Brexit Negotiations Are Poised to Become Chaotic

by | Oct 8, 2019 | World Featured

European policymakers rejected the latest Brexit plan from UK British Prime Minister Boris Johnson saying that the plan was unworkable. While the plan was not rejected outright, EU leaders said that in its current form it could not go forward. Basically, the plan in its current format would not win the support of the entire 27-EU group. British negotiators plan to visit Brussels again on October 4, 2019.

Europe and the UK remain apart with little time left to negotiate a settlement. Britain is scheduled to leave the EU on October 31, 2019.  Parliament passed a law demanding that the prime minister request an extension if a Brexit deal had not been agreed on by mid-October. But Johnson has continued to insist that Britain will leave with or without a deal setting up chaos as the deadline approaches.

Boris Johnson Goes Back to the Well

The path to a UK Brexit continues to take the same path as there is no alternative for those who are looking for a way out. UK Prime Minister Johnson will again attempt to suspend parliament. The suspension would last 1-week and end on October 14. This attempt flies in the face of the recent ruling by the UK Supreme Court that Johnson prior attempt to suspend parliament was against the law.

How to Solve the Northern Irish Issue

Johnson’s believes that he can solve the Irish border dispute by creating a regulatory border across the Irish Sea and have a customs frontier in Ireland.  The Northern Ireland assembly would need to renew this agreement every four years. As this information is processed, negotiators are likely to extend the current Brexit deadline. At least this puts in place some positive signals that could result in a compromise over a sticky issue.

The Stay Camp Gets Some Hope

Scotland piped up about new tariffs that are expected to be issued, in the wake of the historic WTO decision victory in favor of the United States. The WTO case against Europe, could ignite another front on the US trade war.  This was the largest WTO case ever, and the US announced that it would impose tariffs on $7.5 billion.  The US will start with a 10% tariff on imported European aircrafts and a 25% on selected retail items including Scotch Whiskey. While the reaction from the EU side was subdued, Scotland immediately said that they are unsure if a hard Brexit would provide the safety in trade that the UK needs given the current trade dispute with the United States.

Volatility is poised to Rise

Unless Johnson is able to come up with language that will pass through the EU, he will be forced to either ask for an extension or set up a showdown with Parliament. Volatility will likely spike as mid-October approaches. This will likely effect EU markets such as the European stock market as well as all UK assets including the currency and fixed income products.

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