Another Day ... Another Minister Quits. Yesterday Sam Gyimah, the Universities Minister resigned. "It has become increasingly clear to me the proposed deal is not in the British national interest". Oh Dear. The new exciting Chapter for the British people may yet be unread.
"To vote for this deal is to set ourselves up for failure, we are surrendering our voice, our vote and our veto" claimed the minister. The deal leaves us "poorer and weaker".
Jo Johnson, Transport minister resigned earlier in the month with a call for a second referendum. Sam Gyimah echoed the call. It now seems impossible for the Prime Minister's proposal to be accepted in just a few weeks time.
The Prime Minister has succeeded in uniting Remainer and Brexiteer against the deal with the EU. The former, hope for a second referendum to overturn the 2016 decision. The latter quite happy to accept the no deal option, crashing out of the EU, the single market and the customs union in the process.
Business is in favour of the deal because it provides continuity on trade within the customs union and the promise of a single market to follow. Given the option of a second referendum, with a remain vote the outcome, the CBI and others would gladly accept a return to the ballot box.
Michael Gove warned back benchers this week, voting down the deal could mean Brexit would be "by no means guaranteed". The Times reports today, eight cabinet ministers including Michael Gove and Phillip Hammond have held discussions about joining the European Free Trade Area.
The Prime Minister is in Argentina this week-end, reprimanding Mohammed bin Salman on the one hand and drumming up support for the EU deal on the other. Why bother? Back at home, confusion continues. We are heading for a second vote in Parliament and perhaps a second referendum in the country as a whole. The call must be for a FREE Vote in the house, only then may we discover what Labour party policy really is.
Obligingly, the EU have offered to delay the Article 50 exit by several months. Why so? to accommodate the timetable for the second referendum of course ... why else?
Canada Plus ...
The Bank of England released the latest prognostications on life without Europe this week. A no deal scenario, could lead to GDP down by 8%, House Prices down 30%, Commercial Property down 50%. Unemployment up 8%,Inflation up 6.5%, Sterling down by 25%, to 90 cents on the dollar, Government Borrowing soars and interest rates rise to 5.5%.
In other news, the Governor is obliged to stay in the job for a further three years, John McDonnell becomes Chancellor of the Exchequer and Theresa May is elevated to House of Lords.
The good news, the banks and the banking system will be OK. Important to note, the projections are not forecasts. They are worst case scenario planning as part of the "stress test" for the banking system and the British people. Stress tests opportunely released, just ahead of the critical vote in the House of Commons.
*Is the Governor biased ? "People think you just don't want to leave Europe" the Mark Carney challenge this week. "Rubbish" the response "Most days I regret moving over here. If it wasn't for Brexit I would be back home by now. As it is I just have a massive salary and the ability to print money to make up for it. *Extract from My Week Mark Carney in the Times today.
This week, the Treasury released the long term economic analysis of the EU exit. It doesn't make for great reading. It's 90 pages long for one thing. A no deal scenario (with tariffs) could lead to an 8% drop in GDP, a Free Trade deal would lead to a GDP drop of 5%, and EEA deal would lead to a drop in GDP of around 2%.
NIESR have suggested the proposed deal would lead to a drop in GDP of some 4% by 2030 at a cost per individual of £700 to £1,000 in each year.
Either way the forecasts don't make for great reading. We will be substantially worse of leaving the EU in what ever form. There was never an economics case to leave the EU. There was never a business case to leave the EU. The social case was always about immigration. EU citizens are already making the decision to leave. The political case was always about "Who governs Britain" ... always a great question ...
Trade hopes rise at G20 meeting ...
The G20 leaders are in Buenos Aires this week-end. Trump made a great play of signing the NEW NAFTA agreement. It's a good-bye to the old NAFF NAFTA agreement.
The US will be able to sell more chicken, eggs and turkey to Canada. More dairy products will head North. More car components will originate in the region. Higher pay levels in Mexican factories will result. The punitive tariffs on aluminum and steel will remain, imposing a price hike on US manufacturers and consumers in the process.
Trump arrived in South America haunted by the Mueller investigation and the latest revelations from Michael Cohen. The former lawyer and advisor to Trump admitting to lying about plans to expand the Trump Tower empire into Russia. Discussions continued into 2016. The offer of a $50 million dollar apartment to President Putin included. Trump decided not to meet with the Russia President during the visit, allegedly because of latest transgressions in the Ukraine. Nothing to do with the latest confessions from Cohen of course.
The President is due to meet with President Xi Jinping during the trip. In fact they plan to meet over dinner this evening. World leaders are hoping for a de-escalation of the trade tariff wars between the two nations. World trade is slowing. European exports are suffering. The Trade war is bad for all parties, the USA included.
The problem of course, is Trump is so unpredictable and subject to mood swings. The more implacable leader of the People's Republic of China is far more adept about dealing with dissidents, Trump included. Let's hope for progress and trade peace in our time ...
That's all for this week, have a great week-end. Don't Miss Our Monday Morning Markets ... we expand further on market moves ... and assess the fortunes of our "Empires of the Cloud" tech fund ...
The Saturday Economist
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