Image source: Mykhaylo Palinchak © 123RF.com
The Prime Minister would need more time to amend her battered trade deal proposal, so in a statement in the House of Commons today she announced that she would request the aforementioned extension from the European Parliament, however, there are no guarantees that Donald Tusk and the other European MPs would grant her request.
The EU council has expressed on many occasions their desire for the whole Brexit ordeal to be resolved as soon as possible, which would be the best solution for both parties, and based on that premise the EU Parliament could theoretically reject the PM's plea for extension of the withdrawal period, on the grounds that Britain has not really done much headway with the whole procedure and such an extension might simply prolong the struggle without yielding any results.
However, this is not very likely as the European MPs are not in favour of a no-deal divorce, which would most certainly have dire consequences for the British economy as well some detrimental effect for the Euro Zone.
Calling a third parliamentary vote prematurely would almost certainly curtain another defeat for the PM, who needs time to amend her proposal but most importantly, she needs to make new allies, and she needs to work together with Jeremy Corbyn’s Labour in order to get the much-needed support in the House of Commons.
The most likely outcome from Thursday's European Parliament vote would be to grant the extension, but the highlight would be on the upcoming elections for the EU Parliament, and Donald Tusk is likely to pressure Theresa May to speed up the whole negotiation process. In case that there are no significant developments in the trade deal discussions by late April the UK would be forced to make a decision, whether to participate in the EU Parliament elections or not.
If they refuse to do so, then a no-deal resolution would become the most likely outcome, as the EU council will no longer have any incentives to prolong the whole divorce process on vague promises and unsuccessful deliberation.
Hence, in an eventuality where the UK has not really made any significant trade negotiations breakthroughs by late April and at the same time the British lawmakers refuse to partake any role in the upcoming European elections, it would seem that the PM would have exhausted all of her options by time, leaving her and her country with the real perspective of crushing out of the European Union on the 30th of June with no trade deal and no certainties for the future of the British economy.
In today's trading session the pound has depreciated against the Euro with 0.64%, and there is a sizable volatility build up for the crucial European summit on Thursday. The reaction by the European MPs to Theresa May's request is going to be the ultimate trigger for any potential price swings of any currency pairs, involving the GBP. The crux of the summit would be the rhetorical stance they take in regards to the requested deadline – the 30th of June.
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