In our previous parts to Brexit risks, available at http://www.econotimes.com/Brexit-risks-%E2%80%93-justified-or-overestimated-%E2%80%93-Part-1-140164 and http://www.econotimes.com/Brexit-risks-%E2%80%93-justified-or-overestimated-%E2%80%93-Part-2-140307 we discussed the very possibility of Britain's exclusion from European Union poses both risks and opportunity especially in Pound. However for which two question need to be answered or speculated upon -
- Will Britons vote to leave European Union or not?
- If they do, since it is not end of world.......is market overpricing risks?
First one, we have addresses in the second part of this small series.
Before, we discuss the second set of questions, it is vital to know - What reforms UK/David Cameron is demanding of European Union and where is it stuck.
Key reform demands of UK -
UK's demands can be seen as four pillars.
Pillar one: Economic governance -
European Union, consists of 28 member countries, among which 19 are tied closely with a single currency. Basic theme of this economic governance is that if Euro area members pass a law such as financial transaction tax (FTT), which could be beneficial for those 19 countries but could be detrimental for other nine, for example London, which is world's financial hub. So UK is basically looking to safeguard against such imposed economic rules.
While some members are against this especial favor to London, most understand and sympathetic to UK's position.
Pillar two: Competitiveness -
Objective of this pillar is to reduce the burden of over regulations by setting a target.
This is the easiest of all the leaders, since all members share similar view.
Pillar three: Sovereignty
European Union's founding ambition was to form an ever closer union, possibly with single currency, single monetary policy (19 of the members already adopted) and single fiscal policy (still far away but Euro area is getting there). With EU's founding Treaty of Rome, "Ever Closer Union" means EU policies and laws could reduce scope for UK's own rules on the matter.
An agreement in this regard is likely, however trick would be in wordings of the new reform treaty, Britain is unlikely to get full Veto over EU rules.
Pillar four: Immigration -
Control migration from European Union is key objective of the pillars by denying similar benefits to migrants that of UK citizen's, basically limiting the benefits to migrants.
This pillar remains the most difficult to achieve and negotiate as most of the members remain opposed to such idea, including Germany. Moreover, due to Europe's migrant crisis, this has become the top issue for British people too. However, some countries like Hungary in recent days shown some support for the pillar.
As of now, negotiations over this issue still continuing and a deal in February is possible.
We would cover above mentioned second set of questions in final part of the post.
