Quick Recap thus far
The path of Brexit up to this point has been depressingly predictable. I have previously laid out the logic of the issues and nothing meaningful has changed in the past 2 years which is why I have found nothing new worth writing about. The EU has been very clear at all times on its approach whereas the UK seems yet to work out what it wants Brexit to mean.
Options for the UK
- Leave EU but maintain very close economic ties
This makes the UK a rule taker and is very similar to being in the EU except with no say. A clear loss of sovereignty with no obvious benefit i.e. Brexit means “Giving Up Control”
- Leave EU and break economic ties
clear rise in independence but at a very severe economic cost. This could be
a. Orderly i.e. a negotiated transition or
b. Disorderly i.e. “No Deal” Brexit.
The current strategy of the UK is to move to a transition that leaves options 2 and 3 both open.
In this way many decisions are deferred, however the Irish border is an obstacle that makes it difficult to fudge.
The Irish Border Problem
The issue can be stated very simply, either
A. UK has no customs border with the EU
This is much the same as the current situation and so is unacceptable to the Brexiteers. May has committed that we will not do this.
B. UK has a customs border with the EU
If so where?
- Around the UK i.e. a land border between Northern Ireland and the Republic
This breaches the Good Friday Agreement and, as one of the red lines, is unacceptable to the EU. May has committed we will not do this.
- Around Britain i.e. a border in the Irish Sea.
This is unacceptable to the DUP. May has committed we will not do this.
You will notice that the UK government has strongly and categorically ruled out all possible options to appease different factions. How can this be resolved? The main approach so far appears to participate in magical thinking, but we fast approaching the point where choices have to be made. Furthermore, denial of the issues and refusing to make a choice at this stage becomes a choice with ramifications.
It is important to recognise the Brexiteers do not form in any way a unified group with a plan. They are united in their opposition to the EU, not in their plans for what comes next.
- Boris Johnson – resigned so he could continue to talk nonsense and magical thinking solutions from the side-lines. He will claim whatever happens was not his fault, would have worked out much better if he were in charge, and therefore should now be PM.
- Michael Gove – wants the exit from the EU to be as smooth as possible e.g. temporary Norway, thereby not risking a 2nd referendum or a “no Brexit” but leaving the difficult issues for later. Presents himself as the pragmatic face of Brexit and therefore he becomes the next PM
- Liam Fox – had tried to follow the pragmatic line of Gove but recently has been dragged into arguments on sovereignty, with the ECJ involvement in the Backstop quitting arrangement.
- Jacob Rees Mogg – profoundly does not care about Ireland and thinks it is ridiculous that the independent future of England could be impacted as such. Taking his values from the 18th century, his attitude to the Irish is no different. The border is not important to him and he dismisses anyone who suggests it should be or that he should come up with a proposal.
- The DUP – I do not have the foggiest clue as to what they want. A return to the Troubles perhaps?
Some of these factions are aligned with May in aiming for an agreement with the EU that fudges the Irish border issue (the EU are masters of drafting wording which can be interpreted any way you want). However, others are demanding clarity and will vote down any deal with does not have it, believing that a game of brinksmanship with the EU will lead to a better outcome.
This leaves us at a point of impending chaos which makes it the hardest stage to predict. I found this BBC graphic a helpful guide as to some of the possibilities (https://ichef.bbci.co.uk/news/624/cpsprodpb/125F1/production/_104294257_brexit_flow_chart_12_11_640-nc.png)
Brexit – where are we going? An alternative view
May says that the deal may be struck in the next 24 hours, and so at the risk of being immediately proved wrong, I will lay out another potential path, with the help of a little recent history
A Greek tragedy?
In all the analysis of the various complexities of the negotiations, I have not read anything which draws upon the similarities to the Greek financial crisis. This is surprising given the clear precedent on how the EU behaved during a negotiation and furthermore, how it reacted to a crisis.
Greece spiralled into a huge government debt crisis starting in 2009 and couldn’t contain it domestically. To fund the large ongoing budget deficits in addition to historic debt burden, it was forced to turn to the IMF and the EU for loans, resulting in the first Greek bailout package in 2010.
A key part of the bailout terms involved Greece submitting to austerity demands from the EU. This then developed into a narrative within Greece over the next few years (note the echoes for today)
- Germans are the enemy – they are imposing this pain on us. Lots of references to World War 2 and reparations (read The Telegraph in the past 2 years?)
- The EU needs us more than we need them. If we drive negotiations to the brink they will cave in and offer us better terms (listened to any Brexiteer in the last 3 years?)
- Varoufakis claims his clever negotiating strategy (i.e. not engaging in any meaningful dialogue) will force the EU to give in and back down (David Davis past 2 years and still!?)
Pushback from Greece?
In 2011 amid public anger over austerity, the Greek Prime Minister called for a referendum on a second bailout, attempting to pushback on the EU’s demands. However, when it came to it, the Prime Minister called off the referendum and then resigned; Greece backed down and applied for a second even larger bailout with expanded austerity.
- Early 2015
Having been elected in January on an anti-austerity ticket, the Greek government did not want to agree to the third bail out terms. The EU said there would be no improved offer and that any further deal would likely have harsher austerity conditions
- 5 Jul 2015
The Greek government calls a referendum, telling the electorate to reject the terms of the EU offer as it would give the government more leverage in negotiations and they would secure a far better deal.
The referendum votes down the bailout offer by 61% to 39%
EU does not improve its offer
Greece faces immediate economic collapse
(already in default after missing a payment on 30th June 2015)
EU banking system does not collapse.
EU allows Greece to choose to leave the Euro if it wants to.
- 13th July 2015
Greece accepts a revised bailout from the EU with harsher austerity conditions
The Greeks seem to view all this as a great success in standing up to the Germans
What does this teach us?
It shows us that the EU is highly predictable. It does exactly what it says it will do. The EU does not back down in a game of chicken against a smaller nation. When the EU tells us that it would prefer “No Deal” to breaching its red lines, it means it.
The UK, on the other hand, will not be able to secure a better deal from the EU via a repeated game of brinkmanship. If the Greek saga is anything to go by, the deal will likely get worse.
It also shows that nations are capable of material self-harm in the name of independence. We should not assume that the UK will not end up with a “No Deal Brexit” just because it is horrific.
What happens if we are Greek?
- May agrees a deal with the EU
- Either the Cabinet or Parliament vote it down and we move towards No Deal.
- Corbyn’s Opposition continues to fail to come up with any alternative plans and just wants to use the chaos to claim power.
- We wait for the EU to offer us a better deal, which of course they don’t.
- The market and economic implications start to bite, but perhaps not enough for us to agree to make the deal.
- We drop out of the EU into chaos
- After a week of chaos we go back to the EU and take whatever terms they offer us.
- We call Brexit a triumph.