David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Davis Threatens to Walk Away From Brexit Talks if U.K. Provoked

    Here is the opening and a concluding section of this topical article from Bloomberg:

    Brexit Secretary David Davis flatly rejected a reported bill of as much as 100 billion euros ($109 billion) from the European Union, and threatened to walk away from the bloc without a deal if provoked.

    Britain would have no obligation to pay a Brexit bill if it leaves the EU without an accord, Davis said on BBC Radio 4’s “Today” program on Wednesday. While “nobody is looking for that outcome” since the goal is to reach an agreement with the EU, “we have to maintain the alternative option” of walking away, he said.

    The latest flashpoint was a Financial Times report that said EU negotiators had revised their initial calculations upward from about 60 billion euros. The FT said that according to its calculations, the new net figure for the bill would be as much as 75 billion euros, once Britain’s share of EU spending and repaid loans were accounted for, giving a gross 100 billion euros. The newspaper’s previous calculations had given a net figure of 40 billion euros to 60 billion euros, in line with the EU’s estimate.

    “We’ll not be paying 100 billion,” Davis told ITV. “We’ve never seen a number” from the EU, Davis said. He refused to specify how much Britain is prepared to pay, saying “what we’ve got to do is discuss in detail what the rights and obligations are.”

    Davis also rejected as “gossip and spin” the weekend report in the German newspaper Frankfurter Allgemeine Sonntagszeitung that Juncker had expressed shock and skepticism at May’s approach to negotiating Brexit after a dinner meeting last week.

    The dinner at May’s Downing Street residence was “constructive,” said Davis, who was one of 10 people in the room. “There were some disagreements,” he said, but the atmosphere was “absolutely not” hostile.

    May won a measure of support from several European government officials, who distanced themselves from Juncker’s apparent skepticism about the chances of a Brexit deal. Leaked details of the dinner are “not helpful,” Irish government chief whip Regina Doherty said on Tuesday. The comments set the “wrong tone” as Ireland wants a “vibrant” trade relationship with the U.K. after Brexit in 2019, she said in an RTE radio interview.

    “What we’ve seen recently is that at times these negotiations are going to be tough,” May told BBC television in an interview Tuesday. “During the Conservative Party leadership campaign, I was described by one of my colleagues as a bloody difficult woman. And I said at the time the next person to find that out will be Jean-Claude Juncker.”

    (See also: May Accuses Juncker Team of Trying to Sabotage U.K. Election, from Bloomberg)

    This section continues in the Subscriber's Area.

    Britain Must Leapfrog Brussels and Seize the Initiative on Every Front

    The timing of the EU’s bombing raid on Downing Street has caught London by surprise. Germany has hardened its position markedly since the Tories called the snap-election. All signs are that Chancellor Angela Merkel has given a green light to those in Brussels and Paris who want to hold Britain’s feet to the fire.

    This comes despite a string of relatively conciliatory gestures by Theresa May: her defence of Nato and the EU cause in Washington; her unbroken support for the UK’s security and global commitments; her Lancaster House speech calling for intimate ties with Europe, whilst respecting the integrity of the EU’s four freedoms by leaving the single market.

    None of this has made any difference. Anti-British rage has exploded in EU governing circles. After the Phoney War, the logic of Article 50 is at last hitting home.

    For whatever reason, the German finance ministry and Kanzleramt have chosen to interpret Britain’s snap-election as a hostile act, rather than an attempt by Mrs May to limit the influence of Brexit ultras in her own party and to smooth the way for a softer deal.

    Berlin and Brussels are irritated, and have let their irritation show. They had expected to deal with a fragile UK government over the next two years, one without a clear mandate for its Brexit strategy, and vulnerable on multiple pressure points. None of this is so clear any longer.   

    What we now face is diplomatic war and a very dangerous situation. At the end of the day, it is Germany that is setting policy, and Germany has demonstrated in its handling of Europe’s monetary union that it is apt to see events through a self-serving moral prism - without doubting its own righteousness - and is capable of catastrophically bad economic and political judgment.

    Whether the fall-out from the Brexit Dinner has poisoned relations irretrievably remains to be seen. Trust has for now been shattered. Ultra-hard Brexiteers who always argued that it was futile to negotiate any deal with the EU’s Caesaropapist machinery are gaining more credibility by the day.

    It is now imperative to draw up a ‘Plan B’ that limits the need for negotiations. I floated one possibility last week (to the horror of many readers): the revolutionary option of unilateral free trade, modulated by a free exchange rate that would cause extreme discomfort to the European Central Bank. We would never again have to admit Mr Juncker into the hallowed halls of a British institution.

    We should unilaterally announce total protection of all EU citizens living legitimately in the UK, regardless of what the EU does. We should unilaterally declare an open Irish border and total working rights and privileges for all Irish wishing to work in the UK, regulating back-door inflows of future EU migrants by other means.

    We should refer the divorce claims to the international court of treaties in The Hague.  If the EU wishes to thwart any of these actions - which would not be easy - let it explain the moral basis of its decisions.

    What Britain must not do is to limp along responding sheepishly to orders issued by Brussels. Above all it must not go down the suicidal route of trying to bluff the EU. The UK must act.



    This section continues in the Subscriber's Area.

    A Look Inside Airbus's Epic Assembly Line (In the USA)

    The ships from Hamburg steam into Mobile Bay several times a month. Loaded upon them are the titanic parts of flying machines: tails, already painted; wings, already functional; the fuselage, in two segments, front and rear. The pieces are set on flatbed trucks and escorted by police cars to a decommissioned Air Force base, Brookley Field, about four miles from the harbor. There, between the runways, the European aerospace company Airbus has built a $600 million factory to assemble airplanes in the United States.

    It’s an odd arrangement for many reasons, not least among them being the fact that Airbus could assemble its planes almost anywhere. The finished product is easy to move (it flies), and the hardest work of making it is buried in its components. The vertical stabilizer is made in Getafe, Spain. The wings come from Broughton, Wales. The front of the fuselage is made in Saint-Nazaire, France; the back, in Hamburg. What happens in Mobile doesn’t resemble manufacturing so much as the assembly of a particularly large and tremendously complicated piece of Ikea furniture. Here, the American workers attach the pieces of the airplane using tools and connectors, many of which are also imported from Europe. Many of the supervisors come from the continent, too; the Mobile factory manager was raised about 10 miles from the wing plant in Wales. And the company says that it saves no money by building planes in Mobile.

    This section continues in the Subscriber's Area.

    Fed May Finally Be Ready to Change Course

    This article by Mohamed A. El-Erian for Bloomberg may be of interest to subscribers. Here is a section:

    Nevertheless, this will be an interesting test of the view, which I and some others have espoused, that the Fed is in the process of shifting operating regimes -- from following markets to being more willing to lead them.

    Last week’s disappointing reading of 0.7 percent gross domestic product growth for the first quarter, the lowest in three years, added to other data releases (such as retail sales, inflation and autos) suggesting that the U.S. economy -- and consumption in particular -- is going through a softer economic patch. In previous years, this would have provided the Fed with the excuse to soften its policy signals, assuring markets that monetary policies will remain ultra-stimulative and minimizing the risk of financial asset volatility. Indeed, these are the signals that the European Central Bank reiterated last week when its governing council met. And the ECB did so despite official recognition that, in the case of the euro zone, economic conditions have improved and forward downside risk is lower.

    The Fed’s inclination to repeat past practices is countered by three considerations.

    * An element of the recent data weakness is likely to be both temporary and reversible.

    * The Trump administration has reiterated its intention to pursue a large tax cut that, if approved by Congress (a big if), would most likely lead to a considerably wider budget deficit, at least in the short-run until economic growth and budgetary receipts pick up (especially given the lack of large revenue measures).

    * Though even harder to quantify, the Fed is not indifferent to the collateral damage and unintended consequences of prolonged reliance on unconventional monetary policies.

    This section continues in the Subscriber's Area.

    Staff of US multinationals earn over 1.5 times the average wage

    This article from the Irish Times may be of interest to subscribers. Here is a section:

    Workers employed by US multinationals in Ireland earn almost twice the average industrial wage and are paid significantly more than their counterparts in other foreign-owned firms.

    New figures from the Central Statistics Office (CSO) show employees of US firms here earned an average of €59,836 in 2015, which was nearly double the industrial earnings average of €36,519.

    It was also higher that those working for UK multinationals based in Ireland, who earned an average of €34,691, or those working for German multinationals, who earned an average of €42,039.

    The research also shows US multinationals accounted for €581 billion of the foreign direct investment (FDI) in Ireland, equating to over 70 per cent of the €796 billion total.

    This was more than originally thought as previous surveys tended to examine FDI on a “country of origin” basis.

    However, this time the CSO examined the controlling parent of the firms involved to get a better picture of the true origin of the investment.

    Unsurprisingly, US FDI in Ireland dwarfs that from any other country, reflecting the long-standing ties between the two countries. Foreign investment from the UK amounted to just €19 billion, while the stock of investment from Germany and France was €12 billion and €8 billion respectively.

    This section continues in the Subscriber's Area.

    U.S. SEC approves request to list quadruple-leveraged ETFs

    This article by Trevor Hunnicutt may be of interest to subscribers. Here is a section:

    One of the funds is designed to deliver 400 percent of the daily performance of S&P 500 .SPX stock index futures, while another fund will aim to deliver four times the inverse of that benchmark. That means a fund could go up 8 percent on a day the index it tracks falls by 2 percent.

    ETFs offering three times leverage already trade in the United States, but more reactive products have been limited to listing in Europe.

    "We're excited about it," said Sam Masucci, chief executive officer at Exchange Traded Managers Group LLC, which is distributing the product, though he said the product is "not going to be for everybody.

    "But for those people that are looking for the leveraged exposure to the S&P and they're not looking to do it by way of a futures product here you have a publicly listed security," Masucci said.

    Regulators' move to approve the products comes after a difficult time for sponsors of more exotic ETFs.

    This section continues in the Subscriber's Area.

    One Sign That the Retail Industry Isn't Dead Yet

    This article by Leslie Patton for Bloomberg may be of interest to subscribers. Here is a section:

    There’s plenty of talk about the retail industry dying, with malls closing and the slump stressing iconic chains like Sears Holdings Corp. and J. Crew, but healthier big-box giants such as Wal-Mart Stores Inc. and Costco Wholesale Corp. are still chronically in need of employees, at least for now. The number of U.S. retail jobs was about the same last year compared with 2015, according to the Bureau of Labor Statistics. What’s really bedeviling retailers is annual turnover -- at 65 percent, it’s the highest since before the Great Recession -- making it necessary to keep hiring. The chains are so hungry for good help they’re poaching workers from fast-food restaurants.

    “Those jobs tend to be more transitional, they tend to be more fluid, and as a result there tends to be higher turnover,” said Michael Harms of Dallas-based researcher TDn2K. “Even though you hear headlines like retail is dying and the robots are coming, there’s still a lot of things that need human touch points. It’s a dogfight over good employees.”

    This section continues in the Subscriber's Area.

    Unsettling Account That Raises Disturbing Questions about Europe's Monetary Union

    On a baking hot day in July 2015 Greece's radical-Left Syriza government won a spectacular mandate to defy the austerity regime of the EU-IMF Troika.

    Against all expectations, 61pc of the Greek people voted in a referendum to reject the Carthaginian terms of their latest bail-out deal, a scorched-earth 'Memorandum' described by a young French economy minister named Emmanuel Macron as a "modern day version of the Versailles Treaty".  

    It seemed as if the long-running showdown between Athens and the EU authorities had reached an explosive juncture. Markets were braced for the ejection of Greece from the euro in short order. Monetary union was on the verge of break-up.

    Yet the rebel victory instantly and inexplicably metamorphosed into surrender, and with it died the final hopes of the European Left. Premier Alexis Tsipras stunned his own people and the world by announcing that there would be no rupture with the Troika after all, and furthermore that he would join hands with the conservative cadres of Greece's ancien regime. 

    The extraordinary developments are recounted by Yanis Varoufakis in his deeply unsettling account, 'Adults In The Room, My Battle With Europe's Deep Establishment', published in extracts in the Telegraph. What the former finance minister reveals is that leaders of the Syriza government were seriously worried about dark forces in the shadows. They were frightened.

    Vested interests with huge sums at stake – within Greece, and implicitly across the eurozone – were prepared to defend the existing financial order by any means necessary. The prime minister feared a military coup. 

    His warnings to Mr Varoufakis in soul-searching talks that night certainly raise eyebrows, all vividly narrated in a subchapter entitled 'the overthrowing of a people'.

    The final days of the referendum were surreal. Unbeknownst to the Greek people, Alexis Tsipras had called the snap-vote expecting to lose. Most of the Syriza leaders did not campaign. What they wanted was an "emergency exit", calculating that a respectable defeat would give them a way out after boxing themselves into a corner.

    But humiliated and long-suffering Greeks instead seized on the chance to express their defiance, rising to a "gigantic celebration of freedom from fear" in the final intoxicating rally at Syntagma Square.


    As the scale of the victory became clear on election day Mr Varoufakis penned a triumphant piece. "In 1967, foreign powers, in cahoots with local stooges, used tanks to overthrow Greek democracy. In 2015 foreign powers tried to do the same by using the banks. But they came up against an insanely brave people who refused to submit to fear."

    He then went to join the victory party at the prime minister's Maximos Mansion, only to discover that the betrayal of the vote was already under way. "As I walked in, Maximos felt as cold as a morgue, as joyful as a cemetery. The ministers and functionaries I encountered looked numb, uncomfortable in my presence, as if they had just suffered a major electoral defeat," he said.

    Only he and his wife Danae were wearing jeans, once de rigueur in Syriza circles. "Sitting there, I began noticing things about the people around me that had previously escaped me. The men resembled accountants. The women were dressed as if for a state gala," he said. They were like the pigs on two legs, drinking with men, glimpsed through the window in George Orwell's Animal Farm.  

    Mr Varoufakis told the prime minister that it was his duty to honour the referendum, that he should seize on the thundering expression of popular will to escalate Greece's war of resistance, and to present the ECB and Berlin with a stark choice. It was wasted breath. The decision to accept what he calls "unconditional surrender" had already been taken, and a new finance minister willing to go along with this volte face had already been picked.

    This section continues in the Subscriber's Area.

    The EU Must Be In No Doubt: Britain Is Prepared To Walk Away Without a Deal

    When the 27 EU leaders met to review their Brexit talks guidelines yesterday, it took them just one minute to approve the draft. They then burst into applause – almost akin to a Soviet-era meeting of Warsaw Pact comrades. The guidelines are provocative and blatantly breach the UK’s own red lines. Britain, in turn, must spell out that it is prepared to walk away if it is unsatisfied with the deal that talks produce.

    The EU’s mask of collegiality and high ideals is slipping. As it does, so the decision of the British voters to walk away last year looks even wiser. Extracts from Yanis Varoufakis’s memoir of the 2015 Greek crisis depict an EU where the Germans dominate and the Union, they insist, must be preserved at all costs. He claims that Emmanuel Macron, probably France’s next president, described the EU’s deal for Greece as a latter-day “Versailles Treaty”. Angela Merkel apparently overheard and barred Mr Macron from talks.

    Greece is not Britain: a great deal more for the Union is at stake this time around. The EU’s guidelines reflect it. Theresa May attracted shrill criticism for pointing out that continental security might be affected by the course of negotiations, yet the EU has shamelessly put absolutely everything on the table: the cost of the so-called divorce, from which they are determined to wring every penny, Gibraltar, UK bases in Cyprus and, in a concession to the French, an effort to stop any financial deregulatory drive by Britain.

    The UK cannot accept a settlement that would, say, tie its hands on tax and regulation after it leaves the EU: the country voted to get out in part to liberate its economy. And there are matters on the table that have nothing to do with the EU – such as the future of Ireland. Britain therefore has to make it absolutely clear that it will not be drawn into diplomatic traps or be landed with bills and commitments that reduce its status and undermine the raison d’être behind Brexit.

    The EU needs to be reminded that it relies so much on the UK’s markets, intelligence and military that it would be foolish to act so bullishly over the terms of settlement. It is in everyone’s interests to separate amicably and agree as soon as possible on a new trade arrangement. That is what Britain should aim for. If the Europeans will not play ball, however, they must be in no doubt that Britain has the strength and will to go it alone.

    This section continues in the Subscriber's Area.