Weekly Geopolitical Report – Irish Border Revisited (April 26, 2021)

by Thomas Wash | PDF

It has been more than a year since the U.K. and European Union (EU) came to terms with the Withdrawal Agreement, yet questions remain on how it will impact Northern Ireland, which was granted an exception to remain in the EU. Having decisively voted 56% to 44% to remain a part of the EU during the Brexit referendum, it is unclear whether Northern Ireland allegiance lies with the U.K. or the EU.

The exception, which went into effect earlier this year, keeps the Northern Ireland economy in the EU to prevent a hard border between Northern Ireland and the Republic of Ireland. This has angered pro-British Unionists who believe that the exception ostracizes Northern Ireland from the U.K. and draws it closer to Ireland. As a result, the Unionists have protested the decision and violence has erupted between competing factions in Northern Ireland. However, demographic trends have shown that the pro-British faction seems to be slowly dwindling, likely heightening concerns.

In this report, we will focus on the current relationship between Northern Ireland, the U.K., and the EU, and summarize the Good Friday Agreement. Next, we will discuss the impact of demographic changes on reunification efforts and what we expect to happen going forward. As usual, we will conclude with potential market ramifications.

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Weekly Geopolitical Report – Meet Boris Johnson (August 26, 2019)

by Patrick Fearon-Hernandez, CFA

(Due to the Labor Day holiday, our next report will be published on September 9.)

 The great forest fires that consumed swaths of the West in recent years have finally revealed the danger from a century of excessive fire suppression.  Humanity’s natural drive to control the environment has left forests overgrown with impenetrable underbrush and littered with brittle deadwood.

Often, it’s only after the conflagration that the true contour of the land is visible again and the forest floor is bathed anew in the light needed for growth.  Only then can green shoots poke up through the blackened soil on their way to becoming the mighty, majestic new redwoods and ponderosa pines and Douglas firs that will dominate the rejuvenated forest.

Just so, the Global Financial Crisis a decade ago consumed what was in many ways an overgrown, sclerotic, and brittle economic system within the developed countries of the world, revealing for all – both the elites and the non-elites who bore the brunt of the crisis – the true contours and contradictions of the modern economic landscape.  The conflagration destroyed many traditional politicians identified with the previous highly globalized economy, and it encouraged disruptive, populist leaders to put down roots and begin reaching for their place in the sun.  These new populist leaders, who took advantage of the destruction, include such luminaries as U.S. President Donald Trump and Italian Deputy Prime Minister Matteo Salvini.  On July 24, another disruptor, Boris Johnson, was named prime minister of the United Kingdom. In this report, we dissect who Johnson is and how he rose to power.  More importantly, we discuss what he is likely to do and accomplish as the leader of his country, and the likely ramifications for investors.

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Weekly Geopolitical Report – Between a Rock and a Hard Place: The Gibraltar Dilemma (April 24, 2017)

by Thomas Wash

Days after Theresa May triggered Article 50 of the Lisbon Treaty, Brussels issued a nine-page document outlining its guidelines for Brexit negotiations. One of the guidelines gave Spain the authority to veto any deal between Gibraltar and the European Union (EU). The U.K. is currently recognized as holding sovereignty over Gibraltar and thus took exception to this provision, vowing to defend the will of the people of Gibraltar.

The provision is likely the result of heavy lobbying by the Spanish government, who would like to end this 300-year dispute once and for all. A war of words between Spain and the U.K. has already started in response to the announcement. Former Tory leader Michael Howard stated that the U.K. is willing to fight for Gibraltar. Although not responding to the threat, Spain has hinted that it would not block Scotland if it were to apply to the European Union upon a potential Scexit.[1]

Despite the bravado, it is likely that the two countries will come to some sort of agreement as they have deep trade ties. In fact, Spain has been the most vocal backer of a soft Brexit. That being said, the people of Gibraltar are stuck at a crossroads regarding the dispute. On the one hand, they voted 96% to remain in the EU, but on the other hand, they voted 99% against joint sovereignty with Spain. The situation becomes even murkier when its economy is taken into account. Gibraltar is dependent upon the U.K. for trade and Spain for labor. Nevertheless, it is unlikely that Gibraltar would have emerged from Brexit unscathed as its labor force is dependent on the free movement of immigrants permitted under the EU. Ironically, it was the free movement of immigrants that mostly caused British voters to leave the EU.

In this report, we will focus on the significance of Gibraltar, its historical context and the impact of the current dispute. We will conclude with possible market ramifications.

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[1] During the run-up to the Scottish referendum, it was believed that Spain would oppose any immediate transition by Scotland into the EU if it decided to leave the U.K. because it could encourage Catalonia to move toward independence as well.