Hands up if you want Britain to join the North Sea Union?
If you’ve never heard of it before, don’t worry. It doesn’t exist yet. But yesterday Belgian political leader Geert Bourgeois put the idea forward as a “solution” to Brexit.
The Daily Telegraph had the story:
“More and more people now agree that there has to be a ‘soft Brexit,” he told the Daily Telegraph.
“I can’t imagine a situation where we have more barriers on trade in both directions. You are our fourth biggest export market. It is in our mutual interest to find a solution, and the majority of the EU now agrees that anything other than a soft Brexit would have a huge cost,” he said.
The bloc would promote an integrated sphere for offshore energy and marine research, and as well as better grid network with interconnectors to drive down costs and boost back-up power. It would have a defence and security component.
I object to the term “soft” Brexit
To me it doesn’t sound soft, it sounds entirely reasonable: the will of the British electorate is respected and political ties with Brussels are broken, while at the same time everybody realises that it’s in every nation’s mutual interest to maintain trade ties.
That doesn’t sound soft. It sounds like a grown up way of proceeding. To call it soft assumes there’s a “hard” Brexit: where Germany refuses to sell us any BMWs, France refuses to sell us wine, Belgium embargo beer sales to the UK while the rest of the EU collectively shouts “you’ve been a very naughty boy!” across the channel.
Perhaps they want to do that. But sooner or later everyone acts in their own economic interest – and it’s in every EU nation’s interest to maintain trade ties with the UK. So my guess is they will find a way to do so.
Here’s an idea for you: perhaps the very suggestion of a North Sea Union is an admission that insiders know the EU cannot be reformed. Maybe it’s easier to create a second union that is entirely based on trade than reform the EU, which is inherently a political project. Who knows?
Plague of the black debt
It’s easy to see Britain’s vote to leave the EU as the defining European story of 2016 so far. But what if that’s wrong? What if while the world gets itself in a tangle over politics, the real story is quietly unfolding elsewhere?
Like, for instance, inside the Italian banking system.
I’ve just come back from Italy. While there we visited the city of Siena (well worth going to) and took a tour. At one point, our guide stopped us outside an imposing gothic building on the old road to Rome.
“This is the Banca Monte dei Paschi di Siena,” he told us. “It’s the oldest bank in the world. Founded in 1472 and still running today.”
He went on to talk about its history, its proud heritage and its role in the city of Siena. When I got back to our hotel, I looked up the bank’s recent performance. It’s been repeatedly bailed out since the financial crisis.
Siena has a rich history when it comes to banking. In medieval times its banks helped make it one of the richest places on the planet. The city decided to display its wealth by building the biggest church in the world. It succeeded in building a huge, beautiful cathedral, which still stands to this day, but failed to complete the entire project (the cathedral was just the first stage – the transept – of a bigger structure.
The problem was the Black Death. It swept through the city, decimating the population and wiping out the banking system. Siena never recovered to its full, pre-plague status.
Today, it’s not the Black Death… but the plague of the black debt that’s sweeping the Italian banking system. And that matters. Because in an interconnected world, the problems of the Italian banks could trigger a systemic crisis – for the rest of the eurozone, for the UK and for the rest of the world.
Bad debts in Italy have been rising steadily since the financial crisis. According to Thomson Reuters data, 12% of all loans in Italy are now classified as “bad”. That’s three times the level of 2010. House prices are falling. The economy is stagnant – in fact, according to Societe Generale figures, Italian GDP is lower now that it was in 2005.
I know that Tim Price has been hard at work analysing this. He believes Italy could be the spark that lights the fuse. I’ll ask Tim to share his research with you when it’s ready. More on that in a future issue.
Category: Brexit