A rejection of the Barnier Brexit plan would hurl all Europe into existential crisis

My view is that the financial shock of a no-deal Brexit would crystallize mounting risks and hurl the eurozone into an existential crisis. Academic trade models do not capture the multiple channels of contagion, obvious to any Mayfair hedge fund dealing with capital flows. Some 80pc of Europe’s capital markets are in London.  

Confidence would be shattered. The derivatives markets would seize up. The wealth effect of a stock market crash would cause eurozone consumption to buckle. Unless the EU backed off very quickly, the cross-Channel supply chains of European multinationals would break down. Airbus would have to suspend its European operations. Germany’s 750,000 annual car sales in the UK would collapse.  

Britons have been told for two years that a no-deal Brexit would bring the Four Horsemen of the Apocalypse - as well it might - but the European public has not been alerted to the big risks they face in any comparable way. The insouciance has been astonishing. This asymmetry has psychological implications.

It is a fair bet that stunned electorates would turn on their elites with condign fury, ushering in a ‘Salvini Europe’ and the ascendancy of AfD in Germany. How this would play out within the UK’s internal union is anybody’s guess.

This ‘euro-dämmerung’ is what the EU unwittingly risks by presenting Britain with what looks like the peacetime equivalent of Austria’s ultimatum to Serbia in July 1914.