Brexit delusions fading slowly
One of the elements of the evolving Brexit story to watch out for is lack of agreement among the EU-27 in its negotiating stance towards Britain once Article 50 is launched. We know that Berlin would not mind giving the UK a soft Brexit - with immigration controls and full access to the single market. But there is no majority for that position in the EU-27.
Now Nicholas Sarkozy is adding another twist. The day after he is elected president, he says, he will have written the draft of an entire new EU treaty, which we would then graciously hand down on to Berlin and various minions in Brussels for speedy ratification. The beauty of this new treaty, according to Sarkozy, is that it will allow the UK to reverse its position on Brexit. This is political entertainment at the highest level. Our favourite sentence - from the FT's story - is the following:
"I can’t accept to lose Europe’s second-largest economy while we are negotiating with Turkey over its EU membership."
Tell that to the Brits - that they are allowed to remain in the EU whilst simultaneously getting Turkey in as well. We reckon that about 90% of what is said or printed on Brexit stems from ignorance - in Britain's case, ignorance of the treaties, and in Sarkozy's case, ignorance of British politics.
Amid all this noise the contours of a Brexit are beginning to emerge: Britain will have left the EU before the next elections. It will extricate itself from the single market over time. And it will seek to negotiate a comprehensive bilateral trade agreement with the EU.
The following comment is also quite revealing. It is from Hugo Dixon, who heads Infacts, a group that tried to keep the Referendum campaign honest. One of us was a member of that group, but resigned in protest after the group came out in favour of a second referendum or other technical devices to overturn the vote. It seems that, even there, some sense of reality is returning. Dixon notes that developments in the Labour Party not only suggest that Brexit will happen, but that it will be relatively hard. Support for a second referendum is falling fast, including for a second referendum on the exit terms, which he has been supporting. Jeremy Corbyn only wants access to the single market - a meaningless phrase - but not membership of it. Even Labour moderates now seem to accept immigration controls, which obviously reduce the post-Brexit options.
We also noted a comment by Matthias Dopfner, head of the Springer publisher group in Germany, according to which Brexit would be good for the UK economy. The reason we include this comment is not that this man has any special insights, but that the statement will be seized on in the internal British debate. The more the Conservatives believe in the economic neutrality of Brexit, the more they will be prepared to risk a hard brake.
And finally we have an update on market developments since the June 23 referendum. Corrected for the exchange rate, the FT-SE 100 underperformed the main European indices, except Italy's. It has been down by 4.3% since the referendum, while the Ibex was down 2.2%, the CAC40 down by 1.5%, and the Dax up by 1.02%. Sterling is 16.8% down against the yen, 12.1% down against the dollar and 11.0% down against the euro.