The Strategy of Uncertainty

"Risky Calculation"

The Anglo-Saxon media is currently debating the German government's attitude during the stagnating negotiations on Great Britain's withdrawal from the EU - the so-called Brexit. Many Brexit supporters in Great Britain "have bet their house" on Berlin coming through to help the UK gain both "an exit and free trade deal" with the EU under favorable conditions, a leading British business paper writes.[1] They are basing their hopes on the fact that German businesses are very interested in prosperous relations, because the UK is their second most important investment site - right after the USA - and their third most important customer. (german-foreign-policy.com reported [2]). However, in view of the EU's obstructive approach to the summit at the end of last week, the media is now uncertain whether this is not a "risky calculation," given the fact, that former Premier David Cameron had already miscalculated Merkel's policy before the Brexit referendum.

"Cost-Neutral" Brexit

Financial commentators have not yet abandoned hope. Chancellor Merkel ultimately wants a "cost-neutral" Brexit and assuming this can be done, one commentator writes, there is little reason why the negotiations cannot move onto the second phase in December. All the signs from last week’s EU summit suggested this would be the case as well as the fact that the German Foreign Ministry had stated in a draft paper, just recently published, “we share the U.K.’s desire to secure a close partnership with the Union after its exit that covers economic and trade relations."[3] Even though it remains unclear what is meant by a “deep and special partnership” now mentioned, it would be unrealistic to expect that the German government would want to jeopardize the German trade surplus of 50.4 billion euros in 2016 alone - 1.6 per cent of German gross domestic product - with a "hard," unregulated Brexit.[4] It is also reported that some observers in London consider the FDP's likely entry into the future German government coalition as positive, because of the strong Euro-critical tendencies in the that party.

"Keep Calm and Move to Berlin"

On the other hand, US media are far more skeptical in their assessment of Great Britain's chances of negotiating an advantageous exit from the EU. Commentaries say that the hopes London places in Merkel are illusory; it is rather unlikely that the chancellor will stop Britain from "falling off a Brexit cliff edge."[5] In the British capital, there is a tendency to misinterpret "Germany's position on the EU fundamentally." Brexit supporters were hoping that Berlin must protect German economic interests, while missing the fact that German "politicians and leaders of industry" have been sending clear signals pointing to a "hard" Brexit without a bilateral trade deal. Even after the last EU summit's modest signs of freeing up of the Brexit logjam,[6] it cannot be expected that Berlin will fundamentally relent. It is not in Berlin's strategic long-term political nor economic interest to give Britain the "have your cake and eat it too" kind of deal. It is useless for them to put their hopes in the FDP joining Germany's upcoming coalition government. There is a good reason why the FDP, hired vans to drive around London shortly after the referendum assuring startups and businesses to "Keep calm and move to Berlin."

Hopes for an Exodus

Therefore, Berlin considers that the exodus of companies and corporations to Germany from the British Isles, which could come as a result of a "hard" and unregulated Brexit without a bilateral trade deal, may prove more advantageous than Germany's trade surplus, it has accumulate with Great Britain. Quite a few international corporations had chosen to relocate to the United Kingdom because of its low corporate taxes, and an unbridled access to the EU's market. As a business location, the country's attractiveness was largely due to its EU membership. Germany’s biggest industry group, the Federation of German Industries (BDI), has set up a task force and publicly called on its member companies to prepare emergency plans for a disruptive British departure from the European Union.[7] Many of the EU's cities and regions are already hoping to benefit from an exodus of enterprises from Great Britain, if it comes to a "hard" Brexit. Germany's financial center, Frankfurt is among these.[8] Similar intra-EU disputes have erupted over the redistribution of EU institutions, currently located in Britain, which will be resettled to the mainland in the course of the Brexit.

The "Biggest Point of Leverage"

Influential German media are stirring up the mood. For example, some claim that entrepreneurs on the British Isles are "becoming more nervous by the day, because a chaotic, unregulated Brexit is approaching."[9] The imminent exodus of financial groups forms the EU's "biggest point of leverage" in the negotiations. Once "jobs and production sites leave, ... they never return." In fact, this uncertainty is to Great Britain's disadvantage, and to Germany's benefit. By prolonging this uncertainty for as long as possible, Berlin seeks to squeeze the maximum in financial concessions from London. According to reports, Brexit costs for Great Britain range "somewhere between" 60 and 90 billion euros, which is "the zone, where London must ultimately land."[10] The German government is otherwise using this uncertainty in its efforts to try to hold the euro zone together. A "soft" Brexit to London's economic benefit, could soon motivate others to do likewise, or at least leave the euro zone - because, in the meantime, only fear of the socio-economic consequences of leaving the euro is forcing many countries to stay the course in that monetary zone.

[1] Sebastian Payne: Opinion today: Will Germany save Brexit? ft.com 23.10.2017.

[2] See also A Dangerous Game.

[3] Brian Parkin, Birgit Jennen: Germany Drafts Outline of EU-U.K. Ties Post-Brexit, Paper Shows. bloomberg.com 16.10.2017.

[4] Wolfgang Munchau: Germany's financial squeeze offers Brexit hope. ft.com 22.10.2017.

[5] Nina Schick: Angela Merkel won't stop Britain falling off a Brexit cliff edge. cnn.com 20.10.2017.

[6] The Guardian view on the EU summit: a decent 24 hours for Theresa May. theguardian.com 20.10.2017.

[7] John O'Donnell: German industry group preparing for hard Brexit. uk.reuters.com 06.09.2017.

[8] Frank Stocker: Ansturm der Banker - Frankfurt fürchtet eine Blase. welt.de 04.09.2017.

[9], [10] Thomas Gutschker: Ohne Qualen geht es nicht. faz.net 22.10.2017.