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Who will win the Brexit poker bluff?

If no-one intervenes, this week could end with a hard Brexit. Will the British Prime Minister, Theresa May, still be able to force a solution? And will the EU play hardball like France, Spain, and Belgium want it to? Will Great Britain then leave the EU without any good agreements on Friday anyway?

The currency world has begun to become a little concerned in recent days. Last Wednesday, the Pound reached its highest level in more than 18 months. This, after May, agreed to ask the EU to postpone Brexit. She also said she would force a breakthrough by working with the Labour opposition party.

After that, the currency dropped in value again. Optimism was replaced by renewed doubt, according to Joost Derks of the Dutch financial institution, the Nederlandsche Betaal- en Wisselmaatschappij.

Monday and Tuesday: May's move
It is May's move at the start of the week. If she succeeds to reach a quick agreement with Jeremy Corbyn, the House of Commons could still vote on the Brexit route. This must happen before the EU leaders meet on Wednesday. There is, however, very little chance of this happening.

At the end of last week, talks in the House of Commons failed. The season was, in fact, cut short due to leaks. The time it is taking for both sides to come to an agreement is a major stumbling block. Corbyn hinted at the fact that May is not budging very much at all. She, after all, has little room for that since she is under enormous pressure from within her own party.

Wednesday: EU leaders turn
British politicians have been full of surprises lately. Despite this, there is a good chance that the decisive moment will be reached at this week's EU summit. On Wednesday evening, the 27 European leaders will meet in Brussels to discuss Brexit. There, May will ask for an extension until 30 June.

Germany supports this, but leaders from France, Spain, and Belgium have indicated that their patience has run out. Without a new plan from the United Kingdom, they are only open to a short delay in preparation for a hard Brexit. The President of the European Commission, Donald Tusk, would prefer a long delay.

Given the enormous financial cost of a hard Brexit, the chances are good that May will get more time. The possible souring of political relationships must also be taken into account. Even if that means the UK will take part in the European elections in May.

In case of emergency
Even if the EU surprises everyone and chooses a hard line, there is still a chance to prevent Great Britain's chaotic departure from the EU. A few days ago, the House of Commons already passed a law against the possibility of a hard Brexit. The clause that was put into effect to enable Brexit is called Article 50. On 29 March 2017, Theresa May submitted this article.

If the UK retracts Article 50, Brexit is off the cards. However, for that to happen, a majority vote is needed in the House of Commons. At the beginning of last week, this proposal was still rejected by 191 versus 292 votes. If Article 50 were to be withdrawn, two scenarios are most likely - new elections or a new referendum. But, before it comes to that, there is still plenty of room for new Brexit twists and turns this week.

Joost Derks is a currency expert and the General Director at the Nederlandsche Betaal & Wisselmaatschappij (www.nbwm.nl). He has more than 20 years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.


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