So whatever happened with Brexit? Is it happening? Did it matter?
Back in June of 2016, the Brits went to the polls and voted in an open referendum that they would like to leave the European Union, please. David Cameron, erstwhile Prime Minister, had called the referendum as a means of gaining leverage in negotiations with the EU, but ended up backpedaling feverishly and campaigning for people to vote to remain. The whole thing backfired when the UK voted to leave, and he resigned as PM.
In his place stands Theresa May, who now leads the conservative Tory government. Upon being sworn in, May announced in March of 2017 that Britain would indeed leave the EU. The EU and the UK gave themselves two years to figure it out, meaning that whatever happens, at 11pm on March 29th, 2019, aka Brexit Day, the UK is leaving the EU. So where are we now?
Currently, the two sides are negotiating the terms of what they hope will be an exit deal. There are three issues. First, an exit bill: what kind of termination fee are we talking here? Verizon charges $200, but the EU is a bit more punitive – in December, the EU and UK agreed to an exit bill of around $52 billion. A couple months later, they agreed to a 21-month transition period after Brexit Day, which would give the UK until December 2020 to implement whatever deal they come up with. The EU functions on a 7-year budget. When does that budget end? December 2020. Hence the UK’s contribution – it’s to a budget to which they previously agreed.
Here’s where it gets tricky. The next two phases of the negotiation concern the transition period itself and the UK-EU relationship post-Brexit. And until the UK published a report last month, no one, including the Brits, knew what the UK actually wanted out of the deal. As I wrote previously, there are a few options: no deal, which would leave the UK to trade under WTO rules (“that sucks! everyone else already has some sort of separate trade deal!”); remaining in the single market (“well then why’d we vote to leave anyway then?”); or something in between.
Theresa May has elected to pursue something in between. Something that will allow the UK to get basically all the benefits of being in the single market, but also allow it to make its own free trade agreements with others without EU input. Basically, the UK wants to keep dating the EU, but also, yknow, sleep around maybe.
It may not surprise you that the EU is unlikely to take this well. Public response has been mostly positive, but the private reaction is apparently negative. You have to pick, Britain.
So what’s the risk? No deal whatsoever. The UK only gets the transition period if they make a deal. They’re expected to have one by the EU summit in October 2018, but as we trundle along through August with no agreement, that seems unlikely. The absolute last deadline would be the following summit in December 2018. If nothing is agreed by then, then it seems that come March 29th the UK is out.
So what? So the UK loses 4% of its GDP. So does Ireland, which will also see conflict at what will instantly become a hard border between Ireland and Northern Ireland, an issue already fraught with historic violence. The Netherlands, Denmark, and Belgium can all expect about a 1% drop in their respective GDPs as well. The 4 million EU citizens that currently reside in the UK would face extreme uncertainty and potentially limited rights. And although retail and the financial sector are doing pretty well, housing growth has already dropped off and British households are about $1200 worse off than before Brexit.
So things aren’t looking too hot in the British Isles. It’s a slow burn, a catastrophe in slow motion. With skyrocketing trade tensions between the US and China, a nuclear North Korea, election interference from Russia, Twitter spats between Iranian President Rouhani and Trump, and the Beyonce concert last night at MetLife, you’d be forgiven for letting it slip. But it’s happening. And it ain’t pretty. #fpf