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Friday, December 1, 2017

France gets a reprieve as UK takes over as Europe's leading Death candidate

In my blog of May 1st 2015, I forecast the ‘Death of France’. Well, I am now pleased to announce some two and a half years later, that events have changed and France is now unexpectedly on the up and it now looks more likely that the patient will survive and prosper. Unfortunately, the UK has now taken that unenviable position and it's going down the plughole almost as fast as you can say Brexit.

When I wrote my May 2015 Blog, France was in a very sorry state under President Hollande and his incapable government. Unemployment was rising above 10%, the country was so crippled by strikes that nobody paid any attention to them, employers didn’t employ because the labour laws and taxes were so ridiculously onerous, the wealthy had been taxed out of the country (quite a few of them now live in Kensington) and decades of socialism since the Mitterrand government of the 1980s had made progress hard if not often impossible. I said that only a De Gaulle or a Thatcher could come along and save France and that if voters elected Marine Le Pen, the decline would hasten.

Emmanuel Macron

My forecast was not wrong. The French people voted in a young politician (39 years old) who was virtually unknown two years ago, called Emmanuel Macron, as their new president. He made grand promises of how he would change and re-vitalise La Belle France and with his newly created party En Marche, he got a massive majority, outsmarting the established parties and the usual French fridge nutters by miles. There was no doubt that he had got a huge legitimate victory; no hesitation or suggestion that he had not got a fair and massive mandate or that the Russians or someone had intervened to help (- on the contrary in fact). This was a very clear victory for Macron and his party. After just a few months as President, it looks as if he is going to fulfil his promises; he has already made changes to the ridiculously complex and burdensome labour laws, despite the unions trying to prevent him. He has passed laws to try to clean up politics including preventing politicians employing their family at the expense of the taxpayer, and he has helped to secure the 2024 Olympics for Paris. That and other stuff in his first 100 days shows he is a man in a hurry and ready to make changes – but changes that are in line with the French way. The latest economic figures are already showing real growth and employment starting to improve a little. That’s fast and this is why I am now more optimistic about the future of France. Perhaps it is not entirely impossible to reform the unreformable beast.

By contrast, the UK has done an amazing job of going from the top of the European economic league table to the bottom in just 18 months! The pound has lost about 15% of its value over this period, the average family is already about £600 a year poorer, the number of businesses going bust is escalating; crime has shot up by 13% overall and the number of EU staff propping up the NHS looks like it’s collapsing. Inflation is sharply up; wages are down. In fact the only figure so far unaffected is unemployment which is still falling. But not for long in my view. The Bank of England’s latest estimate is that 75,000 jobs will be lost in the City. Imagine the reaction if 10 factories across the UK were going to close, each employing 7,500 people! Only this is worse economically as the jobs are high pay, high tax. And as if an assault on our golden finance sector was not enough, our largest and most successful manufacturing sector, automotive, is seeing an unprecedented decline in domestic sales. And to cap it all, The Nursing and Midwifery Council said nationally the number of nurses from the EU joining the profession dropped by 89% this year.

Source: Trading Economics Data November 2017

In case anyone is unsure about the wider impact, the UK is already losing its global influence. Recently confirmed, London is losing the European Medicines Agency to Amsterdam and the European Banking Authority to Paris (yes really!), in one of the first concrete signs of Brexit as the UK prepares to leave the EU. Both are currently based in Canary Wharf and employ a few thousand people. And the UK will not have a judge on the bench of the International Court of Justice for the first time in its 71-year history after the British candidate is replaced with his Indian counterpart. The ICJ is composed of 15 judges elected to nine-year terms by the UN general assembly and the UN security council.

The trigger for this catastrophe was the referendum on UK membership of the EU on June 23rd 2016. The result was a very close 48.11% to remain and 51.89% to leave. Since then the current conservative government led by Theresa May called an election to re-assert their authority and got exactly the opposite outcome: they lost their majority and now have to rely on the support of the right-wing nationalists, the Democratic Unionists founded in 1971 by Ian Paisley, to get legislation through parliament.

The conservatives under May seem absolutely determined to lead the country through Brexit, despite the tiny majority who voted for it. After a year of negotiations with Brussels, they appear to have made a little progress in the last week or so. On the first of the big three questions, the divorce bill, there is speculation that there may now be agreement at around €50bn. That's roughly the GDP of a medium sized country and nearly half the annual NHS budget (so let's stop saying we don't have any money for the NHS please). The position of EU nationals in the UK and UK nationals abroad should not be so hard to agree as neither side wants to do any re-patriation but the details are exceedingly complex. The third is probably the hardest; the question of the Irish Border, which seems a very hard conundrum to resolve if the UK is outside of the Customs Union and ends free movement of people. The British want to discuss trade but the EU refuses until the big 3 questions have been resolved. It sounds like a right royal mess but let’s hope it’s just good negotiating on both sides and that the British really know what they are doing! As if!

It seems unlikely that May will last as leader for that much longer although she may (pun intended) surprise us all as the conservatives don’t have any obvious contender to replace her other than the old has-been half-wits like Boris Johnson and David Davis who promised the gullible electorate that Brexit would make them rich again. The opposition Labour party under Corbyn looks even more scary, preaching extreme 1970s socialism to young people who weren’t born back than and are desperate to find a new better way. The Lib Dems seem to have lost their way.

We are now 18 months into what I call a ‘lost decade’. Instead of using the riches created by the UK’s excellent growth to ease the edges of capitalism and create hope and inspiration for the significant element of the population who are struggling to make ends meet, our leaders are utterly obsessed with getting ‘the right sort of Brexit even if it means no trade agreement and reverting to World Trade Organisation terms’ and all the things that really need attention (and that if it wasn’t for Brexit would be filling the headlines) are being neglected or ignored. Things like creating an NHS and a social care system that can handle a growing elderly population, sorting out pensions properly, building more affordable housing and so on. Instead, armies of civil servants and expensive lawyers, accountants and advisors have been taken off their normal work to seek Brexit solutions that might work. Is there any one out there who still really believes the UK is going to be richer/better after Brexit? And to complete the vicious circle, growth and tax take are regularly being down-graded meaning there is even less money available for the government to spend.

Required for UK

Just as I said about France two and a half years ago, the UK needs a Thatcher, a De Gaulle, a Churchill to come along and save her before it’s too late. Right now that is looking not just unlikely, but virtually unimaginable.

I hope I am wrong about this.

Quote of the Month

Boris Johnson and the Leave Campaign repeatedly claimed that the £350m that we currently give the EU could be spent on the NHS after Brexit. Our actual cost of EU membership after rebates is €136m per week. If you do the maths, it will take us 7 years to get back the €50bn divorce fee through savings on membership fees if all things are equal. Perhaps there will be some savings after that?

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