Brexit will not be chaos, despite mud throwing

Britain and Europe still have about 60 days to determine what the trade relationship will look like after the turn of the year. However, instead of speeding up the talks, the two sides are still arguing over the order of the negotiations.

Brexit should have been prominent in the news stream this week. The departure of Great Britain was on paper an important topic of a European summit that is now being held. In addition, a new round of negotiations is imminent. But as is often the case with Brexit, the reality looks very different from the beautiful plans.

On the recommendation of German Chancellor Angela Merkel - in her role as EU president - Brexit has been removed from the agenda for the EU meeting. There is nothing to discuss, she said, as there has been almost no progress in the negotiations this summer. Nor can much be expected from the new round of talks. Both camps are more concerned with mud-slinging than with making proper preparations.

Flabbergasted
A good example is the outrage of Michel Barnier, Europe's top negotiator, when the UK delegation wanted to renegotiate brand protection in the food industry. Agreements had already been made in an earlier round that, for example, Parmesan cheese may only be called that if it actually comes from the Parma area.

Great Britain wants to deal with this a little more flexibly in the future. Except for British products. Because it is of course the intention that only whiskey from Scotland retains the predicate 'Scotch'. On the other hand, the European negotiating strategy is once again arousing frustrations with Prime Minister Boris Johnson. The European delegation first wants to remove 2 major stumbling blocks, before discussing further.

Fish for everyone, fair playing field
The 2 stumbling blocks are fisheries policy and government support. The EU wants to prevent British fishing waters from being prohibited areas for the fishing fleet. Moreover, it is not the intention that British companies will gain an edge on the international playing field. For example, due to less strict regulations for safety.

Johnson first wants to talk about topics where both parties are close to each other. This will speed up discussions and make it easier to tackle sensitive topics. It is to be hoped that the ideal order of negotiations will not be wavered for too long. The agreement must be signed by December 31. Since it takes about 2 months to draft that text, time is running out.

60… 59… 58…
Within about 60 days it should become clear what the British-European trade relationship will look like in the future. That will be a very difficult task, if you see how great the contradictions are and how easily both parties let time slip through their fingers. However, the chances of it really coming to a No Deal Brexit are pretty slim.

The economic damage to Great Britain would then be incalculable. It's no coincidence that Johnson did a lot of work to get Brexit through on February 29. In any case, the foreign exchange market is sending a clear signal that we need not worry too much for the time being. The euro/pound exchange rate has fluctuated much less in recent weeks than during previous chapters of the Brexit saga.

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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