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When the revolution eats itself

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A J Maher

Buttonwood is worried that the UK will be less business friendly if a deal isn't agreed.

Fair enough - so why doesn't he suggest that business puts a price on this preference for a deal? As it's currently money that is holding up transition and trade talks perhaps business will commit to paying the EU's financial demands of between 60 - 100 billion Sterling. The benefits of this will be that business would then not be relying on the taxpayer to pay the departure fee (which the voter is clearly not prepared to fund), the impasse over the "bill" would be cleared and business would have the outcome it says it wants.

Of course in reality business are also likely to be reluctant to pay so exorbitant a bill simply to start trade talks but their overdue discovery of the penalties of complying with EU demands would at last align the business view with that of the UK's taxpayers/ voters (whether remain or leave).

Buttonwood would then face the horrifying prospect of having to write articles questioning why so ludicrous a payment is being demanded at all. What would they say in Brussels about such heresy published by their own in house magazine!

A J Maher in reply to Artemio Cruz

The problem with delay is that it is a wasting asset - for both sides. As the clock ticks down the upside of closing a constructive deal diminishes whilst the downside escalates.
There is a lot of trade at stake here and the damage of no deal will not be symmetrical because the trade is not symmetrical. The EU's largest trade surplus is with Britain whereas the UK's largest deficit is with the EU. In particular the Germans and the French will be at a loss to find another "treasure Island" to replace the UK.
As for Romania - Well; we'll all worry about Romania when Romania gets a real say in EU affairs...

A J Maher in reply to Artemio Cruz

The recently retired Belgian judge (Franklin Delhousse) on the ECJ had this to say about the EU stance:

"Unfortunately, now, the same kind of denial now also appears on the EU side. The exit bill has been increased to 100 billion euros (never have the British been so loved as for their net contribution to the EU budget). Perpetual rights seem to be requested not only for EU residents in the UK, but also their future mate or children. The European Court of Justice (ECJ) must imperatively have full jurisdiction on future conflicts concerning the implementation of the exit agreement. This too looks like trying to perpetuate agreeable components of the present situation.

It is dangerous, for two very different reasons. First, of course, loading the boat excessively broadens the scope, increases expectations, generates conflicts and makes a final deal less likely. The EU, like the UK government before, needs to adjust to reality. It must compare the limited immediate benefits of this drastic approach with the global benefits of a new deal. Second, and this is more important, the EU must be extremely careful about the precedents it is creating now. Most people do not see it, as they did not believe before that Article 50 would ever be used, but there will be other exits from the EU. We thus need reflect carefully to create future incentives for fair deals, and not systematic clashes. Article 50 was invented, after all, to show that the EU was not a prison. We must apply it accordingly[1]."

For the UK's part the House of Lords legal adviser has said that, post departure, there is no legal obligation to pay anything at all.

So there is no legal basis for these grotesque EU demands for money and, more importantly, no UK government that agrees to pay them (Corbyn, May or uncle Tom Cobbley) will survive long enough to write the necessary cheque.

Buttonwood of course would never point any of this out....

A J Maher in reply to Artemio Cruz

Parliament voted for the referendum - agreed to accept the "advice" and then proceeded to vote to trigger Article 50 by a majority of 340 votes. We are leaving because Parliament says so. Parliament is respecting the referendum result even though it was not bound by the referendum result.
It's been an impeccable exercise in representative democracy....

A J Maher in reply to guest-wooomeo

If its chump change then the CBI won't mind paying it. I don't think they will pay it because I don't think they really think that it is chump change. The taxpayer certainly doesn't think its chump change and they are overwhelmingly opposed to paying it.

A J Maher in reply to guest-wooomeo

If business wants a taxpayer funded subsidy to avoid the costs of the dreaded "no deal" then business may as well shut up. However, if they are prepared to stump up then they can certainly pay over the door money to those nice extortioners in Brussels and the transition/ trade negotiations can begin....

Artemio Cruz in reply to A J Maher

Buttonwood would then face the horrifying prospect of having to write articles questioning why so ludicrous a payment is being demanded at all.
He wouldn't simply because, it isn't. The EU has requested that an approach between the parties be agreed on how contracted assets and commitments should be accounted for. All the numbers quoted derive from this. Furthermore, the moneys are are related not just to existing contractual obligations but also tangible benefits: the costs of setting up the necessary bureaucracy for handling customs, standards and negotiating trade deals, for example.
The UK agreed to the request of the other 27 member states to discuss these issues before anything else. Unsurprisingly, it is yet again acting in bad faith when it accuses the negotiators of not starting to talk about trade. And, yet again, the UK demonstrates an alarming inability to conduct multilateral negotiations.

Michael JLS

I believe most commentators are failing to assess correctly by when the main details of some sort of deal with the EU has to be complete. The actual deadline is much closer than talked about.
If there is no headline preliminary deal by the end of 2017, companies will need to protect their supply chains from a de-facto trade embargo by the EU and will have to look to duplicate suppliers from Asia (components) or the Commonwealth (food) or USA (both).
Additionally the banks and traders working in the foreign exchange and, especially, the derivative markets will also need to take significant steps to move activity to Dusseldorf, Geneva or Dublin if they can. Some existing contracts are likely to be immobile and will become illegal in March 2019 if passporting is not allowed.
Practical requirements of starting to implement contingency plans could lead to a rush of events leading to "Facts on the Ground" being created and the negotiations with the EU to avoid WTO terms of trade only to become irrelevant.


Oh dear! The Economist's subscription base is getting twitchy about the increasing probability that there'll be a cliff-edge Brexit; and the senior hired hands are sounding the alarm and calling out the Brexiteer ideologues to satisfy their paymasters. It's interesting that The Economist's hired hands had no problem with these ideologues when they were advancing "free" markets. Perhaps it's because many in The Economist's subscription base got rich by rigging, subverting and abusing these so-called free markets.

guest-wooomeo in reply to A J Maher

As usual you aren't very well informed. In fact both the CBI and the FS industry trade body have both urged that the UK should settle the account on EU terms on the grounds that it's peanuts in the scheme of things as indeed it is. 50 billion amortized over five to ten years is chump change by comparison with the potential loss to British GDP as a consequence of crashing out. Numerous public and private studies have been published (EU, British treasury, MIT, Kings London et al) that put the permanent cost to the British economy of leaving without a deal in the range of 5 to 10% of GDP. That's 100 to 200 billion a year in round terms and dwarves the long term cost of settling accounts

Artemio Cruz

In a last minute-deal in early 2019
Another great, thoughtful article but the timeline is off because any deal is going to need the approval of all other 27 member states and this will involve parliaments and possibly referenda. As a result the UK has about a year to get a deal, even the provisional arrangement. May's time will run out even faster because she has failed to align with either wing of her fractious party and purge the others.
For political leaders there are times when sitting on the sidelines while rivals slug it out, à la Angela Merkel, is the right strategy; and there are times when decisive leadership is called for. For Theresay May this would have been the 2016 party conference followed by a snap general election and ruthless bloodletting of those who disagreed with her. Her inability to sideline critics from either side has alienated her from both but she set the clock ticking before the winner became obvious.
If there is no agreement to start trade negotiations in this week's summit, and it's difficult to see the council voting unanimously against Barnier's recommendation, then the pro-business lobby is most likely to launch an attempt for a more conciliatory negotiating position which in turn might well force the Brexiteers to challenge the leadership. This might all happen over confidence vote about something innocuous. It's not as if the Tory ranks is short of stalking horses, from Grant Shaps to Bojo and Jacob Rees-Mogg of the 18th Century.
The Tory Party (and neither does the county for that matter) doesn't want another General Election but it may find it impossible to avoid one now.
Personally, my money is on a dramatic return of George Osborne after all the infighting.

Michael JLS in reply to Ben.Graham

Mr Corbyn is a member of the Hard Left. Many of his senior supporters are further to left than him and are relaxed about the use of violence by the Left to gain political ends.Many of them have tried in the past to subvert our country's democracy and have favoured terrorist organisation both in the UK and abroad.
They are making many large unfunded promises of largess to many parts of our society, while making clear to closer supporters that they would be follow similar policies to those enacted in Valenzuela of expropriation without proper compensation. In fact, they propose the wild left's usual nostrums, which have always ended in disaster when tried.
Any Corbyn or McDonnell led government will not be centre left.
Their policy on the EU is to claim to be clear. They are also claiming to be able to gain easily a low cost exit while retaining all the benefits as if the UK was remaining in the EU, but not saying how this miracle might be achieved. Their approach is the same as a promoter of a company during the South Sea Bubble who tried to float a company whose manifesto was that it had a secret wonderful opportunity but no one was to know.
The Coalition Government inherited a nearly bankrupt state following 13 years of extravagance by the then centre left leadership of the Labour Party. The Coalition Government steered a moderate course of increasing tax yields, reducing the level of government spending increases and reforming & tightening banking regulation, which the Labour administration had wrecked, with its impenetrable Tripartite system.
The Economist is right to expect an disaster from a Corbyn hard left administration.


When some third world basket case embraces democracy but fails to realize the rosy predictions, I always blame their backwardness, their lack of judeo-christian tradition, their lack of protestant work ethic...
But when UK started to bicker about the brexit plebiscite, it got me thinking...
Maybe, just maybe, what is prescribed as a panacea is really an opioid?

AFAIK Article 50 doesn't include provision for a "transitional period", which is just a deal by another name, ergo full agreement from the other 27 is required; with referenda in Denmark and Ireland at the very least. I'm reminded of Bernard Falk's late 70s TV series: Now Get Out of That!.
That said, there's no doubt that the remaining 27 would probably favour some kind of fudge so the timetable could expedited a bit, as long as the UK appears to be acting in good faith. But I fear it's all going to be way too late for Theresa May.

guest-wooomeo in reply to A J Maher

You really need to familiarize yourself with the words prioritize and reality. The CBI aren't responsible for paying it, the British government is. And the CBI made it very plain they are in favor of paying it as has the FS industry as recently as today. Then fresh off making stuff up about the British business community you a) quote some obscure retired Belgian judge as if it's in any way material to the debate... and b) tell us the British taxpayers aren't in favor of paying it. Well they wouldn't be would they? Taking a simple math course wouldn't do any harm either. Finally you tell us the British will renege on any deal made by its government.

Artemio Cruz in reply to Houshu

The UK is a parliamentary democracy and as such is not bound by referendums. In this context, holding them and being bound them is an abrogation of responsibility by the elected Members of Parliament.

guest-wooomeo in reply to Hedgefundguy

You really aught to read what you link to it might remedy your ignorance. It was some notional interest payments on debts incurred by the Weimar Republic to pay the reparations which they then defaulted on ...viz.
"But there was a clause in the so-called London Debt Agreement of 1953 that interest on multi-million pound foreign loans taken out in the Weimar Republic era, to pay off the reparations bill, should themselves be repaid if Germany were ever reunited."
They never really paid all the reparations which amounted to about 22 billion. This is common knowledge to anyone who knows anything about the subject particularly us Americans who loaned most of the money. You may want to familiarize yourself with the Dawes plan and other agreements.

Houshu in reply to Artemio Cruz

But the decision to hold the referendum and to be bound by its outcome was made by the Parliament. Or are you suggesting that the holding and being bound by the plebiscite on the question of Scotland independence was also invalid? Or you are actually agree with my contention that democracy, like opioid, is deadly addictive as it requires more frequent and higher dosage to achieve euphoria (followed by withdraw, ie, whatever-exit)?

Artemio Cruz in reply to A J Maher

Buttonwood of course would never point any of this out…Why should he? It was one of the recent Leaders in The Economist: both sides have adopted hardline negotiating positions, who will blink first? The Leader argued strongly for a softer position on both sides.

Not that the Belgian judge, with Belgium's well-publicised fractious regions, can be considered entirely unbiased in the debate. Be that as it may: I've not heard € 100 billion mentioned by any of the negotiators.

At the moment there is no political advantage for the 27 to go soft on the UK and it is domestic politics which will drive the decisions at the summit. Why should things be any different for the other 27 than for the UK? Well, the only difference might be that the whole matter figures far lower on the national agenda than in the UK.

So, I think we can reasonably expect little or no progress in negotiations over the coming weeks. I argue that this is going to play more trouble with the UK than say with Romania or Croatia, whose agreement the UK needs.