we said that in the historic fallout and unprecedented confusion over
Brexit, so far only one sure winner has emerged - namely Russia,
where Vladimir Putin is watching the slow-motion collapse of this
latest artifical aggregation of Europen states (a quick search of
failed attempts at European integration results in tens of pages of
results) with great interest and willingness to pounce at any
opportunity - even as all of Europe is a loser, and nobody more so
than Germany, whose chancellor Merkel is now watching her legacy go
down in flames as first the UK, then France (National Front), Italy
(Five Star Movement), Denmark (Danish People’s Party), and Holland
(Freedom Party) have all called for either a EU referendum of their
own or a renegotiation of their country’s EU membership.
would be expected, the more worried and desperate Germany gets, the
more ridiculous things Germany is apt to say. Case in point is what
German Foreign Minister Frank-Walter Steinmeier said earlier today,
when he tried to reassure onlookers that the EU would weather the
shock of the British vote to leave the union as he convened crisis
one small nuance: Steinmeier wasn't focusing on the EU, he was far
more concerned about Germany and how the one nation that has
benefited more than anyone one else from the customers union and the
common currency is struggling to keep up appearance that asll is
Steinmeier was heading into a Berlin meeting with his counterparts
from the EU's six founding members, he said the following: "I
am confident that these countries can also send a message that we
won't let anyone take Europe from us."
while "us" was meant to refer to the EU, he really meant
called the European Union "a successful project of peace and
stability" and said that there was a "strong desire"
within the bloc to defend and strengthen it. It would appear that
tens if not hundreds of millions no longer agree.
damage control continued when he said that "it is absolutely
clear that we are in a situation in which neither hysteria nor
paralysis are permissible." Indeed: which is why central banks,
the G7 and the IMF all scrambled to prop up... the world's markets.
must not rush headlong into hectic action, pretending we had all the
answers. But we must also not fall into depression or inaction after
the British decision."
didn't you have all the answers when you said that a vote for Brexit
would assure financial armageddon? Odd how that changed so fast.
Steinmeier's French counterpart Jean-Marc Ayrault urged quick
negotiations on Britain's exit from the union, saying that the
pressure would be "very strong" on British Prime Minister
David Cameron at an EU summit on Tuesday to speed up the process.
who on Friday announced his resignation by October in the wake of the
referendum, said it should be his successor who leads the complex
negotiations under Article 50 of the EU's Lisbon Treaty which sets
out a two-year timeframe to leave.
hosted Ayrault, the Netherlands' Bert Koenders, Italy's Paolo
Gentiloni, Belgium's Didier Reynders and Luxemburg's Jean Asselborn
in a lakeside villa north of the city centre.
said he and Steinmeier, whose countries long represented the
twin-engine of European integration, were working on joint proposals
that could deepen cooperation among EU members that use the euro
currency, or bolster security and defence coordination. Steinmeier
said the ministers would discuss joint action on the refugee influx,
the unemployment crisis and security during their meeting scheduled
to wrap up around 1000 GMT with a news conference.
as Steinmeier scrambles to reassure naive onlookers how "peaceful
and stable" the European project remains, what he is most
worried about is not just another EU member nation quitting, but
specifically a nation that is a member of the Eurozone, and shares
the Euro. If that happens, it's all over.
Barclays wrote overnight, the biggest potential worry is that another
country, especially one that is also part of the EMU, might set out
on a political path towards exiting the EU and EMU. While
a country leaving the EU is a big event, one
potentially leaving the EMU would be a much bigger deal. If
markets start attaching a greater probability to an EU referendum
(and a possible exit) in an EMU country, it
could spark a return of redenomination risk and financial
fragmentation, undermining business confidence and hampering business
investment and growth.
series of recent surveys and statements by some European parties
suggest that this risk is real. Anxiety over immigration and a weak
economic recovery have greatly eroded pro-EU sentiment in the euro
recent Pew survey found that roughly half or more of the population
in large EU countries such as France, Spain and Germany viewed the EU
same survey showed that overwhelming majorities in most countries
disapproved of the EU’s handling of refugees, as well as the
a similar poll released by Ipsos Mori in May, nearly half of euro
area citizens wanted a referendum on EU membership in their own
country, including majorities in France and Italy (Figure
2). And in recent days, leading political parties in countries such
as France (National Front), Italy (Five Star Movement), Denmark
(Danish People’s Party), and Holland (Freedom Party) have all
called for either a EU referendum of their own or a renegotiation of
their country’s EU membership. These calls have become louder in
countries such as Holland after the UK vote.
as the following chart shows, the pain for Europe is just starting:
appears that the trade now is not to sell Sterling, at least not
anymore: one should have done that at 1.50 when everyone was wrong
about the Brexit outcome based on manipulated polls as we
of the event.
If anything, sterling will rebound following the positive boost to
the UK economy following the devaluation. It's the long EUR trade we
would be far more concerned about here...