Brexit: latest news and comments
In a historic referendum on 23 June, 2016, the people of Britain voted for a British exit, or “Brexit”. This decision prompted jubilant celebrations among the elated supporters who saw this as a victory which marks Britain’s Independence from the European Union, while it sent shockwaves through the global markets. Ignoring the plea of world leaders to embrace the EU, Britons voted for Brexit, a move which can lead to catastrophic results for the world economy in the future.
The UK will now have to invoke Article 50 of the Lisbon Treaty to initiate the proceedings of its exit. This will be the first time that this article, which came into force in 2009 will be used. Until the completion of the process, the UK will have to abide by the EU laws. It will however not take part in decision making after it negotiates a withdrawal agreement. The entire process is expected to take at least two years for its completion.
With the Prime Minister and the UK’s most senior diplomat in Brussels stepping down, uncertainty abounds in the country’s political and economic scenario. The Brexit vote displays a split in the country’s opinion, with Scotland and Ireland voting against the general consensus. It also generated mixed reactions across Europe and leaders across the world are sceptical of Britain’s future after it ceases to be a member of the EU.
The British exit will have enormous impact on the world economic scenario and could be a potential threat for free market treaties. This article will provide you with the latest developments in this regards.
A Divided Country
Britain’s historic vote has decided for the country’s exit from the European Union. The Brexit referendum reported a turnout of about 72%, which is the highest since the 1992 general elections. 52% of the total voters favoured Brexit, a move that has left economists across the world aghast. But, the referendum result is not as simple as it seems.
Firstly, the overall result isn’t decided by a very large majority. In fact, the UK as a whole has voted for Brexit by a narrow margin and those who voted against leaving the EU account for 48% of the total voters.
Secondly, the difference in results across different regions in Britain clearly displays a divided opinion. While England and Wales strongly voted for Brexit, with 53.4% and 52.5% voters in favour respectively, there were regions which voted against this decision. Scotland and Ireland voted against leaving with a majority of 62% and 55.8% respectively.
Despite backing Britain’s remain in the EU, Scotland is being forced to accept the decision of England. Commenting on this, Scotland’s First Minister Nicola Sturgeon said that it is “democratically unacceptable” for Scotland to be dragged out of the EU against its will. This decision would lead to significant and material change in circumstance and so the first minister said that a second independence referendum is “highly likely” for the country.
Deputy First Minister Martin McGuinness said that the entire island of Ireland should now be able to vote for reunification since the impact in North Ireland will be “very profound”. However, First Minister Arlene Foster and Secretary Theresa Villiers have ruled out the possibility of a border poll and have asked for people to embrace this decision of the UK as a whole.
Reaction of the Union
While EU sceptics rejoiced on Britain’s vote, others mourned this decision. Leaders across Europe swung into action, trying to measure the outcome of the exit. German vice chancellor Sigmar Gabriel summed up the state of disorientation and anxiety across Europe with his tweet: “Damn. A bad day for Europe.”
Emergency meetings were called out by German chancellor Angela Merkel, France’s President Francois Hollande and Italian PM Matteo Renzi in the wake of this crisis. Angela Merkel said that she sought a “good, objective” climate for Brexit talks. She urged the EU to strengthen its ties with countries that are unsure about their membership with the EU, adding that the Union needed to work out “how to make people feel good in a fast changing world”.
One of the largest member countries in the world’s most ambitious project of integration has decided to quit, and with Britain’s exit, the EU leaders are faced with the problems of averting further such possibilities. The EU must now decide what it stands for to survive the impacts of Brexit and to ensure smooth functioning of this international integration.
PM David Cameron Resigns
British Prime Minister David Cameron’s lips quivered as he spoke the following words: “The British people have voted to leave the European Union and their will must be respected.” In the months preceding the referendum, the PM had toured the entire country, warning the voters of the disastrous consequences of the British exit. Never in his wildest dreams would he have thought that his decision for this referendum would backfire. With Brexit, disaster did occur for Mr. Cameron as he announced his resignation from the office; saying that he would hold office till October after which new elections will be held.
Accepting a defeat that he doubted to materialize, the PM in his emotional speech said: “I will do everything I can as Prime Minister to steady the ship over the coming weeks and months. But I do not think it would be right for me to try to be the captain that steers our country to its next destination.”
The PM’s decision to hold a referendum was probably one of the worst decisions taken by him and however big his accomplishments in office would have been, this decision will always be regarded as a mistake which will scar the country forever.
Jonathan Hill Quits
Britain’s most senior EU official Jonathan Hill’s resignation was fated to occur after the infamous Brexit vote. Jonathan Hill held the portfolio of financial services and it was but natural for EU leaders to oppose a British official presiding over EU financial stability after UK’s exit.
In the wake of the situation, Hill said that it wouldn’t be correct for him to continue office and added: “I came to Brussels as someone who had campaigned against Britain joining the euro and who was sceptical about Europe. I will leave it certain that, despite its frustrations, our membership was good for our place in the world and good for our economy. But what is done cannot be undone and now we have to get on with making our new relationship with Europe work as well as possible.”
In his resignation speech, Hill said that he was disappointed with the referendum results and had wanted it to end differently. But, he accepted the decision of the British people for that is “the way democracy works”.
Hill’s last day will be on 15 July, 2016, when he will pass over the financial services to Valdis Dombrovkis, the commission vice president in charge of the euro. His departure, however necessary, creates further complications in the process of the British exit from the EU.
World Economy after Brexit
In contrast to the jubilant celebrations of anti-EU supporters, the atmosphere was grim for financial markets. The pound plunged to a 30-year low against the dollar by over 10% to $1.32. Stock indices fell down as the world reverberated with the consequences of this shocking turnout. Though Britain accounts for only 3.9% of the world’s output, disruption in the British economy is sure to impact the unstable economies of today’s world.
The collapsing pound will lead to increased inflation. A recession is thus likely in Britain and corporate investment will suffer due to uncertainty regarding deals negotiated by the EU. Europe’s economy will fall face hard due to the impacts of this British recession.
Chinese exports will also have to bear the brunt of a weaker Europe economy. And the weakening of the European currencies is sure to put renewed pressures the value of yen.
Tumbling stock markets present long term worries for investors. Also, Brexit puts up a big question mark on the stability of international economic agreements regarding free trade. Britain’s exit is an encouragement for the nationalist and populist forces in countries worldwide. Trade relations across the world will have to endure the disastrous consequences of a suffering European economy.
The world economy might not have to face such disastrous consequences only if Britain seizes a quick deal with least reductions in single market access. It is all now dependent on the British negotiations with the EU.
Brexit is a grave blow for the European Union and with the British exit; the EU will have to deal with popular anger and threats of further withdrawals. David Cameron will end office in October, leaving the nation in the midst of a violent storm which can run havoc, and even though the anti-EU supporters are cherishing this independence from the EU, with Brexit, Britons have plunged into the unknown. If it unleashes a vibrant economy in the future as promised or not, is a question only time can answer. But as we move ahead into the unknown, let’s hope for the best.
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