The real brexit game can now begin

It was almost inevitable that there would be no Brexit deal at next week's European summit. The quarrels of the past few days have dispelled the doubts. New elections, paving the way for finding a real solution, are now approaching.

The Brexit negotiations (in the run-up to the European summit) are again a wonderful play. Boris Johnson seemed to add some water to the wine. For example, in his proposals Northern Ireland remained part of the European market. In doing so, he avoids the huge stumbling block of how to proceed with the border between Ireland and Northern Ireland. Although it is a temporary solution. In his plan, the Northern Ireland administration will have the chance every 4 years to vote whether they want to leave the European Union. Of course, the European Union did not fall into that trap, after which the mud-slinging could begin.

New round
After the telephone conversation between Chancellor Angela Merkel and Prime Minister Johnson on October 8, an aide to the British Prime Minister reported that the European Union has tightened requirements. Merkel would sabotage the talks to get the most out of these Brexit negotiations and deter other countries from turning their backs on the European Union. Then Donald Tusk, the president of the European Union, accused the British prime minister of only looking for a culprit for the failure of the negotiation, rather than looking for a real solution.

Johnson needs the support of the Northern Ireland party DUP and of the hard Brexiteers in his party. He cannot make any concessions when it comes to the border with Ireland. On the other hand, Europe is in solidarity with Ireland, which does not feel like a wall. Because of this contradiction, the chance that a solution could be found was already small anyway. However, until that door is finally slammed shut, it's up to both of them to make it look like they're fighting for the right cause. The most likely scenario is that no agreement is reached at next week's European summit, after which Johnson asks for a postponement or resigns. In that case, new elections in Britain are almost inevitable.

Advance on elections
The prime minister already took an advance on Wednesday 9 October by promising that a no-deal Brexit in a new election will not be the message of the Conservative Party. Johnson has also said he will not cooperate with Nigel Farage's 'Brexit Party'. Jeremy Corbin, the Labor leader, hinted at a second referendum. However, it is doubtful whether he dares to enter this election with that message. This solution could drive voters to other parties that have clearly aligned themselves with a Brexit or a Brexit.

The British pound is taking a step back because of the uncertainty about what the Brexit delay looks like this time and about what comes next. To bounce back as soon as it becomes clear that a no-deal Brexit is being avoided again. To be continued…

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty 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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