stockpiling three months of food. Plan to get creative with pasta, dried beans, and whole grain, and get some chickens if you can. This is what the UK may be reduced to.

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133 comments

  1. vlade

    Fresh produce, if it’s held for any lenght of time, is held in warehouses with controlled atmoshphere (less O2, more CO2, humidity etc.). I’m not sure how many of those are in the UK so that it could over most of the UK, but my guess is not enough to really “stockpile” much (hint – they are expensive).

    1. PlutoniumKun

      Its very good news for all those Pakistani owned small groceries, all those bags of rice and lentils and chickpeas will be in high demand for the next 6 months or so.

      1. Mirdif

        Those small grocery shops are more expensive than the larger ones that have expanded to much larger supermarket style stores. Even cheaper are the big wholesalers who will usually allow retail customers to shop there so long as they spend above a very reasonable minimum amount. In the North of England, Bradford, Blackburn, Manchester and Dewsbury/Batley have some of the largest wholesalers who import from around the world and export all over Europe…so I’m guessing they’ll have sur product in the case of a crash out.

        1. animalogic

          Who wants to start taking bets on when panic buying of food & other necessities will begin ?

    2. Antagonist Muscles

      Nobody has mentioned London’s (and to a lesser extent England’s) lack of culture and demand for fresh produce. Keeping produce optimally fresh is difficult enough; doing this at large scales in the UK seems like an even bigger problem.

      When I was last on holiday in London, I rented a house with a kitchen. My plan was to buy groceries there and cook, but that plan was thwarted when I visited all the local grocery stores and farmers markets, finding next to no fresh produce that I wanted to cook. This is quite a contrast from shopping at the farmers market here in the SF Bay Area. I usually walk around and salivate at all the things I want to cook and eat.

      The political elite in the UK are certainly delusional, but surely there must be some financial elite that understand the forthcoming doom, right? While I have no sympathy for the ultra-wealthy, it would be typical of them to start shifting their assets to tax havens – as Michael Hudson described in his latest interview about IMF loans subsidizing the capital flight out of Argentina for the powerful and wealthy. Has Yves posted on capital flight out of the UK, especially because of Brexit? She already wrote about the Continent poaching “talent” from the City of London.

      I hope some authority punishes these attempts of post-Brexit capital flight. The 1% in the UK have done enough damage to its people. I’m already feeling terrible for the Brits eating dried goods and pasta because of Brexit. The dried pasta I purchased on my vacation in London was awful. I wanted some fancy imported Italian pasta. And that was before Brexit.

      1. Fazal Majid

        To be fair, very few countries or metropolitan areas enjoy the wealth and variety of produce the San Francisco Bay Area does.

    3. Richard Kline

      That quote from Barnier caught my attention too when I read it previously. His EU team is at the stage of having to speak clearly in words of few syllables to get through the fog of a feverish child on the receiving end.

      Since various EU bodies and meetings both before, during, and after the European Council session in June said, softly but audibly, that Community planning for a crash out scenario had been activated, this issue has, almost week by week torqued into wider attention in Europe. It’s taken longer in the UK because of course all the discussion there is inside cricket on who is up and who is down on the nonfesant-because-nonsensical Tory policy team. But business heard the word at the June meetings, and it is private planning for a no-deal that has pushed this into wider discussion it would appear.

      The Parliament recess comes at just the right time for all heads to go back in the sand in the UK. Come September, the tram is much more likely to jump the tracks. It is quite simply too late to negotiate any actual agreement, even now, let alone five-six weeks from now. There will only be three choices by mid-September: capitulate and initial an EU-dictated document, “Brace yourselves for impact!” or Suspend. The first is a political impossibility, the second plain suicide which the entire UK business community will stand up and scream down, so one can see why I handicap an effort at the third as the ‘collection basin’ of activity from December on. It is manful stiffupperlipism to talk about ‘stockpiling three months of rations,’ but a crash out scenario won’t even hit the worst phase by then. Crashout will take several YEARS to fully unfurl. The new normal will be entirely and enduringly abnormal. I don’t see that as the way this ends.

      1. Clive

        I’d agree that we’re passed the “negotiation” phase and now into the “brinksmanship” phase.

        Which is always, how shall I put it, interesting. Would Kennedy order the US navy to open fire on the Russian ships sailing towards Havana? Would Khrushchev order them to turn back? Who knew then which way it would go, in the end?

        The UK Red Lines and No Deal implications are well documented. Will the UK allow any ECJ jurisdiction? Is any Freedom of Movement tolerable? Will it really withhold the £39bn? Will it be able to operationally manage imports / exports even on WTO terms without a Transition Period to build out the prerequisite infrastructure and systems? To name but a few.

        For the EU, will it really implement controls on the NI/Republic border and if so how? Will member states really begin mass deportation proceedings on the 750,000 (minimum) — 2 million (potential) UK citizens? Will it actually go through with deaccrediting the UK’s membership of EASA and try to route almost every transatlantic flight through Santa Maria ATC (assuming it has the capacity to handle this)? To name but a few.

        Just as with other international crises, both sides are locked into procedural positions and are constrained by their priors. Both are convincing themselves and trying to convince others in their domestic audiences that downsides to a conflict are going to be small, limited and contained — while, at the same time, trying to convince external, out-group, audiences that the consequences for them will be dire. But given the complexities, no-one really can say that with confidence that blow-back won’t be a thing.

        With the UK parliament in recess and the EU not able to really consider anything at heads of government level until the October Council meeting, we’ll have an interminable silly season where the now well-established narratives get continually run out. What, if anything, happens in the October conference will point to what might happen next.

        Deadlines have come and gone in the past (remember June?) so I wouldn’t even say that October will be guaranteed conclusive.

  2. The Rev Kev

    Maybe somebody should tell the United Kingdom’s government that you can only have one “special relationship” at a time.

    1. PlutoniumKun

      Even Trump seems to have had the decency to only have special relationships with playboy models on a sequential basis.

  3. PlutoniumKun

    If you want to see evidence of how decades of neoliberalism has corroded even basic common sense, the fact that it doesn’t seem to occur to government leaders anymore that one of the basic duties of any government is to ensure there is an adequate food supply in the event of a forseeable crisis, well, there is the proof.

    Anyway – to the current events. In one way, the UK government is lucky that all this is happening in the summer silly season. Since the Brexit vote, I’ve been convinced that at some stage there would be a crisis when it became unavoidably obvious that the UK is heading for a catastrophe which will lead to a massive economic contraction. I thought it would happen much, much earlier. Its still possible of course that it won’t happen, but at this stage I truly think that only a miracle will stop it. Its absolutely clear that unless circumstances cause one or both parties to do a complete 180 degree turn, then there will be no deal. Reliable neocons like are trying to push the EU to compromise in order to make up for London’s inadequacies, but for all sorts of reasons, its almost impossible to see this happen, not least because there is no way there would be unanimity among the EU27 to a deal like the one he suggests in that article.

    What mystifies me is that Mr. Market hasn’t had a meltdown over this, which presumably means it is still banking on a fudged deal or a transition. Its surely only a matter of time before sterling starts another serious slide. I’m assuming this will happen once the markets come back from their hols with their suntans, but perhaps others can enlighten me on why this isn’t happening already.

    1. Shrewd Tipster

      “What mystifies me is that Mr. Market hasn’t had a meltdown over this, which presumably means it is still banking on a fudged deal or a transition”.

      I think you have answered your own question.

      The market, as I do, expects a fudged deal or transition and given i have the probability of it happening at 80%, albeit down from 90% two months ago, I am not ready to press a panic button just yet.

      1. Which is worse - bankers or terrorists

        “Mr. Market”. It’s August, basically. Wait until September or October.

        I was trying to call consultants in London today and it’s like merely leaving them a voicemail offended them since they are halfway through their 60 day annual leave.. I’m in the Middle East, calling them on my weekend.

    2. makedoanmend

      “If you want to see evidence of how decades of neoliberalism has corroded even basic common sense, the fact that it doesn’t seem to occur to government leaders anymore that one of the basic duties of any government is to ensure there is an adequate food supply in the event of a forseeable crisis, well, there is the proof.”

      I think you’ve hit the nail on the head. The neoliberal-Tory dogma that the market corrects all human actions is about the only plausible explanation left standing at this juncture.

      And the fact that the talent pool in their current government seems to be pure crap. PR and bullying isn’t the basis for coherent policy formation.

      As for Mr. Market (being a rationalist so they say) probably collectively believes that the Tories can’t be so insane and inept in equal measure – that sanity must take hold at some point before b-day.

      But, how does one approach a problem/situation rationally when one is dealing with people who are not themselves rationally oriented? There is no common frames of reference.

      By analogy, it rather seems like a country that decides to declare war but doesn’t really know how it can win the war and so doesn’t bother to prepare for the war.

      1. Reality Bites

        “By analogy, it rather seems like a country that decides to declare war but doesn’t really know how it can win the war and so doesn’t bother to prepare for the war.”

        You just perfectly described the Ottoman Empire’s approach in World War I. That didn’t end well for them either.

    3. The Rev Kev

      I think that at this point it would be foolish to depend on the UK government to make sure that things are still running properly the day after Brexit. I have seen no indication that the government is taking serious thought to the matter but that they are trying to fob this off to industry as it is “their” problem – or so they say. So the neoliberals are saying that it will require a market solution. Cretins.
      For those commentators and readers in the UK, I am going to suggest that it may be time to make alternate preparations. I can’t believe that I am having to say this. OK, you may have heard of the Mormons (not one myself) and they are big time into long-term food preparation and I mean long term. I found a link at which talks about this and has very useful links.
      There would be other websites that could give useful advice. If I was in the UK I would be starting to make preparations now as I would not be putting my faith in May or Boris to do the right thing. In fact, they’ll probably do a Cameron and resign the day after Brexit. As they say, hope for the best but prepare for the worse. A year ago I never thought that I would be posting such a comment but here we are.

      1. Richard Kline

        And today it was Twitmode.

        Steling is going to sink like the Rodney, i.e. with all hands in a short span of time. That will finally get the attention of the UK political class. But that is for the fourth quarter.

  4. Shrewd Tipster

    I am not a fan of Donald Trump but who would you rather have negotiating Brexit – Trump or May?

    The concept of Thereaa May trying to negotiate Brexit was ludicrous from from Day One.

    May’s version of the Trump negotiating technique was to declare “no deal is better than a bad deal”. But all her actions are the reverse of that and the EU negotiating team know it.

    1. vlade

      That’s like asking whether you prefer hanging or beheading. Neither does/would understand that EU is NOT negotiating, it’s putting out a legal position (i.e. you cannot cherrypick). The best negotiator in the world cannot negotiate an apple to fall upwards, and while that is a natural law, unlike EU law which is man-made, the chances of EU changing/fudging its law on the timeframes, for primarily someone’s else benefit, to avoid their self-harm, are about the same as persuading gravity to stop working.

      Any fudge EU might entertain will have one, and one purpose only – to make life easier for the EU. It may incidentally make life easier for the UK, but that will be incidental, not intended.

      1. beachcomber

        “it’s putting out a legal position (i.e. you cannot cherrypick)”.

        As when, for instance, the ECB flagrantly flouted (and has continued ever since so to do) the provisions of the Lisbon Treaty forbidding it absolutely from underwriting member-states’ bonds (in pursuance of Draghi’s declaration of his intent to do “all that it takes” – note that word “all”) to preserve the viability of the euro?

        The plain fact is that the EU Commission, by turning a blind eye to anything it was simply not willing or able to prevent, has been a serial offender when it comes to cherry-picking which of the provisions of the treaties by which it is purportedly bound it will actually observe. The Euro has only survived by dint of EU law being broken, in both the letter and the spirit. That is a historical fact.

        I ought to acknowledge that in saying that I am relying on the account given by Fazi and Mitchell based on their research, as paraphrased in several articles by Bill Mitchell in his blog.

        Dismiss those if you will. I don’t.

        1. PlutoniumKun

          It was open to anyone to challenge that decision to the ECJ. Nobody did, so nobody knows if it was illegal.

          If the Commission breaks its rules over Brexit, it will be challenged by any number of those who don’t like the decision. And yes, the Commission will accept an ECJ ruling.

          Besides which, this is like someone arguing with a 250lb bouncer at the door of a club who’d been refused entry because they are wearing jeans. ‘But that guy has jeans and he got in’. ‘He’s the manager. You are not. You aren’t getting in. Any more questions?’

          1. beachcomber

            PlutoniumKun:-
            “It was open to anyone to challenge that decision to the ECJ. Nobody did…”

            That’s disingenuous. What conceivable interest would anyone have had in challenging it – all concerned stood only to lose by doing so.

            It doesn’t seem to me to be in any way far-fetched to assume that that was what the Commission and the ECB were counting-on.

            Thick as thieves, as the saying goes.

            And besides if it ever had gone to the ECJ it would have been an open-and-shut case. The treaties are absolutely unambiguous on that point. I suggest you read Bill Mitchell’s blog articles for chapter and verse if you doubt that.

            1. PlutoniumKun

              What conceivable interest would anyone have had in challenging it – all concerned stood only to lose by doing so.

              Thats not disingenuous. Thats the whole point.

            2. Marlin

              Bill Mitchell is an economist not an expert in law. As well there were at various points lawsuits against the ECB (e.g. ). The defence maintained, that there was no underwriting of any bonds. The ECB did buy gov’t debt in the open market at a time of low inflation to fulfill its job.

    2. kolyn

      the problem for the UK wouldn’t be resolved by different personalities May or Trump. The UK’s problem is they’re negotiating from a position of weakness and May doesn’t seem to have a grasp on just how unequal the power relationship between the UK and EU really is.

      She grossly miscalculated by triggering Article 50 before planning how to Brexit.

      1. Which is worse - bankers or terrorists

        It’s not that May doesn’t understand how weak her position is. She is merely reflective or her political base, which does not understand. This is the entire fundamental problem.

        1. Dave

          Precisely. With very few exceptions, the people who are desperate to leave are precisely the ones who haven’t bothered to spend any time learning about it, and the implications of what happens.

          If I’ve got a huge dislike of golf I’m probably not going to spend my time understanding every rule and nuance.

          Incidentally Yves – Ian Dunt’s latest is a very good one.

          Nothing that North wasn’t covering years ago, but very accessible and likely to get a bit more wider traction.

        2. Synoia

          She is merely reflective or her political base, which does not want to understand.

          These are very well educated, intelligent people. Comprehension is not the issue.

      2. Louis Fyne

        that. Rushing to trigger Article 50 was the pointless original sin.

        May has past the event horizon. Collapse into the singularity is inevitable, barring some deus ex machina from the plot twist gods.

        May better start praying.

      3. beachcomber

        She couldn’t know what to plan-for until negotiations got well and truly under weigh, and that wasn’t going to happen before the Art. 50 process was triggered because the EU made it a point of principle (ha! ha!) not to engage in negotiations with the UK while the UK was still a member – ie hadn’t triggered Art. 50.

        Get out of that one, if you can!

        Besides the pressure was on her government (and would have been just as much on any alternative) to demonstrate unequivocally (ie by triggering the exit process) that its undertaking to honour the referendum result was genuine.

        1. PlutoniumKun

          Kolyn didn’t say the UK didn’t ‘negotiate’ before exit. He/she said they didn’t ‘plan’ for the exit before issuing the A.50. This is self evidently true, and it was a grossly negligent act of omission.

        2. Mirdif

          All she had to do was to announce a commission to investigate what the impact would be and the commission would answer to a parliamentary committee within 12 months. They would then have had impact studies and they could begin to put in place policies to mitigate those impacts. So its patently untrue that there is no way to know what to plan for.

          This would have meant that Article 50 would not have been triggered for perhaps 10 years at least. She had the opportunity to explain it as soon as she was elected in the early honeymoon period that triggering Article 50 will give the advantage to the EU so we must study the dangers and find the solutions. Instead we got this nonsense of its going to be really easy and there will be unicorns for everybody. Theresa May is incompetence personified though that arrogant chancer before her was no better.

          1. Kurtismayfield

            Theresa May is incompetence personified though that arrogant chancer before her was no better.

            I disagree.. the plan may be to look incompetent while using a hard Brexit to loot. This is the same as Obama’s “I am aloof and the President is too weak” act so that nothing gets done. It’s all on purpose… don’t look at what people say or do, look at the results of their actions and how good the “post bribes” are.

            I expect proposals for major cuts to the social programs and more privatization if a hard Brexit occurs.

            1. Yves Smith Post author

              Tell me what there is to loot in a burned down building. North Sea oil is pretty much gone. The UK has little in the way of manufacturing and that’s almost entirely owned by mulitnationals or local contractors whose economics depend entirely upon what the multinatiionals give them, and it will be a ton less post Brexit. Per the post the domestic ag sector will be toast. London will lose business to the continent, and if there is a sterling crisis, we have the Reykjavík on the Thames scenario of a financial system collapse that former UK central banker Willem Buiter warned about years ago.

              The looting playbook worked in Russia because it had tons of natural resources (I know someone personally who is a billionaire by virtue of buying aluminum mines and refiners) and was largely an autarky. The UK Is a small open economy that isn’t even close to self sufficient in food. And of all the hardships Russians endured, a financial system failure wasn’t among them.

              1. nervos belli

                I agree with the assertion that the looting of russia worked due to them having lots of resources mainly. However, there certainly was a financial system failure:
                If the state defaults on its debts and devalues the currency what else is that than a financial system failure?

                1. fajensen

                  Credit not available for anyone, at any price, so goods and services, like food and fuel, suddenly stop flowing – is what a financial system failure looks like.

                  Sovereign defaults and sudden devaluations still keeps food on the table. Maybe more expensive food and fuel.

                  Sovereign defaults used to be rather normal events before “we” got so over-leveraged and risk-blind, that it became necessary and prudent to place government bonds as capital reserves for banks under Basel II rules. That is a historically abnormal situation.

        3. Larry Y

          Before triggering Art. 50, could have staffed up and did their homework. Rather, they are over-privileged school boys who though they could cram, hire their drinking buddies as tutors, and bullshit their way to top marks.

        4. vlade

          The EU wanted to press the UK into triggering, knowing it had no lever until it the UK did. And it worked a beaut – and, as I keep saying, Corbyn wanted to do it even faster, which was even dumber.

          The fact that the EU says “we will not negotiate before A50 is triggered” does NOT mean the UK can’t work out:
          – what the hell will be required to be done in the first place
          – how a no-deal would look like
          – and about a zillion of other things that it just ignored. It could even hold a number of informal talks with France and Germany (and more than a few other countries) to work out what the parameters of any achievable deal were, instead of wishing for ponies.

          The “honour the referendum” is a very dumb argument – because “Leave” was approximately 17m different meanings, so it would have been only sensible to see which of those were possible in the first place, and had a reasonable support amongs the populace. I know quite a few leavers who said that they would prefer to be in the EU over the JRM crash-out Brexit wet dream. And I know quite a few Remain voters, who would be ok with (assuming it would fly, and those informal talks could happen) with EEA/Norway type of association.

          1. Yves Smith Post author

            At a bare minimum, May could have used “doing her homework” to force a consensus on her side as to what they wanted, and have gotten some EU experts to sanity check their demands. The resignation of Ivan Rogers was a big loss, but also a big tell as to how screwed up the Government’s approach was.

    3. Richard Kline

      Trump is an incompetent negotiator who has yet to fully close a single deal. He has nothing verifiable in Korea. He got foxed by Barnier earlier this week for no gain. He doesn’t have the least clue what to do next with China since they have failed to capitulate. May is merely damn bad with an impossible hand of cards. Barnier at least is sympathetic to May.

      I suspect history will be reasonably kind to Theresa May. Trump has an excellent chance to end as Roast Pig. They are not comparable individuals.

      1. beachcomber

        @Richard Kline

        For my money (while not disagreeing with a good deal, though not all, of the preceding comments), yours is the most balanced appraisal – in regard to May anyway.

        About Trump I don’t feel qualified to judge, though gut feeling says you’re absolutely right.
        In regard to the shenanigans surrounding his casino venture(s) – money-laundering suspicions, dubious (to put it mildly) associates, neglect of/contempt for due diligence, etc – his lawyer is recorded as having remarked “Donald doesn’t do diligence”. That puts it in a nutshell.

      2. nervos belli

        He has a deal with the alcoholic Juncker: import more soy and fracking gas or that beemer gets it.
        He also has done some minor deals where companies repatriated some manufacturing afaik.

        Trump certainly does a high risk strategy with potential rewards and yuge possibility of loss as well, but May doesn’t even do that. At most she can minimize losses the way she acts but apparently isn’t doing so in any way.

  5. Samuel Conner

    Just curious — did UK government IT people and the leaders of their departments do nothing about the Y2K bug? What has changed in the last 20 years?

  6. David

    I remember being at a seminar twenty years ago discussing the nature of security, and a (then) highly placed person from The Economist piped up to say “of course the only true security comes from access to free markets” (we were discussing oil, I think). Small matters of delivery and stockpiling were assumed to take care of themselves.
    More generally, I think Barnier is signalling (or allowing it to be understood) that the stage of negotiation is over. You can only negotiate when there is some between the most one side is ready to accept and the least the other side is ready to give. That’s not the case here (although it could have been) and it clearly never will be now, no matter how long negotiations theoretically continue.
    We are therefore into a new phase, that of crisis management, and not before time. The crisis that PK was talking about will now, I think, arrive very soon, both within the UK and within the EU. This doesn’t’t mean a crash-out is inevitable, because 28 nations and the EC are not going to stand idly by for six months watching an inevitable car crash develop. It’s rather that the nature of the game is going to change, in ways that at the moment we can’t foresee. But the era of pretending to negotiate about terms and conditions is now effectively over. The era of “how the hell do we get out of this?” is just starting.

    1. beachcomber

      That “highly placed person” was a twat. But coming from The Economist what else could one expect, other than The Gospel according to St. Friedrich?

    2. PlutoniumKun

      I think its actually a huge problem for the UK that there hasn’t been an obvious collapse in the talks or a finanical crisis. The earlier one happens the more time there is for some sort of emergency measures or agreements to come into place. The closer the crisis is to March 2019, the more likely it is to be catastrophic. If the talks had collapsed last December, we’d be in a very different situation now, ironically, probably a much better (or to be precise, much less worse) one.

    3. Summer

      “You can only negotiate when there is some between the most one side is ready to accept and the least the other side is ready to give.”

      That’s usually at the end of the contract term limits.

  7. Which is worse - bankers or terrorists

    I’m not sure why I think of the “Thank you sir may I have another” scene from the movie Animal House when I see these articles.

    As stated earlier, refer to Greece’s 2015 implosion as documented here on NC. The EU strategy and potential outcomes are all documented there. Whatever remains of the UK will be a colony to EU on par with the Belgian Congo by summer next year.

    I’m still not convinced that the UK with end up with something akin to a military/emergency government by next year. Which I imagine is what a few in the business/political Tory elite wouldn’t mind.

    1. begob

      Think of Windrush. It’s conceivable May aims to extend that kind of authority over the entire popuiation.

      1. windsock

        The “hostile environment” policy has been in place for the working class and social security claimants since George Osborne’s first budget after the Coalition took power, as well as for immigrants. Nobody has cottoned on to this yet, but it is true.

        1. begob

          For sure, but in Windrush they used the power to detain people by executive order, and in general required a network of informants.

          Here’s a creepy sentence: From gov.uk

  8. Shrewd Tipster

    Yes, it called the Norway Option, I doubt it will please anyone, certainly not me, but that will be the UK’s situation. if the EU survives!

  9. Which is worse - bankers or terrorists

    I’m not sure why I think of the “Thank you sir may I have another” scene from the movie Animal House when I see these articles.

    As stated earlier, refer to Greece’s 2015 implosion as documented here on NC. The EU strategy and potential outcomes are all documented there. Whatever remains of the UK will be a colony to EU on par with the Belgian Congo by summer next year.

  10. beachcomber

    I know full well this is a dumb question, and I can anticipate some of the answers, but I’ll pose it anyway.

    On 29th March 2019 aircraft will be flying from UK airports to other countries’ and from other countries’ airports to the UK’s, with their airworthiness fully certified and all safety- and other mandatory checks having taken place as usual. The following day, nothing whatever will have changed in respect of any of those mandatory routines:- it will be not one wit less safe to fly those routes on that day than it was the day before. So what is it that, if no deal has been reached, would stop aircraft from flying them?

    The analogy can be extended in principle to all or virtually all other forms of transport, to the movement of foodstuffs and all manner of other goods, and so on. The question is the same in every case.

    Groping for an answer, the only one I can come up with is:- “because rules are rules and must be obeyed, regardless of how absurd it may be to do so”.

    I could buy that, if anyone was proposing that that situation be prolonged indefinitely. Obviously, if prolonged beyond a certain point the rules become a mockery and the whole system begins to unravel, which would be in nobody’s interests.

    But for a week, a month, a year…? Surely not. And in such a short-term scenario just going on mouthing the formula “because rules are rules”, when enforcing them is causing every kind of mayhem, will not wash. Rules are man-made artefacts and can be changed, or their operation suspended, if the will exists and the greater good demands. Slavish obedience to rules under any and all circumstances is the classic Jobsworth’s cop-out.

    Of course it would have to be understood that any suspension of the operation of rules (most especially, safety rules) must be strictly time-limited. But, given that, the question still applies IMO.

    1. Dave

      I’m not sure that “rules are rules” is that inadequate an answer. At least, it’s not a bad jumping-off point for an answer.

      The most obvious reason as I see it would be the invalidation of insurance. If a flight has no legal right to fly or land at it’s destination, an insurer won’t cover it.

      If the insurer won’t cover it, the pilot won’t take off.

      1. Yves Smith Post author

        To add to your point, virtually all aircraft are leased, and it would also be a violation of the terms of the lease. Landing in an airport that is no longer covered by various air transport agreements inevitably means the plane will be serviced. That’s why there is a safety issue. The safety rules are mind-numbingly extensive and detailed in aviation.

        On top of that, non-UK operators will no longer be allowed to fly in UK airspace, so routes will be disrupted by virtue of that as well.

    2. PlutoniumKun

      As Dave says, it ultimately comes down to insurance and liability. No CEO of any airline will let an aircraft lift off if there is any doubt over the legal status of that flight. Its that simple.

      To give an analogy, suppose you’ve just realised your car was due its MOT yesterday and you forgot. And you know the small print of your insurance invalidates it if your car is not MOT’d. Would you drive? Maybe.

      Now imagine you are a private bus driver, and that happened, and the next day you are driving a bus load of lawyers to a conference. Will you decide to drive them?

      1. beachcomber

        All rules are created by man and can be modified or otherwise counteracted by man.

        Remember, I’m talking about time-limited expedients.

        The government could put temporary insurance arrangements into effect. Please don’t tell me it can’t be done. No obstacle is beyond the wit of man to overcome given the will.

        1. PlutoniumKun

          You can apply that argument to quite literally any legal or regulatory situation. That doesn’t mean it makes any sense.

          It needs repeating. Brexit is 100% the idea of the UK. It is not incumbent upon the EU to destroy or undermine its own rules and legal integrity to help a third country. The EU has repeatedly offered a way out to the UK – to withdraw its application for exit. That is the only option which prevents an enormous mess for everyone. It is the UK’s right and choice not to take it. It is the EU’s right and obligation to do what it must to protect its own members.

          1. Oregoncharles

            “to help a third country” – you mean Ireland? Because it seems to me the one really insoluble problem resides at your front door. The rest of the EU will experience minor impacts, but Ireland gets major ones. And isn’t the EU responsible for a member’s fate? They already abandoned Ireland during the Great Financial Collapse.

            That said, I find the furor over air passage puzzling. For one thing, I thought that was regulated by international agreements at the UN level. I don’t quite understand why it’s an issue. For another, it’s a narrow issue in which everyone stands to gain by, eg, grandfathering the present arrangements. There are examples of air passage agreements everywhere, or there wouldn’t be international flights. Just swap in the appropriate names and sign one, for heaven’s sake. Not doing so indicates deep dysfunction on both sides. This is not like trade in services. The only way to lose is to not have a working agreement (and again, the chief losers would be powerful people in business.)

            1. PlutoniumKun

              ‘Third country’ is the term the EU uses for countries which are not in the EU and with which it does not have a bilateral arrangement or deal. In this context, the UK is making itself a Third Country.

              . Put simply, in excluding itself from existing agreements with the EU, the UK simply does not exist legally – it has no bilateral or multilateral deals. It can get them, but it will take years to negotiate each and every one. This has nothing to do with the EU being difficult or awkward. Its simply the nature of international law with regard to aviation.

          2. Which is worse - bankers or terrorists

            “It needs repeating. Brexit is 100% the idea of the UK. It is not incumbent upon the EU to destroy or undermine its own rules and legal integrity to help a third country. The EU has repeatedly offered a way out to the UK – to withdraw its application for exit. That is the only option which prevents an enormous mess for everyone. It is the UK’s right and choice not to take it. It is the EU’s right and obligation to do what it must to protect its own members.”

            While it is true that this is the EU’s right, a backlash is possible if Brexit it too “hard”, similar to the current right-wing turn in eastern Europe, but much more severe. One can forsee a military/authoritarian government in the event of serious food shortages/structural economic strain/etc., and one has to ask itself if the EU wants that.

            1. vlade

              Yes. Someone compared it with humbling similar to WW1 of Germany, and we can see what that brought.

              Doesn’t mean the EU is assuming it will get that far, although I suspect that if there were real food/medicine shortages, the EU would consider help (and it could do so under the WTO rules on emergencies, so it would be even legal) – but the real question is wha the UK politicians and public would do, who would they blame.

              I can’t see the EU trying to help if it was permanently attacked by the UK politicians as the cause of it all – even if it did lead to Farage being a PM. But then I’d say we’re really in the ‘UK is falling apart’ territory, as likely Scotland and NI would secede, and who knows what else would be happening.

              1. Which is worse - bankers or terrorists

                My sense is that the UK will a need military/authoritarian/emergency government in some form, for social stability, probably for food distribution and rationing, and this will help suppress Scotland and NI from leaving. The country is only going to be able to handle so much humiliation it lacks the level of cohesion it had in the 1940s during the war, so some sort of emergency powers will be needed.

                1. puzzled

                  I know it woulddisappoint a few who are anxious for the people of the UK to suffer as much as possible, but is there anything stopping them not leaving if they don’t get what they want from the EU? Can they just revoke the A50 for now?

                  1. PlutoniumKun

                    They almost certainly can revoke A.50 at any time, although there is no written confirmation of this in the treaty and there are no legal precedents. It would probably have to be referred to the ECJ, but if the main EU leaders were on board it would be hard to see the judges go against this.

        2. Dave

          “The government could put temporary insurance arrangements into effect. Please don’t tell me it can’t be done. No obstacle is beyond the wit of man to overcome given the will”

          That’s true. But rather than the UK Government deciding to branch out into providing liability insurance for UK airlines ( all overseas flights landing / refuelling etc as well, given their insurance will also no longer be valid due to the non-existent legal status of UK airports)…

          Why not just go about finding a way that means they don’t have to do any of this after all?

          No obstacle is beyond the wit of man to overcome, after all…

        3. Mirdif

          I believe government putting in place any kind of insurance arrangements has the potential to fall foul of WTO rules on state subisdies.

        4. Anonymous2

          The aviation industry is a very rule bound industry for safety reasons. Its admirable performance in reducing the frequency of fatal crashes for scheduled flights in recent decades is to a major degree the result of people complying with rules.

          You are effectively asking why cannot the rest of the world abandon its obsession with rules in this area to suit the convenience of the UK. Cannot you see the problem here?

          The UK has open to it a very simple way of avoiding this problem – reach an agreement with the EU. They just have to make the concessions necessary to obtain agreement. It was the UK government’s decision to send in an Article 50 letter. They must accept responsibility for the consequences.

          1. Which is worse - bankers or terrorists

            ” It was the UK government’s decision to send in an Article 50 letter. They must accept responsibility for the consequences”.

            The UK government is only doing what is political base expects, and its political base does not want to accept the consequences. So there is no “must” accept responsibility for the consequences; the Leave voters do not want consequences.

            Cannot you not see this is like dealing with the mentality of preschool children?

            1. vlade

              The fact someone does not want to accept consequences has in 99% of cases no bearing on whether the conequences will hit them or not (they will).

              Between wishfull thinking and reality, reality wins 100% of times.

              The problem here is that while the reality wins, a lot of innocent people get hurt

              The “people” who “will the Brexit” can, at the most – and that assumes they all wanted the same, crash-out Brexit – account for approximately a quarter of the UK population (17m out of 66m).

              Moreover, the 0.1% of the richest Brexiters most likely WILL profit from it (but so will the 0.1% of richest Remainers), massively, and even if they will not, they are unlikely to suffer the consequences.

              1. Which is worse - bankers or terrorists

                I look at consequences like this: I was working in the California housing industry in 2006 and, knowing full well we would precipitate a full-blown financial crisis, debated what would happen.

                My theory is that the crisis was too large for anyone too fully accept the consequences of it. I think I was right…this lead to the money printing. Money printing allowed those perpetrating the crisis to avoid the consequences, effectively passing the consequences onto the lower and lower middle classes, who suffered dearly.

                I see a no deal Brexit the same way; this is too big to accept the consequences. Like the financial crisis, the mind can’t wrap itself around something that big, there has to be a shift of consequences and lots of blame shifting due to the overwhelming resentment.

                I see that outcome as a military/authoritarian government in the UK (which will probably be required for food distribution) with potential aggressiveness toward neighbors. The UK will be too destitute to impact the rump EU so this aggressiveness will be mostly made manifest by actions against Scotland and NI if they try to leave the UK.. Like Germany in the 30s, there will need to be scapegoats found and they will be outsiders in nature.

        5. Detlef

          ?

          The head of the UK CAA, Andrew Haines, unequivocally stated that the country should not plan for a new independent aviation safety system, a view the industry shares. ADS Group, the trade body for British aerospace, believes that it would take 10 years for the country’s civil aviation authority to create the necessary certification infrastructure.

          I seem to remember reading another article where the head of the CAA was quoted as saying that it would take 5-10 years to create the necessary infrastructure. And that it would be better to stay as an EASA member and therefore the CAA wouldn´t plan to create the infrastructure.

        6. vlade

          My house, my rules.

          The UK left so it can have its own rules. The EU has its own rules, and will enforce them as it sees fit, to its benefit, not the UKs. How hard is it to get it?

          UK can do what it wants on its territory, but then it has to assume it will have consequences. Decisions have consequences, the UK will have to live with its.

        7. Yves Smith Post author

          You are really out of your depth. Read up on this issue rather than spouting nonsense.

          It isn’t just a matter of insurance. It would also violate aircraft lease terms.

          And there is no point arguing. No and I mean no aircraft operator outside the UK will fly into UK airports if the UK falls out of international agreements due to Brexit and does not have replacement agreements in place. You can say “nyah nyah nyah” all you want to, but that is the deal. Only flights within the UK will be on.

          1. PlutoniumKun

            Ironically enough, a very high proportion of the leased aircraft in the world today are owned by Dublin registered companies (the exception being Ryanair, which owns its own, as a spin-off of having being once an aircraft leasing company itself).

        8. Darthbobber

          No obstacle is beyond the with of man to overcome?

          I guess this explains why we are all immortal.

    3. nervos belli

      I’m not sure if you have the same in UK or wherever you are: we have something called colloquially TÜV for cars here. Essentially it’s a mandatory periodical (2 years) inspection by some bonded guy who checks brakes, emissions, makes sure there isn’t too much rust, etc. Basic safety check “is this car road worthy so it doesn’t pose a danger to anyone?”
      Same here: if your plane or car was in spec a day before that date, the chances are it is the day after as well. However you still are in violation of the law and you will be fined, car impounded, whatever.

      Of course this particular problem that is easy to fix with some panic and transition. It is also one of the things that will get fixed this way probably since it’s in the interest of all parties, UK, EU, US, airlines, underwriters, really everyone everywhere. Just like the ECB buying government debt above. Letter of the law violated maybe, but there is a fudge cause otherwise the system breaks down. Since no one runs to the nearest judge, and that judge doesn’t really want to take that lawsuit anyways, it will simply go *poof*.
      All parties have a healthy self interest and in this case that’s a good thing.

    1. Billy Bolton

      I think we’re a few months away from a new British Government revoking the Article 50 notification that UK intends to Brexit.
      Which, as Nathalie Loiseau said elsewhere in the interview, the French govt would be happy to support.

      1. Summer

        The EU is sending a message about what happens if a country tries to leave.
        Everything goes back to “normal” upon revoking the Article? You think the message ends there?

        1. Ignacio

          Yes the EU has set it clear that if a country leaves the unión… well… it is no longer a Union member.

          1. Summer

            And the spanking will continue even if they reverse the Article.
            Fire or frying pan?
            You doubt?

            1. vlade

              And your evidence for that is….

              The UK can leave. It would be _always_ hard, there’s no easy way to disentangle from 40 years of living together (did you ever meet anyone who divorced after a long mariage? Ask them how easy it is..), but there were thoughtful leavers (North is one of them), who presented at least a remotely plausible plan.

              The UK govt is making it catastrophic due to having nothing but fantasies.

              TBH, it’s not dissimilar to the great plans of WW1 that predicted the war is going to be over by Xmas (by both sides) – because few had an idea of what it actually would mean and look like, and those few that did were shouted down by so-called patriots (again, on all sides).

              1. Summer

                In the years of empire, Brits negotiated the same way with their conquered nations. So not really shedding tears.

                But do you think anyone would enter an agreement if they were told…and if you try to leave, we will destroy you?

                1. Dave

                  Probably not. But that isn’t what is happening here.

                  The UK is being told “if you want to leave these legal structures, then you take on both the positives and the negatives of leaving these legal structures”.

                  The problem is, nobody with any power thought to check what that might entail before flicking the switch.

                  1. Summer

                    But they have to leave now to get back in, right?

                    Upon renegotiation, what do you think will be required of Britain?

                    Then I think you get to the heart of the matter. And it will be seen that it is not just about “current legal structures,” but extracting even more concessions outside the current “legal structures” (which will then change after all the foot stamping about “rules”).

              2. Summer

                “And your evidence for that is….”

                Greece.

                EU/EZ – same project, different currency situations. But overall really the same project.

              3. Summer

                The EU keeps saying they have to go ahead and get out before they can get back in (or something to that effect).

                Getting back would be a negotiation.

                What if…what if the EU says, “You can come back, but you have until X date to join the Eurozone?”

                Just riffing….

                1. Yves Smith Post author

                  Stop making stuff up, It is a violation of our written site Policies.

                  You are perfectly capable of reading Article 50. The UK knew what is was getting into. The EU Is not being arbitrary or capricious, contrary to your claims.

                  The UK can ask to rescind Article 50. It is absolutely false to suggest otherwise. The EU has made clear even before the French minister’s remarks on the BBC that they’d accept a rescission. It is also no mystery, and most certainly NOT a plot, that if the UK goes past March 29 and falls out of the EU, and asks to get back in, it has to go through the application process just like any other third country. Those are the rules. The UK (and people like you) are operating with a sense of inflated self importance. The EU has been crystal clear and consistent from the very morning after the Brexit vote, but diehards keep fantasizing that the UK should get special treatment. It wont’. Divorce is divorce.

                  1. Summer

                    Saying the opposite of Britain is powerful.
                    “In the years of empire, Brits negotiated the same way with their conquered nations. So not really shedding tears.”

                    “Fire or frying pan.”

                  2. Summer

                    Back. Had to get off the road.
                    Did you read up the read and see that I wasn’t a Union Jack “diehard”?
                    Hope anyone else did.

                    And the one Europe mavens would never want Britain in the Eurozone?

            2. Yves Smith Post author

              Huh? The UK had an exceptionally good deal in the EU. It also has its own currency. It is clearly going to suffer a large and permanent reduction in income and wealth if it leaves the EU. And as a small open economy, it will have less influence over rules than by being a jerk about what rules it wanted the EU to follow and being able to take advantage of the EU’s vastly greater power in negotiations.

              You have swallowed a ton of anti-EU propaganda. The EU has a lot of problems, but no way was the UK a victim of them. The Tories did a very effective job of scapegoating the EU for neoliberal policies it was happy to implement and would have implemented on its own. In fact, the UKIP and Tory enthusiasm for Brexit is in large measure due to the fact that they can screw workers more post Brexit by escaping EU environmental and labor regulation.

              And you not only buy but are selling that swill.

              1. Fazal Majid

                Verhofstadt said at the minimum the UK would lose its rebate as a condition for Art. 50’s revocation to be accepted. That said, he is not the Council of Ministers or the Commission, nor has the ECJ ruled on whether an Art. 50 notification can be withdrawn. Barnier thinks not, but he is not the ECJ either. The (British) drafter of Art. 50 himself believes it can be revoked, but he is not the ECJ either.

        2. nervos belli

          I won’t end by going to status quo ante. The EU will gladly take the UK back, but only if that brit rebate that Maggie Thatcher forced by the power of her handbag upon the EU is gone. No more special rules for the UK. The UK blackmailed the EU for more than 30 years, always the implicit “either you accommodate me or I will go” scenario.

          And that is the rub: the UK might even go back right now if all their special circumstances for them were reinstated, but if they have to pay ~30% more than before: that is “I’d rather die” territory for the UK.

          If the UK went back, it would be hat in hand, they would be in the doghouse for quite a few years probably.

  11. tegnost

    “… blathered about how the UK had provided a good faith, innovative proposal.”
    so you use “innovative” when you can’t say “smart”?

      1. Fazal Majid

        We all know the deviant meaning financiers assign to “innovation”. What we laymen call chicanery or fraud.

  12. Octopii

    I’m sure it is not so simplistic but if agriculture is worried about having a market and the people are worried about getting food, it would seem things could work their way out in the manner intended by the brexiteers.

    1. Dave

      Perhaps, in the short term.

      If we do go full Thelma & Louise next March, it’s likely that the domestic market would be flooded with produce that can no longer be exported.

      So there will probably be plenty of salmon, mackerel, lamb and herring to go around in those first weeks.

      Until the surfeit of those goods which had been intended for the continent causes prices to fall and the producers to go out of business, exacerbating the problem in the long-term, and making the country even more reliant on others.

      There’s probably a really important argument to be had at some point about the importance of national self-sustainability, but now probably isn’t the time to have it. Like talking about your toe-nails being too long while you’re sawing your own foot off.

    2. cnchal

      This is key.

      “Stockpiling of food is not a practical response to a no-deal on Brexit and industry has not been approached by government to begin planning for this,” the British Retail Consortium said in a statement.

      “Retailers do not have the facilities to house stockpiled goods and in the case of fresh produce it is simply not possible to do so. Our food supply chains are extremely fragile.”….

      Supermarkets say they operate a sophisticated “just in time” supply model. Fresh food could not be stockpiled for more than a few days, while there was not enough warehouse space to hold large quantities of non-perishable “ambient” goods

      When a fragile system breaks, it gets shattered into a million little pieces. The parliamentary fat cats and elite will eat well, the peasants are going to be lucky with thin gruel within three days of the ‘crash out’. The elite will say, “you voted for it, now suffer for it”.

      The big black swan is visible for miles around, circling, circling. We know when and where it will land. Oh, look at the pretty bird coming in for a crash landing.

      1. Which is worse - bankers or terrorists

        When a fragile system breaks, it gets shattered into a million little pieces. The parliamentary fat cats and elite will eat well, the peasants are going to be lucky with thin gruel within three days of the ‘crash out’. The elite will say, “you voted for it, now suffer for it”.

        No European country will be so humiliated since Germany at Versailles.

        1. puzzled

          Do you think that fat pile of trident missles might come in to play? Trade wars can become hot wars and gloating bystanders can get dragged in over their heads. I find it hard to believe that any victory will end up being more than pyrrhic.

          1. Clive

            It is pointless trying to get into a game of Top Trumps — Brexit Apocalypse Edition. Trade disputes, including non-tariff barriers such as imposing a fee collection or technical standards inspections at point of entry in absentia of the infrastructure, processes or resources to operate these are dealt with under .

            Once the U.K. abandoned WTO dispute resolution — such as any nonsense about blockades of the navigable part of the Channel if the U.K. were to try to declare it an Exclusive Ecconomic Area, interruptions to shared infrastructure such as pipelines and telecommunications networks, or air corridors (amongst many crackpot notions the most swivel-eyed of the Ultras have floated) — you are subject to instant international pariah status. In the event of that, you’d make Venezuela look like paradise.

            I’m not saying the EU has exactly bent over backwards to be accommodating to the U.K. and quite the opposite in some respects (Galileo participation and Open Skies II / EASA membership where ignoring contractual positions and / or less favourable treatment compared to other third countries are legitimate anti-EU arguments).

            But compared to the U.K.’s brazen bad-faith dealing (promises of a Backstop to the Republic of Ireland only to then take it off the table, threats to not pay agreed budgetary contributions which are already agreed 5 years ago, a fundamental lack of understanding about what the EU is and how it works for the CJEU’s essential jurisdiction in management of the Single Market, broken-record’ing over why can’t the UK have a Special Deal when the EU has a whole shelf full of different-flavoured deals already to pick from, shameless and embarrassing divide-and-rule attempts to sideline the Commission — and that’s just what springs immediately to mind, there’s a lot more besides) it is not a case of six-of-one-and-halfdozen-of-the-other.

            More like 9 or 10 of the U.K. whah-whah’ing and 2 or 3 of the EU getting a bit arsey in response.

            Yes, both sides need to move on and work out some sort of compromise (more on the U.K. side than the EU — the EU is what it is). More, or worse, footstamping by the U.K. government is not going to achieve this.

  13. templar555510

    The EU is a technocracy under the influence of a plutocracy unlike the US where the plutocrats are only too visible. We Brits have never fully adapted to that technocracy and neither have our politicians of Left or Right. Breaking with the EU was yet another attempt by a hapless leader of the Tories- David Cameron – in a doomed attempt to reconcile the competing factions within that party . Both parties ( Labour and Conservative ) appear to be hoping Brexit will somehow solve itself and for the rest of us mortals – the populace – we have largely switched off . I can’t remember the last time any of my friends even hinted at a conversation about Brexit . Will there be a second referendum, as some pundits frequently suggest , I doubt it . All politicians would lose credibility for this to even be suggested. So the muddle will continue through the remainder of this very hot summer we are having and as we get nearer to March reality will reappear . By then Mrs. May might be yesterday’s lady . But we Brits are a funny lot and very difficult for Americans to even begin to understand . We will survive this whatever the outcome is simply because the world is hardly awash in leaders, anywhere, and so the best/ worst outcome might be some sort of postmodern/fudgy/sketchy/leaderless ‘ solution ‘ rather than an apocalyptic ending.

    1. Which is worse - bankers or terrorists

      “But we Brits are a funny lot and very difficult for Americans to even begin to understand . We will survive this whatever the outcome is simply because the world is hardly awash in leaders, anywhere, and so the best/ worst outcome might be some sort of postmodern/fudgy/sketchy/leaderless ‘ solution ‘ rather than an apocalyptic ending.”

      I believed things like this until I lived in Syria at the beginning of the civil war and watched a country come apart. It is tough to imagine until it actually happens.

      Wait until the first time the internet and power goes out, and the curfews start. Then it gets interesting.

    2. c_heale

      It could also be said the UK is a feudal system with a democracy on top. The same families have been ruling the UK for the past 1,000 years. The big issue for the UK is that membership of the EU covered up its decline, and the said decline was exacerbated by the neoliberal policies of all the governments from Thatcher onwards. The last two administrations have been particularly egregious in this respect.

  14. Phichibe

    To repeat myself with apologies, UK pain during Brexit is not a bug, it’s a feature. Merkel and Macron are both solid internationalists, as ironically is May, and they regard Brexit as a disastrous policy move brought about by the same nativist crowd that gave us Trump. They are NOT going to ameliorate UK discomfort precisely because they want to set up a firebreak deterrent against future insanity in the EU (see Italy). Look at the Carthaginian “recovery” that Germany imposed on Greece and Spain. Even if UK unemployment hits 25% I don’t see the EU relenting.

    On top of this all I expect that by early 2019 we’re going to be occupied with a rapidly unfolding disaster in the Persian Gulf, brought to you by Netanyahu, MBS,MBZ, and Trump. This truly will be a winter of discontent.

    P

  15. George Phillies

    “Mr Barnier said that it was “perfectly clear” to the EU27 and European Parliament that the financial settlement agreed in December and March was “agreed for good”.”

    Readers may recall one of the guiding geniuses on one side of the negotiation or the other saying that there was no deal until there was a complete deal.

    As I have said on other occasions, this appears to continue to resemble a slow-motion train wreck in which the negotiating positions of the two sides are irreconcilable.

    WIth respect to UK agricultural exports, one might ask what the EU-27 plans to do if they are cut off from them, that being the other half of the UK having all this material it cannot export to Europe.

    1. Dave

      “Readers may recall one of the guiding geniuses on one side of the negotiation or the other saying that there was no deal until there was a complete deal”

      “Nothing is agreed until everything is agreed”, has been the standard EU negotiating motto since time immemorial.

      One of the brighter sparks on the UK side thought early in the process that it would be a good motto to co-opt. Think of it as a football crowd doing a mocking version of the other side’s song.

      The problem (and it’s been of the UK’s biggest problems since the start) is that the EU27 see this as two separate negotiations. The money is in the first part, and until that is “agreed” then the second part doesn’t start.

      Metaphorically, the UK thinks that the £39bn bill is paid at the finish line. It’s not, it’s paid at the start gate.

  16. ewmayer

    Would be interested in readers’ takes whether it might make sense to make a gambling-money punt shorting the GBP sometime between now and 30 Mar 2018. I know, nearly all of the time this sort of thing is a sucker’s bet for us retail mopes, but given that the markets and their MSFM handmaidens still seem to be busily pooh-poohing the threat level here at this late juncture, conditions seem fairly ripe for a “what if the ever-optimistic market mavens are wrong, and badly?” wager. The disconnect between the markets/mainstream-reporting and facts on the ground here reminds me in no small number of ways of 2007.

    1. Antagonist Muscles

      I am uncertain if NC is the proper place to discuss trading, but here goes. Although I have trading accounts, I am by no means an expert. And really, I am more fascinated (disgusted) with how much pain the Brits are due. When a Portland meetup attendee asked Yves about the next crisis, she allegedly hinted at an economic crisis rather than a financial crisis. Seems to me, Brexit will cause some grave economic and financial dislocations.

      Your question expects an answer based upon the timing, yet my answer is based more on price. Right before the Brexit referendum, gbpusd was at 1.43. Today, it is at 1.31. I doubt the exchange rate ever makes a sustained push above 1.40. Anything, above 1.36 seems like a pretty good time to consider shorting.

      As I asked above about capital flight out of the UK, I would expect at least some of the political and financial elite to take the money and run, while getting subsidized in some way. Or if not a subsidy, perhaps the exchange rate is mysteriously around 1.40 because of three months of US dollar weakness. Stranger things have happened. There’s no guarantees, but if it did happen, it might convince some retail traders (the chumps) to take a long position on the pound.

  17. Darthbobber

    A measure of the delusion level: This one from a Guardian columnist.

    Theme “If you don’t change your minds and give us what we want, we’ll implode ourselves and become a volatile failed state. You don’t want that, right? Well, we just can’t help it, which makes you responsible.”

    I am reminded yet again of Sheriff Bart taking himself hostage. This can work as a comic gag but hardly in this context.

    1. Yves Smith Post author

      Yes, I love this “must not impose a punitive exit agreement.” Totally clueless. Does not get that the UK is on the way to a crash out (no agreement) any new trade deal won’t be concluded till after a transition period, if there were one (another ginormous problem had the UK been on a better track).

    2. PlutoniumKun

      TGH is supposedly an intellectual. There has been a series of articles along these lines published recently which leads me to think there is a bit of a movement among European neocons (of which TGH is one) to try to salvage something by persuading the EU that its in its interest to rescue the UK from its folly, even if that means giving the Brexiters what they want.

      Even if this was a viable strategy, I strongly suspect its just too late to get the required EU27 unanimity for a turnaround like that. The EU simply isn’t focused enough on Brexit for there to be an appetite for the horse trading that is always required for the EU to significantly change course on a major policy issue.

  18. jim

    I know it will be very unpopular here but UK should just stop negotiating and just leave next march. Accept the dislocation that it will cause and deal with it. Tell people there will be dislocation and get ready for it. We should not pay anything. Once we have left then we can start negotiating with the EU about a free trade arrangements and any monetary matters.

    we should be expended energy on getting ready to leave not wasting time on pointless negotiations.
    It will be easier to negotiate after we have left I think as we will have a better idea of how good and bad things are.

    I expect some things people think will be problems will turn out not to be big problems and other things that we didn’t think would be problems will be problems so its impossible to do a deal before UK leaves. Its tough but if you break an relationship personal or otherwise you have to deal with the consequences and hope in the longer term you can develop a better relationship after the split.

    This idea that UK politicians have that the EU will be our friends and make it easy to leave to just tosh.

    1. nervos belli

      The crux is: UK is doing neither, not doing any form of treaty nor preparation of a crash out.

      If you take the position of a crash out Brexit then you must prepare for it. Since the preparation means fairly big infrastructure projects like building customs points, they are not really doable inside the 9 months left. As written above: Calais customs bought a hectar sized area for dealing with a crash out Brexit. What has the british side done so far? Crickets…

      As for breaking relationships: a divorce is very very structured and you certainly aren’t divorced before the property, kids and dogs are all divvied up, so I guess your example is a singularly awful one.

      1. Anonymous2

        You walk out on your existing agreements such as the Good Friday Agreement and the financial commitments and then expect people to sit down and discuss new agreements with you just like that?
        The world is watching and can see that the UK is not to be trusted. The US might be prepared to send you an agreement to sign which will be dictated by them because they are big and hard enough to push the UK around but others will think very carefully before signing up to anything without having very strong protection against another UK decision to walk away from international commitments. You trash your reputation, you have to live with the consequences.

    2. Dave

      So”I know it will be very unpopular here but UK should just stop negotiating and just leave next march. Accept the dislocation that it will cause and deal with it. Tell people there will be dislocation and get ready for it”

      So, diabetics just put up with dying because we can’t import insulin and cancer patients just deal with their radiotherapy being cancelled because we can’t import nuclear isotopes?

      You’re right, that probably would be pretty unpopular.

    3. Mirdif

      This is unspeakably stupid. The first thing the EU will demand before moving on with any other talks is the money. Also, nobody else will bother to strike an agreement as they will see the attitude of backing out on commitments.

      Negotiation after the fact will require complete capitulation to the EU. More than half the food required is imported; the contracts governing the interconnecters that supply electricity are governed by the ECJ; the airports lose their licensing and so no take-offs or landings.

      The food shortages alone will lead to civil disorder should it continue for more than a few weeks (perhaps even days) – there are not enough armed forces personnel to restore order. Expect UN resolutions and a UN force (in reality US forces) to step in to restore law and order and then become a vassal state of America. All those things you saw on the TV happening in far off lands with riots and violence and UN forces will be coming to your doorstep. Maybe you’ll escape unscathed but I’d wager you won’t because you’ve yet to understand what that scenario really entails.

  19. RBHoughton

    I begin to suspect there are a few powerful people in UK who believe they can foresee the future. We have often heard prophesies in the newspapers, on TV and in the churches but it has rarely been the case that government before now has been influenced by them.

    Even treaty commitments cannot restrain a UK government when it gets the bit between its teeth. So what’s going on with Brexit? Has Blair, Brown, Cameron and May been persuaded the end of the world approaches? Is that why the country’s economy is collapsing but we have borrowed enough to buy aircraft carriers, F35s and nuclear submarines? What’s up Doc?

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