DEE SMITH: Irene, welcome, and thank you for
being here today.
IRENE FINEL-HONIGMAN: Thank you.
DEE SMITH: So we're going to talk about this
little issue called Brexit and its implications.
And I'd like to start by asking you what do
you think the state of play is today in Brexit.
What's led into it, brought us to where we
are today, and where are things?
IRENE FINEL-HONIGMAN: Well, I think what is
fascinating about Brexit, it's both, I would
say, an irony and a farce.
It's an irony because when we look at the
history that brought it about and the complex
relationship between the UK and Europe going
all the way back to the start of the European
Union, it's never been a comfortable state
of affairs.
The UK originally wanted to come in.
It was Charles de Gaulle in France who absolutely
hated the Brits at the time and said, no.
They did not come into the European Economic
community until 1973.
And it was always a relationship of being
in it but not totally being of it.
Once Margaret Thatcher comes into power in
the late 1970s-- 1979-- the situation becomes
even clearer.
She wants the European Union, as we move toward
economic community to the European Union,
to actually serve best the trade interests--
the agricultural interests, the open market
interests-- of Britain, but not in any way
to impose itself upon Britain.
The real decision takes place in 1991 when
it's about to start the European Monetary
Union, and it's about to start a far greater
integration.
And it's fascinating, because no one had a
better relationship-- we have to remember
in geopolitics-- than Margaret Thatcher, Mitterrand,
Chancellor Kohl, and Reagan and then Bush.
This was an extraordinary group of leaders
who basically ran the whole show for nearly
15 years.
And yet, Margaret Thatcher, from the very
first day, said, no.
We will only be part of a very general structure
of a European Union.
We will never, ever give up sterling.
We will never give up the Bank of England.
We will basically never give up our full sovereignty.
The reason I mention this is this is where
there's the irony.
Brexit was a cataclysmic mess that never needed
to happen.
It came about because David Cameron made a
foolish decision in 2013 because there was
already all this anti-EU, anti-euro, anti-globalization
movement across Europe brought on by the sovereign
debt crisis and then the migration crisis.
In order to humor, in part, this constituency
and to bring them to his side, he said, you
know what, if I'm re-elected in 2015, we'll
do a referendum on this issue.
I personally feel referendums are one giant
mistake.
And along comes, of course, he is re-elected.
And along comes June 23rd, 2016.
And there is a referendum.
And, as you know, the referendum, interestingly
enough, was 52 for leave, 48 for remain.
From day one, it was clear that the UK was
split.
DEE SMITH: So you've said that, really, Margaret
Thatcher delivered a soft Brexit.
IRENE FINEL-HONIGMAN: Yes.
DEE SMITH: And so it really is ironic that
this whole thing had to be revisited.
IRENE FINEL-HONIGMAN: Exactly.
It's ironic, and then at the same time, because
there was never-- forget about a plan B or
C-- once Brexit occurs, there was never a
plan A. Because I think on a very deep level,
certainly the British establishment, the political
class, the intelligentsia, universities certainly
assumed that, yes, this is all very interesting.
It will allow everyone to express their view,
but this won't really happen.
We certainly saw exactly the same situation
in November 2016 with the Hillary-Trump election.
These are situations that suddenly occur.
And they are cataclysmic moments, and the
most awful thing is when nothing's been put
in place.
Cameron is forced to leave, and Theresa May
comes in.
And I just want to say, I personally do admire
Theresa May.
I think she was put in the most atrocious
position and took on probably the most thankless
job possible in any government.
DEE SMITH: So this has happened, and here
we are.
And now it seems that there are three probable
outcomes.
There's the hard Brexit-- leaving with no
agreement.
There is a second referendum of some kind--
however that might be phrased.
And then there's a new election-- a general
election.
Do you see any other alternatives?
IRENE FINEL-HONIGMAN: I think what is oddly
interesting is the Europeans now, with this
brand new deadline having basically crashed
through the previous absolute deadline of
March 31, now on to October 31, 2019-- the
Europeans now are setting out a kind of weird
scenario of either, basically, no deal.
Either going back to something of a sort of
more soft deal-- either, oddly enough, just
canceling the whole thing.
We are, again, in uncharted territory, because
the way Brexit had to come about according
to the rules and laws of dictating the European
Union and the conditions of the EU was that
Theresa May had to invoke Article 50.
And she did that in March 2017, which had
that two-year transition period onto a final
decision.
The question is now, how set in stone is Article
50?
And are we now looking at a possibility of
simply revoking Article 50?
We don't even know what that means.
DEE SMITH: Do you think that's a possibility?
IRENE FINEL-HONIGMAN: I think that maybe--
I don't think the Europeans threw that out,
particularly with Macron and Merkel simply
perchance.
That may be a possibility, because, at the
end of the day, from the other side, the Europeans--
the European Union, specifically Angela Merkel
and once Macron becomes president-- they didn't
want this.
Nobody wanted, basically, Britain, the UK,
to be off the table-- to no longer be at the
table.
DEE SMITH: Do you think that, from the standpoint
of the EU at this point in time, there is
a unified vision about what they would like
to see in terms of Brexit?
Or do you think that there are a lot of different
visions?
That the French look at it one way, the Germans
another, the Italians another.
Obviously there's Poland, Hungary, and Greece
and all these other countries-- how does that
play in?
Is there a center?
IRENE FINEL-HONIGMAN: Maybe there was originally
a center.
I think when this decision occurred, I would
say that the first year-- that year of 2017--
they assumed this would follow certain procedures.
If really this had to occur, Theresa May would
invoke Article 50, which she did.
And then from then on, this would somehow
have a not smooth, but certainly fairly cohesive
transition.
And that the Brits, in turn, would begin to
offer some very definitive conditions they
were comfortable with, and then room to maneuver.
So I'd say that there was more of a kind of
together kind of attitude.
And certainly Donald Tusk, as one of the most
important voices in the European Commission--
Junger, et cetera-- wanted to work with the
UK to find and resolve this issue.
The problem was that when it became clear
that on the UK side, whatever plan was put
forth was immediately shut down.
That Parliament was becoming more and more
fragmented.
That the divisions within the UK were becoming
more and more rigid.
There began to be much greater concern, because
the question is that this began to be a problem
that the Europeans did not want and the Europeans
simply did not quite know how to deal with.
We also have to remember no one has ever dropped
out of the European Union before.
There were all these threats.
The threats were called Grexit.
Occasionally we'd-- horrible word-- tended
to be sort of attached to other countries.
But there was very little reality behind it.
Because, at the end of the day, every country
understood if you drop out, there go your
subsidies, there go your free market.
There goes basically all credibility in global
markets.
And now what?
The UK is not Greece.
UK is not Italy.
The UK is a global power unto itself.
And the UK is not part of the eurozone.
So all of these issues that were somehow crucial,
basically, but then looking at some of the
other countries, this was a whole new ballgame.
Now, the problem was that what now had to
be decided was, how do you even go about this?
If they don't seem to be able to do it, this
fell back on the Europeans.
The burden began to be the Europeans' burden
to sort of figure out how do we do this.
They don't want them to do it, but it looks
like we're going to have to do it for you.
The problem is, remember, the European Union
when it was originally created-- and this
was sort of marvelous in a way.
It reminded me of the American pop Eagles
song "Hotel California"-- You can check out
anytime, but you can never leave.
And that's basically what the European Union
was.
Suddenly, they changed the lyrics.
Suddenly, everyone's looking for an exit.
The problem is this is not-- there are no
precedents.
There's nothing in place.
So it always had a sort of ad hoc nature.
And everyone was reacting to everyone else.
And May, I think, made an enormous effort
to try to give in as much as possible to the
demands of the European Union-- certainly
within the conditions for trade, with sort
of the so-called divorce bill, what the amount
would be, how to basically structure this.
And every time she'd come back, and it got
shut down.
DEE SMITH: Do you think that that's essentially
a problem that's within the Conservative Party?
In other words, is the real problem not the
fragmentation of the UK and the fragmentation
of parliament per se, but the fragmentation
and the infighting within the Conservative
Party?
Because it seems to me that a lot of people
in the Conservative Party care more about
the party than they do about the nation.
And whoever ends up being voted the leader
after Theresa May is going to face the same
set of problems.
They will not be able to deliver something,
it seems to me.
What do you think about that?
IRENE FINEL-HONIGMAN: I think that's exactly
right.
I think, unfortunately, because Theresa May's
plans were shot down, whatever lack of credibility
she already had-- because, again, she was
excellent home secretary but not seen as truly
material to be prime minister.
That increased this problem of credibility
and of trust.
And it made it even easier for any of these
other members of parliament with differing
views to become more aggressive.
And, in fact, yes, right now the rifts within
the Conservative Party plus the total fragmentation
and poor leadership on the Labor side, and
the inability of any of these groups to have,
right now, full support of the country at
large as we do see also other parties coming
back to the forefront.
Certainly the Green, as in every country in
Europe-- the liberals.
So the situation with Brexit, which has, in
a way, moved, really, from irony to almost
tragedy, is that the parties themselves have
no longer kept real cohesiveness.
DEE SMITH: It's interesting to me that Theresa
May was a remain person.
She then-- I'm going to spin a train of thoughts
here, and tell me what you think about it.
Theresa May was a remain person.
She then went totally over to leave, because
she said to not make Brexit happen was to
not respect the wishes of the English voters--
of the UK voter.
So fast forward to what we now know-- and
I'd like to ask you what you think we do know--
about Russian money and other kinds of influence
in the original referendum.
Which, in my mind, calls it into question--
whether it actually did reflect-- I mean,
was it a corrupt referendum?
And if that's the case, then how would enforcing
it be actually-- when we don't know the extent
to which it really did represent, if we don't
know the extent to which it did represent,
the wishes of the UK electorate, then how
can enforcing it actually represent the UK?
I mean, it's a big argument for a second referendum.
So two questions-- or three.
Do you think that that's a valid way of looking
at it?
Second, what do we know about Russian influence
and money in this election?
And my third question is, why is that not
a bigger issue?
Why are senior politicians not making that
the main question of the day?
IRENE FINEL-HONIGMAN: I think clearly we now
know that, particularly with media incursion
and ability to spread so-called fake news,
false information-- certainly there was a
certain impact that Russia had, just like
we can say there was a certain impact in,
basically, hacking into the US elections.
There's no question.
But I really think that we have to be very
careful not to give too much weight to that
argument because when we think of the overall
environment in which Brexit takes place, we
are already looking at least five years of
profound discontent across Europe.
We are also looking at a Europe that has just
gone through the sovereign debt crisis, which,
whether countries wanted it or not-- and the
UK felt it didn't deserve it-- had actually
been pushed into near recession, have had
their entire business cycles and trade balances
thrown off, and have had to suddenly cope
with this really surging movement of anti-EU,
anti-globalization, anti-euro.
And what is so interesting is even smaller
countries in Europe, that they would decide--
all of a sudden they were scared if we leave,
we lose all the advantages.
But we don't want to stay and be constantly
told by Brussels and told by, basically, nameless,
faceless bureaucrats, and, worse, told by
Berlin what we can or cannot do.
And this is a very fundamental psychological
rupture that has occurred in Europe within
less than a decade.
And I think we can not underestimate this.
Because I found it fascinating right before
Brexit when certain polls were taken, and
when actually people in smaller parts of the
UK and disenfranchised areas in former major
industrial cities and fishing villages-- when
they were asked, what do you think of the
representation that you basically have in
the EU?
And most of them just stared blankly.
They had no idea who represented them, who
was making these decisions, why.
All they knew was that this was beginning
to impact on them and on their Britishness.
They could regain.
And the concept of sovereignty-- it's a word
that gets thrown out almost as a cliche--
but there's a profound atavistic cultural
resonance to how do you define yourself, particularly
if you think some foreign person in a foreign
country, particularly in Europe, is suddenly
coming and announcing to you what is good
for you.
This cannot be underestimated.
So I think, yes, there was the, basically,
influence of Russian money.
There also is now the influence, which is
actually even more profound, of money laundering
issues, which are touching on all major global
banks-- particularly European banks.
So there is no question of a lot of internal
corruption.
What I found interesting was that Boris Johnson's
message was so shocking.
Because, basically, Boris Johnson came out
with a series of downright lies, working exactly
into this mythology, this nostalgia.
Ah, those evil Europeans will be gone, and
all this money will suddenly reform our national
health system and do wonderful things.
In my view, this was shocking.
This was atrocious.
This was taking what was already a sense of
unease and fear and feeding into it.
I have the solution.
There was no solution.
And, very sadly in the US, we saw the same
thing with the coal miners in West Virginia,
with small towns where we've told that no,
no, no, forget about it.
No globalization, none of this strange technology--
we're returning to a wonderful time where
we make America great again.
What does that mean?
So this is where I would say we had a confluence
of events and a confluence of different factors
that played into it.
But there were much deeper elements of discontent.
And this is, again, coming through.
If we just think what happened in the fall
of 2017 the German elections-- for the first
time since World War II, a party with basic
neo-Nazi roots feeding into exactly all of
these anti-EU psychological element managed
to get into Parliament.
Marine Le Pen in France, whose party now has
actually done well in the last EU elections
just two weeks ago.
This problem, it was almost like the Russian
influence was the icing on the cake.
But the cake was there.
DEE SMITH: Well, of course, this nostalgia
has been-- I've looked at it a lot myself--
it's being studied quite a bit.
I recall a friend of mine who was talking
to some people in the UK about Brexit.
This was more than a year and half ago.
One person said, we would be happy to be measurably
less wealthy to be measurably more British.
And I have since repeated that to other people
in the UK.
And they said, yes, that's it exactly.
Which is an interesting sentiment that you
would not have-- 15 or 20 years ago, you wouldn't
have believed it.
If somebody had written that in a short story,
it would have been-- it was too much fiction.
But yet, that's where we are today in the
world.
And this idea of make it like it was-- and,
of course, life is never like it was.
And our memory of life is false.
And we don't remember what the 70s were really
like.
We make them into these halcyon days, and
they weren't like that at all, particularly
in the UK-- the council flats and all these.
So the origins of this feeling of ennui and
this feeling of being put upon and the feeling
that things are much worse than they have
been is an illusion.
But it doesn't matter, because it's so emotionally
resonant to people, because they find themselves
confronted with a world filled with change
and change happening more and more extensively
and more and more rapidly-- and filled with
people who are not like them.
And it's a very uncomfortable position for
many people-- some people not, but it is for
many people.
IRENE FINEL-HONIGMAN: And I think this also
does bring up that problem of migration, and
the fact that Europe basically was almost
torn apart by the pros and cons of the 2015
migration crisis in which Angela Merkel, for
all of the right moral reasons, took, however,
a decision which, unfortunately, was not always
understood where the consequences could be.
Interestingly enough, the problem in the UK,
which was sort of brought again to the forefront
of Brexit, was not necessarily that relevant
to what's really happening in the UK versus
what was happening across borders in Greece,
in Italy, and in Central and Eastern Europe--
not at all.
But something somehow surged.
DEE SMITH: Well there was-- I mean, I think
you have to talk about two different kinds
of migration.
You have immigration in migration-- migration
from the outside of the EU into the EU, which
is what set off Germany.
And then you have the migration within the
EU that's part of the Schengen agreement.
And that's what I think the British, the English
particularly, have an anathema of seeing all
these foreigners who are plumbers or whatever
they are speaking different languages.
And, I mean, it's just somehow very upsetting
to them.
And so it's not really Angela Merkel's decision
to let in however many Syrians into Germany,
it's the fact that there are Germans and Poles
and people from other parts of Europe in Britain
doing jobs that need to be done.
But it's still very threatening to them.
IRENE FINEL-HONIGMAN: Oh, I totally agree.
And I think, again, what is so sad is that
there has now been a sort of blurring of all
of the positive aspects of bringing in Europeans
and having open borders.
And we have to remember that the UK did not
sign onto the Schengen Agreement in 1985.
Interestingly enough, they were tremendously
upset about something they weren't actually
all that forced to do it to begin with.
DEE SMITH: It's really very interesting, isn't
it?
IRENE FINEL-HONIGMAN: But the idea of people
wanting to come-- in particularly, exactly,
Polish students and Hungarian and German,
et cetera.
And this interplay, which is one reason why
when you looked at the demographics, young
people wanted to remain in Europe.
Because for young people, it was a sense of
these massive opportunities offered by the
European Union, and, particularly, even educational
opportunities under Erasmus, under so many
programs which everyone benefited from.
And yet, at the same time, there was, again,
this sort of odd, almost instinctive animistic
fear coming in much poorer, much less urban,
less, in part, educated parts of the UK where,
oh, now we won't have these foreigners.
The tragedy was most of the foreigners were
from former countries of the British empire.
I mean, it was so sad.
And this is where I really saw this functioning,
at times almost becoming farce, because it
didn't make any sense.
And then sadly, from farce, there is that
risk.
Do we then move to actual tragedy?
What does this bring about?
DEE SMITH: Well, and, of course, the rural-urban
division is a key thing, I think, not just
in the UK, but really almost globally.
Because what you need to survive, what works
in an urban environment is a certain kind
of interaction.
It's a certain expectation and willingness
and reality of seeing all sorts of different
people all the time.
It's being open to two things.
It's a means-based things rather than an ends-based
thing.
They're almost the opposite of what works
to survive in a rural area where you know
everyone.
You're going to see the same people over and
over.
It's very familiar.
It's not full of change and dynamic.
And I think it's sort of the same way that
you need a different set of tools to survive
in the jungle than you do to survive in the
desert.
And yet people give it a moral dimension in
both directions that becomes very destructive.
IRENE FINEL-HONIGMAN: And I think this is
where this issue-- and we can almost go back
to the original NAFTA from 1993 on-- what
was sort of the response to suddenly saying,
we have to open to the world.
We have to develop regional alliances.
We have complete interdependency and trade.
When we now look, for example, at any major
bank and everyone can say, this is a British
bank or a French bank.
Well, how nice.
But, in reality, probably most of the profits
of these major, systematically important banks
and even smaller banks no longer come from
home country.
They actually come from foreign operations.
They come from international presence.
So the issue is, and the counterpoint of that,
is were such an institution to fail, this
would no longer be a self-contained country
problem.
This becomes a multi-country, or it becomes
a global issue.
And this is the same thing in so many different
sectors.
And this, I think, is profoundly misunderstood.
And politicians have done a miserable job
of explaining it.
DEE SMITH: I agree with you.
And you know the other thing is that if you've
talked to any military historian, they will
tell you that nationalism is a prelude to
war.
I mean, it almost always goes in that direction,
which is an extremely unfortunate thing that
our politicians either don't understand or
won't understand.
And it is really problematic.
So here we are, to get back to Brexit, and
the Europeans have tried to accommodate--
I mean, there's some other interesting questions
about Europe.
But to re-center it on Britain, or on England,
even, what do you think-- I mean, we have
these three alternatives.
What's the chance of a hard Brexit at this
point?
IRENE FINEL-HONIGMAN: I think that, basically,
it's not a solution.
I think everything, oddly enough, will be
done to somehow find something at the end,
probably much closer to the November 15, 2018
plan that Theresa May finally got accepted
in the EU and so desperately wanted to push
through Parliament.
In other words, something that often is more
semantic rather than substantive, but that
offers long transition periods that actually
allows the UK not to go into basic economic
shock, certainly, and that might even find
a way to resolve the awful Irish issue and
question that's floating out there, which
is completely misunderstood or not understood
by anyone.
And find some kind of muddle-through solution.
This, in my view, may, at the end of the day,
be the only way.
Will they actually push it to try to cancel
it?
That can be dangerous politically, because
then it could look as if you're completely
going against what was defined as the will
of the British people.
A referendum in the UK, even in the best of
circumstances, I still see can be tricky.
It depends so much how is it basically presented.
There are still risks, and then what?
So I have a feeling, and I hope, that everyone
will take a little bit of time and realize
this is basically, it's never going to be
a win-win situation.
How can we possibly find something that is
not a lose-lose situation?
DEE SMITH: It trends towards lose-lose.
IRENE FINEL-HONIGMAN: And that could be absolutely
awful.
However, I do want to say-- and the reason
I'm a little bit optimistic about this is
that way behind the scenes-- you know, we
have to remember the problem about the UK--
a hard deal or no deal or some kind of drama--
is the UK is still a global financial center.
The irony about the UK in relationship to
the euro is, although it doesn't have the
euro, it is the global center for euro-denominated
transactions.
You have a huge amount of global derivative
transactions.
You have basically the UK capital markets.
You have every major bank is in London.
What I found fascinating is starting in February,
how many agreements have already very quietly
been set in place with the European market
directives regulatory body to give everyone
a lot more breathing room?
European banks in the UK do not necessarily
have to reapply for a license about a three-year
period.
A number of other firm promises have made
that derivative trades will be honored and
will come to fruition.
So what is interesting is behind all the bluster
and noise, there are a lot of very good people
who are very carefully trying to create some
kind of safety net.
DEE SMITH: Even in the case of a hard Brexit.
IRENE FINEL-HONIGMAN: Even in the worst case
scenario-- some kind of safety net.
With that in mind, there may after all be
a way to somehow-- and I always find one of
the loveliest words sometimes that politicians
use is the word extension, rather than calling
directly a delay.
Or calling it, we have no idea what we're
doing.
But, rather, let's call it an extension.
I have a feeling we may, first of all, end
up October 31-- I'm not sure how totally total
this is-- we may end up with another extension.
And slowly in there, Boris Johnson is right.
He said, eventually a lot of the sentiment
may start to fade, which is not to his advantage.
But that may happen.
DEE SMITH: And there are numerical estimates
that you've already tipped that to the number
of people who would vote to stay being a higher
percentage-- enough of a higher percentage
of the populace that that's the outcome of
the vote.
I mean, lies, damned lies, and statistics.
But, nevertheless, I mean, things are changing
over time.
IRENE FINEL-HONIGMAN: I think so.
And I think as people finally begin to realize,
what does this really mean?
Not what was I told.
Not this sort of huge, rah-rah sentiment,
but, fundamentally, wait a minute-- what does
this really mean?
DEE SMITH: So to go back to markets for a
bit.
You're not as worried about issues like breaking
the share trading markets.
And you think those things will be worked
out.
IRENE FINEL-HONIGMAN: I think so.
Much of this is still up in the air.
There's no question that if suddenly there
was a no deal or something dramatic, there
would be a shock to the pound.
We would see global markets then react I mean,
there would be a very difficult few weeks
or few months.
But this is exactly what everyone being completely
aware is what we spoke about, that nothing
is now self-contained.
This bizarre vision of the UK suddenly becoming
totally selfcontained, it doesn't work.
And I found, in fact, I was watching that
little clip of the Queen's speech that was
such an extraordinary message of history demanding
and requiring that we honor the institutions
and the structures that have helped us get
where we are today and go through the worst
of crises.
DEE SMITH: It was opined-- to the liberal
international order, as we used to call it.
IRENE FINEL-HONIGMAN: That's right.
And it's no question it has to be changed.
We cannot simply accept a status quo that
was established between 1944 and 1949.
That's not the issue.
But the issue is how do we do it in a way
without pretending the world has not changed?
And how do we do it in a way that also respects
these changes and allows us to incorporate
them?
DEE SMITH: Well, of course, this brings up
the issue of the EU-- it does need to be reformed.
And Brexit may sort of have been-- maybe the
UK had to shoot itself in the foot in order
for the EU to mount a serious effort for reform.
Do you think that's the case?
IRENE FINEL-HONIGMAN: First of all, I certainly
hope so.
And I definitely do think so.
And, in fact, what everyone now seems to be
saying in Europe is the one advantage of Brexican
Trump is it's finally forcing us to get our
act together.
And this is actually a fact.
DEE SMITH: So do you think that-- I mean,
I've heard it said that, particularly Brexit,
has an inoculation effect on other countries
in Europe-- that they won't try this sort
of thing at home, so to speak.
IRENE FINEL-HONIGMAN: Absolutely.
DEE SMITH: But do you think that it will have
an amelioration effect on nationalism?
That doesn't seem to be the case.
It seems like nationalism is still there,
it's just being expressed in different ways
that don't necessarily result in Frexit or
Grexit or any of those other horrible-- IRENE
FINEL-HONIGMAN: Yes.
I think that, first of all, a number of countries
that at one point, first of all, had been
close to violating the norms of the European
Union-- certainly Hungary, certainly Poland--
and other countries, despite that, all of
a sudden are very careful now about deciding--
oh, no, no, no.
We definitely want to stay, so can we figure
this out attitude.
What these last EU parliamentary elections
proved is that these extreme parties are still
strong, no question.
But, interestingly enough, they're not overwhelming.
And, interestingly enough, however, the center
may not necessarily be traditional right and
left parties as we defined them for the last
50 years.
They may in fact be mutating and bringing
in much more ecological issues, much more
green issues, a much younger demographic,
much more sort of liberal worldview, which
doesn't accept globalization but which also
demands a whole number of safety nets for
populations at large.
And so we are looking at a moment of transition.
We're in a tremendous moment of transition.
The European Union, I think, during the eurozone
crisis, everyone assumed, ah, it's all over.
It's gone.
Well, it's not.
It has gone through so many crises.
And, somehow, a lot of the fundamental institutions
and principles are still very much in place.
By now, oddly enough, the intensely hated
bureaucracy has also created a very tight
web of interrelationships between European
countries and a sort of interconnectivity.
So all of these factors are very much to the
advantage of the European Union.
The question is that the European Union now
is given an opportunity to have a much more
cohesive set of policies to clear up a lot
of the confusion about who is in charge, who
is not, what do these different bodies do.
We're going to see a new EU commission come
about, which is also happening.
And we also have to remember just on the monetary
front, that Carney may-- we don't know yet
how long he'll be staying Bank of England--
and Mario Draghi, head of the European Central
Bank, is leaving in October.
So a lot of these shifts are going to come
together.
They, again, are connected in terms of a tougher
policy, in terms of being more inter-focused
rather than looking at this in relation to
global conditions.
I think all of this is still in the works.
In a way, this October 31 deadline for Brexit
is also going to be part of a broader set
of issues with the central bank, with the
regulatory front, with what is going on in
the United States.
There's a lot out there that right now we
still don't know.
DEE SMITH: So I've heard people say-- I've
heard this in the UK that we'll become a giant
Singapore.
We'll become a kind of almost an offshore
destination.
And, as you have said and is exactly right,
it is a center of global finance.
What's the possibility and the likelihood
that that kind of thing could happen?
Is that just a over the moon kind of dreaming?
IRENE FINEL-HONIGMAN: I think that this is
a little bit unrealistic.
First of all, again, I think there's a bit
of a mythology.
Singapore is not exactly the perfect model
in terms of human rights, in terms of speech,
et cetera that anyone in the UK would be looking
for as certainly still one of the great bastions
of democracy in this world.
I also think that the UK-- the economy of
the UK is much more diverse and much more
complex.
So I'm not sure that could work.
This is almost a little bit the message that
President Trump tried to say, don't worry
about it.
You'll be all on your own and we'll come and
do this great deal.
Well, yes and no.
, Because, yes you can do this great deal,
first of all, only when all of this is 100%
resolved and you're clearly no longer in the
European Union.
So this isn't tomorrow.
And, even at that point, what does that mean
for every sector in every single aspect?
DEE SMITH: The NHS being on the-- IRENE FINEL-HONIGMAN:
Which I thought was marvelously incoherent.
DEE SMITH: But I mean, you're going to start
running into the realities of the complexities
of the world.
IRENE FINEL-HONIGMAN: Exactly.
And I also-- sometimes as awfully frustrating
that the American congress or the British
parliament can be-- these are still very important
bastions of democratic principles and democratic
discourse.
And so that, in a way is, I think, still very
positive.
Not sure anyone's quite ready to go into the
Singapore model.
DEE SMITH: Do you see any-- I'm thinking back
to those riots that happened in London a few
years ago for, apparently, no reason that
anybody could really discern.
Do you see any evolution in the near-term
of this crisis?
Whether it's a second referendum or a hard
Brexit or whatever, that results in something
like that?
Any kind of real social violence, even on
the level of the yellow jackets in France.
IRENE FINEL-HONIGMAN: Well, I think this is
something we have to be extremely careful
about.
Because what we did see with vestes jeunes--
with the yellow jackets in Paris-- was that
one false move by President Macron of announcing
that he was raising gasoline taxes, while
at the same time pushing for massive investments
and basically tax breaks for foreign money
and certainly for the corporate class in France,
it ignited this.
Very sadly, once it was ignited, then, as
very often happens, deteriorated into a complete,
basically, movement of vandalism, of violence
which lost its original purpose and cause.
Something like this can happen.
So the UK has to be very careful that politicians,
in the process of fighting their own little
fight about Brexit, do not, in term, ignite
a genuine sense of outrage and anger.
DEE SMITH: And it's there to be ignited IRENE
FINEL-HONIGMAN: It is there.
It is there.
And it's there in every country.
And I think in Germany-- and, again, because
of German history, in part-- but Angela Merkel
has also had to be very, very careful of exactly
how she's recalibrated and balanced the role
of Germany, particularly as, presumingly,
the largest donor to all European bailouts,
et cetera, with the needs of her country,
her constituency.
And leaders are going to have to really watch
out for that.
There's no question.
And that's why I mentioned that when we talk
about the Russian influence, it's very important
to understand how deep the sense of disenfranchisement
and marginalization and discontent with, basically,
regional and global entities is within countries
themselves.
DEE SMITH: Absolutely.
IRENE FINEL-HONIGMAN: It's there.
And, yes, I think this is also one reason
why the UK will have to be very careful whoever
comes in to replace Theresa May.
And I think this is not going to be an easy
job.
And, hopefully, some solution is found.
And I'm not sure Boris Johnson's the answer.
DEE SMITH: Yeah, you know, it's very interesting.
It's almost like the butterfly effect too--
these little sparks can just ignite a conflagration.
The whole Arab Spring was literally started
by one vendor who set himself on fire because
he couldn't get his cart back after it had
been taken away from him.
And the fire literally spread throughout the
whole of the region.
And so you do have this-- Macron does one
little thing that if he'd done it the week
before or if he'd done something different,
it might not have produced that at all.
But you can't really judge where those things
are.
It's not a predictable system.
It's like what they call a catastrophic system
in mathematics.
It suddenly changes from one state to another
without any real thing.
So I do have that concern in the UK.
And you just wonder if there was, for example,
a second referendum.
And, of course, the question there is, what
would the question be on the second referendum?
IRENE FINEL-HONIGMAN: That's a problem.
DEE SMITH: And I've heard all sorts of versions
of that.
But if there were-- and one side or the other
is obviously going to lose-- and would that
be a spark that would ignite this?
And how would you control it?
I remember-- who was it that said that-- this
was years ago.
And it was a famous book, and he said he described
the British as having barely controlled anger.
And I think that's true.
I think that is correct.
And one doesn't want to reach the point in
which that's let loose.
IRENE FINEL-HONIGMAN: Well, I think this is
the problem in Europe also.
You could almost go country by country in
Europe.
This basically simmering level of anger against
some of the political class, against a political
decision-- this sense that you still are basically
be run by elites making decisions that do
not necessarily take you into account-- is
running right now very deep.
DEE SMITH: It's a sense of betrayal, I think.
IRENE FINEL-HONIGMAN: It is a betrayal.
And we have to remember, of course, in European
history, it's a long tradition of this.
The revolution in 1848 started this way.
There've been other major revolutions and
tremendous changes in Europe that start, often,
exactly with that.
And so the point I always find fascinating
with a lot of European countries-- and, in
a way, maybe that does go back to their almost
deep and sometimes instinctive sense of their
own history-- they often do have these sudden
movements of rage and anger.
And yet somehow at the end, they always seem--
particularly since the creation of the European
Union-- to almost walk to the precipice and
then walk back.
To somehow understand, perhaps on a deeper
level than we do in the States where we have
not gone through what Europe has gone through--
that you don't want to get too close to the
abyss.
DEE SMITH: You can kind of look over.
IRENE FINEL-HONIGMAN: Exactly.
And then, OK.
And we have seen this already in Italy.
We have, in many ways, seen this in Greece.
We have seen this in a number of countries.
Certainly Macron, interestingly enough, has
tried to a little bit contain this by doing
something typically French, which, years ago,
Mitterrand did-- is appeal to the sense of
the country, appeal to the sense of patriotism.
That we're all in this together.
DEE SMITH: Well, that's that center that seems
to be missing-- or under so much stress and
so thin in so much of the world nowadays.
Everything is centrifugal forces-- it's forced
everything to the side.
And in one little crisis, and it's even forced
more to the side.
And it's really problematic.
Going back to markets for a moment.
So in the various evolutions that, from this
point, seem probable or likely-- a hard Brexit
we hope won't happen.
Some kind of negotiated Brexit fading away
of it-- it's just on hold indefinitely-- another
referendum.
You see a temporary roiling in the markets
in both Europe and the UK-- and probably globally.
But do you feel like people have already almost
priced that in in a way?
And so you don't see that this is going to
be the thing that precipitates a serious global
downturn.
There may be one for other reasons, but I'm
saying do you think that there is a risk--
or how high a risk is there that this is something
that would precipitate a real serious issue--
long-term downturn of some kind?
Or do you think that it's already sort of
in there in people's minds, so whatever happens,
there'll be this period where everybody has
to raise their hands up and scream about it.
And then things will go back to normal?
IRENE FINEL-HONIGMAN: Well, I think one lesson
is what happened right after Brexit was announced--
right after June 23, 2016-- where the immediate
response was the Dow fell 600 points.
The pound suddenly looked like it was about
to crash.
Everything looked like, oh, my god, we've
hit disaster again.
And after 48 hours, it calmed down.
It began to calm down, and everyone sort of
stood back and said, wait a minute.
The fundamentals in our economies are solid.
Nothing else has dramatically changed.
We are looking at one set of, now, major political
changes and possible huge problems.
But, fundamentally, from an economic standpoint,
there hasn't been that much involved in this
so far.
That's why I found it fascinating to what
a point these little safety nets are being
laid out in the regulatory side and are basically
being set out so that nothing is going to
have to take place in absolute immediacy--
neither the banks moving or getting-- the
whole concept of bank passporting privileges
across Europe, a bank being allowed to function
each other's countries.
This will continue, basically, for quite a
while.
There's a time to breathe.
There's a lot of breathing space that is already
built in.
This is already built in.
The fact that the pound has not done very
well since Brexit, but it is not done dramatically
badly either.
DEE SMITH: Went from 1.4 to 1.2.
IRENE FINEL-HONIGMAN: And the example I use
is during the absolute worst of the sovereign
debt crisis when everyone was thinking about,
oh, this is over.
Well, it turned out that the dollareuro parity
never went ballistic.
DEE SMITH: No, it didn't.
IRENE FINEL-HONIGMAN: It remained, yes, a
little bit, up a little bit down-- it remained
fairly solid.
Basically, central bank reserves of 65% dollar
and, roughly, 20% to 27% euro didn't shift.
There are so many more larger global factors
that we have already seen do not necessarily
get impacted by political decision and political
crises.
I think that this may be part of it.
The problem is that, psychologically, the
perception of a sudden no deal or everything
just fall-- may be actually more severe.
That may be more damaging.
The sense of, oh, wait a minute, what now?
Not necessarily market responses.
DEE SMITH: Well, Irene, thank you so much.
IRENE FINEL-HONIGMAN: Thank you.
DEE SMITH: This has been absolutely fascinating,
and it's been a pleasure to speak with you.
IRENE FINEL-HONIGMAN: Well, thank you.
Very much enjoyed it also.
Thank you.
DEE SMITH: Thank you.
I want to thank Irene for a fascinating discussion
about the ins and outs of Brexit and its potential
effects in the future.
And thank you for watching.
