Thread: Brexit - It's Still On!

Europe is pushing its luck by letting German inflation run wild.


Inflationary policies are fuelling a eurosceptic backlash in the Continent’s largest economy

AMBROSE EVANS-PRITCHARD
30 December 2021 • 6:00am
Ambrose Evans-Pritchard
Germany’s famous aversion to inflation and monetary disorder is the dog that has declined to bark all through the last half-decade of quantitative easing.

Outrage was brief even when the European Central Bank cut interest rates to minus 0.5pc, and banks started to impose confiscation fees on deposit holders, or “punishment rates” as they are called in the German press.

One might conclude that German inflation-phobia was always a myth, but there are clear signs that this strange political calm will finally break in 2022. What if monetarists are right and German headline inflation - currently at a euro-era high of 6pc - proves stubbornly persistent?

Germany faced this level of inflation during the Reunification boom of the early 1990s. The Bundesbank crushed it by raising rates 500 basis points to 8.75pc, and in the process blasted sterling out of the Exchange Rate Mechanism, with potent political consequences for Britain’s relations with Europe.

This time the ECB is persisting with negative rates even as Germany hits full employment and full capacity, and even as the ECB’s own staff union demands a 5pc pay rise.

The central bank is continuing to soak up eurozone budget deficits with QE bond purchases on a vast scale, essentially shielding a string of insolvent Club Med states from market forces under scarcely-disguised “fiscal dominance”. The ECB’s balance sheet has hit 81pc of GDP. The US Federal Reserve is calling it quits and is preparing to tighten hard at less than half this level.

With apposite timing, German fund manager Count Georg von Wallwitz has just published “Die Grosse Inflation” - no translation needed - a forensic exploration of events from the end of the First World War to Wiemar’s hyperinflation in 1923.

His conclusion is that the Reichsbank under the hapless Rudolf Havenstein allowed inflation to spin out of control as a way to clear the legacy debts of the war, deeming expropriation of creditors to be a lesser trauma than mass unemployment and grinding deflation in the chaotic circumstances of regional revolutions.


Great Britain opted for deflation because it was able to do so. It still had a full-functioning government, and powerful creditor interests in the City. But that British policy of austerity and the Gold Standard was a painful failure in retrospect. It led to the General Strike and the lost decade of the 1920s. Neither model worked.

Count von Wallwitz is not of course suggesting that today’s QE is comparable to Reichsbank printing. He is too sophisticated for that. The German imperial regime collapsed in 1918 and the Weimar government lacked a reliable stream of tax revenue, which he likens to the dysfunctional hybrid structure of the EU today. It was almost a patriotic duty to withhold taxes diverted to cover reparations payments to the victors of Versailles.

But there is an obvious parallel today with legacy debts from the pandemic, coming on top of earlier damage from the global financial crisis in 2008. Debt ratios have risen by as much as they did in the First World War, and in several countries by considerably more.

Debt ratios have jumped by 52 percentage points since 2007 in France (118pc), 54 points in Italy (155pc), 72 points in Portugal (135pc), 84 points in Spain (120pc), and 104 points in Greece (206pc), despite serial write-offs.

It is staggering to think that the ratio has risen by just four points in Germany to 69pc of GDP. This divergence in debt burdens is now the central political fact of eurozone economic management.

A cartel of mostly Latin debtors has in effect seized control of the ECB in alliance with academic New Keynesian economists, and is pushing through loose-money policies chiefly in its own interest, regardless of German needs and sensitivities.

This cartel is violating the founding contract of Europe’s monetary union: that the ECB would be a hard-money replica of the Bundesbank, and that German people would not be swapping their beloved D-Mark for a lira. A lira is what they may get.

“The Latin model has arrived: we’ve got a full industrial policy, a green deal (i.e. fiscal expansion), and now we’ve got Latin inflation as well,” said Thomas Mayer, Deutsche Bank’s ex-chief economist and author of Europe’s Unfinished Currency.

“The northern model of independent monetary policy and hard budget constraints is finished,” he said.


France’s Emmanuel Macron and Italy’s Mario Draghi are now trying to push the envelope even further, signing the bilateral Quirinale Treaty in Rome last month in a bid to take control of Europe’s fiscal regime as well.

They aim to dismantle the legal architecture of budget discipline, allowing states to run much bigger deficits by excluding public “investment” from the normal figures. They are right in one sense: the austerity bias in the deficit rules led to frightening economic blunders during the EUM debt crisis. But while their proposal looks like a variant of Gordon Brown’s Golden Rule, the implications are radically different in the creditor v debtor context of monetary union.

They also aim to usher in a de facto European treasury with joint debt issuance, even though the German constitutional court has already ruled that this violates the country’s Basic Law.

Professor Daniel Gros, head of the Centre for European Policy Studies, said this Quirinale demarche was seen as a provocation by Berlin, an attempt to bounce Chancellor Olaf Scholz and his new coalition into a high-spending “transfer union”. The Draghi halo changes nothing.“Draghi will not be there in the future: the debt will remain,” he said.

Italy is the lynchpin of what unfolds over the next two years. “It is too big to be bailed out by fiscal transfers, and it cannot roll over its outstanding debts unless the ECB is there to keep the market open. The market will shut the moment that the ECB steps away,” said Professor Mayer, now at the Center for Financial Studies in Frankfurt.

Three years ago Matteo Salvini’s Lega and the Five Star Movement, the two leading parties in Italy’s parliament, were both flirting with exit from the eurozone. Neither have any further reason to do so since the ECB has been fully captured by their camp. The threat of rupture in the one-size-never-fits-somebody structure of the euro therefore rotates northwards. This new tension is likely to be the story of the early 2020s.

Inflation is highly corrosive in the particular circumstances of Germany, where the poorer half of the population rents rather than owns property, and almost none have equities or inflation hedges. They keep their life savings in bank accounts. These are currently being eroded at a real rate of over 6pc a year. It implies galloping pauperisation, even if it is not 1923.

Negative rates are also destroying the business model of the smaller cooperative and savings banks that fund 90pc of loans to the Mittelstand family firms, the stable backbone of German society and its industrial machine.

Prof Mayer said Europe should not to take German quiescence for granted, warning that it is only a matter of time before a political backlash starts to convulse the political scene. “People are waking up. The longer inflation goes on, the more it will fuel populist forces in Germany. It was the migrant crisis that revived the fortunes of the right-wing AfD party, and I fear that inflation will have the same effect,” he said.

The Christian Democrat Party and Bavaria’s Social Christians already have hardliners itching for a fight with the ECB. They are now in opposition and ideologically liberated by the departure of Angela Merkel. These parties may well tilt in a eurosceptic direction to cover their flank against the AfD.

This has a familiar feel to those who followed the series of incremental irritations that turned the UK against Brussels and ultimately led to divorce. These tensions are too long to list, but they culminated in the Lisbon Treaty, which created a European supreme court in the fullest sense, and gave euro-judges sweeping powers to rule on almost anything they wanted by making the EU rights charter legally-binding.

British opposition was swatted aside, and a supposed opt-out protocol later turned out to be meaningless. Lisbon was followed quickly by the breezy decision of the EU Council - against all precedent - to circumvent David Cameron’s veto of the Fiscal Compact in 2011. Did they have any idea that this would set off the chain of events that led to the Referendum?

At the root of Brexit was an inchoate biut widely felt sense among the British people that their country was being pushed around, and that its souverainiste vision of how Europe should evolve counted for nothing. This process of disenchantment takes a long time to unfold but the early signs are already there in Germany.

It is courting fate to try to strip Europe’s dominant power - and long-suffering cash cow - of control over monetary and fiscal policy, and doubly hazardous to do so without much regard for the niceties of EU treaty law.

A debtor country cannot walk out of the euro without scorched-earth economic consequences: a rich creditor country most certainly can.

Europe is pushing its luck by letting German inflation run wild

as i keep saying, it is a long game and we are better out.

Originally Posted by malmomike77

but Remainers will still be bleating in the 2030s

Oddly enough the only ones 'bleating' are you and others of your ilk here . . .


A nice quote from a Brit paper, opinion . . .

At the core of Brexit is a conflict with sanity.With every day that the UK continues with the madness of Brexit the country becomes poorer and impoverishes itself politically, diplomatically and culturally.
Brexit is personified by Johnson: unkempt, uncombed and untidy. Quite incapable of making a rational argument but lots of appeals to unreason and prejudice.
Brexit will never be over for as long as the Brexiters exist bec…

Nothing but whining and finger-pointing at others . . . fucking idiots, of course

Here's an interesting Brexit curve ball.

Woman loses PS2k after being taken off flight over Brexit passport rule | Evening Standard

A woman has told of her frustration after being removed from a flight to Spain and having her New Year’s Eve “ruined” over a little-known change to post-Brexit passport rules.

Aya Shillingford, 36, said she was “devastated” after staff escorted her from her Jet2 flight to Tenerife on Thursday morning after claiming her passport had been issued over ten years ago - meaning she could not travel to the EU under new post-Brexit guidelines.

She had planned to spend New Year’s Eve on the island with her partner Gareth and a group of friends – but now faces losing nearly £2,000 after being forced to cancel the holiday at the last minute.

The Jet2 official said she could not fly to the EU as her passport had been issued more than ten years ago – despite its expiry date being June 28, 2022.

“We had arrived at the airport in good time, made it through security and dropped off our bags. Two members of staff - at security and at the gate for the flight - had already checked our passports and not raised any issue,” Aya said.

“But when we got on the flight suddenly there was a big commotion. A Jet2 staff member took my passport and said ‘I’m sorry but you can’t fly, this was issued over ten years ago’.

Bad luck, eat shit and whine . . . were it the other way around the Brexit-morons would be howling that she was trying to bully the poor UK under orders from Brussels . . .

Here's another well-expressed opinion from the UK:

I'm a UK citizen and I live in a EU country and have for 10 years since leaving the UK. There's rarely any major news in the media about the Johnson government. Since the foolishness of leaving the EU in such an unprepared and ungracious manner the attitude of the EU countries is it's the UK's loss.
Johnson, in his desperate longing to be PM has shown for all to see how hopelessly ill-equipped he is intellectually and morally to do the job.
The UK is on a downward trajectory and the pandemic has only taken away the news coverage of Brexit and how much permanent damage it's creating in the UK.
But, hey, there's a crown on pint glasses. That is what the fool Johnson boasts about as a Brexit achievement.

^^ UK government have been explaining this on their website since 2019. I can't believe anyone who travels doesn't understand that rule by now.

Originally Posted by Troy

^^ UK government have been explaining this on their website since 2019. I can't believe anyone who travels doesn't understand that rule by now.

Well, I don't spend my days browsing UK government websites and this story was news to me. It is pertinent because my passport has a validity of 10.5 years so I'll need to renew it at least 9 months before it expires.

I'd be interested in a link because I looked for more detail at the Passport Office and the FCO and didn't find it.

Have any of you pro- EU whingers even been in the UK lately its booming.

^ Yeah, of course it is...

I was there in October and the only thing I saw booming was Covid.

Originally Posted by Chico

Have any of you pro- EU whingers even been in the UK lately its booming.

Originally Posted by Troy

I was there in October and the only thing I saw booming was Covid.

He's used his laughing smiley to indicate he's joking. Ask him for ten things that are *booming*.

Originally Posted by Troy

That link was first issued Oct 2020 and lists all countries it applies to.

This is truly government obfuscation at its finest.

What that link tells me is:

"How much time you need on your passport depends on the country you’re visiting. Check the travel advice for the country you want to travel to - read the entry requirements section."

That in itself is not news, we all know that different countries have different rules. What it does not say in bold in a red box at the top of the page is:

"Following Brexit you might not be able to enter the EU if the passport we issued to you is now over or close to ten years old and completely useless."

I chose France, no alert on the heading, so I went to the 'Entry Requirements' section. There must be 200 lines of stuff about Covid before you come across the information you need. Buried. This is nothing new, Douglas Adams nailed it in The Hitchiker's Guide where Arthur Dent was surprised to learn of the earth's imminent demolition:

' …You hadn’t exactly gone out of your way to call attention to them had you? I mean like actually telling anyone or anything.’
'But the plans were on display…’
'On display? I eventually had to go down to the cellar to find them.’
`That’s the display department.’
`With a torch.’
`Ah, well the lights had probably gone.’
`So had the stairs.’
`But look you found the notice didn’t you?’
`Yes,’ said Arthur, `yes I did. It was on display in the bottom of a locked filing cabinet stuck in a disused lavatory with a sign on the door saying “Beware of The Leopard".’
— Douglas Adams.

An excellent comment on Lord Frost and the reasons he left

I wish the UK media would report the legal situation of the UK wrt the ECJ. The UK is once again only negotiating with itself.

Lord Frost published his Command Paper with his demand to remove the role of the ECJ on 21 July. Within hours the EU Commission answered in a statement by Vice-President Maroš Šefčovič: "We will continue to engage with the UK, also on the suggestions made today... However, we will not agree to a renegotiation of the Protocol."
No renegotiation means the Protocol will not be changed and the role of the ECJ remains unchanged.
That should have been the end of it as there are no legal means for the UK to unilaterally end the Northern Ireland Protocol, or to amend it, or to scrap it, or whatever the numerous liars in the UK demanded. And no, Article 16 cannot be used to trigger the renegotiation of the Protocol itself.
As for his resignation, he gave lots of reasons to resign, the only one not mentioned was the Brexit he asserted was now "secure".
If he was so close to success or even only triggering Article 16, why did he not wait for a month or two before resigning? Because obviously, he was close to failure, not to success.
https://www.theguardian.com/politics/2022/jan/03/the-guardian-view-on-britain-and-france-the-very-worst-of-rivals#comment-154040583

When signing an agreement it is always wise to read and understand it first instead of moaning and whining and sabre-rattling about how awful it is just to get the halfwit population on board.

^^ It should be simple but the government originally tried to put the blame on the EU for having to change its passport renewal policy. The original page has been removed following hassle from various media.

It's all simple really, if you ignore special cases and play it safe.

The UK used to allow passports to be renewed up to 6 months in advance and extend the original valid until date by 10 years. This results in a passport valid for longer than 10 years.

EU rules are passport valid for 10 years from date of issue. Passport must be valid for more than 3 months after expected length of stay.

UK are now issuing passports with 10 years from issue date.

The simplest method is to just renew based on 10 years from issue date and ignore the expiry date.

Originally Posted by Troy

The simplest method is to just renew based on 10 years from issue date and ignore the expiry date.

As i have always done, if it didn't fill up first which was that case in 7 out of 9 i have had.

Originally Posted by Troy

The UK used to allow passports to be renewed up to 6 months in advance and extend the original valid until date by 10 years. This results in a passport valid for longer than 10 years.

Yep, mine is valid for 10 years and 9 months. Now that I am alert to the issue it isn't a huge problem, it just means renewing a year earlier than I otherwise would. Still four years away. Unless I feel the need for an urgent Bangkok trip.

Originally Posted by Shutree

Unless I feel the need for an urgent Bangkok trip.

PM Mendip for renewal advice

Bring it on.....

Halt to Northern Ireland Brexit checks ‘a breach of international law’

Ireland’s European commissioner criticises decision by DUP minister affecting food and animal imports

A decision by a Democratic Unionist minister to halt all Brexit checks on food and animals entering Northern Ireland has been described by Ireland’s European commissioner as “an absolute breach of international law”.

The move announced by the devolved administration’s agriculture minister, Edwin Poots, on Wednesday has been branded an electioneering stunt by opposition parties in Northern Ireland and has set the UK on a collision course with the EU.

Mairead McGuinness, the finance commissioner in Brussels, said the two sides were working “tirelessly” to resolve the dispute over the checks, and the move – which came into effect on Thursday – was unhelpful. “This announcement has created uncertainty and unpredictability and certainly no stability, so I’m not sure what the purpose of this move is … it’s an absolute breach of international law,” she told RTE.

A spokesperson for the European Commission said the issue would be raised at a meeting between the UK’s foreign secretary, Liz Truss, and the commission vice-president Maroš Šefčovič later on Thursday.

“The European Commission will closely monitor developments in Northern Ireland pursuant to this announcement. It recalls the responsibility of the UK government for the respect of the international obligations it has entered into. The protocol is the one and only solution we have found with the UK to protect the Good Friday (Belfast) agreement.”.

That Brussels did not reference any legal action in its statement indicates that diplomacy will be the first line of offence in the latest row.

Ireland’s foreign minister, Simon Coveney, also described the move as “a breach of international law”.

But the Northern Ireland secretary, Brandon Lewis, told ITV that the decision was a matter for the Northern Ireland government and that such unilateral action “was exactly the sort of thing” London had been warning the EU might happen to ensure goods move across the Irish Sea seamlessly.

The DUP MP Sammy Wilson confirmed to BBC Good Morning Ulster that the advice was given by the former Northern Ireland attorney general John Larkin. He predicted the move would accelerate a solution after almost a year of negotiations between the UK and Brussels.

“If it requires a bit of a kick for a bit of reality to come into these talks, then what has happened today is a bit of kick. This will also test whether the checks are really necessary because 95% of the goods are not going near the Irish republic.”

Simon Hoare, the Conservative MP and chair of the Northern Ireland select committee, suggested the move had put the reputation of the UK at stake. He tweeted: “In relation to NI Protocol checks: I’m a Conservative. I believe in the Rule of Law and adhering to obligations we voluntarily entered. There’s no ifs and buts on this. The reputation of the UK on these matters is important. Anyone who cares about the UK should feel the same.”

Poots confirmed on Thursday that checks were continuing to take place at Northern Ireland’s ports while “financial” issues were being considered. He predicted they would stop “in days”.

Lorries coming off the 6am ferry from Cairnryan in Scotland were still being directed to the border control post with officials in hi-vis jackets seen conducting checks in the back of at least one lorry.

Seamus Leheny, of the trade association Logistics UK, told BBC reporters at the port that the order only applied to checks on the 3% of lorries carrying food and animals. He added that the removal of checks would not mean a reduction in the customs administration and other paperwork his members were obliged to complete.

Northern Ireland is due to hold elections in May and opinion polls suggest the Irish nationalists Sinn Féin could overtake the DUP to become the largest party for the first time.

Poots, who was leader of the DUP last May, is also facing local turmoil. Last week he lost out in his attempt to be selected for the South Down constituency in the upcoming local election.

https://www.theguardian.com/politics/2022/feb/03/halt-to-northern-ireland-brexit-checks-a-breach-of-international-law

Northern Ireland is due to hold elections in May and opinion polls suggest the Irish nationalists Sinn Féin could overtake the DUP to become the largest party for the first time.

Northern Ireland bailing out of BREXIT, then. Who can blame them.

Yep, bring it on.

Sinn Fein can unite Ireland and job jobbed, everyones a winner.

Originally Posted by malmomike77

Sinn Fein can unite Ireland and job jobbed, everyones a winner.

BREXITers with a military background - a double whammy of dumb.

Classic tory doublespeak from Sunak yesterday.

Being able to cut VAT on fuel was a fantastic benefit of BREXIT.

But he’s not going to do it because it wouldn’t be of any help.