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Posts published in “Day: June 2, 2019”

Britain’s ugly Brexit explained


Sir Xavier Rolet's explanation to the City Club of Idaho Falls about the significance of the controversial British exit (“Brexit”) from the European Union (EU) could not have come at a more momentous time. The former London Stock Exchange Group CEO addressed the club on Thursday, May 23.

The very next day after he spoke, a tearful British Prime Minister Theresa May announced at No. 10 Downing Street in London that she would resign on June 7 after three years leading the United Kingdom – primarily due to her failure to finalize Britain's divorce from the EU.

Rolet's talk also coincided with the start of European Parliament elections that weekend which saw far right political parties surge in popularity and gain a sharp increase in delegates, causing a seismic shift among the 751 members representing more than 512 million people from 28 European member states.

“A new Europe is born!” Italian Interior Minister Matteo Salvini, the leader of the Lega Nord (League), declared after his far right political party won the majority of votes in Italy's shocking election. “I am proud that the League is participating in this new European renaissance.”

The Daily Mail of London reported: “The surprising result comes on a night of high drama. In France, Marine Le Pen’s right-wing group National Rally secured victory against Emmanuel Macron’s En Marche. Germany also saw leader Angela Merkle lose six seats, but continue to claim a majority. And in the U.K., the Brexit Party completed a historic win as the region’s split over leaving the EU deepened.”

(picture: Sir Xavier Rolet, right, discusses Britain's exit from the European Union with veteran Idaho Falls banker Park Price/Mark Mendiola)

Brexit Party leader Nigel Farage tweeted following his victory: “Never before in British politics has a party just six weeks old won a national election. If Britain does not leave the EU on October 31st, these results will be repeated at a general election. History has been made. This is just the beginning.”

A French businessman, Rolet has been chief executive of CQS Management Ltd., a global investment company, since January. He was CEO of the London Stock Exchange Group from May 2009 to December 2017. As of April 2018, the London Stock Exchange's market capitalization stood at $4.59 trillion.

Rolet was knighted by Queen Elizabeth II in 2015 and named as one of the best 100 CEOs in the world in the 2017 Harvard Business Review. His great grandfather was a founder of the French Foreign Legion.

Rolet owns property in southwestern Montana's Centennial Valley, which is part of the Greater Yellowstone Ecosystem, a 385,000 acre wildlife corridor that links the Yellowstone and Salmon-Selway Wilderness habitats.

Through the Centennial Valley Association, Rolet became acquainted with Jerry and Carrie Scheid, Idaho Falls residents who also own neighboring property in Montana. As a result, the Scheids – City Club of Idaho Falls members – invited him to address their organization.

Rolet told the club that if nothing of sustenance happens between now and October 31, the United Kingdom will be bound by law to leave the European Union on that date in what he called “a cold turkey separation,” deeply impacting Britain's position in relationship with the rest of the world.

In a June 2016 national referendum, the British voted by 52 percent for the United Kingdom to leave the European Union. Rolet described the past three years as a time of “amazing contradictions,” calling May “a Remainer prime minister leading a deeply Brexiter party.” He commented that opposites often attract.

The British people generally believe political representatives made a mess of negotiating the Brexit process and have been disappointed in the political class, Rolet said. “The public in general is fed up that everything has been put on hold.”

The European Union, he noted, arose from the ashes of World Wars I and II. It was designed to prevent future wars in Europe by binding Germany and France initially in a steel and coal community, but expanding to establish economic and political unity on the continent.

In 1963 and 1967, Britain applied to join the Common Market, but it was rejected both years by France. In 1973, Britain entered the European Economic Community. Two years later, British people voted 67 percent in a referendum for the United Kingdom to remain in the EEC – the EU's predecessor. In 2002 when 12 EU countries introduced the euro as legal tender, Britain opted out, keeping the pound sterling as its currency.

For more than 40 years, Britain has been deeply integrated with the European Union, Rolet stressed. It at one time was one of the top economies of the Group of 8 industrialized nations, “but today it is the bottom of the pile.”

During the 2016 Brexit referendum, London was a “gleaming metropolis” bustling with business, the arts and other activities, but the rest of Britain's economy was hurting. Most of London's residents voted in favor of remaining in the EU, but following the financial crisis of 2008, “the United Kingdom was particularly left behind.”

He said the way for the EU to survive is to prosper, but some 22 million people are unemployed there. The majority of British voters who favored leaving the EU “were given the opportunity, pardon my French, to 'stick it to the establishment',” Rolet remarked, noting “even in the best of times, 'blue chips' do not create jobs.”

The economic consequences of Britain exiting the European Union remain to be seen, but some have feared they could be severe, he said. Belonging to the EU has hedged Britain's interest rate and foreign exchange exposures, Rolet added, emphasizing that extricating itself from the EU will be extremely difficult and “really, really complex” for Britain.

It will be left to the market to sort out hundreds of trillions of invested euro-denominated securities and 150 trade agreements signed by the EU that cover the United Kingdom, Relot said.

In history, nationalism always has arisen as a sign of decadence, he said. By 2022, it has been estimated that the United States and China will account for 52 percent of the world's gross domestic product and will own 75 percent of global financial assets.

The U.S. is by far the world's mightiest military power while Europe has virtually no military capability left, Rolet said, adding neither Britain nor France could put 50,000 combatants on the ground.

Rolet accurately predicted that Theresa May would probably be replaced by early June as Britain's prime minister because of her failure to finalize Brexit. The status of 1.9 million British citizens in the European Union, meanwhile, remains unsettled.

“There will be many, many more years, possibly a decade, for these issues to be resolved,” Rolet said, predicting the United States, China and Russia will be the dominant economic and military powers in the near future as the world moves from its post World War II binary status between the U.S. and USSR to a multi-faceted outlook.

“Don't be surprised if there is a peace treaty between Russia and the United States in the Middle East,” Rolet said, adding that reforms in Saudi Arabia also could lead to peace between the Saudis and Israelis. He also predicted the U.S. and China ultimately will sign a trade agreement, ending the increasingly hostile trade war between the two super powers.