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Brexit: The renegotiation ahead of the UK’s EU referendum – Goldman Sachs

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 18, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    Research Team at Goldman Sachs, suggests that for the UK, as for Europe, much is at stake as the UK faces its n in/out referendum on continued EU membership, likely later this year.

    Key Quotes

    “We have argued in the past that the economic costs of leaving the EU would be substantial for the UK and the process of departing would itself involve considerable uncertainty. Yet, for advocates of leaving the EU, issues of national sovereignty are no less important.

    For Europe, which is itself a group of diverse interests, the UK is seen as an important partner, including through its sponsoring of market-oriented reforms. At a time when Europe is facing considerable political tensions – within and between countries – resulting from the refugee crisis, the combined effect of a UK vote to leave the EU and the possibility that those tensions intensify this summer is a worrying prospect.

    In our view, the renegotiation under way will result in some improved terms for the UK in its membership of the EU. But it does not offer substantial changes. And, more fundamentally, the UK continues to face the same basic choice – whether it wants to belong to a 28-member union or not. That said, by facilitating PM Cameron’s active campaigning for continued membership, we expect the renegotiation to contribute towards the UK remaining an EU member.

    As reflected in last week’s draft settlement, there are two unavoidable aspects of the renegotiation and the UK’s links with Europe. First, the renegotiation will be a matter of compromise, on all sides. Compromise is the only way that decision making in a union of 28 states can work. It also makes the results of any renegotiation appear convoluted. Second, the UK and Europe as a whole must decide if each is prepared to act as a union. This also involves recognition that compromise is unavoidable.

    The former has shaped the renegotiation process. The latter remains the choice in front of the UK’s voting public in the referendum expected in June. The renegotiation was never going to be able to change that basic choice, even if it alters the precise terms of the UK’s links with Europe somewhat.”
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