When Boris Johnson’s Conservatives crushed the Corbyn – led, anti – Semitic, terrorist loving, far – left, borderline Maoist incarnation of the Labour Party in the UK’s General Election on December 12 (thus giving Donald Trump’s hopes of re-election as US presiident in 2020 as the Democrats seem determinted to pick an equally whacky, far left candidate as their nomineee,) the resulting solid majority voters gave Johnson led many political pundits to predict that it would marginalise the Brexit lobby and free Johnson to negotiate a soft landing type deal with the EU.
But, love him or hate him, Johnson is a far more astute politician than that. He knows his impregnable majority is down to traditional Labour voters deserting the party, not simply over its failure to take a clear position on leaving the EU as most of mainstrwam media would have us believe, but for many identifiable reasons whoch can be condensed down to a single sentence by saying the working classes believe Labour has abandoned them and is not the party of lawyers, academics and managers.
The working classes are not stupid, though not all are highly articulate as Labour’s lawyer – politicians tend to be, and not all are academically gifted as most of Labour’s university educated candidates, parachuted into safe constituencies in working class areas by party headquarters tend to be, they know where their interests lie. And it is not in the hands of a party that would open the borders to millions of uneducated, unskilled third world migrants, or which promises to fund its profligate public spending by “taxing the rich.” Working class people are not easily fooled, they know the seriously rich have their money tied up in trust funds and investments which are protected from the taxman. And they know those investments can quickly be moved offshore should any future Maoist government threaten to seize personal assets.
They also know something which socialist economists (who generally have a sub – zero IQ rating,) remain blissfully unaware of. The majority of invested wealth is held by pension funds and investment trusts used by small savers. So Labour’s “tax the rich” pland would hit the moderately well off, the thrifty and those who had no choice but to save for retirement by paying into a company pension fund as Labour’s taxation plans have always previously hit hardest at those whose votes Labour has relied on. Well that’s socialism for you folks.
So after a hundred years, as Labour has gradually moved more and more towards becoming the party of affluent intellectuals, the working classes have seen through the pretence. Socialists do not care about the working classes, socialist care only about their votes as a stepping stone to power.
However, as previously mentioned, Boris Johnson is an astute politician, he knows that former Labour voters did not turn out and vote Conservative, instead they stayed at home and did not vote, while large numbers of traditional Conservative voters who had stayed at home in the previous election in protest as Theresa May’s inept leadership and attempts to negotiate a leaving deal with the EU that would effectively keep the UK tied to EU law and policies made by unelected bureaucrats in Brussels. And Johnson knows if he wants to be re-elected he must get the Conservative voters out again at the next election, and at least keep the Labour voters at home if he cannot persuade them to switch alliegence.
It is perhaps with all this in mind Prime Minister Johnson appears to have chosen to play it tough with the EU.
Then he could undermine Brexit by giving back all the concessions during his subsequent negotiations with the EU over a trade deal.
This analysis should have been the correct one given the staunch opposition by the political elite in the U.K. to Brepxit.
So the political situation in the UK has changed. For all the haters say about him, Boris has the likeability factor while more of Labour’s likeable figures are gone, stepp[ed down like Andy Burnham, now Mayor of Manchester, or defeated, like Caroline Flint, for may years the hottest female politician in Britain. And because the Conservatives know they must hold the working class to hold on to power, and working class voters by a considerable majority support our leaving the EU, a soft Brexit is no longer a viable way forward.
This is probably why Boris Johnson is almost channeling Nigel Farage in his ‘come and have a go if you think you’re hard enough’ approach to trade negotiations with the European Union.
The modified Withdrawal Bill passed by the new Parliament with six Labour defectors in the week before Christmas strengthens Johnson’s hand as he embarks on new trade negotiations with the organisation that said it would absolutely not renegotiate Theresas May’s Brexit In Name Only deal, by removing any potential extension of negotiations beyond the end of 2020. There are a ton of changes noted in the Guardian article linked above covers.
The original two year transition period EU Chief Negotiator Michel Barnier was planning on using to bully whoever became political leader of the UK into accepting whatever one – sided conditions the EU chose to impose is gone. January 31st Brexit happens, and for the following eleven months the EU can negotiate or we leave at the end of the year on WTO terms (Hard Brexit). This would hit the EU, and particularly the EU’s biggest economies, Germany, France, Italy and Spain far harder than it will hit Britain which has an enormous deficit in its trade with the EU, largely because EU protectionism prevents us sourcing many of our imports more cheaply from outside the Union.
Although the political situation is changing in Britain, it is changing in Europe too.
Given the context of his negotiations with French President Emmanuel Macron in October which secured the current Withdrawal Treaty, it seems Boris sees more clearly than Theresa May ever did that it is Britain rather than the European Union which negotiates from a position of strength.
The keys to understanding the EU’s weakness is the shifting dynamic between France, Germany and the U.K. in relation to their relationship with the United States, the underlying weakness of the EU single currency system, The Euro, and the political weakness of Emmanuel Marcon as, after struggling for a year to resolve the internalo conflict with the Yellow Vests movement’s protests over high taxes, he now faces a general strike against his proposed reforms to France’s retirement and pensions policy .
Simultaneously Macron is pushing France to unseat Germany as the de facto rule-setter for the EU. He wants more integration at every level, but most importantly fiscally, while the fragile coalition government led by Chancellor Merkel could fall at any time, plunging Berlin into chaos.
Macron, a former Goldman Sachs Investment Banker understands that the euro is in trouble and that around half the 27 members of the Union are economic basket cases. Since the 2008 financial crisis the European Central Bank (ECB) bought aaround €1.5trillion of junk bonds in its efforts to prop up Eurozone economies. The French president also sees the flaw in this policy is because of the lack of fiscal integration of EU member states, this puts enormous pressure on the more successful economies which are already stalling due to the EU’s expansionism. For the euro to survive at least three things need to happen.
- There needs to be a single entity capable of issuing and redeeming Euro-zone sovereign debt. Until and unless that happens the weaker states will continue to issue Euro denominated bonds and rely on the ECB to buy them.
- The euro has to weaken considerably to remove the garrote around the necks of countries like Spain, Portugal, Italy, Greece and even France. Unfortunately for the past three and a half years EU officials have been forcing the bank to keep the value ofv the Euro high to undermine the UK pound.
- Much of the existing sovereign debt needs to be converted into a Eurobond, doing away with much of the stock of debt as liabilities for member states like Italy and Spain.
Macron also understood that British voters would never accept the EU overturning Brexit in the same way as it had previously overturned results of democratic votes in France, Netherlands, Denmark, Ireland, Portugal, Greece, Italy and most recently Spain, and the way it had planned with the government of long term EU loyalist Theresa May. He saw the opportunity to cut Britain loose, thuse easing the path of France to more power, and to shaft Germany at the same time.
Germany will not be eager for any of these developments, the current single currency system is designed to benefit German’s manufacturing base and underwrite its mercantilism. The status quo suits Germany fine, the country has benefited handsomely from the hollowing out of member states economies through the internal trade advantages the Euro gives German business. Once the weaker economies are insolvent, Germany has used its financial clout to force debt restructuring, buying up assets at pennies on the euro. The prime example of this is what happened in Greece.
This explains why the single currency system is designed the way it is. What Emmanuel Macron sees as a flaw was in fact a plan, rather it was the plan. They may claim to have had genuine reasons for doing this, but this is classic colonialism.
But, what does this have to do with Brexit? Quite a lot actually.
Macron installed convicted criminal and former IMF chief Christine Lagarde as head of the ECB to push for fiscal integration and to politically blackmail the Germans into going along with it.
How? By threatening to write down or allowing default on the massive $850 billion in TARGET 2 liabilities German banks have in euro-zone sovereign debt on their balance sheets.
But there’s no way City of London and the crown would survive the British people’s anger at underwriting the costs of this shakedown and subsequent debt crisis.
Nigel Farage and the other hard Brexiteers understood that this was a key issue, but one that didn’t resonate with voters. Fishing rights and immigration get people to the polls, not bailing out German banks.
But, make no mistake, Farage, the old commodities trader, knows that breaking the British banking system free from the EU’s and put up a hard border, as it were, between them is the key to a successful Brexit.
And I suspect, after it was clear they couldn’t convince the British people otherwise, that City of London and the Crown saw this as well.
So, Macron and Johnson looked at the landscape clearly and with the blessing of the British political class negotiated a settlement.
By allowing Johnson and the U.K. to get clear of the fiscal and political storm, Macron gets even more leverage over Germany whose economy is the one hurt most by a hard Brexit.
The Germans run a huge trade surplus with the U.K. Cutting that down weakens the euro and Germany at the same time.
Germany will insist on bail-ins of depositors versus bailing out the Italian government. But Macron realizes the only way for the EU to survive the coming debt crisis is to over-ride Germany’s deflationary attitudes. They are going to have to print euros like no tomorrow.
He may throw Merkel a bone in the negotiations but it won’t be much. Macron is many things, but he’s not stupid. He knows the Euroskeptic populists will eventually rise to power in Italy, Spain, Portugal and potentially even Germany. He knows he’s in trouble in France. And he knows the wheels have come off Merkel’s federalization bandwagon because German taxpayers are sick of propping up the European Projectfinancially.
The miserable results returned by the two leading German political parties supporting moves towards a federal Europe are an indicator of the public’s disillusionment with EU policy. Prime Minister Johnson may be just what France has been waiting for in order to tip the balance of power in its favour.
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