Article 50: Is Theresa May Pulling the Trigger Tomorrow?
There are rumours, speculations and indeterminate answers like Liam Fox’s comment that “It will definitely be this week or next week or the week after.” The international trade secretary didn’t give us much guarantees, neither Theresa May, who is generally believed to be triggering Article 50 sometime before the end of March. Others are even talking about tomorrow, Tuesday (14 March), when she will give a statement on the Brussels summit to parliament.
Triggering it on Tuesday
The belief that the PM will be triggering article 50 on Tuesday is based on two events: the Brexit bill being passed on Monday and Wednesday’s general elections in the Netherlands. The Brexit bill is heading to the House of Commons today in the afternoon, and if it is cleared by parliament and the amendments are removed, then it gives May the opportunity for Tuesday before the Netherlands’ elections. But if this doesn’t work, then it will have to be before the end of March.
Before the end of March
The Brexit bill’s journey back and forth in a “ping pong” movement from the House of Lords to the House of Commons has postponed the PM’s plans. The peers’ two amendments on guaranteeing the rights of EU nationals in the UK and parliament having a vote on the final bill might be rejected by MPs later today, and by the evening the bill will arrive back at the House of Lords. Everyone believes that MPs will vote against the amendments and that the House of Lords will have to agree with their decision. After this, getting the royal assent will be easy and the bill will become law. This will also determine the time of triggering article 50.
The Brexit secretary, David Davis reiterated his harsh stance by saying that the only deal on the final vote would be a take-it-or-leave-it decision. Liam Fox also remarked that his department is creating a committee that will examine the possibility of having no EU deal, which is not desired. Fox said: “Of course it would be bad. But it would not just be bad for the UK, it’s bad for Europe as a whole.”
It is clear that triggering article 50 cannot happen just any kind of day now. This is because the Scottish National party is also holding its spring conference which will take place on 17-18 March. The SNP’s first minister, Nicola Sturgeon, could even talk about plans for a second Scottish referendum.
There is another obstacle. The EU’s 60th anniversary summit to celebrate the Treaty of Rome (25 March 1957), which established the European Economic Community (EEC) and is one of the two most significant treaties of the European Union, will also be held on 25 March. (The Treaty on European Union (TEU) or the Maastricht Treaty signed in Maastricht in 1992 is the second most important treaty of the EU.) May will avoid annoying the EU member states by sabotaging their party.
So, what this leaves us with is the possibility of 27 March, or any day of that last week of March.
Brexit negotiations will begin among the 27 member states without the UK, where they will discuss the UK’s exit fees and citizens’ rights. Their final agreement will be sealed in an EU summit sometime in the beginning or the end of April, depending on when article 50 is triggered.
Will sterling weaken after article 50 is triggered?
While the day article 50 is triggered used to be considered a crucial day that will affect the pound, the time that has elapsed has given investors time to digest the Brexit news and possible uncertainty, while taking measures to protect themselves from any currency volatility. According to Morgan Stanley strategists, Brexit uncertainty is now priced into sterling: “We don’t think that triggering Article 50 will be a big event for the currency.”
However, sterling remains weak and the uncertainty around the UK’s relationship to other EU countries as well as the strengthening of the Eurozone economy and Marine Le Pen’s possible loss of the French elections will definitely weaken the value of sterling more. Jane Foley, the head of FX strategy at the Dutch multinational financial company Rabobank, said: “The longer the uncertainty over the UK’s future trading relationship with the EU lasts, the longer the potential downside pressure on investment spending, employment growth and inflation.”
At the moment, all eyes are on the Brexit bill and ensuring there is a deal in place before exiting.