Brexit: It’s Now Reality
It’s been nine months since Britain stunned the world by voting to leave the European Union.
After decades of accepting the European Union’s burdensome regulations – one after another – the British people finally said enough is enough.
Now, the EU’s days of stifling the economic growth of Britain – and other countries that joined the union but not the currency – are finally coming to an end.
Last week, Britain moved one step closer to taking back its sovereignty, and escaping the burdensome regulations of the EU, when it was announced that Prime Minister Theresa May plans to invoke Article 50 of the Lisbon Treaty on Wednesday, March 29.
Article 50 is the mechanism for quitting the European Union, thus launching a chess match: Pitting the U.K.’s desire for a trade deal – while regaining power over immigration and lawmaking – against the EU’s view that Britain must not benefit from Brexit.
Britain is the world’s sixth-largest economy, and it’s been more than 40 years since the U.K. joined the European Union. So this separation won’t be a piece of cake.
In fact, the U.K. will have to pay a bill of about $62 billion when it leaves the European Union, warned Jean-Claude Juncker, the president of the European Commission, the EU’s executive branch. While Britain prepares to start Brexit negotiations, the EU has already been tallying the U.K.’s share of liabilities such as pensions for EU officials, infrastructure projects, and the bailout of Ireland.
I don’t know about you, but $62 billion is a heck of a divorce settlement!
Once Article 50 is invoked, the two sides have two years to come to terms on a trade deal.
And a lot can happen in two years.
In fact, if the negotiations collapse, May says she’ll walk away without a new commercial framework in place rather than accept a bad deal. All this makes the likelihood of a disruptive breakup “troublingly high.”
Brexit is just the beginning
The EU is already on borrowed time, same goes for the euro.
And the U.K.’s exit is just the beginning. There are still plenty more disruptions looming …
==> The elections in France – along with right-winged political rhetoric gaining strength in other countries across the eurozone – has the EU on life support.
==> And don’t forget about the debt problems: Once again, the Greek government is set to run out of money. In a few months, it will need a fresh bailout from the EU and the International Monetary Fund. After nine years of trying to fix Greece, the situation has only gotten worse. Even if the Greeks do end up with another bailout, it will only be another stay of execution.
==> The EU also has an identity crisis – and it’s not just the refugee crisis causing the divide. There is also a political bias between the Northern and Southern European countries. Dutch Finance Minister Jeroen Dijsselbloem recently inflamed the hostilities by making insulting remarks about Southern European culture. The remarks provoked former Italian Prime Minister Matteo Renzi to demand Dijsselbloem’s resignation as president of the Eurogroup, a coalition of eurozone finance ministers.
Bottom Line: The Brexit fiasco is finally coming home to roost. And that’s going to continue to wreak havoc on the European Union. Mark my words: There will be pitfalls ahead for investors who don’t know what they’re doing. Do you?