Members of Parliament will vote on Prime Minister’s Theresa May’s Brexit deal to on 11 December. Without hesitation, they should vote it down.
More and more people have realised that Brexit was built on a fantasy that we could keep all the benefits of being in the European club without paying any of the membership fees – what leading Brexiter Boris Johnson called the ‘Have Your Cake and Eat It Strategy’. Well, it turns out that having a cake after you have already eaten it once is not so tasty after all. Theresa May has brought back an unpalatable deal that no one likes because it crystallises the reality of what leaving the European Union (EU) actually means. To get easy access to European markets you have to play by the rules of the club – and once a country leaves the club, it no longer gets a vote on what those rules are. So much for taking back control.
The argument for remaining in the EU is fundamentally moral and political, not economic. However, it is important for lawmakers to know that Brexit will make their constituents poorer. Whereas the wealthier can ride this out, it is families on middle incomes and the less well off who will feel the financial pain most sharply. The economics of Brexit are very simple. Being outside the EU inevitably means higher costs of doing business with our nearest neighbours – so there will be less trade, and less trade will make us poorer. The more distant a relationship we have with the EU, the bigger will be our pay cut. This will be hugely painful if there is a disorderly ‘No Deal’; it will hurt to a lesser degree with a softer approach. The formal amounts that the UK pays into the EU disappear in the rounding error compared with these economic losses. (The section at the end of this blog goes into the gory economic details for the truly dedicated reader).
In 2009 when my colleagues at the National Bureau of Economic Research and I began planning a conference for a project we’re running on the global financial crisis, we were concerned that the material would no longer be timely when the symposium actually occurred. We needn’t have worried.
I’ve just returned from Washington, DC, where our symposium was held, and again financial crises were the topic of the day. Three years after cracks in the subprime mortgage market erupted into the most severe and synchronized global financial crisis and recession since the Great Depression, the world economy is once more in dangerous territory. What began as a singular sovereign debt problem in Greece has spread to the rest of Europe, and now threatens to become a second act to the first financial crisis. How did we get here? And how can we keep it from happening again?
After receiving support from the United States at the critical moment, Christine Lagarde was named Tuesday as the next managing director of the International Monetary Fund. In campaigning for the job, Ms. Lagarde, France’s finance minister, made various promises to emerging markets with regard to improving their relationships with the I.M.F. But such promises count for little.
The main impact of her appointment will be to encourage countries like South Korea, Brazil, India and Russia to back away from the I.M.F. and to further “self-insure” by accumulating larger stockpiles of foreign-exchange reserves –- the strategy that has been followed by China for most of the last decade.
From an individual country’s perspective, having large amounts of dollar reserves held by your central bank or in a sovereign wealth fund makes a great deal of sense – a rainy day fund in a global economy prone to serious financial floods. Read More »
Jean-Claude Trichet, president of the European Central Bank until October, last week floated two proposals aimed at dealing with Greece and related eurozone public-debt problems.
The first idea would allow European Union authorities to override the policy decisions of member governments that can’t come up with sustainable budgets, implying the creation of an external control board for the likes of Greece. This approach has been used in the past for very weak countries (as well as for the cities of New York andWashington in recent decades). In Europe today, it would have no political legitimacy and would be completely unworkable — imagine the street protests it would spark.
Even before the shocking events of the past few days, the international policy community had been contemplating a successor to Dominique Strauss-Kahn at the International Monetary Fund.
Strauss-Kahn, the IMF managing director, was expected to begin campaigning soon for the presidency of France. Now, whatever happens in the New York legal system as he defends himself against attempted rape allegations, it seems likely that the IMF will be searching for a new head sooner rather than later.
The idea that the job has become an attractive sinecure with nice fringe benefits should have been laid to rest by German Chancellor Angela Merkel’s preemptive strike earlier this week, when she said there are currently “good reasons” for the European Union to have a candidate. That produced similar expressions from other leading European politicians, although not all of them are willing to say that Strauss-Kahn is finished. Yesterday, the Chinese Foreign Ministry pronounced that the selection process must emphasize “fairness, transparency and merit.” Translation: China is pushing back against the idea that Europe necessarily gets to name Strauss- Kahn’s heir.