SUMMARY
  • Breaking Up Is Hard to Do
  • Brussels Will Play Hardball With the U.K.
  • Concerns Over Currency Manipulation Have Faded

Editor’s note: You can now follow our musings on Twitter @NT_CTannenbaum.

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Parting is such sweet sorrow,
That I shall say good night till it be morrow.

-- Romeo and Juliet

Shakespeare was certainly not naïve to the challenges of governance. He wrote extensively and elegantly about managing alliances in many of his plays. But even the Bard would struggle to find words to describe the impending separation of his United Kingdom from the European Union (EU). The parting is likely to be anything but sweet.

The narrow victory for the Brexit camp last June led many analysts to predict the worst. Doomsayers anticipated the British economy would fall headlong into recession as uncertainty over the country’s future led businesses and consumers to pull back. Investors would find other destinations for their capital, the FTSE index would crash and London property values would return to Earth’s orbit. Political knock-ons in the worst case scenario included secession by Scotland and the reunification of Ireland. The United Kingdom (not to mention the Union Jack) looked like it might require substantial redefinition.

After the initial hysteria, however, calm settled in. The less that Brexit was discussed, the more its consequences receded in the collective consciousness. Forecasts for U.K. economic growth first stabilized, and then improved. And forward-looking economic indicators provided cause for cautious optimism.



There was silence on the negotiating front, largely because the two sides were scurrying to formulate their positions and to appoint spokespersons. But some suspected that there was back-channel bargaining going on that would preserve the substantial commerce that exists between the U.K. and the rest of the EU. There were even those who dared hope that British leaders were quietly pursuing ways to revisit the decision to leave the EU.