But let’s have some sympathy for Prime Minister Theresa May. She is dealing with a rebellion in her own party, has lost numerous votes and it is not clear she can force her (let’s call it) Brexit-lite proposal through Parliament. You can read about her troubles here.
This deal has monster implications for economics and investments and you really need to pay attention. I think I would vote against, not that anyone in Great Britain will care, as it seems to me that her compromise leaves Europe with more control over what a “final” agreement would look like. It’s not exactly what the “leave” crowd originally wanted. But in reality there are no good choices. If this is voted down, I see real chances for problems everywhere.
Another national vote might seem sensible, except that would look like the elites keep taking votes until they get the outcome they want. It would make a large part of the country upset no matter what. As I said, no good choices…
Regardless, it is highly uncertain what happens next. The United Kingdom gave formal notice it would leave the EU on March 29, 2019, whether terms of separation are reached by then or not. A “hard Brexit” would be chaotic, to say the least, as it would leave businesses trying to operate in a legal vacuum. World Trade Organization rules might serve as a backstop in some matters but the massive trade volume between the United Kingdom and EU would certainly slow. Can they walk that notice back? Fudge a little bit on the date? This is the EU. They can do anything they bloody well like. Damn the rules and full speed ahead…
On the other hand, remaining in the EU would enrage the millions who voted to leave and probably bring down the May government. Where it would go from there is anyone’s guess. It is hard to even imagine “democratic socialist” Jeremy Corbin as Prime Minister. So both economies are probably in for a shock unless some miracle produces orderly separation terms in the next three months, which seems unlikely.
The third critical event, says Hill, is the growing Italian crisis, which I’ve been warning about for quite some time. That kettle is getting ready to boil over. Now banks in Italy are having trouble refinancing their bond issues, which is forcing them to curtail lending to an already-weak private sector. Rising mortgage rates are cutting into consumer spending. Italy is arguably already in recession but the situation looks likely to get worse—which is a big problem for its creditors, mainly Germany, which we will discuss in a bit.
But Hill says, I think correctly, that the Italian crisis is no longer just economic, if it ever “just” was. It is emblematic of a culture war that is pitting anti-immigration populist movements against “elites” they believe are hostile to their interests. As happened elsewhere, unemployed and working-class people are losing faith in the system. We see this most recently in the violent gas-tax protests in France.
This protest movement has an altogether different feel when you pay close attention. It is not just about higher fuel taxes. It is about almost half the country being angry at the educated city-dwelling elite while the brunt of increased taxes falls on an increasingly burdened rural middle class. The French government now consumes 46.2 percent of GDP, making it the most-taxed OECD nation. Even a slight tax increase affects the working class disproportionately. And when it increases taxes on something like diesel fuel, which is critical in rural areas, it is particularly hard.
In Europe and around the world, we see this pushback against what is seen as an elite group at the top (the “Protected”) which pays no attention to the problems of their less successful “Unprotected” brethren. And those brethren are demanding attention.