Populist Uprising Forcing EU into Hard BREXIT

While BREXIT may indeed mean BREXIT there are two commonly described forms that BREXIT may take; hard or soft. For the UK government and much of the press BREIXT is seen as a non-zero-sum game and there is much exasperation with regard to the Europeans failing to appreciate this. However, European governments do not see BREXIT this way. For Europe BREXIT is not a non-zero-sum game or even a zero-sum game. It is a game where there is no single optimum solution and where gains on one side may lead to disproportional losses on the other.

On the one side we have the UK that would prefer a soft BREXIT where it is able to enter into a bilateral agreement with compromise on free movement of people. In exchange access to the single market would be maintained, albeit on more restrictive terms.

And on the other side we have the EU who post the election of Donald Trump and with the prospect of a Le Pen victory in the French Presidential elections have finally cottoned onto the populist wave sweeping established democracies. The result of which is propelling the EU to a 27-nation consensus that a “hard BREXIT” is likely to be the only way to see off populist insurgencies. By granting the UK a soft BREXIT the price on the EU side could end up leading to the break-up of the EU.

What leaders of the EU are saying is that allowing Britain favourable exit terms is an existential danger to the EU, since it would encourage similar demands from other countries with surging Eurosceptic movements. What this means for the UK, and apologies if it seems a tad overwrought, is that the UK can not just be allowed to leave, even if it is without single market access. The UK has to be seen to be punished and to suffer.

The direct result of this is that we believe the current stability seen in sterling is not likely to last and that we should see the Euro climb again. Political pressures in the UK may also rise to intolerable levels.