With Prime Minister May due to trigger Article 50 eight days from now, shit’s about to get real the clock is about to start ticking, not least for the huge financial center in London. Nothing in the present UK government suggests that they will be able to negotiate an amicable separation in the twenty-four months before they are unceremoniously bounced from the European Union. (Less actually, as agreements will have to be finished early enough for the relevant bodies to vote on their approval.) Hard Brexit, here we come.
Likewise, I don’t see any reason for the 27 to let London continue to have the same access to EU financial markets that it had when the UK was a member of the Union. Prudent bankers came to similar conclusions long ago, and indeed Bloomberg finds that plans to move people and capabilities into the remaining EU are taking concrete shape. Frankfurt and Dublin are the likeliest winners: Frankfurt is the largest financial hub on the continent, and home to the European Central Bank; Dublin is the only English-speaking alternative. (At least until Scotland joins the Union.) This was always the way to bet, and reporters’ talks at individual banks are adding micro details to the macro framework.
“Bank of America Corp., Standard Chartered Plc and Barclays Plc are considering Ireland’s capital for their EU base to ensure continued access to the single market, said people familiar with the plans, asking not to be named because the plans aren’t public. Goldman Sachs Group Inc. and Citigroup Inc. are among banks eyeing Frankfurt, other people said.”
Two Japanese institutions Bloomberg spoke with are considering Amsterdam; Morgan Stanley, local patriots, insisted that New York would gain as they and other institutions re-allocated resources away from Europe entirely. Brexit is going to put a huge dent into one of the UK’s most important economic sectors. Taking back control!
Jean-Claude Trichet, European Central Bank president, on Friday delivered a stiff warning to eurozone finance ministers to back off in an escalating dispute over the bankâ€™s independence.
Mr Trichet pointed out that it was his signature on euro banknotes and that it was unlawful under the EU treaty for finance ministers to give instructions or try to influence the bank.
His comments came at a strained news conference in Helsinki with Jean-Claude Juncker, Luxembourg prime minister, who was on Friday given a second two-year term as political head of the eurozone.
Mr Juncker said he had only agreed to carry on chairing the eurogroup â€“ the political arm of the single currency â€“ after finance ministers supported his plan to have an â€œintensified dialogueâ€ with the ECB.
As I say in a comment on Daniela’s post. This is about the only topic I am currently in agreement with Trichet on: I simply don’t see what he and Trichet have to talk about.
Well, it’s back to another wave of German electoral goodness. The latest bizarre artefact of coalition weirdness is that Angela Merkel’s team are frantically denying claims that they have a secret plan to call new elections in the event that the elections end in a hung parliament. Obviously, this would rely on Merkel actually becoming Chancellor, but without a working majority…and would mean a really tiresome bout of national self loathing.
As the election campaign powers into the final desperate dash, some rightwingers have been frantically signalling that they might, might, just go in for a grand coalition (read: that way we can ditch the bitch AND get back in power). The CDU’s deputy leader, and chief in Rheinland-Pfalz, says at the link above that this would encompass “their duty as citizens”. Ha. (What is it with people from RP?)
Meanwhile, on the Handelsblatt‘s election futures market Wahlstreet, where the percentages are quoted to two decimal places and the cigarettes are paid for on the bill, the CDU showed a marked turn for the better, pushing back over 40%. But the Greens also showed an uptick, or perhaps only a technical rally, getting back to 8.1%. The result? Neither black-gold or red-green can quite make the nut. BG is hovering around 47-48%, with RG around 41% – which sounds like a decisive margin until you remember that the Linke are still in the game, with enough points to push RG over the finish line. And, equally, there are still enough FDP about to give the Ampelkoalition a majority over all other parties…. Continue reading →
There is a curious combination of expectations right now. The euro is rising, principally because of preoccupations about the US trade deficit and the associated sustainability issues, but also because there seem to be signs of a slightly better collective performance later in the year. This assessment may well be accurate. So what this means is that growth may still be slowing, but it may be about to pick up. Hence downward revisions for this year are quite compatible with mild optimism in the near term. Of course this situation will not be the same everywhere, and there are still no encouraging signs from Italy.
Economic growth in the euro region will fall short of official forecasts in 2005 as oil hovers near a record, consumer confidence stagnates and Italy struggles with recession, European finance ministers said.
Finance ministers are counting on growth in the 12-nation economy of only 1.3 percent, less than the 1.6 percent predicted by the European Commission in April, Luxembourg Prime and Finance Minister Jean-Claude Juncker said.
German Finance Minister Hans Eichel said today that the German deficit would be over the 3 percent limit for the fourth consecutive year this year, and would remain there at least till 2007.
The latest data, from a meeting with state finance ministers, projected this year’s deficit to reach 3.7 percent. In addition, the country is projected to maintain a deficit of 3.4 percent in 2006 and 3.1 percent in 2007, the finance ministry said. On Wednesday, the IMF said as part of its regular review that it expected Germany’s budget deficit this year to be 3.8 percent of
GDP this year.
1/. The German Finance Ministry have declined to comment on the Stern report that discussions took place last week between Finance Minister Hans Eichel, Bundesbank President Axel Weber and various economists on a possible failure of European Monetary Union. Continue reading →
I have already posted on my own blog about what I see as the surreal consequences which might follow from this wish becoming a reality. If what I think happens next to the Spanish economy really does happen – and I have no doubt whatsoever that the housing bubble will crash one or other of these days – then the situation will be a bit like having Menem at the head of an IMFwhich is telling Argentina that they should have thought about the consequences before getting into all that trouble……..
My interest here today, however, is more the European dimension of this process. Firstly, if it is true, as the FT seems to contend, that the European candidature will carry the field, what does this tell us about the IMF? Secondly, maybe focussing on the IMF managing directorship is to miss the point. Maybe the real horse-trading is over future control at the ECB. In other words: will this be a case of wagging the finger, or wagging the dog? Continue reading →
So the Dutch Finance Minister – Gerrit Zalm – has a weblog. Not understanding too much Dutch it’s hard to make a very thorough assesment, although it does look rather austere. However, unlike Howard Dean and Wes Clark, it does appear that he is posting himself. But it is not for the fact that he has a weblog that Finance Minister Zalm is making headlines at the moment. Rather it is for some of his statements on the French government and the stability pact. According to Frans he announced last week “that he gave up trying to get the European Commission to act against France’s repeated breaching of the rules”. Now Frans understandably is scratching his head trying to determine what this might mean. Continue reading →
Now since nothing in life ever comes entirely free, a post to balance my last one (as we say in Spain: one hot one and one cold one). The French are to be given an extra year to get their fiscal act together. This is more a sign of impotence than a seal of approval. In the end I agree with this approach, there is really nothing – except ridicule – to be gained from imposing a symobolic fine. But the point is that this should not be necessary. Everything here seems to be calculated. But still Austria, the Netherlands and Finland don’t seem too happy. So how fine is the calculation? How often can you take advantage of the impotence of the other before a limit is reached? I have no answer to this, but I know the answer is out there somewhere. I guess we’d better all just hope the EU Commission growth provisions are fulfilled, and that we aren’t going to see an even worse re-run of this next year. Continue reading →