The Day Europe shrunk: Brexit and LSE-Deutsche Boerse

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March 29, 2017 will be remembered as the Day Europe shrunk. The letter of Prime Minister Theresa May initiating article 50 of the European Treaty is delivered today. Article 50 was aiming at countries that would become dictatorships or not respect human rights. “It seemed to me very likely that a dictatorial regime would then, in high dudgeon, want to storm out. And to have a procedure for storming out seemed to be quite a sensible thing to do — to avoid the legal chaos of going with no agreement,” the writer of the article Lord Kerr said. It was never conceived as an exit strategy for legitimate Member States. Whatever the intention of the legislator was, the text was ambiguous enough to allow Brexit.

It is the day the European Commission decided to reject for the third time the opportunity to build a pan European capital market by opposing the merger of Deutsche Boerse and the London Stock Exchange. The European anti-trust regulation lacks indeed one fundamental dimension: the global markets. It was creating, according to the Commission, a “de facto monopoly in the markets for clearing fixed income instruments". The triple murder will cost Europe any possibility to avoid the domination of the United States and Asia.


Rightly blamed on the selfishness and political mean spirit of David Cameron and the conservative party, Brexit is now championed by the same party. Theresa May did not sign the fatal letter reluctantly. She is deeply convinced that there is a way for the United Kingdom to have its cake and eat it. The weak European leadership might make it possible, but it should not happen.

French President Charles de Gaulle, was right in saying in 1963 that the entry of Britain into the Common Market would create “problems of a high dimension”. He was wrong to refuse it. The entry of the United Kingdom was, from the beginning, complicated by protracted negotiations offering the UK some exceptions to the rules. It has been the case ever since.

Brexit is a political decision for which Theresa May fought hard with aggressive rhetoric. As the House of Commons approved it, they ignored what we learned since June 23, 2016: the referendum was voted on lies and wrong assumptions and the eight months following it showed the huge risks associated with it.

While the UK has already outlined its approach, the European Commission has slept since then, except for outrageous political slogans that show how much resentment there is against Britain. We do not know what lies ahead, except that a reasonable compromise would be in the best interest of both parties. In october 2016, Michel Barnier, the chief negotiator indicated that he wanted the negotiation to take place in ... French.

London Stock Exchange-Deutsche Boerse

The $ 30 billion merger of the London Stock Exchange would have made the European platform equivalent to Japan and smaller than ICE-NYSE, Hong Kong and the Chicago Mercantile Exchange. It would also have created a European equity market: only the European Commission wants to push an ill-conceived Capital Market Union that, since it was announced, does not include London.

It was also an opportunity to create a bridge with London that is essential if Europe wants to play a role in global capital markets. The dreams to see Frankfurt or Paris supplant London ignores the basic strength of the City: it speaks a global language for global markets. It is the place where the five continents meet.

The fracture proves one decisive characteristic of the European leadership: it does not realize that its policies might actually prove deadly. By focusing on the European antitrust regulation, it ignores that Europe, between the United States and Asia, is actually fights to be meaningful and might not be sustainable.

Every election in a European country (with the noticeable exception of Germany) is questioning the EU membership and considers it to be an anonymous and undemocratic decision maker on matters that the average citizen cares about.

This decision to reject the merger is a confirmation that there is no vision at the European Commission and the Member States on the role of Europe in the highly competitive world we live in.

Europe shrinks

Today, a key Member State has decided to leave the European Union and the European Commission closed the door to an ambition pan European capital market project. It represents a huge shrinking of the ability of Europe to maintain its place in the world. It is a sad day.

It does not mean that Europe will not survive this self-inflicted wound. It needs, however, to look at the reasons why so many mistakes were made. A Europe “a la carte” is equivalent of half-pregnancy. France and Italy are over indebted and increasingly fragile politically and economically.

The challenge is huge… Where will the leadership come from to redesign Europe? It is not impossible, but it requires vision and courage, none of which have recently been displayed.


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