As 2018 was beginning its climb in the northern hemisphere
toward eventually warmer days, the prospect for the E.U. through and after the
secession of one of its largest states was perhaps brighter than commonly
thought at the time. When the days are short, it is perhaps all too easy to be
pessimistic. Signs of strength in the euro implicitly sent the message in
January of 2018 that the E.U. would be
just fine without its foremost euro-skeptic
state.
The first month of 2018 witnessed negative interest rates
both for the euro and the yen, and stronger economic growth for the E.U. and
Japan. Interestingly, however, the two currencies were heading in opposite
directions as markets protected that interest rates would rise quicker in the
E.U. than in Japan. In 2017, the euro had rallied by 14% against the dollar,
while the yen had been up by only 2 percent. Against a bloc of trade-weighted
international currencies, the yen had actually declined.[1]
The normalization of the E.U.’s context, and the E.U.
itself, even as a large state was in the midst of seceding from the Union, can
be inferred from the euro’s relative strength. “What we clearly have is that
the expectation for normalization is giving the euro a boost, and that’s part
of what’s moving the currency,” said Andreas Koenig of Amundi. Normalization is
not a word that most Europeans would have probably been using at the time.
Britain was still holding that it could avoid a hard border in Ireland and yet
leave the single market and the customs union, as well as have diverging
regulations. At the federal level was the expectation that the state’s intent on
ending the free movement of E.U. citizens in and out of an independent Britain
as no longer being subject to the ECJ, the E.U.’s Supreme Court would “point to
a free-trade agreement little more comprehensive than those with South Korea or
Canada.”[2]
With the E.U. and one of its states holding such divergent expectations still
in the dawn of 2018, normalcy is a
word that people then likely were not applying for the E.U. for the year and
indeed the next several to come.
Yet the secession of a state whose government had not only
resisted transferring more governmental sovereignty to the federal level, but
also wanted some back and even viewed the E.U. itself eschew as a network or
mere trading “bloc,” could even then be reckoned as a good thing for the Union
because a stronger, more internally aligned one would come out without even
such a large state at the UK. For a house divided cannot long stand, and at the
very least the vast majority of any political society, even a federal one,
should agree on the basics of what the society is.
[1] Mike
Bird, “Euro and Yen Tell Different Tales on Negative Rates,” The Wall Street Journal, January 22,
2018.
[2] “Now for the Difficult Bit,” The Economist, January 13, 2018.
