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Meaningful discussions on Brexit unlikely before end 2017

July 15, 2016 6:44 PM
By Thomas Cole
Thomas Cole

Thomas Cole on Brexit

Theresa May started her tenure as UK Prime Minister on 13 July, with the big decision awaiting her as to whether to trigger article 50 of the Treaty of the European Union, which sets in motion a member state's exit from the bloc. Although no member state can be forced by the other member states into activating article 50, internal conservative party politics, the markets, the position of the EU-27 and the electoral cycle across the continent will play an important role as to when this actually takes place. Of these, it is the last which may well influence the timing of any negotiations.

The upcoming electoral cycle in Italy, the Netherlands, France and Germany - four of the EU's most important member states - as well as in Austria complicates the timing of when in depth negotiations could actually take place. In all of these countries, there is a threat of Euro-sceptic parties doing well, looking to galvanise their support in the wake of the UK's referendum result. The second round of the Austrian Presidential election will take place on 2 October; Italy faces a referendum on constitutional change in October 2016; Parliamentary elections will be held in the Netherlands in March 2017; France will have Presidential elections in April and May 2017 and Germany will have parliamentary elections in September or October 2017.

Taking these electoral events into consideration, the window of opportunity for Theresa May to have any kind of meaningful Brexit negotiations is going to be very narrow any time prior to the formation of a German government in late 2017. Despite the importance of the UK as the EU's third largest economy, leaders in Italy, the Netherlands, France and Germany will have to give greater attention to the domestic situation in their own countries than they will have time for any meaningful talks with the UK government. There is no guarantee that by late 2017, Theresa May's government will even be dealing with the same governments in those countries that are in place today. And, regardless as to whether the UK government triggers article 50 by the end of 2016 or not, it should be expected that current EU leaders will look to take a tough line with the UK in order to discourage EU-sceptic sentiment in their own countries, especially when faced with the electoral challenges highlighted above.

Thus, Theresa May will find herself in a very difficult position: One the one hand facing pressure from euro-sceptics within her own party to activate article 50 as quickly as possible but on the other hand, having to accept that eventual Brexit negotiations, if article 50 is triggered, may not get going until late 2017. Uncertainty in the UK is therefore likely to continue and the markets and the economy will continue to react accordingly. Lengthy uncertainty would impact Ms May's own approval ratings and she will face an uphill challenge from day one of her Premiership as regards how best to manage the next steps of the UK's relationship with the EU.