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EU-UK relations from now on.

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    I was reading this post by Blanchard and I was wondering how will the EU treat the UK in the upcoming negotiations.

    If the UK performs quite well post-Brexit and if it secures a good deal with the EU, it's likely that other countries will follow (Le pen already asked for a French referendum). The EU will be destroyed if Brexiters become a model for other EU countries.

    So isn't it in the best interests of the EU to damage the UK as much as they can? wouldn't that deter future referendums? the EU will lose economically but first, it's gigantic and can absorb the shocks and second, it will retain the union intact in the end. But the UK would be hurt irreparably if access to the EU market is severely restricted.

    Why is this scenario unlikely?

    I highly doubt UK will get a better deal from the EU and from now on it will be one-sided.

    I doubt they will be harsh as to not anger the eurosceptics out there but they have zero reason to roll out the red carpet.

    I somewhat sympathise.

    One of the key campaigning points of the 'Leave' campaign was about how the EU would treat the UK favourably in any post-Brexit negotiations. I supported 'Remain', so I argued at the time that this wouldn't be true - 45% of our exports are to the rest of the European Union, more than any other collection of countries (we export more to Luxembourg than to the rest of the Commonwealth combined, I've been told), whilst the UK makes up only about 7% of the exports of the rest of the European Union. It's true we have an £80bn trade deficit with the rest of the EU, which was the argument made by Nigel Farage as to why we would achieve a favourable post-Brexit negotiation, and so it was argued that the EU would lose more money than the UK if it didn't secure a good deal. At the same time, the 'Remain' argument was that the UK would still be the worst hit because that money is more important to the UK than to the EU precisely because the EU makes up a much larger percentage of the UK's exports than vice versa.

    That's what I believed, until yesterday morning. Now, I'm not so sure.

    Looking at the markets around Europe, the FTSE 100 may well have lost £100bn at opening bell, but it recovered quite well in the remainder of the day. What British individuals has neglected to talk about is how badly European markets have done. Milan lost maybe 10%, whereas London lost less than 5%. It hasn't been catastrophic either - sure, it was the greatest slide in the pound in British history and it fell to its lowest value since 1985, but it recovered during the rest of the day. The sun was shining, WW3 had not started, and the pound was recovering from the initial shock. It wasn't as bad as anyone - be that the 'Remain' or the 'Leave' campaign - was suggesting. Whilst the short-term still isn't over and we will have to keep a close eye on how the situation changes over the next few days, weeks and months, it seems as though it's so far, so good. The Brexiteers seem to have been right: the EU has been hurt more than the UK on Day 1 of the new United Kingdom.

    There are still plenty of arguments, though, to suggest that the situation will deteriorate and the UK will not secure any brilliant negotiations - and that the European Union will not fall apart because of Brexit.

    The most convincing argument that I have heard thusfar to support this view is this: French and German capitals have little to lose and plenty to gain if the UK leaves the Single Market; we heard JP Morgan already announcing 2,000 job movements from the UK to the mainland. London will surely lose its title as the financial capital of Europe if the UK leaves the Single Market for the benefit of the French and the Germans (and this is half of the reason why I support the idea of a Londerendum on Londependence). Foreign Chinese and Swiss banks who have their headquarters in London on the simple fact that London is the gateway to the Single Market will surely have pack up and leave if they suddenly find their access to the Single Market removed by the UK leaving the European Union entirely and not subscribing to the Single Market, for which many 'Leave' campaigners were arguing. The London Evening Standard was warning of this quite heavily yesterday, saying that the country had voted against the London economy. A bad trade deal could benefit the European Union quite substantially.

    [This article that I read yesterday also gave a quite enlightening view of what Brexit means for the European Project.]
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