Brexit: Uncharted Territory – Deutsche Bank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 15, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
    Likes Received:
    Research Team at Deutsche Bank, suggests that the EU and the UK are set to conclude a new settlement on the terms of the British EU membership.

    Key Quotes

    “A deal on the upcoming EU summit on February 18/19 could pave the way for the in-out referendum most likely on 23 June or otherwise in early autumn 2016.

    The EU has broadly accommodated the four British pledges - economic governance, competitiveness, sovereignty and immigration. Major drivers for the political goodwill have been (i) the broader recognition of the need for certain reforms in the EU, (ii) an increased and shared awareness for sensitive topics particularly migration, and (ii) concerns over the negative economic and political repercussions of a Brexit on the EU itself.

    The draft settlement combines clear and immediate actions, tasks for the EU Commission to prepare changes to existing legislation and political commitment to incorporate UK demands in future treaty changes. A number of details in the most contentious issues are still up for discussion, though, and might be agreed upon only at the EU summit.

    However, even with a fair deal for the UK the risk of an out-vote in the referendum remains. In such a case the UK and the EU would enter unchartered territory. Although the EU Treaty includes a procedure for the withdrawal process of a member state – in contrast to an exit of EMU – this will not prevent substantial economic and political turmoil in the post-referendum period.

    Uncertainty will prevail until the shape of the post-membership relation between the UK and the EU becomes clear. It could well be longer than the two year period foreseen in the treaty depending on how quick EU partners were prepared to return to the negotiation table. The prospect of a European super election year 2017 with the Netherlands, France, Germany and possibly Italy going to the polls is unlikely to speed up talks.

    There are a number of options available to the UK in case of a Brexit but they all have their shortcomings. The final design of a new structured relationship between the EU and the UK will need to strike a balance: on the one hand ensuring a trade-focused outcome for the UK, while at the same time disincentivising other member states from pursing a referendum-strategy aimed at tailor-making their own relationship within (or out of) the EU.”
    For more information, read our latest forex news.

Share This Page

free forex signals