Spanish life is not always likeable but it is compellingly loveable.
Christopher Howse: A Pilgrim in Spain
Note: As it's Thursday, some of the items below have been borrowed from Lenox Napier's Business Over Tapas
Spain
- The final day of Las Fallas, Tuesday 19.
- As you might expect, the new Vox party wants gun laws to be relaxed, as all its male members are honourable and trustworthy. As it were. Interestingly, the party's leader denies it's far right and says it's the equivalent of the Conservative party in the UK. Not, I'd have thought, a comparison that would reflect well on Vox right now, even if it were true.
- Temporary good news for us retired Brits in Spain.
- What will happen to British residents here if there's a no-deal Brexit, according to the Spanish government.
- And, in contrast, what will happen if Mrs May’s deal finally gets approved:
- If there's one thing worse than Spanish doyennes stopping you in the street to coo over your grandson in a buggy, it's an Italian waiter going beyond even this and slavering him with kisses and then giving him breadsticks. What's with these Latins??
- So, the EU has decided to use the negotiating leverage given it, firstly, 2 years ago by the British government and, now, by an indecisive parliament to impose the toughest possible terms on its acceptance of a short postponement of the Brexit. That said, no one knows how it would respond to a request for a long one, as this would open up the possibility of a softer Brexit or, as Brussels hopes, no Brexit at all. But, as Ambrose Evan Pritchard writes below, increasing the risk of a 'stupid' No Deal Brexit in 8 days' time is causing great concern in Berlin. As, indeed, is a Brexit based on the Withdrawal Agreement currently on the table. It's shaping up to be a momentous week in European history.
- Meanwhile 1: Richard North today: We could find ourselves in the situation where the parliament - for its different reasons - defies their leader and precipitates us into what amounts to an accidental no-deal Brexit. If that happens, it will have been brought about by the inability of parliament to bring a majority to bear for the deal, even though the vast majority are opposed to a no-deal – the law of unintended consequences. . . The only good thing to come out of all this is that the uncertainty looks set to end.
- Meanwhile 2: Someone else: The one positive outcome is that any other country considering leaving the EU in the future will be able to use this chaotic Brexit as an indispensable guide on how not to proceed.
- Meanwhile 3 . . . How wars happen . . . Each side, Britain and the EU, is making calculations rooted in misconceived ideas about how the other will respond in an emergency. After months of can-kicking, No 10’s strategy rests on the EU being accommodating in the final days when its patience with the Brits is exhausted. On the EU side, the assumption is that the crazy Brits who have lost control will see sense; that is, do what the EU wants and agree the blasted deal. One of the two sides is going to be proved wrong. . . . History in the moment usually happens thanks to a series of inter-related cock-ups made by tired leaders in a hurry. That is where we are.
- AEP rehearses its major non-Brexit problems in the article below.
- As the UK’s deer population explodes, more of the animals are heading into urban areas. If the experience of friends in New Jersey is anything to go by, this won't be at all welcome to people with gardens.
- Correction: Reader Maria has advised that the Finnish Civil War was in 1918, not 1923. I blame the book I'm reading, which said it was contemporaneous with events in Ireland in the early 1920s.
- Word of the Day: Paisaje.
- Having been told in 3 shops that my old laptop was defunct and that data couldn't be extracted from its hard disk, I polled along to the Apple shop in Sol yesterday without too much optimism. But . . . They achieved it, pretty quickly and easily, having explained that the real problem was only a non-functioning screen. And possibly yet another useless charger.
- As I was transferring the files, a young lady next to me initiated a conversation by asking how old my (decrepit-looking) MacBook was. Having chatted a bit, I discovered she was a Gallega, from Vigo, doing a psychology degree in Madrid. Which we agreed was a better city than Vigo. I wonder if a conversation would ever be started by a young Anglo woman. Well, possibly in the USA or Australia but never in the UK, I imagine. Where all men are seen as imminent - or at least potential - rapists. Should they have the temerity to talk to you.
German alarm grows over the EU's dangerous ultimatum terms for Britain: Ambrose Evans Pritchard, Daily Telegraph.
Ever louder voices in Germany are denouncing the Brexit Withdrawal Agreement as a fundamental failure of European statecraft that can lead only to a diplomatic debacle and festering animosity.
If the EU’s ultimatum policy causes a geostrategic rupture with a pillar of the European defence, security, and financial system - sooner or later, as it surely must under the existing terms - the recriminations in Berlin will be ugly.
“Europe is well on the way to inflicting huge damage on itself for decades by the way it has handled the failed Brexit talks,” said Marcel Fratzscher, head of the German Institute for Economic Research (DIW) in Berlin. Professor Fratzscher says the EU is undermining its own democratic legitimacy by demanding that Westminster MPs swallow the Barnier package with a “gun to their chest” and subject to threats of “catastrophic consequences” after two-thirds have already rejected it. Parliament is fully justified in rejecting a backstop arrangement that would lock UK in a customs union against its will. “No sovereign nation could agree to such terms lightly. The Bundestag itself could hardly have voted otherwise in comparable circumstances,” he wrote in Der Spiegel this week. He argues that if MPs capitulate and accept the Withdrawal Agreement this would be “just as catastrophic” as a no-deal Brexit.
The point is obvious: it is a constitutional absurdity to try to imprison a military power with a large industrial economy in the EU’s regulatory and legal orbit without EU voting rights. This must blow up in acrimony and end in an abrogation crisis.
The Article 50 process may give the EU legal and psychological leverage as the cliff-edge nears but this does not make it is wise to exploit that power. “Not just the British but the whole European Union will pay an immense price unless EU leaders make a fair offer under plausible terms,” he said.
Needless to say, the ‘game theory’ calculus for Brussels has been greatly influenced by signals from Parliament, the Cabinet Office, and powerful forces within the British economic establishment that Brexit could be eviscerated or reversed altogether.
Sigmar Gabriel, Germany’s vice-chancellor until last year, says Europe can’t afford the luxury of a strategic break with Britain. The EU is split on multiple lines of cleavage - North-South over money, East-West over the rule of law - and is surrounded by dangerous neighbours.
Sigmar Gabriel, German foreign minister for most of the Brexit process, has caustic words for Boris Johnson but says the EU must do more to keep the British on side. “We’re the last political vegetarians in a world of meat-eaters. When the British go, everybody will think we have become vegans,” he said. Mr Gabriel advises the EU to rewrite the Withdrawal Agreement or risk geostrategic oblivion in a G-2 world run by US and China, warning against the temptation to punish a nuclear-armed, military ally with the world’s premier financial hub. “Brexit will damage Europe’s role in the world in a way that we Europeans currently seem unable to grasp. It may be factually correct to point out that the UK put itself into this position, owing to the feckless behavior of its political elite. But this stance helps no one,” he said.
Mr Gabriel was German foreign minister and a member of the cabinet’s inner Brexit when the broad policy was set. Why was the problem allowed to fester?
The perils of Europe’s near abroad were on display this week in Turkey where Recep Tayyip Erdogan is cynically whipping up anti-Western fervour by showing videos of the mosque atrocities in New Zealand in his electoral campaign, almost alleging state collusion with the killer. “Why is the West silent? Because they prepared it and handed it to him,” he said. Britain should be the least of Europe’s problems.
When the British people delivered their bombshell verdict in June 2016, Europe could have taken stock and recognized that the one-way Monnet conveyor belt of the EU Acquis and centralization of power in Brussels was no longer workable. It could have come up with a creative model of ‘variable geometry’ for the ring of countries on the outer tier that want partial membership of the club on sovereign terms. This was the plan for a “Continental Partnership” - first for Britain but then as a model for Ukraine, Turkey, and others - put forward by a roster of leading European figures for the Bruegel think tank in Brussels. Among the authors was Emmanuel Macron’s top economic adviser Jean Pisani-Ferry. It was shot down in flames. Mr Macron said Britain had to pay a price for its apostasy, and be seen to pay a price.
Gabriel Felbermayr, President of the Kiel Institute for the World Economy (IFW), said any deal with Britain that is perceived to be coercive by the British people will fall apart. “If it is going to have any credibility, it must offer mutual benefits,” he said. Prof Felbermayr said the original sin of the Barnier team was to demand British submission to the Withdrawal Agreement before starting talks on the future relationship. Nothing in Article 50 stipulates such sequencing. It was a political choice and - we now know - a deliberate trap. He wrote a joint report in January with the heads of the German finance and economics ministry boards exhorting the EU to tear up the withdrawal text. Brussels should ditch its “indivisibility dogma” on the EU’s four freedoms and stop trying to shoehorn Britain into a customs union with colony status along the lines of the failed Turkish model. “This is a very dangerous game,” they said. They warned that Europe is more exposed to the fall-out from a disorderly Brexit than some in Brussels seem to think. “Can the EU really be sure that losses are sufficiently asymmetrically distributed that it ‘wins’ this game?” it asked.
The Commission crafted the backstop strategy at the moment of peak hubris in late 2017 when the eurozone economy was briefly booming. Brussels mistook the eurozone’s catch-up effect for self-sustaining growth. It was of course the result of quantitative easing a l’outrance and a weak euro - combined with the end of fiscal austerity - in a depressed economy with a big output gap. The eurozone reverted to structural malaise as soon the low hanging fruit had been picked and QE was wound down. It is chronically unable to generate its own internal growth, relying on world trade to stay above water. China is refusing to oblige. Its economy is still slowing, taking Asia with it. That is why Germany, Italy, and France are all in the grip of an industrial recession.
Brexit Secretary Steve Barclay says the no-deal emergency plans of Operation Yellowhammer will be activated on Monday unless an EU extension is agreed.
I have no doubt that the UK will fall into recession if there is a hard exit on such terms but will such terms actually apply? A fully-sovereign state can in any case take drastic action in self-defence, if necessary nationalising parts of the car industry on a temporary basis as the Obama administration did during the Lehman crisis. In extremis, the Bank of England could fund counter-cyclical infrastructure spending through ‘helicopter money’ or People’s QE.
The economic shock for the eurozone would be less (in aggregate) but its ability to respond would also be less and its populist politics are on a hair-trigger.
Interest rates are already minus 0.4pc. Plain vanilla QE has reached its limits. The machinery of the Stability Pact blocks serious fiscal stimulus in a crisis.
A botched Brexit at this juncture - with world trade in the doldrums and the US slowing to stall speed - would tip the parts of the eurozone into debt-deflation trap, trigger a collapse in eurozone bank equities, push Italy’s bond spreads through the danger line of 400 basis points, and expose the unhealed pathologies of monetary union. All this assumes that Donald Trump does not slap 25pc tariffs on European cars.
The Cabinet Office says it will impose duties of 10.8pc on cars and 12.6pc on buses in a no-deal. The EU would have to compete on a level playing with China, India, and Mexico, and with Korea and Japan much sooner than would occur under their trade deals. A large chunk of the EU’s £95bn good surplus with the UK would go up in smoke.
Germany’s IW Institute warns that a worst-case hard Brexit could slash German exports to the UK by 57pc, with compound effects from severed supply chains and the wastage of sunk investments. Berlin cannot allow a shock on this scale to happen and so it will not happen.
Whatever is being said today will not last a week if there is a no-deal. The EU will resort to emergency standby arrangements to keep trade flowing for its own political self-preservation. It will discover the beauty of trusted traders, blockchain technology, and the once derided ‘MaxFac’ solution for the Irish border.
Discussions between Britain and the EU might suddenly take a very refreshing turn.
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