The Brexit gamble: An adventure in market volatility

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After the summit

  1. The Economist: "But nothing will matter as much as Mr Cameron's standing. Believe it or not, voters are not terribly interested in Europe. In the Ipsos MORI issues index it has long bumped along well below other political subjects. Even as it has spiked in the past months—not least thanks to the prime minister’s theatrics—it has remained below most other big policy areas (like education, housing and poverty, not to mention healthcare and the economy) and far, far below its historical peak in the early 2000s. Eurostat polling suggests that Britons are the worst- or second-worst informed electorate in the EU when it comes to the workings of the union. So the facts of the matter are at best peripheral. The referendum will be decided by mood and trust."
  • WSJ: Bank of England Sets Contingency Plans for British Vote on EU
  • FT: Moody’s warns on Brexit impact (again)
  • Nicola Sturgeon: Brexit will 'almost certainly' trigger independence referendum
  • Jacob Kirkegaard: “As was the case in the Scottish referendum in 2014, market volatility can be a powerful persuader for many late-deciders and risk-averse voters. The In campaign may well try to run a positive campaign for staying in the European Union, but financial markets will likely make the fear argument for them.”
  • Ian Bremmer: After #Brexit, “Europeans will be seen as less relevant as allies to Americans.”
  • The Economist: “Britain is subject to some 700 international treaties involving multi-lateral submissions to multilateral compromises.” And membership in NATO, WTO, United Nations, the EU, etc., has been benefited Britain.
  • WSJ: "The country will spend the next four months mired in claims and counterclaims about immigration, economics and security. Investors are beginning to worry that it could be a bad time for them as well. They aren’t worrying nearly enough."
  • Simon Nixon: “Mr. Cameron insists that he will cling to office even if he loses. But defeat would split his party, potentially trigger the breakup of the U.K. and accelerate the disintegration of the European Union. It is hard to see how any leader could survive such monumental failure.”
  • Nixon on the deeper meaning of the concessions: "At the heart of the European project is the notion that relations between sovereign states should be based on the rule of law, that big countries shouldn’t be able to bully small countries, that all EU citizens should be treated equally.On Thursday night, as Mr. Cameron threatened to blow up the postwar European order unless the EU changed its rules to help him settle a domestic political dispute, the nature of the European project changed."
  • Paul De Grauwe: Why the European Union will benefit from Brexit:
    "There is a deep-seated hostility of the British media and large parts of the political elite against the European Union. This hostility has found its political expression in the Brexit movement. The proponents of Brexit cannot accept that the UK has lost sovereignty in many areas in which the EU has competences. They abhor the fact that Britain has to accept decisions taken in Brussels, even if it has opposed these. For the Brexit-camp there is only one ultimate objective: to return full sovereignty to Westminster. Those who believe that a referendum will finally settle the issue have it wrong. [emphasis added] ... One may argue that having lost the referendum, the Brexit-camp will lose influence. That is far from certain. The agreement achieved by Cameron with the rest of the EU has not transferred a shred of sovereignty back to Westminster. ... I conclude that it is not in the interest of the EU to keep a country in the union that will continue to be hostile to “l’acquis communautaire” and that will follow a strategy to further undermine it."
  • Reuters: Sterling slides on Brexit fears; safe-haven yen soars
  • Also: IMF chief Lagarde warns against Brexit, as pound hits new seven-year low
  • IMF's 2015 Article IV Consultation (Press Release & Staff Report) "[the] benign baseline is subject to risks, including those related to potential shocks to global growth and asset prices, still-high levels of household debt, the elevated current account deficit, and the degree to which productivity growth will recover. Uncertainty associated with the outcome of the forthcoming referendum on EU membership could also weigh on the outlook."
  • Czech Prime Minister Sobotka: A leave vote would invite similar discussions in the Czech Republic
  • Niall Ferguson: Brexit now and we will only have to Breturn to save a disintegrating Europe
  • Jonathan House: Could the UK really leave the EU?
  • BBC: EU referendum timeline: Countdown to the vote

In the event of a Leave vote, a country can withdraw from the EU two years afternotifying the European Council of its intention to leave. However, leaving would still involve "complex and probably lengthy negotiations", a Parliamentary briefing paper concluded. Talks would be held on the future of the UK's relationship with the EU, including whether it could still have access to the single market. Resolving all this could take some time. [Does anyone expect that this the divorce would go smoothly?]

  • 13 of Britain's most senior former military commanders urge voters to back EU membership to protect British national security
  • Dalibor Rohac: “By leaving the EU, the UK would make it harder for the West to speak with a unified voice in the face of the Russian threat. Worse yet, Brexit would empower the rising centrifugal forces on the continent, propped up by the EU’s economic woes, the refugee crisis, and also by Russian money and propaganda.”
  • [Pictet](There does not seem to be even the beginning of an agreement on a framework for subsequent negotiations on relations with the EU. Our biggest concern is that investors would panic because the new rules will not be known for some time (the fear of the unknown).): "There does not seem to be even the beginning of an agreement on a framework for subsequent negotiations on relations with the EU. Our biggest concern is that investors would panic because the new rules will not be known for some time (the fear of the unknown)."
  • Simon Tilford, CER: “If Britain votes to leave the EU it will be because of hostility to immigration. It will not be because of the threat of eurozone caucusing, the role of national parliaments vis-a-vis the European Parliament, regulatory threats to the City of London or concerns over the competitiveness of the EU economy. Disillusionment with the EU has risen in the UK because membership has become synonymous in many voters’ minds with uncontrolled immigration. Why has immigration, in particular EU immigration, become so toxic an issue in the UK that it could cost the country its membership of the Union?”
  • Adam Posen: Self-inflicting an economic wound:

Cost estimates

The Leave Campaign is criticizing the deal it wanted:

The Leave Campaign can't be trusted

MUST WATCH: the Leave Campaigns are trying to criticise a deal they've spent years calling for.You can't trust a word they say about Europe. Britain is Stronger In.

Posted by Britain Stronger in Europe on Saturday, February 20, 2016

Choosing camps (before the ink dries)

What is in the deal?

The modest reforms are described here.

Before the deal

Cameron Pushes for Tougher Welfare Curbs in ‘Brexit’ Gamble: "At the opening session of Thursday’s EU summit in Brussels, the prime minister made a surprise bid to extend a so-called emergency brake on welfare payments to non-British citizens for a total of 13 years, according to three European officials with knowledge of the meeting. He asked for an initial suspension of seven years that could be lengthened twice by another three years each, they said"

POLITICO: Central bloc demands rights for EU migrants settled in UK

Bloomberg Business - Euro Area Stalls Deal to Shield London Banks From EU Rules: "Envoys from euro-area governments balked at a draft European Union proposal to ringfence Britain’s financial industry, putting extra pressure on Prime Minister David Cameron before he meets German Chancellor Angela Merkel in Hamburg on Friday."

Alexander Stubb: Without UK, there is no EU: Finland Fin Min

NYTimes editorial: Everyone Loses if Britain Exits the E.U.

Draghi urges clarity in Brexit negotiations

European Central Bank President Mario Draghi told the European Parliament on Monday that “a less than clear framework for negotiations with the U.K. would have implications of systemic nature” for the European economy.

The ECB president also declared that “the unfinished status of the monetary integration may become a source of fragility” in Europe and that an agreement with the U.K. “should not hamper any further integration [of the monetary union].”

Report: Britain, Europe and the World: Rethinking the UK’s Circles of Influence

The international context presents three main challenges for the UK: the opportunities and pressures from economic globalization; a range of evolving security risks and crises, particularly in Europe’s eastern and southern neighbourhoods; and the decay in the international institutions that have long amplified Britain’s voice in international affairs. The UK must rethink how it interacts with the world if it is to remain influential in the face of these and other challenges.

The UK & EU have a deal

What's inside? European Council conclusions, 18-19 February 2016 Tusk and Cameron briefings: multiple videos David Cameron's statement (at 1:20: "I do not love Brussels,...

Background for the G20 deputies meeting in Shanghai

Global Prospects and Policy Challenges: G-20 Finance Ministers and Central Bank Governors’ Meetings: The global recovery has weakened further amid increasing financial turbulence and falling asset...