Theresa blinks

In her keynote speech in Florence, Prime Minister May set out plans for a status quo implementation phase of Brexit  with the UK and the EU maintaining access to each other’s markets on “current terms”, and under “the existing structure of EU rules and procedures”. She also announced that the UK will leave the EU in March 2019. What this amounts to is that: free movement will continue for four more years; Britain pays its full contribution in that period; that the ECJ overrides UK law; and that the UK postpones trade deals with the rest of the world.

The EU gave a guarded welcome to the speech, praising its “constructive spirit”(Michel Barnier). President Macron was quoted in Le Monde, as welcoming the speech, adding that “Before any progress, we await a clarification on the right of EU citizens, the financial terms of Leave, and the question of Ireland”. Guy Verhofstadt, the European Parliament’s chief Brexit co-ordinator, is quoted as saying that “six months after the triggering of article 50, it appears that the position of the UK is becoming more realistic”.

The speech left unclear what the destination is. May said that the UK will be leaving in March 2019, but the transition period lasts another two years, and could be extended indefinitely. By that time, the UK will not have MEPs in the European Parliament, which has been the prime platform from which Brexit has been launched. Given the near 100% opposition in Whitehall to Brexit, it is also implicit that the UK will shadow EU laws and regulation during, and possibly beyond the transition period.

The speech also reiterated her Lancaster House speech  in January of this year, where she had declared that “no deal is better than a bad deal”. She did not deny this at Florence, but she was not keen to emphasise it. Yet the fact of the matter is that the UK and the EU are living in two parallel worlds, and Prime Minister May’s speech is predicated on the assumption that a compromise deal is possible. She sketched the outcome of her envisaged compromise as a United Kingdom living in close cooperation with a cohesive European Union.

Tomorrow is the German general election, where Chancellor Merkel is widely expected to win a fourth term. Just as May continues to take the advise of Nicholas Timothy to search for grounds for compromise, so the UK’s Candides-Daniel Hannan, David Davis, and even Nigel Farage- on the Leave side look to Chancellor Merkel as a pragmatist willing to cut a deal ,rather than stay stuck in the theological clouds of European integration.

Dream on, friends. The Church of England is rooted in the first Brexit of 1529, and is predicated on compromise, compromise between hard like Protestants and hardline Catholics, who finally defined their position at the Council of Trent, some 30 years later. The residue of the Council of Trent is visible in the position of Juncker, Barnier et al. All the Florence speech did is clear the air, as the EU-27 pocket the gifts and ask for more. The EU does not negotiate.

Here is why.

UK optimists hope that  a fourth-term Chancellor Merkel will prod the EU-27 to settle for a business friendly Brexit package  because it makes good economic sense, and frees the EU to get on with “ever closer union”.

This is a fantasy. There is a fundamental clash between the vote of June 23, 2016 and the EU project.

The EU’s purpose was succinctly spelt out by the late Chancellor Kohl: “disintegration of the nation states of Europe into one large integrated political union,” the architect of German unity entoned,  is a “question of war and peace in the twenty-first century”.

The EU is an empire in the making, and the UK has to be taught its place. It can return with a begging bowl, under Article 49 and sign up to the full federal programme as sketched by President of the Commission Juncker in his “state of the union” speech to the European Parliament last week.

Or the UK can be shunted on to a Norwegian-type sideline, where it will have to accept EU laws, heed ECJ jurisprudence, acquiesce in free movement and ask permission from Brussels if it wants to make trade deals with third parties.

The UK meanwhile is reasserting its sovereign powers to make its own laws. Were it to succeed and prosper, the EU hypothesis about the end of the nation state, embraced lock, stock and barrel by Edward Heath, will be shown to be a fallacy.

The vote of June 23, 2016 drove a horse and cart through Heath’s deceptive formula that EU membership did not entail “an erosion of essential national sovereignty”. It most assuredly did, as one power after another drifted from Westminster to Brussels.

June 23 also gave two fingers to the project’s deepest conviction that the cause of Europe’s wars in the early twentieth century was nationalism. More accurately, they were caused by Wilhelminian Germany’s hegemonial ambitions in Europe, and by Hitler’s supranational racism to enslave the continent.

Worse, the vote showed that the project’s progress to “ever closer union” was reversible by the ballot. Here was a national parliament voting to give the electorate a definitive say by referendum on whether or not to stay in the EU.

The great fear in Brussels is that the integration process of the last fifty years goes into reverse, nationalism revives, and Europe reverts to the condition that EU supporters consider brought it to war in 1914 and 1939.

While the EU’s enemy is “populism”, understood as popular opposition to EU policies, in the UK millions of Leave voters consider that they have re-affirmed the central trait of a constitutional democracy, to wit that legislators can be sanctioned at the ballot box. They consider themselves as democrats, not “populists”.

They are right. At Melun in 2002, I had a spat with the préfet of Seine et Marne. My advice, in preparation for the Constitutional Convention, which eventually yielded the highly centralizing Lisbon Treaty. was to ground the EU in the legitimacy of national parliaments.

In true Napoleonic spirit, the préfet’s response was that the EU forge ahead, and ignore the UK and Denmark, the two countries, he observed, with the strongest parliamentary traditions.

To the EU, a politically independent UK cannot be allowed to succeed. Hence, the pretence at negotiation, the inflexible mandate, the school masterly tone, the divide and rule tactics, the threats of trade war, and the massive exit bill, to plug the gap in EU finances which opens up as the UK leaves in March 2019.

Berlin does not diverge from the EU’s position. Merkel has repeatedly stated that Germany’s prime objective is to keep the EU-27 together. In the past, she opposed Cameron’s quest for a more flexible and cooperative Europe. She made no serious effort to give Cameron a package that he could sell to the British public.

Her priorities lie elsewhere. It is to shape a European order in which Germany is stable, secure and dominant. For public consumption, the Chancellor laments Germany’s loss  of an open market partner in the UK. But the loss is compensated by the reflection that Germany is more than ever No 1 in the EU.

“We Europeans, she stated this past May, must really take our destiny into our own hands, of course in friendship with the US and in friendship with the British,.. also with Russia.” To Merkel, the UK is not in the EU, so not European.

The UK faces  a European empire in the making, forged in a Napoleonic likeness, under Berlin’s leadership, and  intent on consolidating its sovereignty and identity. For the UK, there is no going back. We have to prepare for the worst.

If we are prepared, the empire may decide on Realpolitik grounds to propose a business friendly package. But not because German business prefers a frictionless Brexit deal.



About Jonathan Story, Professor Emeritus, INSEAD

Jonathan Story is Emeritus Professor of International Political Economy at INSEAD. Prior to joining INSEAD in 1974, he worked in Brussels and Washington, where he obtained his PhD from Johns Hopkins School of Advanced International Studies. He has held the Marusi Chair of Global Business at Rensselaer Polytechnic Institute, and is currently Distinguished Visiting Professor at the Graduate Schoold of Business, Fordham University, New York. He is preparing a monograph on China’s impact on the world political economy, and another on a proposal for a contextual approach to business studies. He has a chapter forthcoming on the Euro crisis. His latest book is China UnCovered: What you need to know to do business in China, (FT/ Pearson’s, 2010) ( His previous books include “China: The Race to Market” (FT/Pearsons, 2003), The Frontiers of Fortune, (Pitman’s, 1999); and The Political Economy of Financial Integration in Europe : The Battle of the Systems,(MIT Press, 1998) on monetary union and financial markets in the EU, and co-authored with Ingo Walter of NYU. His books have been translated into French, Italian, German, Spanish, Chinese, Korean and Arabic. He is also a co-author in the Oxford Handbook on Business and Government(2010), and has contributed numerous chapters in books and articles in professional journals. He is a regular contributor to newspapers, and has been four times winner of the European Case Clearing House “Best Case of the Year” award. His latest cases detail hotel investments in Egypt and Argentina, as well as a women’s garment manufacturer in Sri Lanka and a Chinese auto parts producer. He teaches courses on international business and the global political economy. At the INSEAD campus, in Fontainebleau and Singapore, he has taught European and world politics, markets, and business in the MBA, and PhD programs. He has taught on INSEAD’s flagship Advanced Management Programme for the last three decades, as well as on other Executive Development and Company Specific courses. Jonathan Story works with governments, international organisations and multinational corporations. He is married with four children, and, now, thirteen grandchildren. Besides English, he is fluent in French, German, Spanish, Italian, reads Portuguese and is learning Russian. He has a bass voice, and gives concerts, including Afro-American spirituals, Russian folk, classical opera and oratorio.
This entry was posted in Europe, France and Germany, United Kingdom, World politics, business and economics and tagged , , , , . Bookmark the permalink.

1 Response to Theresa blinks

  1. A grim prospect. I just wish I had more confidence in Theresa May (I have none really).


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