Wednesday, May 31, 2017

Brexit -- the cost

The EU has been rather adamant that the UK will pay a very steep price for exiting the European Union.  In fact, requiring that the UK pay for everything.  The figure could be anywhere between Euro 60 billion and Euro 200 billion.  In effect, the EU has asked all its institutions to create a list of demands -- like a divorce, the demands can (will) be outrageous, because if you don't ask, you certainly will not get.

How the whole thing plays out is a different story.  There is no doubt that the EU wants its cake and to eat it too!  The UK has the same problem, of course its not about "cash" rather is about access to markets and ability of British National to travel freely within Europe.  The Ft this morning indicated that the UK will need to negotiate more than 700 treaties with various countries over various issues (so lots of work there).

How all this plays out is dependent on many factors:

(1) British Elections:

This morning the worse possible news for Theresa May, she may lose her parliamentary majority -- a richly deserve outcome at a particularly poorly run campaign, when Ms May though she had a 20 point lead in the opinion polls.  Her party's platform was mean (a la Trump) and she seem the relish the idea that she could do anything.  She had her platform demolished by various journalists -- in particular by Jeremy Paxton -- who demonstrated that Ms May had a poor understanding of what she was offering her country...

(2) Italy:

Now, all this could go away if Italy become the spoiler in this whole game.  It seems that the 2018 elections may actually occur in 2017, as the risk of a non-confidence vote escalate.  The reality is that within Italy's parties the vast majority are against remaining in Europe (and the Euro) because the country is facing dire problems with its banking system.  This could really upset the European apple cart.  Time will tell

(3) Greece

The key to Greece are the German Election in the autumn, the problem for Greece is that it has payment obligations in July -- on which it may default (it simply cannot repay the loans).  As the risk of default rises, there is a feeling among European that the Greek problem could play a major roll in the future of Europe, not because its important but because it too may exit the EU, and as such provide a blueprint for the UK -- after all the rules cannot be harsher for one player than for the other!  

(4) Trump

There is no doubt that Trump's European tour was a catalyst for European unity in the face of a a poorly informed bully.  His "planned announcement" to quit the Paris Accord, his non-support for Article 5 of the North Atlantic, and his clear pleasure at paling around with dictators -- Philipies, Saudi Arabia Russia -- he's event hinted that 


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