Brexit News: Why Theresa May Is Pushing for a Hard Brexit on June 8

This is a syndicated repost courtesy of Money Morning. To view original, click here. Reposted with permission.

In the latest Brexit News, UK Prime Minister Theresa May has called for snap elections on June 8 in order to simplify negotiations of the country’s exit from the European Union.

Brexit News

On April 19, the House of Commons approved the snap elections by a vote of 522 to 13.

The highly risky move is likely to see May voted in as the prime minister. May rose to power last year when David Cameron stepped down as prime minister after the Brexit vote. Her party, not the people, voted her into the position. This would be the first time the public would vote for May as prime minister.

Her party stands to gain almost 60 seats, which would give them 60% of the seats in the House of Commons. This majority will mean May needs to appease fewer factions within Parliament in order to finalize the Brexit deal.

However, there are no guarantees with elections, as we saw in the United States last November. May could potentially lose her position as prime minister, and her party could also lose seats in Parliament.

The timing of the elections allows May to secure a majority in Parliament before Brexit negotiations formally start sometime in June.

Many around the world are watching May’s actions leading up to Brexit, but we at Money Morning are looking for how the Brexit news will affect you. And we’ll show you how the American markets will be affected in just a bit…

Why Will There Be Snap Elections on June 8?

A snap election is an unscheduled election, usually to decide on a pressing issue. In this instance, all eyes are on Brexit in 2017.

The UK’s exit from the EU has been a contentious issue, even though it was approved by a public vote in June 2016. However, it seems as though implementing the will of the public is easier said than done.

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May has called this snap election in hopes that she can play off of increased support for her Conservative Party in order to push a hard Brexit through Parliament.

The opposing party, the Labour Party, threatened to derail the final Brexit agreement by voting against the deal. There was also some pushback from Liberal Democrats and the Scottish National Party as well.

Another issue is May’s own Conservative Party and its majority in the House of Commons. Currently, it holds just 330 of 650 seats, which gives the party a slim 10-seat majority. With the upcoming snap elections, May hopes to increase the Conservative Party’s holding to 389 seats. This would allow May a comfortable majority to pass the hard Brexit she wants without having to worry about getting all members of her party on board.

Having a larger majority is a necessity for May since not everyone thinks a hard Brexit is best for the country…

Why Does Theresa May Want a Hard Brexit?

May has been pushing for a “hard” Brexit, which is a term that many around the world are unfamiliar with.

A “hard” Brexit refers to a clean break from the EU. The UK will trigger Article 50 of the EU Treaty, the formal mechanism for EU departure, and will give up all access to the EU markets. This means that the UK will regain control over its borders and withdraw from the EU’s customs union.

The customs union portion of the EU allows for the free movement of services, goods, capital, and people, which is what people refer to as the single market. A full exit from the customs union will create sweeping changes in the UK.

For instance, the UK will regain control over immigration, which was one of the hot-button issues driving Brexit. However, the country will also be forced to quickly negotiate new trade pacts with countries around the globe.

A “soft” Brexit, on the other hand, is a compromise between being “all in” and “all out” of the EU. While the UK would leave the EU and give up its seat on the European Council, the country would still have access to the EU single market.

The UK would be able to continue trading goods and services tariff-free with other EU states, and exports wouldn’t be subject to border checks. Iceland and Norway operate in a similar manner.

The price of a “soft” Brexit agreement, however, is that the UK would still allow European nationals to settle and work inside its borders, which is something that many oppose.

While the focus is rightly placed on the UK, it’s not the only place that will feel the effects of a hard Brexit. What happens in the UK will also have a major impact on U.S. markets…

U.S. Markets Are in for a Surprise with a Hard Brexit

Markets love stability, and a Brexit is the antithesis of a smooth and stable system. The Dow dropped 611 points on June 23, 2016, the day the UK’s referendum vote on Brexit took place.

We could easily see this sort of market volatility again once the UK begins the exit process.

According to the BBC, 44% of all UK exports in 2015 went to countries within the EU. When Brexit takes place, trade agreements will need to be renegotiated. However, the EU refuses to speak about trade agreements until the Brexit deal is complete.

This unknown is going to cause volatility in the markets leading up to the 2019 Brexit deadline. And if there is one thing the markets don’t like, it’s unknowns.

Couple this with the Greek bailout deal that still needs European approval, and we predict a lot of instability in the markets. But we’ve found the perfect profit opportunity amidst the increased volatility of the Eurozone.


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The post Brexit News: Why Theresa May Is Pushing for a Hard Brexit on June 8 appeared first on Money Morning – We Make Investing Profitable.

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