Five months after the UK officially triggered Article 50 to leave the EU, the Brexit negotiations are currently in their third round and not going anywhere fast. The negotiations have worrying similarities to those with Greece. It did not end quite well over there.
Here are five similarities. It could get much worse from here:
- Priorities: Brexit talks currently focus on the “divorce settlement”: the UK’s exit bill, the border in Ireland and the rights of citizens. Future trade relations will wait. In short, negotiations prioritize what is important for the EU, not for the UK. With Greece, negotiations focused on austerity measures that Greeks hate, not on much-needed debt relief.
- EU decides on sufficient progress: The EU summit in October will decide if sufficient progress has been made in the divorce settlement. If so, trade negotiations can commence. So far, European leaders are stating that not enough progress was made. Basically, Britain has to pay whatever the EU tells it to pay, and only then, talks can continue. This is similar to the situation with Greece: the troika decided if Greece fulfilled its obligations before releasing the next tranche of the bailout.
- UK/Greek proposals are “not serious”: The image of EU negotiator Michel Barnier and his team sitting with papers while David Davis and his colleagues sitting without them is somewhat misleading. The UK did produce quite a few proposals, some of them including climbdowns from red lines that were stated publicly. However, the response from the EU was that “talks need to move to the actual negotiations”. When Yanis Varoufakis, then finance minister of Greece, came out with detailed proposals, he was blamed for “lecturing” and for not coming prepared to the negotiations.
- The clock is ticking but time is wasted: Barnier says that “the clock is ticking” regarding the 2-year deadline in Article 50. With Greece, it was always the next debt repayment and a potential default. However, they are taking their time.
- And finally, a horrible “take it or leave it” proposal: This hasn’t happened yet in Brexit negotiations as we haven’t reached the deadline, but here is a reminder of what happened with Greece. When the money was about to run out and the repayment to the IMF carried a risk of an imminent default, the Eurogroup made a proposal to Greece. This was a “take it or leave it” offer, made under duress. Greece decided to put the offer to a referendum and had its banks shut down. Shutting down UK banks is not something the EU can do, but a “take it or leave it” ultimatum for the UK is not beyond the EU.
If things continue on the same path, Britain could find itself in a very uncomfortable position and the pound could extend its falls.
What do you think?
More: GBP: Brexit Round 3 Showdown Weighing On GBP; What’s Next? – BTMU
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