Austrian Chancellor Sebastian Kurz addresses the annual meeting of the World Economic Forum in Davos, Switzerland, Thursday, Jan. 24, 2019.
European Union Trade Commissioner Cecila Malmstroem attends a session of the World Economic Forum in Davos, Switzerland, Thursday, Jan. 24, 2019.
"We want a better world, you're not deciding for us," said 20-year-old protester from Geneva, Thomas Bruchez. The demonstration was originally planned in part to protest against President Donald Trump, who had been expected in Davos this week before cancelling his trip over the U.S. government shutdown. The protest went ahead anyway, training some anger at Brazil's new nationalist President Jair Bolsonaro, who did attend.
Divisions have been evident all week at the conference center a mile or two away, notably on trade. On Thursday, Europe's splits were evident — and they weren't just related to Brexit. Dutch Prime Minister Mark Rutte was particularly pointed, arguing that the generally richer countries in the north of the EU are beginning to feel that the poorer south are getting away with not playing by the rules on an array of issues. Italy's stand against the single currency bloc's debt rules was one incident that caught his ire.
Rutte said people in his country are asking him why the Netherlands is implementing measures to abide by the budget rules when others like Italy are not. "We should because we want to have our house in order, not because some European treaty requires this from us but this is creating distrust between north and south and given those dividing lines, I'm not optimistic about whether we can achieve on competitiveness, on reform and on climate change," he said.
The diplomatic spats are an unwelcome backdrop for the EU, which is due to lose key member Britain in a little more than two months. Britain's departure from the EU is laden with uncertainty after British Prime Minister Theresa May saw her Brexit deal voted down by parliament earlier this month and is now struggling to find a solution with Parliament so divided. That is raising the possibility that Britain might fall out of the EU without a deal on March 29, which could have huge repercussions for the economy as tariffs and border checks are re-established. The EU is trying its best to stay out of it but some politicians are starting to talk about extending Britain's departure date to give the country more time to come to a consensus of what to do, while others are hinting at supporting a second referendum.
All are agreed though that a 'no deal' Brexit would be damaging to the EU as well as to Britain. "I think the United Kingdom in a 'no deal' scenario will face enormous difficulties," said Irish Prime Minister Leo Varadkar.
That argument stands at odds with one of the main benefits of Brexit that supporters of a 'no deal' departure have been positing of late. The Bank of England warned late last year that the British economy could shrink by 8 percent in a matter of months if the country crashes out with no deal and with no transition to any future trading arrangements with the EU. The shock could send house prices plunging by around a third.
Still, Bank of England Governor Mark Carney said British banks are financially strong enough to survive such a scenario. Ports and borders will still face many logistical problems. For many firms, it's just too difficult to prepare for a "no deal" eventuality, Carney said.