Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The EU Is in a Legal Battle That Will Define Its Future

Politics / European Union Jul 14, 2016 - 10:10 AM GMT

By: John_Mauldin

Politics

I spent considerable time last week discussing Brexit with my good friend George Friedman.

George’s opinion is invaluable to me because he is the most dispassionate person I know. He analyzes geopolitics by looking at facts and following them wherever they lead.

George is no one’s cheerleader or nemesis. He calls the shots exactly as he sees them, and he’s usually right.


(If you haven’t done so already, subscribe to his free column, This Week in Geopolitics, at Mauldin Economics)

As for Brexit, George says it is the logical consequence of the European Union’s decisions in recent years. Some country was going to take this step. As it turned out, the UK was first, but it would have happened somewhere eventually.

Who’s in charge of the EU?

George was not at all surprised to hear the EU bureaucrats in Brussels instantly take a hard line after the vote.

Of course, they say they’ll treat the UK harshly. Bureaucrats, and especially those of the EU Commission, always resist when someone tries to escape their grasp.

The important point to remember is that the EU Commission, which is the executive body that implements policy, is not in charge of the EU. The leaders of the member states, collectively called the European Council, are the real power.

And within the European Council is a smaller group of powerful states that usually gets its way. Their opinion is what counts. So what did they think of Brexit?

The foreign ministers of the so-called “EU 6” original members (Belgium, France, Germany, Italy, Luxembourg, and the Netherlands) issued an unusual joint statement shortly after the Brexit vote.

For Europe, that is a lightning-fast move. The statement leads off with the usual platitudes about the EU’s magnificent achievements then expresses regret at the UK’s decision to leave.

But then we see reality begin to seep in. These Inner Six countries basically said, “Okay, we get it, some people are justifiably upset. Maybe we haven’t run this railroad quite as well as we should have. We are going to listen to you and change.”

Now here’s the key paragraph of this short statement (emphasis mine):

It is to that end that we shall also recognize different levels of ambition amongst Member States when it comes to the project of European integration. While not stepping back from what we have achieved, we have to find better ways of dealing with these different levels of ambition so as to ensure that Europe delivers better on the expectations of all European citizens.

This is a big deal. The Brexit vote made it inevitable that smaller and less wealthy members will try to follow the UK out. The EU 6 have little choice but to drop their hard line and look for compromise.

George and I both read that statement Saturday afternoon, and we came away with the same “aha!” moment. The acknowledgement of “different levels of ambition” was a message to those less-advantaged countries, essentially saying, “Don’t go away. We can negotiate.”

But that wasn’t the end of it.

The full European Council met to discuss Brexit, with the UK’s David Cameron leaving the meeting early as the other 27 countries pondered their next moves.

Their statement reads much like the earlier one from the EU 6.

Here is the key part, again with my bold highlights.

5. The outcome of the UK referendum creates a new situation for the European Union. We are determined to remain united and work in the framework of the EU to deal with the challenges of the 21st century and find solutions in the interest of our nations and peoples. We stand ready to tackle any difficulty that may arise from the current situation.

6. The European Union is a historic achievement of peace, prosperity and security on the European continent and remains our common framework. At the same time many people express dissatisfaction with the current state of affairs, be it at the European or national level. Europeans expect us to do better when it comes to providing security, jobs and growth, as well as hope for a better future. We need to deliver on this, in a way that unites us, not least in the interest of the young.

7. This is why we are starting today a political reflection to give an impulse to further reforms, in line with our Strategic Agenda, and to the development of the EU with 27 Member States. This requires leadership of the Heads of State or Government. We will come back to this issue at an informal meeting in September in Bratislava.

Strip away the banalities and we again see the EU leaders recognizing how the game has just changed and acknowledging that they need a different approach to governance.

The conclusion of the statement is important, too. They will “come back to this issue” in September.

A battle for power

What happens between now and then? Probably, a series of informal, closed-door meetings among the members. Factions may form as they each set priorities and seek allies.

We’ll probably hear a lot of conflicting rumors in the coming weeks. However, pay very close attention to whether it is the EU Council or the EU Commission that gets to take the lead role in negotiating with Britain.

This point is already the subject of a very acrimonious debate in Europe. If the Commission (basically the Brussels bureaucracy) wins, it will want to punish Britain.

If the EU Council gets the right to be the lead negotiator, it will want to try to figure out a way to make it all work, especially trade and commerce.

The lawyers from both sides are arguing forcibly that it’s their team that should be responsible for the negotiations. This is a legal battle with real consequences.

Free Special Report: How Brexit Will Affect the UK, Europe, and the US

Britain’s vote to leave the EU sent shockwaves throughout the world, plunging markets into chaos and Europe into an existential quagmire.

Get this free special report from Geopolitical Futures founder and acclaimed intelligence expert George Friedman to uncover the truth about Brexit—and the devastating fallout we can expect to see worldwide.

John Mauldin Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in