The member countries of the European Union have increased in number over the decades, but today's Union, observed on the map, is smaller than the EEC of 1962 or the Community of 1985. In declaring independence from France, of which it was juridically having been an integral part and not a colony, Algeria left the European Community in 1962 after seven years of war (against the French, not against Europe) and immediately joined the Organization of African Unity.
Less bloody, but still troubled, was the exit of Greenland which, to tell the truth, had never wanted to enter Europe. An autonomous county of the kingdom of Denmark, the island participated in the 1973 referendum on entry into the EEC, voting 70.3 percent to stay out. However, Denmark as a whole joined, and Greenlanders, who had always made a living from fishing, saw their fears realized in the form of European fishing vessels invading their waters. Having won the devolution of other powers in 1978, the Greenlanders did not wait long before organizing a new referendum on Europe, this time only local. Thus it was that, in 1982, 52 percent of voters voted to leave.
Greenlanders are not many. They are 56 thousand, exactly like the inhabitants of Foligno. Their economy is much less diversified than that of Foligno, based exclusively on fishing. For these reasons, the negotiators who went to Brussels in 1982 for the divorce papers expected a quick and simple negotiation. It wasn't like that. It took more than a hundred meetings and three years of effort before an agreement was reached. The European technocrats were initially incredulous (Are you crazy? Everyone wants to get in and you want to get out?) and imposed grueling negotiations, confident that their interlocutors would change their minds. The technocrats were naturally convinced that they were doing good for the Greenlanders. The Germans, in particular, thought that the island was too dependent on one sector and that, by reducing fishing, Europe would push them to diversify.
However, the Greenlanders, largely Eskimos or Eskimo-Danes, were a little tired of being told what to do by loving planners sitting thousands of miles away. In their eyes was the hideous P Block, a brutalist building that scarred their pretty capital and in which Danish planners, convinced that the island needed urbanization, had decided that one percent of the entire population should live. greenlandic. However, the architects of Copenhagen had not thought that in Greenland people dress warmly and so it happened that the inhabitants could not even enter the house because the doors were narrow. Also for this reason the island's negotiators went straight and obtained a divorce in 1985. Also for this reason, having obtained semi-independence in 2008, they abolished Danish, renamed their country Kalaallit Nunaat and blew up Block P with dynamite.
How did Greenlanders live after 1985? For many years bad. The collapse of the cod fishery has hit them hard and Denmark has had to increase subsidies to the island. Then came, in recent years, the discovery of huge offshore oil fields, which the collapse in the price of crude oil has however made uneconomical at the moment. Eventually the island drew closer to Europe and signed an economic partnership agreement with the Union in 2012, a decent compromise. Now let's multiply the Greenland story by a thousand and we have an idea of the complexity of Brexit. Humans have learned to get to and from the moon in eight days and three hours, but trade agreements now take ten years or more when public opinion is distracted and much longer when it is attentive and hostile.
Geopolitics tells us that Greenland is American land (the United States in 1946 offered one hundred million dollars to buy it, but Denmark refused) and that the British Isles are half Atlantic and half European. In the long run, by trial and error, the United Kingdom and the Union will find an optimal formula for coexistence and will be able to forget hostility and rancor, but the 27 years it took the Greenlanders and the Europeans to finally find a good agreement are a precedent which makes you think. The pound, over the years, will still have to devalue. Foreign investment which has so far financed the current account deficit will drop sharply. The Japanese who have built their car plants in England certainly appreciate the beauty of the landscapes and legal certainty, but only if their production has access to the Union.
Otherwise, if you like, there are beautiful landscapes in Slovakia as well. Of course, the UK will cushion the blow because it is flexible. Having lowered banks' capital ratios a week after Brexit shows speed and intelligence, just as it is a deft and correct move to have proposed, by Osborne, the reduction of the corporate tax to 15 per cent. If the new prime minister is Theresa May (as flexible and pragmatic as Thatcher was rigid) dialogue with the Union will be less difficult. What is Europe doing instead, also affected by Brexit? It follows the rules instead of sticking to reality, but it also goes one step further not required by the rules when it requires Italian banks to drastically accelerate fiscal consolidation measures beyond what has already been agreed, as the Federal Reserve did in 1930-32 with the sick banks and with the well-known results.
It should be noted that the decline in bad debts has stabilized and that what risks being destabilizing now is the impending bail-in atmosphere. In summary, Brexit will have a high cost, but one that can be spread over time. This cost can be eased with anti-cyclical policies (UK) or burdened with pro-cyclical policies (Europe). Thankfully the US is doing quite well right now and China is able to devalue without creating drama in the markets. The postponement of the rise in US rates to a later date (December or next year) gives further peace of mind to Wall Street and emerging markets.
Consequently, it is on the dollar, Wall Street and emerging markets (and gold on weakness) that it is best to park in the coming months while waiting for feverish Europe to find a minimum of calm. We do not expect particular increases in the assets on which we aim, but at least relative tranquility. In Europe there is value, but before buying it will be a case of seeing if following the rules will lead us to strange new adventures or not.
