A Tale of Two Cities: A New Hope with Europe? 

Blain’s Morning Porridge, 14^th November, 2023: A Tale of Two Cities: A New Hope with Europe? 

‘If it were done when ’tis done, then ‘twere well It were done quickly”

Athens and London? The power of positive politics is very evident in Greece. Curiously, the surprise appointment of David Cameron as UK Foreign Secretary might just hint at a positive outcome for the UK if it triggers a proper discussion on Brexit failure and our relationship with Europe.

Apologies for the lack of Morning Porridge in recent days. While inflation has been falling in the US and UK, raising the likelihood the Fed and BoE will hold rates steady, and global energy prices show few signals of an upside price break-out to reignite inflationary pressures, markets feel more stable – even constructive? Could a Christmas rally still be in prospect?

This morning I have a tale of Two Cities: Athens and London

I’ve been on business in Greece the first part of this week – I got the last plane back very late last night. Frankly I’m staggered by extraordinarily positive noise from bankers and investors I met about prospects for the Greek economy. When last I was in Athens during the Debt Crisis some 10-years ago, it felt like Armageddon was nigh. The market was rife with rumours of imminent default. Consumers were hoarding cash – fearing an overnight relaunch of the Drachma if Greece withdrew from the Euro. In order to cut back the burgeoning national debt, stringent cuts and austerity measures were adopted. The economy crashed. It was a truly miserable decade for most Greeks.

Today it’s hard to find a Greek not positive about prospects for the economy. Greek GDP is still 38% lower in 2023 than it was pre-GFC in 2008 (€355 in 2008 vs €220 bln), but growth is now taking off. Unemployment is down while wages remain low. There is an expectation of growth strengthening from the 2.5% the IMF expects.

The Greeks I met this week cited multiple factors spurring recovery: repaying the IMF, a reduction in the Debt/GDP number (It remained around 180 most of the last decade, but peaked at 207 during the pandemic and is now down to 173) showing resilience. Others factors include the number of young, educated Greeks returning to the nation with ideas for new businesses, less endemic corruption, a rising number of tourists, a rising number of digital nomads, a better, more professional civil service, positive lessons learnt from the decade of austerity, a more honest and realistic approach to business, a new spirit of entrepreneurship, the success of investments into renewable energy making the country more competitive, but two common factors particularly stand out:

• Political Stability – Although Greek politics remains… “complex”, after the Greek sovereign bond crisis and the political brinksmanship that accompanied it, Greece is now reaping the benefits of years of stable and more honest politics.
• The European Union – directing infrastructure and Covid recovery funds into Greece has unleashed an exceptional multiplier effect on the economy. Many Greeks still blame Europe, and especially Germany, for their economic pain, but also acknowledge its Brussels support that’s sustained the nation and is now fuelling growth.

Many Greeks believe Covid funds from Europe were the single most important factor behind recovery. One crossed himself as he dared to suggest another pandemic could be the making of the nation! I asked one particularly ebullient CEO I met what most concerned him in terms of the Greek economy and global friction – expecting something bland about uncertainty and rising global tensions. Instead, I got a direct: “Nothing worries me, Greece is on course for continued growth for at least the next 5 years, and my business is to remain fully aligned with that growth.” Ok. I’ve heard that kind of confidence before… and it didn’t end well.

Even the lawyers are telling me they are positive on the economy – one was particularly honest: “Greece is a success story because we are massively cheap.” There are issues to be concerned about; more than one Greek told me the economy will boom when Russian money returns, perhaps not understanding the likelihood that avenue is permanently closed.

The early lesson to draw from Greece is political stability and competency works. It’s a lesson not to forget in the UK.

Back in London, the mood is not so positive…

Prime Minister Rishi Sunak’s decision to appoint former Tory premier David Cameron as Foreign Secretary has been analysed to death in the paper and chat shows the past few days. Its either a streak of genius or a moment of desperate political failure  – I guess we won’t know till an election reveals all. It’s kicked off yet another outbreak of Conservative civil war – as if anyone outside the Westminster bubble really cares.

My first thought was to be absolutely scathing about Cameron’s appointment. Let’s face it, he was no great shakes as Prime Minister – but he was occasionally clever. He won his second term in office with an increased majority in 2015 by dint of persuading voters the first five-years of pointlessly damaging austerity (at a time when cheap interest rates should have been fuelling an economic boom, rather than the repressed economic fizzle and massive financial asset inflation) was all the fault of his coalition partners – the Liberal Democrats. They were effectively wiped out at the polls, giving the Tories a majority by default.

Then he threw everything away by loosing the foolish Brexit referendum. Rule one: never hold a vote you might lose. He resigned, and looked set to be a footnote in history, famous only for dodgy dealings with Australian financier Lex Greensill, writing memoirs no-one has ever read in his purpose-built shepherds caravan – and rumours of porcine shenanigans. For the last seven years he has stayed well clear of politics – cutting a rather dejected figure when occasionally spotted. Celebrity everyman farmer Kaleb Cooper (Jeremy Clarkson’s foil on Clarkson’s Farm) lives in the same village and had no idea who he was…

To say I was surprised by Lord Cameron’s appointment would be an understatement. The Guardian summed it up nicely – the Conservatives scrape the Gene Puddle of Tory Talent and the answer is David Cameron. Hah ha ha.. Who knows what was going through Sunak’s head when he made the appointment. Who cares… but….

On the other hand… maybe Recall me Dave is not such a bad thing because of the signals about reconciliation and Brexit it may intentionally or unintentionally have sent.

The Tory right-wing are understandably furious that Cameron has been brought back into the fold – they see it as a clear betrayal of Brexit. Cameron carries too much baggage to be a popular vote winner himself, but Sunak is showing a pragmatic streak in appointing him to such a key position. Cameron was the public face of Remain. By appointing him is Sunak signalling a closer, more constructive relationship with Europe?

Although the right-wing will scream that’s a betrayal of the holy idol of Brexit, the bulk of Tory voters are not fools – they can see the reality: Brexit has delivered none of the benefits that were promised. Mistakes were compounded by the absolute dither and failure by Boris et al to deliver it. It has hit consumers in the pocket and makes going abroad more troublesome. In short, voters increasingly perceive Brexit was a mistake. They want it sorted.

Appointing Cameron to talk for the UK at the international table may open the doors for a proper discussion and post-mortem on Brexit. There is no point continuing to pander to fulminating Brexiteers. Let’s be grown-ups, acknowledge it failed, and do something to mitigate the negative effects! Let’s have a rational, reasoned economic discussion about how to fix it! For too long no one has dared openly speak about it – scared the Brexit right will berate any politician or commentator with the temerity to question the will of the 52% of those who voted, who voted to leave. (That’s a smaller number than 52% of the eligible voters – lest we forget.)

Yes… we can’t deny or forget that a slim majority – but a majority nevertheless – of Brits voted in favour of leaving Europe. That was then. This is now. Things are not what we expected and were promised. The negative consequences and effects upon the economy are increasingly clear. The reality is Brexit was not done well. It has not delivered any discernible Brexit Bonus or Dividend.

I will publish/approve any reasonable comment outlining any positive benefits from Brexit.

The economic reality is Brexit did not free the UK economy. It slammed on the hand-break. It is an anchor holding us back. It has unravelled the many national advantages the UK had over Europe in terms of law, regulation and language. Brexit wins have been few and far between – I can’t think of a single one. Support for Brexit is largely “whataboutisms” rather than quantifiable facts. Whether its being stuck in a passport queue for hours, or being unable to sell goods into Europe, the costs to the UK economy of a fractured European relationship are very real.

How many Brexit voters regret their choice? That’s a fair question to ask. I admit I voted for Brexit and I now regret it. I was a fool. Hindsight is a wonderful thing.

I suspect much of the country feels the same way. Time we admit it. If the Conservatives are willing to talk about Brexit, then so should the Labour party. What kind of new relationship with Europe should the UK have? That’s a fair and honest question. It’s a question we should ask. If we do, then it’s another reason to be positive about the UK’s future prospects.

Five Things To Read This Morning

FT                     The Case for Loosening is Getting Stronger

WSJ                  The $2 Trillion Interest Bill That’s Hitting Governments

BBerg               BOE Chief Economist Pill Warns UK Pay Growth “Stubbornly High”

Businessweek   Why It’s So Hard To Make Money in Space

Torygraph         The Cassandra warning that central banks are driving the world’s economy off a cliff

Out of time, and back to the day job…

Bill Blain

Strategist and author of the Morning Porridge