Reuters reports in an article that can be found here:
“[I]n an interview with several European newspapers on Monday, Barnier stressed that any deal would not replicate the kind of access London financial services firms have now and he has repeatedly said that while a trade pact will be tailored to the specifics of the British economy, it will follow the broad outlines of the Canada treaty, without ‘bespoke’ advantages.”
So any agreement will not replicate the kind of access the UK’s financial services currently have to the EU, even though such access is among the “specifics of the British economy”. The reason for this is clear: the EU wants to encourage financial services firms to move to Paris or Frankfurt. It has nothing to do with “cherry-picking” and is entirely a commercial decision to grab whatever they can out of Brexit that they can’t get while the UK is a member state.
We can expect a new “set of negotiating directives for Barnier” from the Commission and we look forward to reading a specific directive to kill off ‘passporting rights’ that are commercially advantageous to Britain.
Don’t Cry for Maio, Argentina
Luigi Di Maio, Italy’s Deputy Prime Minister and leader of the Five Star Movement, is one of the proponents of an Italian parallel currency that could help destroy the euro – the mini-BOT.  His partner, Deputy PM Matteo Salvini is with him on that. Both must be aware of an ominous precedent.
In 1991 – after two decades of currency crises, poor economic growth, low capital investment and high inflation – Argentina finally pegged its peso to the US dollar at par and with guaranteed convertibility. This was to enable it to stabilise the economy and encourage both local and foreign investment. But that effectively handed monetary policy to the US Federal Reserve, which cared a lot more about its own economy than any other country’s and set interest rates accordingly; the peso varied in accordance with the demands of the US economy rather than Argentina’s and of its main trade partners. In 2002 the peg was abandoned, the peso lost 75% of its value but the economy flourished with growth rates at 6% or more, for a while. Having failed to fix its perennial problems of corruption, tax avoidance and the government’s pork-barrel spending, it is again one of the worst-affected nations now that the US Fed is once more raising rates to suit itself.
Italy is also in the line of fire but its monetary policy is in the hands of others with interest rates set to suit the German economy. At the least it needs a floating currency to restore competitiveness, something it is accustomed to doing so that today it remains a major producer and exporter of manufactured goods. Italy has its own perennial problems, similar to Argentina’s, but this would at least give it breathing space. If Italy can’t recover while the ECB is buying its bonds and charging nil for loans it is trapped.
A country with a large trade surplus is by definition not spending it on things its partners produce. The ace exporter within the eurozone instead accumulates Target2 balances which are entries in a digital ledger that can’t be redeemed, never expire and earn 0% interest at the ECB’s current rate. It’s a case of robbing Signore Pietro to pay Herr Paul but with fake money. Neither of them is going to be happy when they understand it.
Round ‘Em Up
A poll of polls currently suggests that if the Brexit vote were rerun today the ratio of Leave to Remain votes would be 48% to 52%, exactly reversing the 2016 result of 52% to 48%. This is also what the polls said on 23rd June 2016; Remain was predicted to win by 4%, exactly the reverse of what happened.
The polls can’t be relied on, clearly, but if they were right this time Leavers would surely demand another vote. As it would only be fair to give Leavers another chance if Remainers were given one, nothing would be settled. Since the early 1970s there have been 48 referendums within the EU and only those whose results didn’t conform to the EU agenda were re-run (until they did).
For those of you old enough to remember black and white television – or those young enough to be curious to find out what your grandparents used to watch – try this:
Harmful Tax Competition
The EU has an explanation of what it means by harmful tax competition, in its Code of Conduct:
Here is our interpretation of key points in this document.
“The Code is not a legally binding instrument but it clearly does have political force. By adopting this Code, the Member States have undertaken to
- roll back existing tax measures that constitute harmful tax competition and
- refrain from introducing any such measures in the future (“standstill”).”
“The code covers tax measures (legislative, regulatory and administrative) which have, or may have, a significant impact on the location of business in the Union.”
By “political force” they mean ‘you will obey’. We wonder why Ireland, for example, would have agreed to this. The EU wishes to eliminate internal competition between member states as part of its unification strategy. They don’t acknowledge this motive; here’s their squishy justification:
“In the tax field, the Commission suggests more transparency and information exchange in the company tax area so that tax systems are better able to deal with complex corporate structures.”
But what they are after is “harmonisation”, not simply “transparency and information”, which they deny elsewhere.  In a further fudge the Code links members states’ tax regimes to state aid, which for more easily understood reasons they wish to avoid (unless it’s done by France or Germany). For example, state-owned companies in France – EDF (85%) and Germany – Deutsche Bahn (100%), plus Airbus/EADS (France, Germany and Spain) appear to be exempt from the ‘no-state-aid’ rule.
 Timely Judgement