Friday 30 September 2016

David McWilliams: Ignore all the shouting - Brits will get their Norway-style trade deal

Published 06/07/2016 | 02:30

Marine Le Pen of Le Front National is riding high in France’s opinion polls. Photo: AFP/Getty
Marine Le Pen of Le Front National is riding high in France’s opinion polls. Photo: AFP/Getty

Brexit changes everything. The British will leave the EU. There can be little doubt about that. How and when it happens are now matters of debate, but it will come to pass. All the legalistic talk about whether it will be politically possible for the UK to leave and whether the British Parliament must sanction this is simply the technocratic fantasy of a profoundly undemocratic elite that has been traumatised by the referendum.

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Last week, this column was written from England and maintained that lots of people who voted for Brexit are not racists, nationalists or little Englanders.

Many look at the EU and see a deeply undemocratic set of institutions that appear to believe more in their own narrow interests than the fact that they are supposed to represent the people of Europe.

Indeed, the vindictive reaction of the EU Commission in the past two weeks has been revelatory.

While Brexit has undoubtedly revealed the profound lack of political leadership in both main parties in the UK, not to mention the meltdown of the top brass of the Leave campaign, it has also opened up a chasm between the EU officials and the politicians of national governments. If you doubt this, just compare the cautious stance of Enda Kenny with the much more truculent stance of his former henchman Phil Hogan, who is now a fully paid-up member of the Brussels echo chamber.

While Kenny is speaking about the various different relationships that need to be considered before the UK's next move, Hogan is insisting that the British trigger Article 50 as soon as possible.

Of course, the main player in all this will be Germany. Germany calls the shots. Over the past five years, the pretence of a European Germany has given way to the reality of a German Europe. This is the new deal.

As a result of this, the eurozone is Ersatz Deutschland, where the rest of the countries are little more than policy eunuchs, emasculated by German fiscal straightjackets and German creditor obsessions.

Again, if you doubt this, watch the ongoing implosion of the Italian banking system, which will dwarf even the great Irish banking crisis.

Italy wants to recapitalise its banks using government money because it fears a complete collapse of its crippled economy. Germany is saying no. As always, German decisions reflect the interest of German industry.

This is entirely understandable. It means that the interests of German carmakers that sell tens of thousands of cars to the UK every year will influence the attitude of German politicians towards the deal that Britain gets. Already Angela Merkel is urging the Commission to back off and give the British time to sort themselves out.

So because of German industrial interests, Italy, the friend with the broken banking system, will be treated harshly by Germany, while the UK, now the putative political enemy, will be treated more favorably. In short, the anti-EU Brits will get a better hearing from the Germans than the pro-EU Italians.

It is this apparent mistreatment of so-called allies that initially drove Brexit and is driving Marine Le Pen's support in France and will determine the background noise to the Italian general election later this year. All this also puts Germany on a collision course with the EU institutions that are seeking to punish the UK for the temerity of Brexit. Germany will look to get the Brits the most access to EU market in the same way as Germany shouted loudly about Vladimir Putin's annexation of bits of Ukraine but still took Russia's oil and gas. This is Realpolitik - and the Commission had better get used to it.

So I suspect that after lots of shouting and roaring, the Brits will get a trade deal with the EU not unlike Norway's. I also suspect that the free flow of labour - the sticking point preventing the UK getting a quick deal now - might change after a year of elections in Europe.

Next May, the French go to the polls. Le Pen is riding high in the polls. It will be a disaster for the EU if she wins. But even a strong second place showing by the National Front in the presidential election will cause the EU to think again about the political feasibility of free, unfettered immigration from eastern Europe.

By the time the British get to negotiate, the EU's central position on migration might have shifted to accommodate the political reality that millions of European voters don't want free and open borders.

Meanwhile, the weakest man in Europe is Italy. The country's prime minister, Matteo Renzi, knows that to win the election he has to prevent Italian banks from going bust and to do this he has to ignore Brussels and pump government money into the banks. So Italy too is going rogue.

In the next 12 months, the EU institutions will be fighting battles with major countries like France and Italy, not just with the exiting British. All this gives Ireland time to figure out our strategy.

We need to attract as much mobile capital that is holding off investing in the UK because of the uncertainty as possible. This means shouting loud and clear that Ireland is open for business.

Rather than sneer at the British for going it alone, we should cheer the opportunities that this presents as the only English-speaking country, with low capital taxes that has open, and unfettered, access to the markets of Europe.

When everyone else is losing their heads and the Europeans and British are at loggerheads, now is the time for clear thinking here within Official Ireland. That can't be too much to ask for, surely?

Irish Independent

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