UK now closer to crashing out of the EU with no deal than ever before

Very quick here on Brexit.

British Prime Minister Theresa May has now submitted a formal request to the EU to extend the Article 50 time period to June 30th. The reason for the extension is that Britain has nearly run out of time, and it is clear her deal cannot get over the line. So, she needs more time.

The problem is that, in response to her request, European Council President Donald Tusk has said the EU would not accept a short extension like the one Theresa May requested unless her deal is approved by the British parliament. Moreover, Tusk said that the June 30 date that May has requested creates legal and logistical problems that EU leaders must discuss tomorrow in the next heads of state encounter.

The biggest complicating factor here is that the Speaker of the House of Commons, John Bercow, has prevented May from trying to hold a third House of Commons vote on her Brexit deal unless what she puts on offer is substantially different than what was offered in the first two votes. So, absent the pressure from Tusk, it is likely a third vote would yield a catastrophic defeat for May, just as the first two votes have done.

May is cynically hoping to have run down the clock so far that MPs are forced to vote in favour of her EU deal to avoid leaving the EU without a deal. But only 9 days remain for this outcome.

The result is that the UK is closer than ever before to crashing out with no deal. It is palpably close now. To avoid that outcome, one of three things has to occur.

  1. The EU tells May it will only accept a long extension of Article 50 in conjunction with the UK holding EU elections and either UK general elections or a second Brexit referendum. And then May would have to accept.
  2. The House of Commons votes to finally wrest control away from Theresa May and they extend Article 50 for a longer period (or revoke it altogether to start again).
  3. The EU relents and allows May’s 3 month extension to happen, even without any substantive changes in the political situation in the UK.

I see the third option as highly unlikely. And, therefore, there are now only two ways to avoid a no-deal Brexit: either May backs down and acquiesces to a longer extension or the British parliament strips her of the power to make the decision.

If the UK leaves without a deal, it will certainly be a catalyst for global market volatility. So, we now have nine days to await the outcome.

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