UK Ministers Cry Foul As £40 Billion Ransom Idea Is Floated
Foreword: German Chancellor Angela Merkel faces an uncertain political future. In July 2016, she hosted the prestigious G20 summit, and she was the most seasoned diplomat in attendance. Merkel has been credited with rebuilding Germany’s economy and political influence around the world. If this is the end of Angela Merkel, it will have critical implications for the broader European economy, and the global economy.
A new leader may boost the EUR, although it is more likely that the EUR will come under fire in Merkel’s absence. The French are in favour of collaboration and multilateralism, but the failure of coalition initiatives in Germany spells doom for any talks of a united Europe. The refugee crisis is the biggest bugbear in Merkel’s list of growing problems. Germany’s internationalism is coming under fire, with the rising popularity of the far right and the far left. This will have an impact on the EUR, and the GBP. For sterling, there are many homegrown issues that need tending to, spearheaded by the fate of Brexit negotiations.
UK budget speech weighs heavily on GBP
The political rancour in Germany, the recent budget speech by the UK Chancellor of the Exchequer Philip Hammond, and Brexit negotiations are weighing heavily on the GBP. In the run-up to the UK Autumn Budget, the GBP rose against the USD and other currencies. On Monday, 20 November 2017, the GBP was trading around 1.326 to the USD, markedly higher than the 1.325 reached on Friday the previous week. Expectations of a favourable budget have been pressuring the GBP, but bulls gained the ascendancy.
The most important issue in the UK at present is housing. Brexit-related concerns have only contributed to the many problems evident in UK society. Philip Hammond and Prime Minister Theresa May are determined to find feasible solutions to the housing crisis in the UK. It’s not so much a matter of insufficient supply as it is high prices that are adding pressure to already stretched household budgets. It was touch and go for the GBP ahead of the UK autumn budget on Wednesday, 22 November 2017.
£40 billion ransom to be paid to the EU?
There are competing schools of thought in the UK. Those in favour of a Brexit who want greater clarity on the Brexit negotiations and an exit strategy, and those who oppose giving the EU any more money. The BBC recently reported that the UK ministers in favour of a Brexit have agreed in principle to offer more money to the European Union. This helped to propel the GBP to higher levels against the USD. While a new figure hasn’t formally been adopted or agreed upon, it could be as much is £40 billion.
Many conservative members of Parliament are livid with such figures, equating it with nothing more than a ransom payment. The figure is seen as a prerequisite for beginning trade discussions in earnest. Leading Brexiteers in the form of Boris Johnson and even Michael Gove are supportive of the Prime Minister in her efforts to pay the EU more. MPs were quick to point out that no final figure would be agreed upon until the UK reaches a trade deal with the EU. This will have to be ratified between Brexit Minister David Davis and his EU counterpart Michel Barnier. Negotiations between both parties will continue on December 14, 15, 2017.
According to both the UK and the EU, there is no way the UK can escape unscathed. The UK owes money to the EU for pensions, and these are calculated over time. Additionally, multiple countries had locked in trade agreements with the UK with construction projects that cost billions. Various education initiatives, roads and railways, and even health programs included the UK prior to the Brexit referendum. The UK has a responsibility to meet these commitments, after breaking the trade deals vis-à-vis the Brexit referendum on June 23, 2016.
Do you feel that the UK should have to pay £40 billion to the EU for cancelled contracts, pensions and other projects? How will this impact your taxes in the UK, your job prospects, and the stability of the government?
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About Brett Chatz
Brett Chatz is a graduate of the University of South Africa, and holds a Bachelor of Commerce degree, with Economics and Strategic management as his major subjects. Nowadays Brett contributes from his vast expertise in online trading for iForexTrader.co.uk.