A United Kingdom "Brexit" from the European Union without a negotiated divorce may hurt the British economy, but staying in the E.U. could surprisingly cause worse pain.

The U.K.'s representative democracy has complicated the process of defining what the two-and-a-half-year-old national referendum vote to leave actually "means."

With just seven days before crashing out without a transitional agreement, the 650 members of Parliament have not come to a negotiating consensus, because both staying in the E.U. and leaving risk inflicting serious pain on members' constituents.

The 1991 collapse of communism across Central Europe and the subsequent collapse of the Soviet Union was hailed by former RAND Corporation policy analyst and Harvard Ph.D. Francis Fukuyama in his 1992 bestseller The End of History and the Last Man, as the march of history had reached its end with the emergence of liberal democracy as fully victorious over all other philosophies such as fascism, communism, and socialism.

Fukuyama adopted nineteenth-century German philosopher Georg Hegel (1770–1831)'s "dialectical" process that logical steps are the driving force in a human history and will lead to a final political and economic structure.  But instead of Karl Marx's claims that communism was the "end of history," Fukuyama argued that there were now no "contradictions in human life" that could not be resolved within the context of liberalism.

With the fall of the Soviet Union, Europe was intoxicated with a triumphal unification wave demanding a single market with the "four freedoms" for movement of goods, services, people, and money.  The 1993 "Maastricht Treaty" on the European Union began with 12 Western European states, including the U.K.

But the British people expressed deep reservations about the pillar system extending E.U. jurisdiction over members regarding foreign policy, military, criminal justice, and judicial cooperation.  Misgivings over treaty amendments that grew E.U. membership to 28 states with 343 million residents caused the U.K. not to join the "euro" common currency.

The British were initially told they would have a modest E.U. "net contribution" payment each year.  But the U.K. by 2017 was paying an $18-billion E.U. budget contribution and receiving only $5.5 billion of E.U. spending, for a net contribution of about $12.5 billion.

Despite strong assurances that the four freedoms would provide fair and balanced trade among E.U. members, 2017 U.K. exports to the E.U. were $359 billion, and U.K. imports from the E.U. were $446 billion, for a trade deficit of $89 billion or 3.3 percent of U.K. GDP.

The non-U.K. members of the E.U. want a negotiated deal that allows the British to officially Brexit but keeps the wildly lucrative U.K. transfer payments rolling in.

They warn that a "No-Deal" Brexit represents an existential risk of a U.K. depositor bank run, due to the British banking system's 393-percent leverage of assets to GDP.  Even if there is not a bank run, the Centre for European Reform estimated that a "No-Deal" will cost the British economy about 2.5 percent of GDP.

But with years to prepare for Brexit, U.K. banks were mostly winners in the first quarter of 2019: Lloyds Banking Group up 24 percent; RBS up 23 percent; Bank of Georgia up 22 percent; Barclays up 9.1 percent; and Standard Chartered up 2 percent.  The only losers were HSBC, down 4 percent, and Metro Bank, down 44 percent.

Despite the constant media drumbeat that the U.K. faces impending doom, E.U. commissioner for financial services Valdis Dombrovskis warned on April 2 that it may be the banks in the 27 remaining E.U. states that face serious "No-Deal" existential risks. 

Dombrovskis told the E.U. Parliament that the E.U. banking regulators could not "mitigate all possible negative economic effects."  He cautioned that in a hard Brexit, unplanned risks include invalidation of the indenture clauses for bonds issued by E.U. banks under English law: "There is going to be disruption.  There may be effects on liquidity."

Although Dombrovskis did not specify which E.U. member's banks are at greatest risk, Reuters reported on April 4 that the European Central Bank demanded that Germany's Deutsche Bank raise equity capital before being allowed to merge with Commerzbank.