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January 18, 2019 www.intellinews.com I Page 2
Elevated no deal Brexit risk threatens CEE
hint from the EU’s chief negotiator Michel Barnier, who said post-vote that should the British side
be willing to compromise on some of May’s “red lines” — drawn on issues such as freedom of movement and the jurisdiction of the European Court of Justice — then the EU would respond fa- vourably. Yet such a step is hard to envisage given the opposition it would meet from hardline Brexi- teers in London.
EU leaders have already stressed that it is up to the UK to decide what course it takes. “First of all, the UK government has to clarify its position. We need to know what comes next in the UK,” said Romania’s President Klaus Iohannis. “The proce- dures that may ultimately lead to the approval of this agreement have not been exhausted, and this would be the best solution. On the other hand, the European Union, made up of the 27 states, is also prepared for other alternatives. Many people have wondered whether a renegotiation of this Agree- ment is possible or whether there are different positions within the EU27. And I can tell you very clearly: EU27, so we who remain in the EU, are united. There are no divergent approaches.”
MEPs from neighbouring Bulgaria have also com- mented on the situation, saying that the ball is in the UK’s court, but also expressing concern over “potential chaos” facing EU businesses.
“The set of possible ends to the Brexit drama seems to have become smaller last night. Where- as before there were three elements: {“deal“, “no deal“, “no Brexit“} only the options starting in “no” seem to be left now,” Commerzbank analysts
wrote on January 16. “Of course “no deal” (i.e. a disorderly UK exit from the EU) is the less likely of these two possibilities.” This was reflected in the value of the pound, which appreciated after the vote.
The consensus among analysts is that the British government will apply to postpone Brexit given the March 29, 2019 deadline is now imminent. “The government must now present a plan B by the end of the week. We expect it to apply to the EU for a postponement of the exit date (until the summer months). Given the almost unpredictable economic impact, the EU is likely to agree,” wrote Raiffeisn analysts after the vote.
“It now looks as if the Brexit date will be post- poned ... but I wonder what good that will do,” concurred the note from Commerzbank. “The British side has — to use FX market parlance
— no positive theta, unless Brussels caves in. I consider it to be quite courageous to bet on that. There will not be much of an extension anyway. The European elections limit that — it would not work for British parliamentarians from the previ- ous election period to remain in the European parliament for too long. And it cannot be imagined that the UK will take part in European elections again.”
With the current disarray in the UK, the outcome of the vote makes the prospect of a no deal Brexit — the worst case scenario for fellow EU members in terms of trade and the wider economy — that bit more likely, even if no Brexit at all is also now looking like a stronger possibility.
Even an orderly Brexit would, as ING analysts wrote in late 2018, “have profound implications for Central European countries”. ING’s report projects that while all of the EU would be affected, “Brexit