One of the most direct and important consequences of the Brexit vote is the uncertainty it casts on the merger of Europe’s largest stock exchanges and clearing houses, the London Stock Exchange and the German bourse in Frankfurt, the Deutsche Börse. The two mammoth institutions, the double sun of Europe’s financial universe, last March agreed to merge, keeping the headquarters of the new firm in London, with Carsten Kengeter the CEO of Deutsche Börse, chief executive of the joint group. However, if Britain leaves the EU, the German administration cannot accept that London can host the joint headquarters. Let’s see the details of it.
Undoubtedly, this merger is a major step towards the new era in the financial history of the European economic volume, including Russia. The obvious target for the British and German financial elites is to cement a key position in the western economic system. The German side sets a foot in LSE’s commanding role in the derivative and swap markets, a prospect actively sought by Frankfurt for a long time. At the same time, the London’s City financial elite gets an enviable place in Frankfurt, where the heart of mainland Europe’s financial system beats.
A merger too many
The merger has received wide publicity in Britain and Germany, being criticized though for targeting to create a quasi monopoly in some vital market segments. Last week the US and Russian competition authorities gave their consent to the merger, while the EU Commission bureaucracy in Brussels is not expected to block it. Not without reason then very few people have confidence in fair competition watchdogs, for really protecting the consumers from the creation of dominant business entities, which become ‘too big to fail’. Such mammoth unions set up a kind of ‘feudal’ control over certain markets, enjoying in perpetuity a kind of ‘rental’ super-revenue, extracted from the rest of the economy and society.
If it wasn’t for the Brexit, the merger would have gone through with no problems whatsoever. Nevertheless, after the ‘leave’ vote there are objections in Germany about accepting London as the headquarters of the merged bourse. The opposition isn’t coming from the shareholders of the German bourse. It’s BaFin, the German market regulator who has expressed strong reserves about that.
London begs for the union
Every day the controversy gains new momentum, while both the LSE and the German bourse CEOs and shareholders become growingly impatient, seeking the merger at all costs. No need to say that the London side is actually begging for the union to go through. There is information though saying that it’s the German bourse shareholders who propose the hybrid double headquarters in London and Frankfurt, in order to soothe the objections of BaFin.
Everybody knows though that this twin headquarters solution may not protect the new firm from a possible exclusion from the mainland European markets. Eventually there might be a withdrawal of London’s ‘passport’ to clear all euro denominated transactions in derivatives and swaps, as it currently does.
The issue is so big that in some respects this merger may determine if and how Britain is to leave the EU. No wonder then that there are more hidden angles in this affair. For one thing, the failure of this union may become the turning point in rethinking the ‘Laissez faire laissez passer’ character of world financial markets and put a question mark on globalization.
A blow to globalization
As a matter of fact, the Brexit vote has perplexed, if not voided the attempts by the European mega-financiers to merge LSE and Deutsche Börse. In reality the Britons voted, among other things, to cancel the plans of the British financial overlords of London City (the most decisive ‘remain’ advocates) to create, in collaboration with their Teuton colleagues, a mega financial ‘comptoir’, of the West Indies kind. Such a mammoth stock exchange can become a kind of new ‘feudal’ sovereign of the European financial universe. The merged firm would be at the same time ‘too big to fail’ and progressively may assume a role, of a perennial ‘boss‘ directing Europe’s economic course.
In short, the Britons who voted ‘leave’ – that is the provincials who make a living with medium, small and very small businesses plus the older generations who had known the world without the omnipotent ‘markets’ – blocked the domination of the economy by an Anglo-Saxon alliance. The same negative attitude would very probably have emerged ‘data occasionem’ in France, Holland, Greece, Italy or Spain and elsewhere, if they were called to express their opinion in referendums, about creating some colossal supra-national entity within the EU.
The EU citizens are convinced that the European political elites are facilitating the expansion of the big multinationals through mergers and acquisitions. So when citizens are given the rare opportunity of a referendum, they choose to use their vote to block the development of this ‘neo feudalism’. It’s a kind of citizens’ arrest. Everybody has, most likely, understood that free and fair competition exists only in the books of economic history. Our globalised markets, during the past three decades have been freed from the traditional post WWII anti-monopoly rules and controls and this has led to ‘oligopolistic’ structures, like the New York banks, the Euronext – NYSE merger and now the LSE – Deutsche Börse marriage. The super-tide of mergers and acquisitions of the last two decades is very telling, about what the authorities and the multinationals think about free and fair competition.
The role of various ‘Competition’ authorities is a deplorable story for all of us, who bear the effects of the practically undeterred mergers and acquisitions wave. This is a method which has already created monopolistic – oligopolistic platforms in the US (financial sector, defense industry, agro-food, pharmaceuticals, retail trade, etc). It seems that Europe wants to follow in this direction and the LSE-Deutsch Börse merger is a tracer round.
The dream of financiers
The German financial elite doesn’t want to miss again the opportunity to create a mega-bourse. This entity is thought to be able to place the financial markets of the entire EU, or at least of a good part of it, under its command, albeit in cooperation the British – until today -competitors. After all they both do the same thing; usurping the real economy and society. The Deutsche Börse has been trying since 2001 to acquire or merge with the LSE. It’s only natural then that the management and its 20 larger share holders show an extraordinary dynamism for the merger to go through.
They are all seemingly very well prepared to take full advantage of this mammoth stock exchange and clearing firm. There is information that the London City lords, strongly supported by the Frankfurt financial elite, are advising the London government to either throw away the referendum result or long for an UK-EU relation exactly as if this vote never happened. To this effect the shareholders of the LSE voted last week by the astonishing majority of 99.98% for the merger to go ahead. Obviously, they are eager to see the ‘leave’ result being buried in any possible or impossible way.
Nothing else other than money
Understandably, the LSE – Deutsche Börse merger is considered by the financial communities of London and Frankfort as a key to unlock the way towards bigger and bigger supra-national constructions, possibly within the EU as the euro area. If it goes ahead, the merger of LSE and Deutsche Börse, will be the paradigm in this process, and will, in a way, fuse Britain to the Eurozone, at the exception of the use of the physical euro money.
The zeal which ‘financial analysts’ also show about this merger is so strong, that one of them working for a major British financial media, even explored the idea that Britain doesn’t leave the EU at all, just for the merger to go through. He didn’t bother to say that this means the British government has to totally ignore the ‘Brexit’ result. For those people there is nothing more important than money.
Regarding the possibility of sidestepping the results of a referendum, it’s not the first time this happened in the EU. This is exactly what the Greek Prime Minister Alexis Tsipras did last August, when he ignored the ‘no’ vote of the July 2015 referendum and quite openly turn it into ‘yes’. Last week during the EU Summit the German Chancellor Angela Merkel actually praised Tsipras for that, calling him the ‘master of referendums’, of course in the presence of David Cameron to take a lesson. In this way, Tsipras kept the EU in one piece at a great cost to his country. Still, nobody with power in Europe reprimanded him for ignoring the will of the people, not because they loved the Greeks, but because a Grexit doesn’t go well with the ‘globalization’ ideology and practice of the EU. Not to forget that the EU has as its main ‘raison d’être’ the increase in size of the European multinationals.
All in all, it’s more than certain, that this mega-merger, among other things, will determine the way Brexit is to be implemented.