No-Deal BREXIT: The COST

Brussels claims the UK will need to cough up $47.7 billion in a hard BREXIT. PM Johnson claims the number is closer to $8 billion. Who is right?

When Theresa May was PM, she supposedly offered $40 billion to the EU Commission and that was rejected.   Obviously, the art of the deal was to never have a deal. And May was a part of that treason. While the EU continues to use this number as an agreed dollar figure, given there was ‘no agreement’, that number disappears from any future negotiations.  As in – poof.

In other words, the EU Commission may have royally screwed themselves in not making any partial or piecemeal form of agreement within the Theresa May treason. That could have obligated the UK to some form of payment.   But a ‘no deal’ means exactly that, nothing was resolved.   A legal misstep.

And in that, Boris Johnson is correct, the only potential obligation would be the UK’s annual membership fee through 2020.

Most recently, the EU has insinuated that a nonpayment scheme would result in instituting a trade war to punish the UK.   Roughly 35% of UK exports find their way to EU countries. But more significantly, 45% of UK imports come from the EU bloc.   With the economy of Germany tanking, a trade war with the UK would all but collapse the EU. Still, the EU is adamant, “UK will have to pay no deal BREXIT”.

But the UK isn’t arguing that, the argument is how and how much?

The problem? The legal position is unclear, allowing for vast differences of ‘opinion’ as to how and how much.

While May invoked Article 50 in 2016 giving a two year window for negotiations, there is no mandate in that Article for financial reparations.   Article 210(3) discusses the exact template of divorce, but also provides no insight into a financial obligations.   However, some legal opinion states that the UK is subject to trade agreements made by the EU in 2014, which are valid for seven years, placing the UK liable for their unused share – November 1, 2019 thru December 31, 2020, which would amount to 16%.

It is then up to the EU Commission to provide substantive analysis of each and every trade agreement created in 2014 for which the UK would be held responsible, and the amount that remains unpaid in such negotiations.   But that is rather simplistic when one considers the co-mingling of assets – as in a marital divorce.   Those assets far exceed any dollar figure the EU can legally assert against the UK, and will require extensive research and market analysis.

In 2017, the UK’s net contribution to the EU was roughly $9 billion.  If the EU wants to have access to the single market system like Switzerland, it is estimated to cost $3.71 billion per year.   It is based on a flat rate of .2% of GDP.   But someone hasn’t done their math!   In 2017, Switzerland’s GDP was roughly $679 billion. If their contribution rate is .2% – their contribution would only be $1.35billion.

In 2017, the UK GDP was $2.62 trillion. If we impose the same deal as Switzerland, the incorporated trade deal would cost the UK, $5.2 billion per year or about half its current contribution with all the luxuries that are afforded other non-EU members including Switzerland.

In that light, the UK would have no obligation to commit to the Socialist rules and agendas imposed by the EU, would not be propping up faltering economies, and would enjoy the freedom of single market trade.

But during the massive treason exploited by Theresa May, the GDP growth rate for the UK tanked falling recently to negative territory triggered by manufacturing.     France and Germany have also experienced a sharp decline in the GDP since the beginning of 2018.   (Interestingly, Russia’s GDP growth rate has far surpassed that of the EU member states – but the media is silent…).

Forecasts for France and Germany, the EU powerhouses, are glum with high unemployment, low growth, a rising trade imbalance, and high personal and corporate tax rates. They have lost their ‘mojo’.

The EU Commission no longer holds the aces in a poker hand, and PM Johnson and President Trump are all too aware of that truth.

A no-deal BREXIT may have a sluggish start, but given assistance from the US in trade, it would be absolutely disastrous for EU partners to lose the UK as a trade account.   Germany’s economy would tank, France’s would follow, while other lesser trade countries might take advantage of a lucrative deal; Hong Kong, Italy, China, Japan, South Korea, Turkey and UAE, to name a few.

If Germany and France go – so shall the entire EU, as in – poof…

BREXIT – Turkey and the Rise of The Ottoman Empire

With all the talk of whether the UK should make a ‘Brexit’ or not – perhaps the reality is that the UK is not following the criteria and doesn’t want more probing into its finances that might reveal some inconsistencies…

David Cameron?

There are five financial rules for maintaining EU membership:   1) HICP Inflation model which states that inflation can not be higher than the value of the three countries with the lowest levels averaged (Greece, Bulgaria and Cyprus have been given a green light despite their levels not complying), 2) Government deficit relative to GDP must not exceed 3%, 3) Government debt to GDP must not exceed 60%, 4) Exchange rate stability of their currency for the previous two years, and 5) Long term interest rates can not be more than 2% higher than the government bond yields of the three countries with the lowest HICP values.

Can the UK even meet this criteria?  Nah.

Government debt to GDP is 90.6%.

Government deficit relative to GDP was 5.7% for 2014-2015.

Inflation rate is 2.2% vs the max allowable as of 2014 of 1.7%.

But they aren’t the only ones who don’t meet the criteria. Exceptions are rampant in order to create a false bubble of membership. Denmark and Sweden have opted out. Switzerland and Norway were never in. Greece is in trouble. Italy is in trouble. A number of countries simply can not meet all the financial criteria and yet they are continually given – a pass. Which makes the criteria – ridiculous at best.

Enter Turkey. Turkey is blackmailing for admission and the EU is bowing and scraping. Is that a membership club you would want to belong to?

Who is Turkey’s biggest supporter in accession to the EU? The UK!   The same UK that wants to leave, as in Brexit, supports Turkey joining. A bit odd. Interestingly, one of the biggest parts of the EU membership accession would allow for visa-free travel. As in refugees, ISIS, etc… How do you stem the flow of refugees from Turkey while opening visa-free travel?   They are not mutually indistinct.

Turkey only has 3% of it’s physical land that is considered a part of southeastern Europe, and this 3% gives it the authority to apply for membership. Currently, Turkey has a population that would make it second to Germany. As a result, they would be entitled to the second largest number of MEP’s in the European Parliament. It is anticipated that their population will exceed that of Germany as of 2020, potentially giving them control of the EU. Arab refugees are the new population in Europe given a falling national population for just about every country in Europe.   So, it isn’t just about ISIS, it is about changing the demographics of Europe.

In addition, admitting Turkey and giving them Parliament advantage, would open the door to the admission of other Islamic nations. And the rise of the Ottoman Empire could once again take hold, not through the backdoor as in ISIS – but right through the front door…

But then there is Cyprus. Cyprus has no land in congruence with Europe and was still granted admission (Cyprus sits ‘below’ Turkey). So if Turkey became an EU member, and a part of Europe, would it follow that any lands adjacent to Turkey could qualify for membership? Turkey is bordered by eight countries; Iraq, Syria, Armenia, Azerbaijani, Iran, Georgia, Greece and Bulgaria.  Ottoman Empire united…

While currently no EU country may have more than 96 MEP’s, opening the door to more accession, changing the face of the Parliament, and applying lax standards and rules with exceptions can easily be seen as the shift toward a Europe that is no longer European.

It becomes easier to understand why the UK would vote for Brexit.

Side note: Turkey is directly North of Israel…