Après le Brexit
Edition 148 of the Revue d’économie financière, which is devoted to Brexit, opens with an article by former European official David Wright, who sets out to identify the causes leading to the Euro-British divorce. The author, who joined the Commission in 1977, was one of the first British civil servants to enter the European institutions. He is currently president of EUROFI, the European platform for exchanges of views on financial regulation, and is deeply in favour of the European Union, as his article makes clear.
As others before him, the author stresses that “there is virtually no major influential British public figure who has had the courage in the last 20 critical years to stand up against the manifest and extremist lies about Europe spread by Nigel Farage of the party (…) UKIP, and by the hostile and anti-European Right of the Conservative party” (our translation throughout). He goes on to argue that “public opinion has been stirred up by a biased and hostile press, under the influence of the steadfastly anti-European Australian Rupert Murdoch, and by Lord Rothermere, a right-winger and owner of the Daily Mail. In the United Kingdom, European history has also been eradicated from school syllabi (…). The benefits to the United Kingdom of European integration and European peace have been roundly ignored – they have never been politically acknowledged, appreciated or explained”.
What has this led to? The UK “is now posting one of the lowest growth rates in the whole of the G20, very high inflation due to its market economy, considerable depreciation of the pound sterling, stagnating productivity and deteriorating public finances”, Wright summarises, going on to refer to the disaster of Liz Truss’s premiership and add that the “great political and economic instability caused by Brexit is not over yet”. Conversely, “it is hard to argue, however much one would rather not, that Brexit has not facilitated European integration”, he writes, pointing out quite correctly that the adoption of the European recovery plan Next Generation EU, with an envelope of 800 billion euros, “would never have been possible with the UK at the negotiating table”. He concludes that Brexit is a “tragedy for the British people and its harmful effects will continue to echo down the generations”.
At the end of 2022, the level of revenue generated by financial flows between the United Kingdom and the European Union was virtually unchanged compared to 2016, Srobona Mitra and Mahmood Pradhan (IMF) observe, going on to explain that “British exports of financial services even increased (…), although, according to some figures, the share of these exports to the EU fell. At the same time, the use of the British financial sector by major EU countries did not decrease (…). These links run even deeper in the field of derivatives clearing and go well beyond what the balance of payments data indicate. Nearly 2 years after the United Kingdom officially withdrew from the single market, around 85% of EU interest rate swaps are still being cleared in the United Kingdom. This does not come as a surprise. It reflects the deep and long-standing cross-border links between various financial services and one of the greatest successes of the single market”.
“By dint of the privileged place it holds on the international Eurodollar market – and as a hub for the global trade in currency and interest rate derivatives more generally – London plays a dominant role in the European finance industry”, they go on to state, adding that “its role as a global market has not changed with Brexit” and that “British companies continue to have lower costs on it, as they benefit from financial instrument in currency clearing on a large scale”. They add that “this is particularly the case as an enormous proportion of the balance sheets of European banking institutions are reported in American dollars and London offers the most effective hedging market for that currency”.
Mitra and Pradhan also stressed that within the EU, “financial integration is at most stagnating in the banking sector and fragmentation is greater”. “Cross-border debt between Eurozone countries has returned to its pre-2005 level and this decline”, they write, adding that “cross-border debt between the banks of Germany, France, Spain and Italy (…) are showing a major inversion of financial integration, despite a slight increase observed in the last two years”. This fragmentation within “incomplete banking union” has a cost in real terms: “it brings about a considerable gap in the costs of borrowing for households and businesses between member states”. Although at an advanced stage, the initiative of the capital markets union falls a long way short of offering EU entities a common market for intra-EU capital and the market liquidity and network advantages currently offered by London, the authors stress.
Several writers welcome the pragmatism or flexibility shown by the European Central Bank and the national supervisory authorities in the framework of the process of relocating financial activities within the EU following the loss of the passport allowing a financial institution located in one member state to provide services across the entire EU territory from that member state. Andrea Enria, chair of the Supervisory Board of the ECB, reports that this “relocation process is now almost completed”. He goes on to state that “of a sample of nine of the largest international banks, the assets shown in the balance sheets of their legal entities established in the Eurozone have grown from around 275 billion euros to more than 1300 billion euros at the end of the first quarter of 2022, or an increase of nearly 500%”. Additionally, an increase in the number of accredited credit institutions has been observed: “the ECB, which is the only EU institution authorised to issue banking accreditations within the jurisdiction of the single supervisory mechanism, has approved 15 new credit institutions (six significant institutions, placed under direct supervision, and nine less significant ones) while the activities of 16 existing credit institutions (two significant establishments and 14 less significant ones) have been extended”.
Referring to an undeniable but limited relocation movement, the former governor of the Banque de France, Christian Noyer, argues that the scale of these relocations (the think tank New Financial reports a transfer of banking balance sheets in the order of 900 billion pounds sterling, which corresponds to the increase referred to by Enria, and of 7400 jobs) varies considerably between individual companies, in favour of Dublin, Paris, Luxembourg, Frankfurt, Amsterdam and, to a lesser extent, Madrid, Brussels and Stockholm, without the emergence of any clearly dominant financial centre. “As things stand at the moment, Brexit has led to a multi-polar landscape, in which a small number of financial centres have succeeded in attracting a critical mass of activity”, the author reports, also indicating that there is a certain degree of specialisation: Dublin for asset managers; Frankfurt for banking legal entities; Amsterdam for trading platforms. (Olivier Jehin)
Après le Brexit (available in French only). Association Europe Finances Régulations. Revue d’économie financière no. 148, Q4 2022. ISBN: 978-2-3764-7072-4. 286 pages. €32,00
Retour sur l’affaire Speidel
Robert Belot takes a deep dive into a case that caused shockwaves in 1957, when the German General Hans Speidel was appointed to the post of Commander of the land forces of the Central Europe theatre, within the framework of NATO. In response, the communists and Gaullists mounted a huge press campaign to criticise this appointment, which they found beyond scandalous as the German officer had served as chief of staff to General Otto von Stülpnagel, commander-in-chief of the German troops in France between 1940 and 1942. The federalist Henri Frenay, on whom Belot is a noted specialist (see also Kiosk no. 75), threw himself into the fray with a petition signed by other objectors and various courts in which he “once again condemn[ed] the logic of ‘making every German soldier, in other words an entire people, bear the responsibility for Nazi crimes’” (our translation throughout). This page in history, largely forgotten today, but which followed hot on the heels of the rejection of the European Defence Community in 1954, is interesting because it reminds us of “the prevalence in France of a potential anti-German sentiment, which bears witness to the lasting effects of an anti-European national culture”. Time eventually healed the breach, but to judge from certain recent debates, one may legitimately wonder whether the wound has been reopened.
“We must accurately re-evaluate the efforts that had to be made by the pioneers of Europe to escape from their national cultures, to overcome their own histories, while building a new historical paradigm. In the case of France, it must be concluded that the general public is not ready for this upheaval, as the French so believed that they achieved the liberation of France and won the Second World War alone (or almost). The persistence of mistrust was certainly stronger than the desire for reconciliation and the fear of the German metanoia is always at the back of their minds”, Belot writes, adding that in 1948, “the French communists created the movement, outwardly depoliticised, of the ‘Combattants de la paix et de la liberté’”. He goes on to state that the “opposing camp would therefore be that of war, the nuclear bomb and ‘imperialism’, as embodied by Western Europe and North America. The Americanised Germany is the axis of the ‘wrong’ camp. The exaggeration of this threat allows the USSR to take back the positive capital of the anti-fascist heritage and depicts the United States and their affiliates as the perpetuate is of nazism”. Any resemblance to current Russian propaganda is entirely coincidental!
Belot takes the view that “the French (and they are not the only ones: Ed) have not yet put aside the disastrous fantasy of the persistence of a renaissance of a Nazi or, at the very least, dominant Germany”. “Today, it is Walter Hallstein, university lecturer turned Wehrmacht officer in occupied France, architect of the ECSC and first President of the Commission of the European Economic Community (1958-1967), whose past has been reinvented, who has become the figurehead of the primary anti-Europeans spreading on social networks: he serves as an emblematic figure of German dominance or the survival of nazism, even though he played a major role in moving forward the Europe of the single market by reconciling Germany’s interests with those of France, firmly convinced that there was a ‘European sentiment’ that would be a source of peace for the European continent”, he writes. He goes on to state that the “non-recognition of what Germany has become is frequently used to back up the argument, or rather the illusion of discrediting the European project. At the start of the third millennium, it is one of the common views of the sovereignists on the left and right alike, entrenched in the myth of ‘old France’ and obsessed by the prejudice that ‘Germany’s individual history continues subtly to inform the functioning of its democracy, both internally and externally’”. (OJ)
Robert Belot. La mémoire anti-allemande en France – Henri Frenay et l’affaire Speidel (1957) (available in French only). Presse fédéraliste. ISBN: 978-2-4914-2911-9. 171 pages. €15,00
Au cœur du modèle chinois
In this article for the review Futuribles, François Chimits states that the “current leadership team, surrounding and headed up by Xi Jinping, has set its sights on nothing less than establishing a new alliance between market forces and State interventionism, with a view to the primacy of Chinese power by 2049” (our translation throughout). “In the wake of commercial and technological tension with the United States, technological independence became the absolute number one priority in 2019. Official victory over extreme poverty in 2020 prompted Xi Jinping to include the concept of common prosperity on the agenda for the new economic model. He stresses that this must not be allowed to lead to assistantship (which, he argues, burdens the advanced economies), but the middle classes must be prioritised by establishing a social security system and limiting excessive accumulations of wealth. Finally, Covid-19 has prompted information of the objective of resilience of supply chains and the economic system in general, which is reflected, amongst other things, in the new importance accorded to the internal market”, the author writes, but goes on to stress that “in terms of demography, political incentives have not been sufficient to halt the disturbing collapse of a birthrate that was already in decline”.
“The new Chinese model must allow the ‘rebirth of the Chinese nation’. This rebirth seems to take the form, internationally, of an affirmation of the positions of the PRC, together with an aggressive rhetoric towards countries with liberal values, which feeds the rise of a disturbing Chinese ultra-nationalism. This rhetoric, taken to the extreme of outrage and aggression by certain diplomats, is not a temporary anomaly, but a deliberate action endorsed at the highest level and reflected in the organs of the party. The party is thus consciously fostering a sentiment of national humiliation and one of Xi Jinping’s first major decisions after he took office was to produce an internal circular to stress the absolute rejection of the Western values of freedom of expression, the separation of powers or liberal democracy”, Chimits stresses, adding: “this radicality is reflected in the vehemence of Chinese propaganda against the positions of the G7 following the Russian invasion of Ukraine. These countries are being painted as shifty aggressors who left Russia with no alternative”.
China’s positions are also increasingly at odds with the mindset of the international institutions: the affirmation of public support to certain national sectors and enterprises goes against the spirit of the WTO; Chinese funding for development follows standards other than those established by the OECD and the IMF in their great lack of transparency and the obligation to spend it on Chinese companies and products; at the UN, China completely rejects any criticism of its record on human rights. “China’s behaviour, which is uncooperative to say the least, with regard to the most important challenges of recent years (Covid-19 and breaks in the supply chains, Afghanistan, the war in Ukraine, food tensions) simply reinforces the awareness that Beijing has never intended to become a ‘respectable partner’”, Chimits argues, adding that “in view of Beijing’s radical stance towards the G7, a spiral of sanctions and counter-sanctions is the likely result”. (OJ)
Au cœur du modèle chinois (available in French only). Futuribles. Edition 452, January-February 2023. ISBN: 978-2-8438-7467-3. 128 pages. €22,00
Quand musique rime avec Belgique
The latest edition of the Revue générale, devoted to the subject of music, includes an excellent tribute to the late Marc Danval, as well as a very rich article on mediaeval French literature by Sandra Otte, who makes the point that the “literature we know today could never have existed without that which came before it” (our translation throughout). “It was in the Middle Ages that literature in the so-called vernacular language was born, the fin’amor and courtly love, the genre of the novel, the Arthurian legend, chivalric novels, etc.”, Otte points out, going on to argue that “to forget mediaeval literature is to forget the origin and roots of our literature and numerous artistic productions and, consequently, of great swathes of our culture”. (OJ)
Quand musique rime avec Belgique (available in French only). Louvain University press. Revue générale. No. 2022/4, December 2022. ISBN: 978-2-3806-1313-8. 250 pages. €22,00