U.K. Prime Minister David Cameron got a taste of the sort of reaction that awaits him in Europe’s capitals if Britain votes to quit the European Union next week.

Sweden’s EU Minister, Ann Linde, slammed the British premier as an opportunist who has put the 28-nation bloc at risk for his own domestic political purposes, signaling that talks that would follow a Brexit vote are likely to be acrimonious.

“I don’t want to burn any bridges,” Linde told journalists Tuesday in Stockholm. But I’m hearing “great bitterness toward Great Britain.”

That rancor counters the optimism of that pro-Brexit economists and politicians in the U.K., who have said Britain would maintain access to the single European market and manage the departure from the EU without significant downside.

At the same time, neither the U.K. nor the EU is prepared for negotiations that would follow a vote to leave on June 23, according to Henri de Castries, chief executive officer of Axa SA, France’s largest insurer.

They will face “a true landscape of uncertainties,” de Castries said at a conference in Paris.

In Stockholm, Linde expressed concern that a Brexit vote could throw Sweden back to the debate of the early 1990s, when Swedes voted to join the 28-nation bloc.

David Fuller's view

The comments above are revealing in terms of EU politics.  Sweden’s Ann Linde is criticising David Cameron for promising the Brexit vote before the last UK General Election on May 7^th 2015, so that he could prevent an even bigger drift of Conservative voters towards UKIP.  Apparently, Ms Linde was not speaking alone, adding that she was hearing “great bitterness toward Great Britain”.  Apparently, other politicians in EU countries did not want this democratic referendum, in case a Brexit win incited similar referendums in other EU countries. 

Politics is a funny old business.  David Cameron is an appropriately moderate and inclusive Conservative Prime Minister.  He has also been lucky, winning the last election against a weak opponent stridently backed by Nicola Sturgeon of the SNP.  Labour’s current leader lacks national appeal. 

David Cameron seemed unchallenged following the last General Election.  However, he is now in danger of being ‘hoist with his own petard’.  If Brexit wins on the 23^rd, Cameron’s tenure as Prime Minister will be tenuous.  Perhaps worse still, at least for the PM, his chance of succeeding Jean-Claude Junker or one of the EU’s other four presidencies which he could handle (the fifth is held by Mario Draghi of the ECB) would vanish. 

In politics, the transformation from hero to anti-hero occurs all too frequently and quickly.  Of course Cameron could still be lucky if his increasingly desperate Remain campaign actually succeeds in next week’s election.     

The Referendum campaign has inevitably slowed UK GDP, not least because many corporate decisions have been on hold until the result is known.  Additionally, there has been little central government in recent weeks with so many senior officials on the campaign trail. For reasons of uncertainty, I think there is a small chance that the UK experiences a brief recession in the event of a Brexit vote.  However, this would probably be partially offset by a soft pound, shown here against the Dollar (GBPUSD). 

Sound UK governance will be required to limit short to medium-term risks in the event of a Brexit vote.  However, over the longer term I think the UK economy will surprise on the upside once it is out of the EU.   

In these volatile markets hedge/speculative positions can easily change between now and the Referendum result on Friday the 24^th, in line with polls and betting odds.  For instance, over the last week we have seen a big increase in Brexit hedges.  In addition to Sterling above, these include stock market shorts, bond market longs and purchases of gold and silver.  We can expect some profit taking and de-hedging shortly after the result is known, and this may commence before Friday next week.  The uncertainty of a Brexit result would create more medium-term buying opportunities.    

(See also Monday’s Comment)