So, that happened

In retrospect, the outcome of the Brexit vote was not a surprise. If you take a look at the world, it fits the narrative we're in now. The "leave" campaign was another example of the rise of populism we've seen developing over the last years and there are plenty examples of its success: Trump in the States, the far-right parties in Austria, France, Germany, Belgium and the Netherlands, the Ukraine referendum in the Netherlands. All are examples of right-wing populism which provides simple (but irrelevant and non-working) 'solutions' to complex problems. It also shows how disenfranchised the common people are from the ones in power and it shows that there is a limitation on how much politicians should barter, negotiate and compromise. Populism becomes an answer when compromising is no longer effective. 

So, where does this leave us, mainland Europe from a political perspective and a financial markets perspective?

First, it is starting to look like another 'much ado about nothing' all over again. The vote left a power vacuum in British politics and politicians are still scrambling for finding an answer to the mess they have created. The resigning PM has not invoked Article 50, as he said he would, and it does not appear he will do so in the short term. The expected new PM does not seem to be in a rush and Scotland and Northern Ireland are mulling their options on preventing it from ever happening. From the EU itself, the Game of Thrones and Confusion seems to continue. The Council would like to start the exit talks ASAP and the effective leader of Europe, Angela Merkel seems to be in no rush. To paraphrase Churchill: "This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning."

So, with that in mind, let's look at where we could go from here. From a political perspective, it is time to take a critical look at what we have now. In the old situation, the EU was 'the least of the two evils'. Yes, the EU was and is a bureaucratic, labyrinth nightmare. But at least there was some cohesion, some joint decision making based on the idea that 'we're better together'. It always outweighed the alternative of each country for its own.

Those days seem to be behind us. You cannot have a union when each decision by a member state gets put in a referendum or when one of the largest economies bails on you. Face it, the EU is effectively comatose and will be for some time to come. 

That does not mean we should have the populist movement have their way and break it all up. It means that the 'pro-Europe' movement needs to take a less compromising stance and go 'all-in'. That means building a new union that is truly a union with real powers. A union that consists of willing members, smaller and more effective. The rise of populism can only be stopped by resolute alternatives and real pragmatic answers. Will this be easy? Hell no. But it seems like the only way forward. 

From a capital markets perspective, it is time to realize that the City should no longer be the financial capital of Europe. It turned its back on Europe and we need a new capital. Frankfurt seems like the most likely place (even though Amsterdam would make most sense). It will be very interesting to see what the DBAG/LSE combination will announce now. They have always said that their merger was 'Brexit proof', now let's see what that entails. The statement issued today by LSE/DBAG gave very little information on what actually changed in their strategy or what Brexit proofing is. It really only stated that they will continue on the path outlined before. That could be because they realised, the outcome of the vote would have no real short-term consequences, Whatever happens takes years to become effective. Meanwhile, you simply proceed as planned. It could also be that they have not played their final cards and there is another scenario ready to be rolled out.

Then, there is the whole financial regulation issue. Mifid was already postponed and the FTT is still lying about somewhere. A EU crisis will not bring about much change in the current outlook in the short term. But, it could be though that more delays occur in Mifid as the EU remains in a power vacuum and bigger issues need to be resolved. And, with the biggest opponent to an FTT stepping away, the coalition of the willing might make another run for finding common ground with the other opponents and revitalising the effort.

To end, a little speculation of what will likely happen instead of what should happen. The UK will, after long deliberation will return to the fold of the EU, for the 'good of the British Union and Europe. It will have renegotiated a new deal with the EU, an even better one than Cameron struck almost a year ago, as the Euro politicians are allergic to real change and the Union is 'saved', ready to limp on to the next crisis, fueled by more populism, frustrated voters and catalyst events like another downturn in the economy and terrorist attacks.