“Should I stay or should I go” (The Clash)

“Should I stay or should I go now?

If I go, there will be trouble

And if I stay it will be double

So come on and let me know” (the Clash)

The question posed by the Clash (i.e. the famous rock band) has unfortunately no reason to be, at the moment when we are commenting on BREXIT. It seems that those who speak the most about Brexit impacts are the English themselves. The subject in continental Europe does not worry us too much or at least we talk less about it, I guess. Admittedly, it will have consequences often mentioned. But ultimately, it may not be as bad as announced. The English rightly are worried and the "Britstayers" are still hoping for a final rebound. All of us are beginning to realize the economic consequences of Brexit. It will not be, as I have written many times, a victory for anyone. It will be a Pyrrhic victory and we will lose-lose even if, in the end, the British will lose more than continental Europeans. Without wishing to interfere in English politics, I think that the referendum launched by David Cameron will remain one of the worst political decisions of this century. Europe did not need that. But it will recover and come out stronger in my opinion. We must take this opportunity to reinforce our European cohesion as much as we can.

The bad augurs and other negativist gurus may advance the end of the EUR and the Union. It won’t be the case. Brexit will strengthen Europe. This is the reason why Michel Barnier has negotiated fiercely to protect the interests of the Union and deter secessionists from leaving it. It must be shown to the Catalans or other Corsicans that independence without the Union may be costly. The spirit should be union and not disunity, even as we enter a more delicate economic phase. If we think of the problems for the mainlanders, for example that of the capital of the European Investment Bank (EIB), we see that it will lose 10% of its capital given the withdrawal of the English. However, the "27" will compensate by bringing the EUR 3.5 billion that will be missing by the EIB to remain "AAA" rated. We will find solutions to the problems this exit will cause and we will be back on tracks, that’s my conviction.

On the other hand, England will have to reinvent itself, as it is able to do and as it already did in the past. But it has also been proved with Norway that not to enter the Union is not necessarily a sign of less regulations, as promised by Brexiters. On the contrary ... many bilateral and other double taxation treaties will have to be renegotiated, rules on everything and nothing will have to be established, and European rules will have to be ruled out, at the risk of being excluded from its single market. It is difficult to be a partner of EU without respecting its rules and get “passporting” like for the fund industry, for example. The nuance is maybe subtler that people imagine at first sight. Will England come out of SEPA? Will it refuse to apply MiFID2 and the AML and KYC rules? Of course not. The tempting financial regulatory laxity promised by D. Trump, would be like shooting himself in the foot. Europe is not only through, spending and waste or constraints. The English treasurers know it. It always surprises me to see that among my English colleagues and peers none, to my knowledge, having voted for the Brexit, nor their relatives and friends. Who then voted for? The same who elected a different president in the USA, maybe? In 20 years, young English people who have grown up and who will be in business may wonder what has gone wrong with their ancestors. Unfortunately, when they ask to return to the Union, the conditions will be more restrictive, as explained by Jean-Claude Juncker.

Do you know a single English student happy to no longer be able to benefit from Erasmus? No, the future, in my humble opinion, will, alas, prove right to the supporters of the "Britstay". It will be too late. In the meantime, the cards will have been redistributed among the different financial centers. Admittedly, in the beginning Brexit will be a source of some concerns: e.g. EUR / GBP exchange rate volatility and need to cover transactional and translational risks, potentially higher UK interest rates, possibly different rules (though) and documentations to be reviewed (such as ISDA's, loans under English law, references to rates or indices, etc ...). It does not seem to me that the treasurers of Continental Europe are traumatized by this Brexit. They have many other more important and critical concerns now, I’m afraid.

We have heard that there were a certain a lack of knowledge of the potential consequences of such a decision among the British population. During the Brexit campaign, I heard that the consequences haven't maybe been not that well explained. Many say, among my English friends, that if the consequences were explained to the British citizens more clearly, their choice would have been different. Maybe ... We see that politics can be "courter-mists". At the end of the day, as we use to say in French, the dogs bark, the (European) caravan will pass. The future will show that the Union still has benefits, despite all that has been said and criticized. I remain among those who continue to believe in the European idea and its benefits. I am fully aware of the future challenges of the single currency. However, it is not a reason for not continuing to believe in the EUR. The road is littered with obstacles, but they will make us stronger (at least I hope it).

Fran?ois Masquelier, Chairman of ATEL  -  Luxembourg, February 2019