Comment: What if…Brexit?

In 2015 Prime Minister Cameron ceased pressure and decided to organize a referendum. The question, asked to British and Irish residing in UK, Commonwealth qualifying citizens and Britons living abroad for the last 15 years, on June 23, 2016, will be: “Should the United Kingdom remain a member of the European Union or leave the European Union?” The reasons for this referendum were: migration, economic problems, over-regulation. EU already has some great economies not being sure, nor convinced, that they should deepen their involvement within the Union and enter Euro Zone: Norway, Sweden… Until a couple of weeks ago, odds inclined more to a “YES” answer. That meant, those who were in favor of remaining in EU were more than their opponents: 80%, 70%, 60%, 55%. It seems that the “remaining” voices are fading: only 47% of the respondents to the latest poll from June 11-14 were pro EU. Could that be because people learned more about implications of exit or they are more uncertain, due to overwhelming information from all British debates? Could that be because they don’t like being in the same boat with poor economies, with countries that have unemployment and migration problems, with terrorist attackers that can easily move inside EU due to EU frontier relaxed legislation? Is it because they feel that, on long term, they have more to gain than to lose? Maybe the membership fee is too high and Britons feel that paying to be part of the EU mechanism is more expensive than being on their own? Is it because EU mechanisms proved weaken lately and not flexible or adaptable enough to cope with diverse problems and challenges? What’s in it for Britons, if GB leaves EU? Well, although there are many unknown things, some pros can be revealed: GB was never a great embracer of migration and immigration; although leaving EU, it still can be part in some regional commerce organizations such as European Free Trade Association (EFTA), or the European Economic Area (EEA) and therefore continue to have access to the single market; GB might as well prefer to go alone and negotiate bilateral agreements with the EU along the lines of the Swiss model; with agile negotiators as they are known to have, they may obtain new concessions so as their losses be minimized or their possibility of gain be maximized. The “leaving” period is about two years, whilst it will still be member of EU and will be able to attend meetings in this respect, except for having the right to vote; during this period, and even afterwards, it can hold bilateral negotiations with each EU country – which can prove more profitable to GB than as things are at present. What will happen to the pound? Probably great volatility will continue till markets will become more used to the idea of Great Britain not being an EU member. Trade has to continue; also financial flows; so a stabilization of currencies one against other, ought to take place in the end. The Bank of England will probably step in and sustain the pound, as far as needed; other central banks may also intervene (a great flow of capital towards “safe heavens” is to be expected and central banks will intervene to devalue their currencies, if facing massive inflows of capital); a weaker pound may also be very attractive to importers from UK thus the mechanism of the free market working by default towards a stabilization (attractive low pound means an increased demand for it which means, in the end, an appreciation of this currency against the others). Regarding British financial institutions exposure in Europe, some calculations on taxes differential and other constrictions will occur and so, time passing, companies will also rebalance. Other issues are more political: will Scotland organize a new independence referendum (the last one was in September 2014)? will Prime Minister Cameron stay in place? For the rest of the Europeans, drama seems to be wider: they remain with migration issues, and a narrowing gate to a great economy, such as GB; they will have to think, beside all that are on table for the next semesters, their negotiation strategy with GB; the commerce and freedom of movement with GB will be affected; there will remain fewer strong economies in EU (EU budget will narrow with roughly 13%, that being GB’s contribution to it); last, but not least, thoughts of “divorce” may appear in other countries as well: a precedence will be created and also a path towards its completion. Not later than last week, Switzerland officially withdrew its application to join EU. Indeed, a lot are at stake if GB leaves. If it remains, its “rebel” behavior will be remembered and has already given birth to new ideas towards what is the meaning and the very existence purpose of EU.