The ECB has enough on its hands already: Collapsing Italian banks, a Deutsche Bank derivatives mess, massive Target2 imbalances, and the rise of eurosceptics like Beppe Grillo in Italy and Marine le Pen in France.
Nonetheless, ECB president Mario Draghi decided there was room on his plate for yet another problem: trade politics.
Please consider Draghi Urges EU to Take Tough Line with UK in Brexit Talks.
Mario Draghi has become the latest European official to push for the EU to take a tough line in negotiations with the UK over Brexit, saying Britain should be refused access to the single market unless it sticks to rules on free movement of labour.
“Regardless of the type of relationship that emerges between the European Union and the United Kingdom, it is of utmost importance that the integrity of the single market is respected,” Mr Draghi said, speaking at the European Parliament on Monday. “Any outcome should ensure that all participants are subject to the same rules.”
Referring to rules on the free movement of labour, capital, goods and services, the ECB president said: “The four freedoms go all together. That’s clear.”
Mr Draghi added: “How we come out of this position will impinge on the stability of the union in future.” Allowing the UK to skirt the rules would weaken the EU’s strength in years to come, he said.
It might feel good to rattle sabers, but nothing good can possibly come of it. The risk of a hard Brexit is very real, and it’s a two-way street.
If the UK loses access to the “single market”, the EU will find itself losing exports to the UK.
No one wins these kinds of trade wars, but the EU will lose far more.
Cherry Picking Math
Bluff or Stupidity?
Germany exports €50,963,643 more to the UK than it takes back in imports.
The EU on the verge of falling into an economic black hole. Threats on the UK will not help matters.
Integrity of the Single Market
“It is of utmost importance that the integrity of the single market is respected,” commented Draghi.
Excuse me, but what integrity is that? Nannycrat rules do not constitute integrity.
Earlier this month, Luxembourg’s foreign minister said “Hungary Should Be Ejected From EU”
On August 16, 2016, the European Council on Foreign Affairs reported Poland Chooses Confrontation Over Compromise with EU.
A bit of digging turned up some interesting facts. It is impossible to kick someone out of the EU, and other than fines stipulated in the treaty, it is impossible for the EU to do much of anything if a country refuses to abide by rules.
If Hungary decided to trade with Russia, what could the EU do really do about it but piss and moan? The answer is nothing unless there is a specific sanction in the treaty covering that kind of scenario.
Risk of Global Trade Collapse
The risk of global trade wars is very high and rising.
- A “Hard Brexit” and a trade collapse between EU and UK is a very real if not likely outcome of the Brexit negotiations.
- On September 17, Over 300,000 Germans Protest EU Trade Deals With US and Canada.
- A US-EU Trade War Looms thanks to an Airbus-Boeing feud, EU fines on Apple, and US fines on Deutsche Bank and Volkswagen.
- Prior to the Brexit vote, president Obama gave a “Back of Queue” Brexit Warning to the UK.
- Donald Trump wants to build a wall on the Mexican border. Supposedly Mexico will pay for it. Hillary talks as tough as Trump. She wants a global trade prosecutor.
- Obama’s Trans-Pacific Partnership (TPP) trade agreement is on the death bed. Hillary Clinton and Donald Trump are both against it.
- On September 23, Germany’s Economy Minister stated the US-EU TTIP Talks are “De Facto Dead”.
- EU trade sanctions on Russia hurt the EU more than Russia.
- Both Japan and China seek to devalue their currencies to maintain exports.
- On September 9 I reported Germany’s Finance Minister Blames ECB For German Trade Surplus. My comment on that line item was “Why the Eurozone Will Destruct”.
Instead of talking nonsense, Draggi ought to ponder this questions: Can the EU Survive as a Prison?
The risk of a global trade collapse is large and growing. Trade talks are collapsing everywhere. Protectionism is high and rising.
The above 10-point list is very real and very scary. It’s also incomplete. Add to the list a very simple construct: no one wins trade wars.
Instead of worrying about real problems, Draghi is worried about the “integrity” of a system that has no integrity to begin with.
Mike “Mish” Shedlock