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Happy Article 50 Day!

Happy Article 50 Day!

March 29, 2017

Happy Article 50 Day!  While it doesn't have the same cache as America's Declaration of Independence, Great Britain today filed a letter with the European Union beginning the exit process known as "Brexit".   Earlier this year British voters passed a referendum instructing its leaders to part ways with the EU.  However, the formal process did not begin until today when Article 50 was triggered.

Prior to 2007, there was no way for a country to leave the EU.  In that year the Treaty of Lisbon was signed by all the members of the Union.  Article 50 of the Treaty of Lisbon gives any EU member the right to quit unilaterally, and outlines the procedure for doing so. It gives the leaving country two years to negotiate an exit deal and once it's set in motion it can't be stopped except by unanimous consent of all member states.  Article 50 has never been invoked before so this is clearly unchartered territory.

This means that Great Britain has until late March 2019 to negotiate new trade agreements and treaties with the members of the EU before its exit.  This process is expected to be lengthy, difficult and contentious.  The negotiators for both sides will have their hands full as business leaders want terms of any new agreements to be relaxed so business can continue as usual.  Political leaders for the remaining 27 States in the EU want the agreements to be harsh towards Great Britain, so that no other countries will try to leave the Union.

What does all this mean for investors?  In a word, Uncertainty.  The economies of most European Countries have shown little growth over the past few years, but things seem to be pointing up.  Could this Brexit throw a monkey wrench into that growth model?  Or, will this move spur on further growth in the years ahead.  

This real life British drama may be more exciting than anything found on the BBC.