Foreign Secretary Boris Johnson has stated that Brexit talks will likely begin in early 2017. After his demand for immediate action in June and Cameron’s announcement for October, this is yet another delay showing the fear British politics have. According to current rules, the United Kingdom only has two years to officially exit the Union once the resignation note has been filed. The UK wants to sort important questions prior filing the resignation note yet all other EU member states do not want to open talks before the note has arrived in Brussels.
The United Kingdom government has undergone quite a bit of turbulence over the past few months, with David Cameron having resigned as Prime Minister, and the government having since been reshuffled. Now that the new government is in control, negotiations for the United Kingdom’s European Union exit must begin shortly.
The exit process will be triggered with article 50, and formal talks will begin shortly after. The United Kingdom must chart both its own course going forward, and also negotiations with European Union officials. As of right now, the United Kingdom will likely try to remain as close to the European Union as possible, especially in regards to trade and markets.
However, the European Union has so far made it clear that freedom of movement must go hand-in-hand with open markets. Freedom of movement and immigration, meanwhile, was one of the major reasons that United Kingdom voters voted to leave the Union.
This issue is likely to once again prove to be a sticking point in negotiations.
ECB Likely to Maintain Asset Buying Program
In other news, the European Central Bank will likely maintain its asset buying program with only minor tweaks coming next month. A source close to ECB leaders revealed to the press that leaders so far view the asset purchasing as being effective.
The asset purchasing program, also called quantitative easing, involves the purchase of various assets, often none-government, with newly created money. In Europe’s case, the ECB has been purchasing up to 80 billion euro worth of covered corporate bonds. Q.E. programs are used to increase liquidity within markets, and the ECB’s policy makes it easier for companies to gain access to cash.
However, quantitative easing policies can also distort markets. Increasing liquidity can encourage unsound lending, and as a result, bubbles can form. Q.E. programs can also encourage inflation, which is one of the primary reasons the United States curbed its own Q.E. programs. The EU, however, looks set to continue its asset purchasing program.
Further, there are questions over whether or not there are actually enough assets for the ECB to purchase. In some countries, such as Germany, qualified assets to purchase are becoming scarce. Assets are currently purchased in proportion to the country’s economy.
The current asset buying program is set to expire in March of 2017, but an extension is likely in the works. As of now, however, the ECB is not expected to cut interest rates. With rates so low, the ECB wouldn’t be able to cut rates much anyways, and some ECB officials believe a rate cut would send the wrong signal.