EU referendum are you in or out

[Meow]

This why best to leave the EU.

http://www.bloomberg.com/news/articles/ ... tells-welt

EU Banks Need $166 Billion, Deutsche Bank Economist Tells Welt

Europe urgently needs a 150 billion-euro ($166 billion) bailout fund to recapitalize its beleaguered banks, particularly those in Italy, Deutsche Bank AG’s chief economist said in an interview with Welt am Sonntag.
"Europe is extremely sick and must start dealing with its problems extremely quickly, or else there may be an accident," Deutsche Bank’s David Folkerts-Landau said, according to the newspaper. "I’m no doomsday prophet, I am a realist."

With Italian banks weighed down by 360 billion euros of soured loans, the government has been sounding out regulators on ways to shore up lenders amid a renewed selloff after Britain voted to leave the European Union. Lorenzo Bini Smaghi, a former member of the European Central Bank’s executive board who now chairs Societe Generale SA, said Wednesday that Italy’s banking crisis could spread to the rest of Europe and rules limiting state aid to

lenders should be reconsidered to prevent greater upheaval."I do not expect a second financial crisis like in 2008," Folkerts-Landau said, according to Welt. "The banks are much more stable today and have more equity. What we face this time is a slow, long downward spiral."
The Bloomberg Europe 500 Banks and Financial Services Index has tumbled 33 percent this year, falling to the lowest level in more than seven years on Thursday. Deutsche Bank’s stock price has fallen 48 percent during that period.
Folkerts-Landau said he had recently bought 100,000 Deutsche Bank shares and was optimistic about the outlook for his employer.
BlackRock Inc. Vice Chairman Philipp Hildebrand said earlier this month the European Commission should allow governments to take temporary equity stakes in their banks, similar to what the U.S. did with its Troubled Asset Relief Program during the 2008 crisis.

[pogo]

No it’s not. We have no liability for Italy’s banks, and have no need to contribute towards any bailout, much as they did not contribute towards the bailouts of our banks. That is a matter for the Italian government, and for the other governments with failing banks.

Where it is complicated is that governments in the eurozone were not allowed to rescue their banks, as they wanted to. In the UK banks’ liabilities were mostly domestic, so savers, shareholders, investors and pensioners took a hit. But in the eurozone a lot of the liabilities were cross border. In particular a lot of money had been funnelled into Spanish, Greek, Portuguese banks by banks in France, Holland and in particular Germany. A lot of these investments went bad, and the German banks should have suffered losses, with the decisions about how to share out the losses (taxpayers, shareholders, savers) being political ones for German politicians.

Instead governments were made to take on the debt themselves. That’s how e.g. Spain, which had low debt and a surplus before the crisis, ended up owing large sums to Germany. In retrospect it was a rare work of genius, turning simple commercial contracts into complex, messy inter-governmental loans, manufacturing a crisis where none existed before. They did it to avoid the political cost of bailing out their own banks. But they’ve only postponed it. We can’t be sure when this will be resolved, but it will be much more expensive and disruptive when it is.

Anyway, now the fate of eurozone banks is tied into their governments’ finances, so no-one can move or do anything without German approval. But that has nothing to do with us, directly. It’s all part of the eurozone. E.g. the ECB, the central bank of the eurozone, is in charge of the various mechanisms of these loans. Whether we are in or out of the EU, we have little to do with the eurozone banking crisis.

(UK banks did have some investments in Ireland when its banks collapsed. But they were resolved in normal ways, with losses shared out between government, shareholders and savers)

[Meow]

No it’s not. We have no liability for Italy’s banks, and have no need to contribute towards any bailout, much as they did not contribute towards the bailouts of our banks. That is a matter for the Italian government, and for the other governments with failing banks.

Where it is complicated is that governments in the eurozone were not allowed to rescue their banks, as they wanted to. In the UK banks’ liabilities were mostly domestic, so savers, shareholders, investors and pensioners took a hit. But in the eurozone a lot of the liabilities were cross border. In particular a lot of money had been funnelled into Spanish, Greek, Portuguese banks by banks in France, Holland and in particular Germany. A lot of these investments went bad, and the German banks should have suffered losses, with the decisions about how to share out the losses (taxpayers, shareholders, savers) being political ones for German politicians.

Instead governments were made to take on the debt themselves. That’s how e.g. Spain, which had low debt and a surplus before the crisis, ended up owing large sums to Germany. In retrospect it was a rare work of genius, turning simple commercial contracts into complex, messy inter-governmental loans, manufacturing a crisis where none existed before. They did it to avoid the political cost of bailing out their own banks. But they’ve only postponed it. We can’t be sure when this will be resolved, but it will be much more expensive and disruptive when it is.

Anyway, now the fate of eurozone banks is tied into their governments’ finances, so no-one can move or do anything without German approval. But that has nothing to do with us, directly. It’s all part of the eurozone. E.g. the ECB, the central bank of the eurozone, is in charge of the various mechanisms of these loans. Whether we are in or out of the EU, we have little to do with the eurozone banking crisis.

(UK banks did have some investments in Ireland when its banks collapsed. But they were resolved in normal ways, with losses shared out between government, shareholders and savers)

So basically thank god we kept the pound.

[pogo]

Yes, basically. There’s lots wrong with the EU but the by far two biggest problems, the euro and the Schengen area, we have opt-outs from. Because of the pound and not being in the euro, even though our crisis was one of the worst (we had a bigger deficit than anyone else at one point, and have an oversized banking sector) it bottomed out quickly and we recovered strongly.

[KlaxonCow]

and we recovered strongly.

Any news on when that strong recovery is going to actually manifest itself in people's daily lives, that they can start giving a shit about it being a real thing that actually happened?

[pogo]

Unemployment is back to where it was before the crisis and employment is at record levels. The rate of recovery surprised many who thought unemployment would take much longer to come down. Now it has wage growth is picking up, though it is low in historical terms as inflation is so low. GDP recovered to where it a was before the crisis in 2014. Consumer confidence has largely recovered (in fact that led the recovery).

[gumboot]

Will the EU demand that the UK adopt the Euro as a condition of free trade? It's not hard for me to imagine a UK government (or whatever will pass for one in a couple of years) doing that bad a job of the exit. Free trade, free travel, the same regulations, the same fees, no rebate, and adopt the Euro, all in the name of Brexit. Because that's what the majority voted for.

[KlaxonCow]

Yeah, there is every possibility that the negotiations could not only fail to secure us any useful advantages for the UK, but it could even go backwards, leaving us in a worse position than before.

As the UK was given exemptions to things like the Euro and the Schengen area, but those exemptions were basically to help make our continued membership easier. But when we leave the EU, we're no longer a member. There's really no motivations there to do us any special favours like that any more (even a motivation to do the exact opposite, though hopefully Merkel's call to be sensible and not vengeful is heeded).

So they could say "if you want free trade with the EU, then you have to adopt our rules" and they don't mean adopt the special rules we had before, but the full set of rules without any of the exemptions.

Not that we have any obligations to accept any such deal, of course. But if we don't, then we don't get free trade.

As I was saying before, one also has to appreciate that there's a degree to which the EU simply can't offer much exemption anyway. Nothing to do with whether they'd like to do that or not, but just the pragmatics of it all.

If you insist on certain rules for EU members but then offer free trade to the EU that isn't obliged to those rules, then you're creating a loophole. You're putting a member state at a disadvantage compared to the non-EU country.

As a contrived example, let's say that the EU rules insist on, say, a 20% tax on shoes for member states. They then offer free trade to the UK but, no, we don't have to abide by that 20% tax on shoes and it's only 5% for us, as they're excusing us that particular rule.

Well, clearly, if you make and sell shoes then it's obviously very much to your advantage to shift your operations to the UK, because you can continue serving the EU market under free trade, but you get a nice 15% tax discount for doing it out of the UK rather than the EU.

There's a practical limit to how accommodating they can be, lest they create such "trade loopholes" and actually put EU members at a disadvantage, which encourages businesses to up sticks and start trading out of the UK instead, because the UK got such a sweet deal.

Even if they were motivated to give the UK a special deal - although, why would they, when we just told them to fuck off, at a time when the EU, from its own perspective, could really do with more solidarity to tackle its problems? - there's a degree to which they pragmatically can't.

If Brexit ends up clearly advantageous to us, then other countries will want to exit too, in order to get one of these sweet leaving deals. You can't have free trade with too much disparity between the members, or if you can easily dodge regulations or taxes or whatever by operating out of one country that you can't operating out of another, then businesses will shift their operations to where they can gain that advantage and that sucks out trade from the remaining countries who do have to abide by the rules, as all their businesses are leaving them.

As another contrived example, if you're a manufacture of cheap and nasty children's toys, and the EU rules insist on safety standards that these children's toys can't include razor blades or toxic paints but - oh look - we've given Norway free trade without obliging it to those safety standards, then you'll shift all your operations to Norway, because then you can make your cheap and nasty children's toys - filled with razor blades and toxic paints - but still gain access, through the free trade agreement, to all of the EU.

Hopefully, you can see what I mean. You can't create such "loopholes" by having too big of a trade disparity between countries, or you'll find that all the trade will start going through these loopholes. If you have a loophole for safety standards but still provide full trade access then, well, you might as well not even have safety standards. Going back to my slightly silly contrived example, it's not just that all children's toy manufacturers would shift operations wholesale to Norway, it's that the EU would get filled up with children's toys containing razor blades and toxic paint - being smuggled in through the "loophole" - so that, in practice, there's bugger all reason to have any safety standards in the first place.

These things can't happen for purely pragmatic reasons. So we should not expect any negotiated exit deal to give us any special exemptions and great advantages over EU members obliged to the EU rules.

That is, we should expect to be offered the standard EU deal that all countries are offered. And, yes, that "standard deal" does not include the special exemptions to the Euro or the Schengen Area or anything.

Certainly, looking much further forward, if we leave and then decide, later on, that we want to re-apply and join back with the EU - because Brexit hasn't gone so well - then we'll have to accept the Euro and ditch the Pound. We'd rejoin on the same terms as anyone else and new members are obliged to use the Euro.

[pogo]

Will the EU demand that the UK adopt the Euro as a condition of free trade?

No. Leaving aside that it’s a disaster of a currency that no country should adopt, it’s only meant for EU members. It would require a major overhaul of the ECB and euro, for it to be formally available to EU and non-EU members.

(to be clear anyone can adopt the euro unilaterally, and some countries have. But doing so is very unusual – it essentially means you have a currency but without a central bank, and have e.g. the interest rates suitable to the euro area without being in it.)

[gumboot]

Will the EU demand that the UK adopt the Euro as a condition of free trade?

No. Leaving aside that it’s a disaster of a currency that no country should adopt, it’s only meant for EU members. It would require a major overhaul of the ECB and euro, for it to be formally available to EU and non-EU members.

(to be clear anyone can adopt the euro unilaterally, and some countries have. But doing so is very unusual – it essentially means you have a currency but without a central bank, and have e.g. the interest rates suitable to the euro area without being in it.)

Being a disaster is exactly why I thought it was well suited for the British to adopt.

[Governmentyard]

Unemployment is back to where it was before the crisis and employment is at record levels.

Quantity at the expense of quality.

[KlaxonCow]

Half hour "quick summary" video of how fucked we all are.

[pogo]

Unemployment is back to where it was before the crisis and employment is at record levels.

Quantity at the expense of quality.

Nonsense. I assume you mean too many people working part time or zero hours. Those certainly rose during the recession, but now far more full time jobs are being created. I.e. both the quality and quantity of work has improved. Turns out the best cure for “low quality” work is more jobs, to provide more choices including full time work to those who want it.

[snaff]

[pogo]

If you have a few minutes here’s the new Brexit Minister with his views on, well, Brexit:

David Davis: Trade deals. Tax cuts. And taking time before triggering Article 50. A Brexit economic strategy for Britain

This leaves the question of Single Market access. The ideal outcome, (and in my view the most likely, after a lot of wrangling) is continued tariff-free access. Once the European nations realise that we are not going to budge on control of our borders, they will want to talk, in their own interest. There may be some complexities about rules of origin and narrowly-based regulatory compliance for exports into the EU, but that is all manageable.

But what if it they are irrational, as so many Remain-supporting commentators asserted they would be in the run up to the referendum?

This is the man charged with negotiating Brexit? “Either the EU27 do what we want, or they are irrational” ??? That, as a negotiating position, is a joke. Yes, they will insist on free movement of people if we want access to the single market. That was clear before, and has been made clear since. It’s a perfectly reasonable position, in fact the only one on offer.

Then he goes on to the alternative.

In this process, we should work out what we do in the improbable event of the EU taking a dog in the manger attitude to Single Market tariff free access, and insist on WTO rules and levies, including 10 per cent levies on car exports. Let us be clear: I do not believe for a moment that that will happen, but let us humour the pre-referendum Treasury fantasy.

“dog in the manger”, "fantasy”. But that’s what we will end up with, with this fool in charge of negotiations. Tariffs yes, but they are not the worst of it. Outside the single market there is no automatic access for our products. All products need approval, everything has to be stopped and checked at the border. Cars will be the least of our problems - they are at least high value and high margin and can absorb the costs and tariffs.