The BREXIT Opera – it’s never over until the Fat Lady has sung…

27 June 2016

Brexit in a nutshell

Last Thursday Britain – or at least the majority of it – voted to leave the European Union and pursue what has widely been referred to in media as “BREXIT”.

The decision to leave surprised many, including many of the leaders of the “Leave” Team, and the consequences of exiting are still very unclear. We still don’t know what “BREXIT” will mean for the future of Britain’s economy, its future policy direction, and its relations with the rest of Europe.

Britain hasn’t pulled the Trigger Yet

Because Britain hasn’t invoked the terms of Article 50 of the Treaty on European Union, the formal and irreversible decision to leave the European Union hasn’t actually been taken. In fact, there are scenarios in play that could actually see Britain stay in the European Union.

The UK hasn’t pulled the trigger, but a round is certainly in the chamber.

First one must recognise that the vote on Thursday is not legally binding and does not immediately trigger Britain’s exit from the European Union.

The Prime Minister (currently David Cameron, who has resigned, but intends to remain in Office until October) or his successor (likely to be Boris Johnson) could decide to ignore the result of the referendum. That seems to be an unlikely scenario. However, the possibility exists that between now and October future events will overtake the decision taken in the referendum.

To understand further one has to understand a little about Article 50.


What is Article 50?

Article 50 of the Treaty on European Union establishes the procedures for allowing a member state to leave the European Union. Under the terms of Article 50:

  1. Any member State may decide to withdraw from the Union in accordance with its own constitutional requirements.
  2. A member State which decides to withdraw shall notify the European Council of its intention. In light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with article 218(3) of the Treaty on the functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.
  3. The treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement, or failing that two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member state concerned, unanimously decides to extend this period.

Because no country has ever invoked the terms of Article 50 it is not entirely clear how the whole process will work.


Implementing Article 50

Despite there being no precedent it would appear that to invoke its terms the Prime Minister would have to:

  1. Formally inform the European Council in writing that Britain intends to leave.
  2. The European Council would then meet and agree on a framework for the withdrawal of Britain.
  3. Using the agreed framework, the European Commission led by Jean-Claude Juncker negotiates the precise technical terms of Britain’s withdrawal.
  4. Once the deal is reached, it enters into force if both the Council and the European Parliament agree.

Prime Minister David Cameron has stated that he will leave the implementation of Article 50 to his successor. As things stand a successor is unlikely to be appointed until October at the earliest.

Might Britain not invoke Article 50 and Stay?

As crazy as it may seem there are scenarios that would see Britain staying in the European Union.

Simply ignore the results of the referendum

The results of the referendum are not binding on the government. As long as Article 50 is not invoked Britain has not taken a binding constitutional decision to leave the EU.

So could the British Government choose to ignore the results of the referendum?

There are certainly precedents for this happening before in Europe.

The Republic of Ireland voted down the EU’s Lisbon Treaty in 2008 before adopting it less than a year later. In more recent times, the Greeks defied their “Troika” masters by rejecting the EU’s bailout terms in 2015. However, a few days after rejecting those terms, they were effectively forced to swallow the bailout “hook, line, and sinker”.

Renegotiation – Part Deux

The day after Boris Johnson announced that he was going to join the Leave Campaign he wrote in the Daily Telegraph that “there is only one way to get the change we need – and that is to vote go; because all EU history shows that they only really listen to a population when it says no.”

In other words, vote “no, non, nein etc” initially to gain leverage to negotiate on better terms with the EU bureaucrats in Brussels, and then if those terms are favourable simply stay.

So is this likely?

Jean-Claude Juncker, the current President of the European Commission, and no great lover of the British, was very quick to pour cold water on the chance of renegotiation the day the result was announced. To all intents and purposes he told the British to “get lost” and invoke Article 50 immediately.


Others are more conciliatory. Angela Merkel, by far the most dominant power in the European Union would be more open to the idea of renegotiation perhaps because she can see the bigger picture that if Britain leaves then other may very likely follow suit.

Many voted for BREXIT in Britain because they are against the free movement of people from the EU into Britain. If there was a change to the principle of free movement of people across the EU, then it may be acceptable to many who supported BREXIT.

In other word, allow free movement but only if a person has a guaranteed job to go to, and not to allow unrestricted movement just to look for work. Such a change might also appear sensible to other members of the EU.

So until the Fat Lady Sings

Politics is a funny and dangerous game. If you keep talking and keep an open mind anything is possible. Until Article 50 is invoked the band (and the Opera) plays on.

So…It is never over until the “Fat Lady Sings”

Closing thoughts – time to consider your investing strategies

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