The Combustibility of Brexit (w/ Dr. Irene Finel-Honigman and Dee Smith)
DEE SMITH: Irene, welcome, and thank you for being here today. IRENE FINEL-HONIGMAN: Thank you. DEE SMITH: So we're going to talk about this little issue called Brexit and its implications. And I'd like to start by asking you what do you think the state of play is today in Brexit. What's led into it, brought us to where we are today, and where are things? IRENE FINEL-HONIGMAN: Well, I think what is fascinating about Brexit, it's both, I would say, an irony and a farce. It's an irony because when we look at the history that brought it about and the complex relationship between the UK and Europe going all the way back to the start of the European Union, it's never been a comfortable state of affairs. The UK originally wanted to come in. It was Charles de Gaulle in France who absolutely hated the Brits at the time and said, no. They did not come into the European Economic community until 1973. And it was always a relationship of being in it but not totally being of it. Once Margaret Thatcher comes into power in the late 1970s-- 1979-- the situation becomes even clearer. She wants the European Union, as we move toward economic community to the European Union, to actually serve best the trade interests-- the agricultural interests, the open market interests-- of Britain, but not in any way to impose itself upon Britain. The real decision takes place in 1991 when it's about to start the European Monetary Union, and it's about to start a far greater integration. And it's fascinating, because no one had a better relationship-- we have to remember in geopolitics-- than Margaret Thatcher, Mitterrand, Chancellor Kohl, and Reagan and then Bush. This was an extraordinary group of leaders who basically ran the whole show for nearly 15 years. And yet, Margaret Thatcher, from the very first day, said, no. We will only be part of a very general structure of a European Union. We will never, ever give up sterling. We will never give up the Bank of England. We will basically never give up our full sovereignty. The reason I mention this is this is where there's the irony. Brexit was a cataclysmic mess that never needed to happen. It came about because David Cameron made a foolish decision in 2013 because there was already all this anti-EU, anti-euro, anti-globalization movement across Europe brought on by the sovereign debt crisis and then the migration crisis. In order to humor, in part, this constituency and to bring them to his side, he said, you know what, if I'm re-elected in 2015, we'll do a referendum on this issue. I personally feel referendums are one giant mistake. And along comes, of course, he is re-elected. And along comes June 23rd, 2016. And there is a referendum. And, as you know, the referendum, interestingly enough, was 52 for leave, 48 for remain. From day one, it was clear that the UK was split. DEE SMITH: So you've said that, really, Margaret Thatcher delivered a soft Brexit. IRENE FINEL-HONIGMAN: Yes. DEE SMITH: And so it really is ironic that this whole thing had to be revisited. IRENE FINEL-HONIGMAN: Exactly. It's ironic, and then at the same time, because there was never-- forget about a plan B or C-- once Brexit occurs, there was never a plan A. Because I think on a very deep level, certainly the British establishment, the political class, the intelligentsia, universities certainly assumed that, yes, this is all very interesting. It will allow everyone to express their view, but this won't really happen. We certainly saw exactly the same situation in November 2016 with the Hillary-Trump election. These are situations that suddenly occur. And they are cataclysmic moments, and the most awful thing is when nothing's been put in place. Cameron is forced to leave, and Theresa May comes in. And I just want to say, I personally do admire Theresa May. I think she was put in the most atrocious position and took on probably the most thankless job possible in any government. DEE SMITH: So this has happened, and here we are. And now it seems that there are three probable outcomes. There's the hard Brexit-- leaving with no agreement. There is a second referendum of some kind-- however that might be phrased. And then there's a new election-- a general election. Do you see any other alternatives? IRENE FINEL-HONIGMAN: I think what is oddly interesting is the Europeans now, with this brand new deadline having basically crashed through the previous absolute deadline of March 31, now on to October 31, 2019-- the Europeans now are setting out a kind of weird scenario of either, basically, no deal. Either going back to something of a sort of more soft deal-- either, oddly enough, just canceling the whole thing. We are, again, in uncharted territory, because the way Brexit had to come about according to the rules and laws of dictating the European Union and the conditions of the EU was that Theresa May had to invoke Article 50. And she did that in March 2017, which had that two-year transition period onto a final decision. The question is now, how set in stone is Article 50? And are we now looking at a possibility of simply revoking Article 50? We don't even know what that means. DEE SMITH: Do you think that's a possibility? IRENE FINEL-HONIGMAN: I think that maybe-- I don't think the Europeans threw that out, particularly with Macron and Merkel simply perchance. That may be a possibility, because, at the end of the day, from the other side, the Europeans-- the European Union, specifically Angela Merkel and once Macron becomes president-- they didn't want this. Nobody wanted, basically, Britain, the UK, to be off the table-- to no longer be at the table. DEE SMITH: Do you think that, from the standpoint of the EU at this point in time, there is a unified vision about what they would like to see in terms of Brexit? Or do you think that there are a lot of different visions? That the French look at it one way, the Germans another, the Italians another. Obviously there's Poland, Hungary, and Greece and all these other countries-- how does that play in? Is there a center? IRENE FINEL-HONIGMAN: Maybe there was originally a center. I think when this decision occurred, I would say that the first year-- that year of 2017-- they assumed this would follow certain procedures. If really this had to occur, Theresa May would invoke Article 50, which she did. And then from then on, this would somehow have a not smooth, but certainly fairly cohesive transition. And that the Brits, in turn, would begin to offer some very definitive conditions they were comfortable with, and then room to maneuver. So I'd say that there was more of a kind of together kind of attitude. And certainly Donald Tusk, as one of the most important voices in the European Commission-- Junger, et cetera-- wanted to work with the UK to find and resolve this issue. The problem was that when it became clear that on the UK side, whatever plan was put forth was immediately shut down. That Parliament was becoming more and more fragmented. That the divisions within the UK were becoming more and more rigid. There began to be much greater concern, because the question is that this began to be a problem that the Europeans did not want and the Europeans simply did not quite know how to deal with. We also have to remember no one has ever dropped out of the European Union before. There were all these threats. The threats were called Grexit. Occasionally we'd-- horrible word-- tended to be sort of attached to other countries. But there was very little reality behind it. Because, at the end of the day, every country understood if you drop out, there go your subsidies, there go your free market. There goes basically all credibility in global markets. And now what? The UK is not Greece. UK is not Italy. The UK is a global power unto itself. And the UK is not part of the eurozone. So all of these issues that were somehow crucial, basically, but then looking at some of the other countries, this was a whole new ballgame. Now, the problem was that what now had to be decided was, how do you even go about this? If they don't seem to be able to do it, this fell back on the Europeans. The burden began to be the Europeans' burden to sort of figure out how do we do this. They don't want them to do it, but it looks like we're going to have to do it for you. The problem is, remember, the European Union when it was originally created-- and this was sort of marvelous in a way. It reminded me of the American pop Eagles song "Hotel California"-- You can check out anytime, but you can never leave. And that's basically what the European Union was. Suddenly, they changed the lyrics. Suddenly, everyone's looking for an exit. The problem is this is not-- there are no precedents. There's nothing in place. So it always had a sort of ad hoc nature. And everyone was reacting to everyone else. And May, I think, made an enormous effort to try to give in as much as possible to the demands of the European Union-- certainly within the conditions for trade, with sort of the so-called divorce bill, what the amount would be, how to basically structure this. And every time she'd come back, and it got shut down. DEE SMITH: Do you think that that's essentially a problem that's within the Conservative Party? In other words, is the real problem not the fragmentation of the UK and the fragmentation of parliament per se, but the fragmentation and the infighting within the Conservative Party? Because it seems to me that a lot of people in the Conservative Party care more about the party than they do about the nation. And whoever ends up being voted the leader after Theresa May is going to face the same set of problems. They will not be able to deliver something, it seems to me. What do you think about that? IRENE FINEL-HONIGMAN: I think that's exactly right. I think, unfortunately, because Theresa May's plans were shot down, whatever lack of credibility she already had-- because, again, she was excellent home secretary but not seen as truly material to be prime minister. That increased this problem of credibility and of trust. And it made it even easier for any of these other members of parliament with differing views to become more aggressive. And, in fact, yes, right now the rifts within the Conservative Party plus the total fragmentation and poor leadership on the Labor side, and the inability of any of these groups to have, right now, full support of the country at large as we do see also other parties coming back to the forefront. Certainly the Green, as in every country in Europe-- the liberals. So the situation with Brexit, which has, in a way, moved, really, from irony to almost tragedy, is that the parties themselves have no longer kept real cohesiveness. DEE SMITH: It's interesting to me that Theresa May was a remain person. She then-- I'm going to spin a train of thoughts here, and tell me what you think about it. Theresa May was a remain person. She then went totally over to leave, because she said to not make Brexit happen was to not respect the wishes of the English voters-- of the UK voter. So fast forward to what we now know-- and I'd like to ask you what you think we do know-- about Russian money and other kinds of influence in the original referendum. Which, in my mind, calls it into question-- whether it actually did reflect-- I mean, was it a corrupt referendum? And if that's the case, then how would enforcing it be actually-- when we don't know the extent to which it really did represent, if we don't know the extent to which it did represent, the wishes of the UK electorate, then how can enforcing it actually represent the UK? I mean, it's a big argument for a second referendum. So two questions-- or three. Do you think that that's a valid way of looking at it? Second, what do we know about Russian influence and money in this election? And my third question is, why is that not a bigger issue? Why are senior politicians not making that the main question of the day? IRENE FINEL-HONIGMAN: I think clearly we now know that, particularly with media incursion and ability to spread so-called fake news, false information-- certainly there was a certain impact that Russia had, just like we can say there was a certain impact in, basically, hacking into the US elections. There's no question. But I really think that we have to be very careful not to give too much weight to that argument because when we think of the overall environment in which Brexit takes place, we are already looking at least five years of profound discontent across Europe. We are also looking at a Europe that has just gone through the sovereign debt crisis, which, whether countries wanted it or not-- and the UK felt it didn't deserve it-- had actually been pushed into near recession, have had their entire business cycles and trade balances thrown off, and have had to suddenly cope with this really surging movement of anti-EU, anti-globalization, anti-euro. And what is so interesting is even smaller countries in Europe, that they would decide-- all of a sudden they were scared if we leave, we lose all the advantages. But we don't want to stay and be constantly told by Brussels and told by, basically, nameless, faceless bureaucrats, and, worse, told by Berlin what we can or cannot do. And this is a very fundamental psychological rupture that has occurred in Europe within less than a decade. And I think we can not underestimate this. Because I found it fascinating right before Brexit when certain polls were taken, and when actually people in smaller parts of the UK and disenfranchised areas in former major industrial cities and fishing villages-- when they were asked, what do you think of the representation that you basically have in the EU? And most of them just stared blankly. They had no idea who represented them, who was making these decisions, why. All they knew was that this was beginning to impact on them and on their Britishness. They could regain. And the concept of sovereignty-- it's a word that gets thrown out almost as a cliche-- but there's a profound atavistic cultural resonance to how do you define yourself, particularly if you think some foreign person in a foreign country, particularly in Europe, is suddenly coming and announcing to you what is good for you. This cannot be underestimated. So I think, yes, there was the, basically, influence of Russian money. There also is now the influence, which is actually even more profound, of money laundering issues, which are touching on all major global banks-- particularly European banks. So there is no question of a lot of internal corruption. What I found interesting was that Boris Johnson's message was so shocking. Because, basically, Boris Johnson came out with a series of downright lies, working exactly into this mythology, this nostalgia. Ah, those evil Europeans will be gone, and all this money will suddenly reform our national health system and do wonderful things. In my view, this was shocking. This was atrocious. This was taking what was already a sense of unease and fear and feeding into it. I have the solution. There was no solution. And, very sadly in the US, we saw the same thing with the coal miners in West Virginia, with small towns where we've told that no, no, no, forget about it. No globalization, none of this strange technology-- we're returning to a wonderful time where we make America great again. What does that mean? So this is where I would say we had a confluence of events and a confluence of different factors that played into it. But there were much deeper elements of discontent. And this is, again, coming through. If we just think what happened in the fall of 2017 the German elections-- for the first time since World War II, a party with basic neo-Nazi roots feeding into exactly all of these anti-EU psychological element managed to get into Parliament. Marine Le Pen in France, whose party now has actually done well in the last EU elections just two weeks ago. This problem, it was almost like the Russian influence was the icing on the cake. But the cake was there. DEE SMITH: Well, of course, this nostalgia has been-- I've looked at it a lot myself-- it's being studied quite a bit. I recall a friend of mine who was talking to some people in the UK about Brexit. This was more than a year and half ago. One person said, we would be happy to be measurably less wealthy to be measurably more British. And I have since repeated that to other people in the UK. And they said, yes, that's it exactly. Which is an interesting sentiment that you would not have-- 15 or 20 years ago, you wouldn't have believed it. If somebody had written that in a short story, it would have been-- it was too much fiction. But yet, that's where we are today in the world. And this idea of make it like it was-- and, of course, life is never like it was. And our memory of life is false. And we don't remember what the 70s were really like. We make them into these halcyon days, and they weren't like that at all, particularly in the UK-- the council flats and all these. So the origins of this feeling of ennui and this feeling of being put upon and the feeling that things are much worse than they have been is an illusion. But it doesn't matter, because it's so emotionally resonant to people, because they find themselves confronted with a world filled with change and change happening more and more extensively and more and more rapidly-- and filled with people who are not like them. And it's a very uncomfortable position for many people-- some people not, but it is for many people. IRENE FINEL-HONIGMAN: And I think this also does bring up that problem of migration, and the fact that Europe basically was almost torn apart by the pros and cons of the 2015 migration crisis in which Angela Merkel, for all of the right moral reasons, took, however, a decision which, unfortunately, was not always understood where the consequences could be. Interestingly enough, the problem in the UK, which was sort of brought again to the forefront of Brexit, was not necessarily that relevant to what's really happening in the UK versus what was happening across borders in Greece, in Italy, and in Central and Eastern Europe-- not at all. But something somehow surged. DEE SMITH: Well there was-- I mean, I think you have to talk about two different kinds of migration. You have immigration in migration-- migration from the outside of the EU into the EU, which is what set off Germany. And then you have the migration within the EU that's part of the Schengen agreement. And that's what I think the British, the English particularly, have an anathema of seeing all these foreigners who are plumbers or whatever they are speaking different languages. And, I mean, it's just somehow very upsetting to them. And so it's not really Angela Merkel's decision to let in however many Syrians into Germany, it's the fact that there are Germans and Poles and people from other parts of Europe in Britain doing jobs that need to be done. But it's still very threatening to them. IRENE FINEL-HONIGMAN: Oh, I totally agree. And I think, again, what is so sad is that there has now been a sort of blurring of all of the positive aspects of bringing in Europeans and having open borders. And we have to remember that the UK did not sign onto the Schengen Agreement in 1985. Interestingly enough, they were tremendously upset about something they weren't actually all that forced to do it to begin with. DEE SMITH: It's really very interesting, isn't it? IRENE FINEL-HONIGMAN: But the idea of people wanting to come-- in particularly, exactly, Polish students and Hungarian and German, et cetera. And this interplay, which is one reason why when you looked at the demographics, young people wanted to remain in Europe. Because for young people, it was a sense of these massive opportunities offered by the European Union, and, particularly, even educational opportunities under Erasmus, under so many programs which everyone benefited from. And yet, at the same time, there was, again, this sort of odd, almost instinctive animistic fear coming in much poorer, much less urban, less, in part, educated parts of the UK where, oh, now we won't have these foreigners. The tragedy was most of the foreigners were from former countries of the British empire. I mean, it was so sad. And this is where I really saw this functioning, at times almost becoming farce, because it didn't make any sense. And then sadly, from farce, there is that risk. Do we then move to actual tragedy? What does this bring about? DEE SMITH: Well, and, of course, the rural-urban division is a key thing, I think, not just in the UK, but really almost globally. Because what you need to survive, what works in an urban environment is a certain kind of interaction. It's a certain expectation and willingness and reality of seeing all sorts of different people all the time. It's being open to two things. It's a means-based things rather than an ends-based thing. They're almost the opposite of what works to survive in a rural area where you know everyone. You're going to see the same people over and over. It's very familiar. It's not full of change and dynamic. And I think it's sort of the same way that you need a different set of tools to survive in the jungle than you do to survive in the desert. And yet people give it a moral dimension in both directions that becomes very destructive. IRENE FINEL-HONIGMAN: And I think this is where this issue-- and we can almost go back to the original NAFTA from 1993 on-- what was sort of the response to suddenly saying, we have to open to the world. We have to develop regional alliances. We have complete interdependency and trade. When we now look, for example, at any major bank and everyone can say, this is a British bank or a French bank. Well, how nice. But, in reality, probably most of the profits of these major, systematically important banks and even smaller banks no longer come from home country. They actually come from foreign operations. They come from international presence. So the issue is, and the counterpoint of that, is were such an institution to fail, this would no longer be a self-contained country problem. This becomes a multi-country, or it becomes a global issue. And this is the same thing in so many different sectors. And this, I think, is profoundly misunderstood. And politicians have done a miserable job of explaining it. DEE SMITH: I agree with you. And you know the other thing is that if you've talked to any military historian, they will tell you that nationalism is a prelude to war. I mean, it almost always goes in that direction, which is an extremely unfortunate thing that our politicians either don't understand or won't understand. And it is really problematic. So here we are, to get back to Brexit, and the Europeans have tried to accommodate-- I mean, there's some other interesting questions about Europe. But to re-center it on Britain, or on England, even, what do you think-- I mean, we have these three alternatives. What's the chance of a hard Brexit at this point? IRENE FINEL-HONIGMAN: I think that, basically, it's not a solution. I think everything, oddly enough, will be done to somehow find something at the end, probably much closer to the November 15, 2018 plan that Theresa May finally got accepted in the EU and so desperately wanted to push through Parliament. In other words, something that often is more semantic rather than substantive, but that offers long transition periods that actually allows the UK not to go into basic economic shock, certainly, and that might even find a way to resolve the awful Irish issue and question that's floating out there, which is completely misunderstood or not understood by anyone. And find some kind of muddle-through solution. This, in my view, may, at the end of the day, be the only way. Will they actually push it to try to cancel it? That can be dangerous politically, because then it could look as if you're completely going against what was defined as the will of the British people. A referendum in the UK, even in the best of circumstances, I still see can be tricky. It depends so much how is it basically presented. There are still risks, and then what? So I have a feeling, and I hope, that everyone will take a little bit of time and realize this is basically, it's never going to be a win-win situation. How can we possibly find something that is not a lose-lose situation? DEE SMITH: It trends towards lose-lose. IRENE FINEL-HONIGMAN: And that could be absolutely awful. However, I do want to say-- and the reason I'm a little bit optimistic about this is that way behind the scenes-- you know, we have to remember the problem about the UK-- a hard deal or no deal or some kind of drama-- is the UK is still a global financial center. The irony about the UK in relationship to the euro is, although it doesn't have the euro, it is the global center for euro-denominated transactions. You have a huge amount of global derivative transactions. You have basically the UK capital markets. You have every major bank is in London. What I found fascinating is starting in February, how many agreements have already very quietly been set in place with the European market directives regulatory body to give everyone a lot more breathing room? European banks in the UK do not necessarily have to reapply for a license about a three-year period. A number of other firm promises have made that derivative trades will be honored and will come to fruition. So what is interesting is behind all the bluster and noise, there are a lot of very good people who are very carefully trying to create some kind of safety net. DEE SMITH: Even in the case of a hard Brexit. IRENE FINEL-HONIGMAN: Even in the worst case scenario-- some kind of safety net. With that in mind, there may after all be a way to somehow-- and I always find one of the loveliest words sometimes that politicians use is the word extension, rather than calling directly a delay. Or calling it, we have no idea what we're doing. But, rather, let's call it an extension. I have a feeling we may, first of all, end up October 31-- I'm not sure how totally total this is-- we may end up with another extension. And slowly in there, Boris Johnson is right. He said, eventually a lot of the sentiment may start to fade, which is not to his advantage. But that may happen. DEE SMITH: And there are numerical estimates that you've already tipped that to the number of people who would vote to stay being a higher percentage-- enough of a higher percentage of the populace that that's the outcome of the vote. I mean, lies, damned lies, and statistics. But, nevertheless, I mean, things are changing over time. IRENE FINEL-HONIGMAN: I think so. And I think as people finally begin to realize, what does this really mean? Not what was I told. Not this sort of huge, rah-rah sentiment, but, fundamentally, wait a minute-- what does this really mean? DEE SMITH: So to go back to markets for a bit. You're not as worried about issues like breaking the share trading markets. And you think those things will be worked out. IRENE FINEL-HONIGMAN: I think so. Much of this is still up in the air. There's no question that if suddenly there was a no deal or something dramatic, there would be a shock to the pound. We would see global markets then react I mean, there would be a very difficult few weeks or few months. But this is exactly what everyone being completely aware is what we spoke about, that nothing is now self-contained. This bizarre vision of the UK suddenly becoming totally selfcontained, it doesn't work. And I found, in fact, I was watching that little clip of the Queen's speech that was such an extraordinary message of history demanding and requiring that we honor the institutions and the structures that have helped us get where we are today and go through the worst of crises. DEE SMITH: It was opined-- to the liberal international order, as we used to call it. IRENE FINEL-HONIGMAN: That's right. And it's no question it has to be changed. We cannot simply accept a status quo that was established between 1944 and 1949. That's not the issue. But the issue is how do we do it in a way without pretending the world has not changed? And how do we do it in a way that also respects these changes and allows us to incorporate them? DEE SMITH: Well, of course, this brings up the issue of the EU-- it does need to be reformed. And Brexit may sort of have been-- maybe the UK had to shoot itself in the foot in order for the EU to mount a serious effort for reform. Do you think that's the case? IRENE FINEL-HONIGMAN: First of all, I certainly hope so. And I definitely do think so. And, in fact, what everyone now seems to be saying in Europe is the one advantage of Brexican Trump is it's finally forcing us to get our act together. And this is actually a fact. DEE SMITH: So do you think that-- I mean, I've heard it said that, particularly Brexit, has an inoculation effect on other countries in Europe-- that they won't try this sort of thing at home, so to speak. IRENE FINEL-HONIGMAN: Absolutely. DEE SMITH: But do you think that it will have an amelioration effect on nationalism? That doesn't seem to be the case. It seems like nationalism is still there, it's just being expressed in different ways that don't necessarily result in Frexit or Grexit or any of those other horrible-- IRENE FINEL-HONIGMAN: Yes. I think that, first of all, a number of countries that at one point, first of all, had been close to violating the norms of the European Union-- certainly Hungary, certainly Poland-- and other countries, despite that, all of a sudden are very careful now about deciding-- oh, no, no, no. We definitely want to stay, so can we figure this out attitude. What these last EU parliamentary elections proved is that these extreme parties are still strong, no question. But, interestingly enough, they're not overwhelming. And, interestingly enough, however, the center may not necessarily be traditional right and left parties as we defined them for the last 50 years. They may in fact be mutating and bringing in much more ecological issues, much more green issues, a much younger demographic, much more sort of liberal worldview, which doesn't accept globalization but which also demands a whole number of safety nets for populations at large. And so we are looking at a moment of transition. We're in a tremendous moment of transition. The European Union, I think, during the eurozone crisis, everyone assumed, ah, it's all over. It's gone. Well, it's not. It has gone through so many crises. And, somehow, a lot of the fundamental institutions and principles are still very much in place. By now, oddly enough, the intensely hated bureaucracy has also created a very tight web of interrelationships between European countries and a sort of interconnectivity. So all of these factors are very much to the advantage of the European Union. The question is that the European Union now is given an opportunity to have a much more cohesive set of policies to clear up a lot of the confusion about who is in charge, who is not, what do these different bodies do. We're going to see a new EU commission come about, which is also happening. And we also have to remember just on the monetary front, that Carney may-- we don't know yet how long he'll be staying Bank of England-- and Mario Draghi, head of the European Central Bank, is leaving in October. So a lot of these shifts are going to come together. They, again, are connected in terms of a tougher policy, in terms of being more inter-focused rather than looking at this in relation to global conditions. I think all of this is still in the works. In a way, this October 31 deadline for Brexit is also going to be part of a broader set of issues with the central bank, with the regulatory front, with what is going on in the United States. There's a lot out there that right now we still don't know. DEE SMITH: So I've heard people say-- I've heard this in the UK that we'll become a giant Singapore. We'll become a kind of almost an offshore destination. And, as you have said and is exactly right, it is a center of global finance. What's the possibility and the likelihood that that kind of thing could happen? Is that just a over the moon kind of dreaming? IRENE FINEL-HONIGMAN: I think that this is a little bit unrealistic. First of all, again, I think there's a bit of a mythology. Singapore is not exactly the perfect model in terms of human rights, in terms of speech, et cetera that anyone in the UK would be looking for as certainly still one of the great bastions of democracy in this world. I also think that the UK-- the economy of the UK is much more diverse and much more complex. So I'm not sure that could work. This is almost a little bit the message that President Trump tried to say, don't worry about it. You'll be all on your own and we'll come and do this great deal. Well, yes and no. , Because, yes you can do this great deal, first of all, only when all of this is 100% resolved and you're clearly no longer in the European Union. So this isn't tomorrow. And, even at that point, what does that mean for every sector in every single aspect? DEE SMITH: The NHS being on the-- IRENE FINEL-HONIGMAN: Which I thought was marvelously incoherent. DEE SMITH: But I mean, you're going to start running into the realities of the complexities of the world. IRENE FINEL-HONIGMAN: Exactly. And I also-- sometimes as awfully frustrating that the American congress or the British parliament can be-- these are still very important bastions of democratic principles and democratic discourse. And so that, in a way is, I think, still very positive. Not sure anyone's quite ready to go into the Singapore model. DEE SMITH: Do you see any-- I'm thinking back to those riots that happened in London a few years ago for, apparently, no reason that anybody could really discern. Do you see any evolution in the near-term of this crisis? Whether it's a second referendum or a hard Brexit or whatever, that results in something like that? Any kind of real social violence, even on the level of the yellow jackets in France. IRENE FINEL-HONIGMAN: Well, I think this is something we have to be extremely careful about. Because what we did see with vestes jeunes-- with the yellow jackets in Paris-- was that one false move by President Macron of announcing that he was raising gasoline taxes, while at the same time pushing for massive investments and basically tax breaks for foreign money and certainly for the corporate class in France, it ignited this. Very sadly, once it was ignited, then, as very often happens, deteriorated into a complete, basically, movement of vandalism, of violence which lost its original purpose and cause. Something like this can happen. So the UK has to be very careful that politicians, in the process of fighting their own little fight about Brexit, do not, in term, ignite a genuine sense of outrage and anger. DEE SMITH: And it's there to be ignited IRENE FINEL-HONIGMAN: It is there. It is there. And it's there in every country. And I think in Germany-- and, again, because of German history, in part-- but Angela Merkel has also had to be very, very careful of exactly how she's recalibrated and balanced the role of Germany, particularly as, presumingly, the largest donor to all European bailouts, et cetera, with the needs of her country, her constituency. And leaders are going to have to really watch out for that. There's no question. And that's why I mentioned that when we talk about the Russian influence, it's very important to understand how deep the sense of disenfranchisement and marginalization and discontent with, basically, regional and global entities is within countries themselves. DEE SMITH: Absolutely. IRENE FINEL-HONIGMAN: It's there. And, yes, I think this is also one reason why the UK will have to be very careful whoever comes in to replace Theresa May. And I think this is not going to be an easy job. And, hopefully, some solution is found. And I'm not sure Boris Johnson's the answer. DEE SMITH: Yeah, you know, it's very interesting. It's almost like the butterfly effect too-- these little sparks can just ignite a conflagration. The whole Arab Spring was literally started by one vendor who set himself on fire because he couldn't get his cart back after it had been taken away from him. And the fire literally spread throughout the whole of the region. And so you do have this-- Macron does one little thing that if he'd done it the week before or if he'd done something different, it might not have produced that at all. But you can't really judge where those things are. It's not a predictable system. It's like what they call a catastrophic system in mathematics. It suddenly changes from one state to another without any real thing. So I do have that concern in the UK. And you just wonder if there was, for example, a second referendum. And, of course, the question there is, what would the question be on the second referendum? IRENE FINEL-HONIGMAN: That's a problem. DEE SMITH: And I've heard all sorts of versions of that. But if there were-- and one side or the other is obviously going to lose-- and would that be a spark that would ignite this? And how would you control it? I remember-- who was it that said that-- this was years ago. And it was a famous book, and he said he described the British as having barely controlled anger. And I think that's true. I think that is correct. And one doesn't want to reach the point in which that's let loose. IRENE FINEL-HONIGMAN: Well, I think this is the problem in Europe also. You could almost go country by country in Europe. This basically simmering level of anger against some of the political class, against a political decision-- this sense that you still are basically be run by elites making decisions that do not necessarily take you into account-- is running right now very deep. DEE SMITH: It's a sense of betrayal, I think. IRENE FINEL-HONIGMAN: It is a betrayal. And we have to remember, of course, in European history, it's a long tradition of this. The revolution in 1848 started this way. There've been other major revolutions and tremendous changes in Europe that start, often, exactly with that. And so the point I always find fascinating with a lot of European countries-- and, in a way, maybe that does go back to their almost deep and sometimes instinctive sense of their own history-- they often do have these sudden movements of rage and anger. And yet somehow at the end, they always seem-- particularly since the creation of the European Union-- to almost walk to the precipice and then walk back. To somehow understand, perhaps on a deeper level than we do in the States where we have not gone through what Europe has gone through-- that you don't want to get too close to the abyss. DEE SMITH: You can kind of look over. IRENE FINEL-HONIGMAN: Exactly. And then, OK. And we have seen this already in Italy. We have, in many ways, seen this in Greece. We have seen this in a number of countries. Certainly Macron, interestingly enough, has tried to a little bit contain this by doing something typically French, which, years ago, Mitterrand did-- is appeal to the sense of the country, appeal to the sense of patriotism. That we're all in this together. DEE SMITH: Well, that's that center that seems to be missing-- or under so much stress and so thin in so much of the world nowadays. Everything is centrifugal forces-- it's forced everything to the side. And in one little crisis, and it's even forced more to the side. And it's really problematic. Going back to markets for a moment. So in the various evolutions that, from this point, seem probable or likely-- a hard Brexit we hope won't happen. Some kind of negotiated Brexit fading away of it-- it's just on hold indefinitely-- another referendum. You see a temporary roiling in the markets in both Europe and the UK-- and probably globally. But do you feel like people have already almost priced that in in a way? And so you don't see that this is going to be the thing that precipitates a serious global downturn. There may be one for other reasons, but I'm saying do you think that there is a risk-- or how high a risk is there that this is something that would precipitate a real serious issue-- long-term downturn of some kind? Or do you think that it's already sort of in there in people's minds, so whatever happens, there'll be this period where everybody has to raise their hands up and scream about it. And then things will go back to normal? IRENE FINEL-HONIGMAN: Well, I think one lesson is what happened right after Brexit was announced-- right after June 23, 2016-- where the immediate response was the Dow fell 600 points. The pound suddenly looked like it was about to crash. Everything looked like, oh, my god, we've hit disaster again. And after 48 hours, it calmed down. It began to calm down, and everyone sort of stood back and said, wait a minute. The fundamentals in our economies are solid. Nothing else has dramatically changed. We are looking at one set of, now, major political changes and possible huge problems. But, fundamentally, from an economic standpoint, there hasn't been that much involved in this so far. That's why I found it fascinating to what a point these little safety nets are being laid out in the regulatory side and are basically being set out so that nothing is going to have to take place in absolute immediacy-- neither the banks moving or getting-- the whole concept of bank passporting privileges across Europe, a bank being allowed to function each other's countries. This will continue, basically, for quite a while. There's a time to breathe. There's a lot of breathing space that is already built in. This is already built in. The fact that the pound has not done very well since Brexit, but it is not done dramatically badly either. DEE SMITH: Went from 1.4 to 1.2. IRENE FINEL-HONIGMAN: And the example I use is during the absolute worst of the sovereign debt crisis when everyone was thinking about, oh, this is over. Well, it turned out that the dollareuro parity never went ballistic. DEE SMITH: No, it didn't. IRENE FINEL-HONIGMAN: It remained, yes, a little bit, up a little bit down-- it remained fairly solid. Basically, central bank reserves of 65% dollar and, roughly, 20% to 27% euro didn't shift. There are so many more larger global factors that we have already seen do not necessarily get impacted by political decision and political crises. I think that this may be part of it. The problem is that, psychologically, the perception of a sudden no deal or everything just fall-- may be actually more severe. That may be more damaging. The sense of, oh, wait a minute, what now? Not necessarily market responses. DEE SMITH: Well, Irene, thank you so much. IRENE FINEL-HONIGMAN: Thank you. DEE SMITH: This has been absolutely fascinating, and it's been a pleasure to speak with you. IRENE FINEL-HONIGMAN: Well, thank you. Very much enjoyed it also. Thank you. DEE SMITH: Thank you. I want to thank Irene for a fascinating discussion about the ins and outs of Brexit and its potential effects in the future. And thank you for watching.