The ghost at the feast during the annual Venice seminar held by the Italian government for British and Italian journalists last weekend was the shadow of Brexit. While Italian officials were scrupulously reticent about voicing opinions on the subject, the undercurrents were obvious – not least because the Italians value the UK as an “outward-looking” ally in some of the more introspective discussions in Brussels.
Reports from Davos, too, show bafflement on the part of fellow Europeans and others about the UK referendum and subsequent debate.
Back in London, the first item I came across on the Today programme was the sound of economist and former Conservative minister Jim O’Neill saying that, although he was a Remainer, Brexit was really not so bad. But the main reason for this appeared to be the upturn in world economy, and in continental Europe – our main market, which the Brexiters want to leave. Later in the week we had David Cameron saying Brexit was “a mistake, not a disaster”.
In both these cases, and many others, including regular proclamations from the Daily Mail, the main point has been missed. The main point is that Brexit has not actually happened. The serious damage, unless the British people change their minds, has yet to come.
Yet already it is evident that the UK is a laggard in the world economic recovery, and that investment plans are being shelved at the mere prospect of Brexit.
Now, in recent weeks we have seen olive branches being extended by President Macron of France and Donald Tusk, president of the European council. While the French are quite content to look for financial pickings that Brexit might offer them, it is abundantly clear Macron would prefer us to remain.
However, the so-called “negotiations” tend to go around in circles. The British side persistently ask for concessions, in demands that are tantamount to a wish to enjoy all the benefits of EU membership while officially going through the departure gate. How many times do Michel Barnier and others have to repeat that “cherry-picking” and “having your cake and eating it” are simply not on? The hard fact is that, if we are intent on leaving, we have few cards.
The ultimate irony is that, as members of the European Union, we have been able to cherry-pick to a point where we enjoyed all sorts of concessions: although late joiners, we were still able to negotiate the famous budget rebate; we did not have to join the eurozone or the Schengen arrangement; and, notwithstanding the misinformation that streams from the Brexit camp, we possess a “get out of jail free” card from any moves by the others towards “ever closer union”. This is a very important point, of which many people concerned about sovereignty do not seem to be aware.
Non-membership of the eurozone gave a freedom to policymakers that countries such as Italy do not possess. When Italy joined the euro it lost the flexibility to adjust its exchange rate to keep competitive pace with low-inflation Germany. This affected its manufacturing sector (which, by the way, is twice the size of the much-depleted British manufacturing sector).
The financial crisis and the constraints of the eurozone precipitated a 10% collapse in Italy’s national product between 2009 and 2013. Recently there has been a gradual recovery, and the economy is growing in line with the eurozone average. There is an unresolved debate as to how much this is due to “cyclical” factors – the expansionary policies of the European Central Bank – and how much is “structural”, that is, attributable to boosts to productivity from manufacturers who can no longer rely on exchange rate adjustments within the single currency area.
Which brings us to the unfortunate observation that, in spite of the UK’s freedom from the constraints of the euro, our present and prospective economic performance is widely considered to be abysmal. More and more commentators make the point that the Brexit referendum vote was the culmination of a series of winters of economic and social discontent, which have to be addressed. I could not agree more! But this does not destroy the case for, one way or another, reversing the referendum result. Going ahead with Brexit can only aggravate these sources of discontent.
Finally, a reminder of that revealing quote a year ago from Dominic Cummings, one of Boris Johnson’s accomplices in the referendum battlebus campaign. To the question whether the Brexiters would have won without the £350m National Health Service claim, he replied: “All our research and the close result strongly suggests no.”