The UK is getting ready to hold a referendum on whether the country will leave the European Union, a process often referred to as “Brexit”.
Thursday’s vote is seen as more important than a general election, because it can shape Britain’s relationship with Europe and the rest of the world for generations to come.
BREXIT – What it is
BREXIT is a portmanteau for Britain and Exit. The exit in question is from European Union (EU), erstwhile European Economic Community. Last referendum which was held in 1975 showed an overwhelming inclination of the citizens of UK to stick with EU (67% vs. 33%). It has already been around 40 years since then, and David Cameron decided it is high time they have a relook at their positions. On June 23, 2016, a referendum will be held, asking if citizens want to remain with EU. A simple majority will do, even if the margin is narrow between the people exercising two options. Cameron, has advocated and clarified position, his and conservative party’s, to stick to EU even when they have been vocal about drastic changes they wish in EU’s structure.
BREXIT – Why Can Britain Exit
A section of the population has never been happy with its unification in the greater Union. Attempts were made to repeal the association – once on the condition of Labour party getting elected, in 1983, which never happened. ‘Euro-sceptics’ is one name given to proponents of such efforts. They resent the one-size-fits-all conditions ‘imposed’ on Britain and would want to let away these ‘regulations’. Though the chances of Britain exiting look bleak, some preliminary polls showed significant support for the disassociation.
Last six opinion polls averaged out show a close fight. 51% are in favour of remaining with EU. Rest are all against since this takes only opinionated people. But here is the catch. Polls show the number of un-opinionated voters, or the ones who have not made their minds yet may be as high as 20%. These sway voters hold the key to the outcome of referendum. With Jeremy Corbyn of the Labour party, who is the darling of leftists the world over, taking a U-turn from his earlier position of secession; now supporting stay, has brought upon a weird position in British politics. Both the heavyweights –Conservatives and Labour party- are now in favour of EU stay, but may be some people are not. There are some advocacy groups which are trying to convince people for exit inside these parties. The recent Brussels attack which lacerated anti-EU fears may be a crucial factor in the sway. Since EU advocates easy migration of people, something which echoes with the likes of Corbyn – who believe migrants should be welcomed since they bring their culture in Britain – a majority of the citizens are skeptical of the ‘utility’ of such a culture. In the last decade or so, we have seen the culture which most migrants brought nothing but devastating for the openness that Europe was proud of a few years back. Many[LINK1] countries now asking their women to not venture out in night and cover themselves to avoid attacks (by migrants) will not propound migrant assimilation (here slapdash).
Scottish Referendum – A recent example
On 18th September 2014, a (simple) majority of Scots (55% No vs. 45% Yes) voted in the referendum, deciding to not get independence from United Kingdom. Just to put things in perspective, United Kingdom is Great Britain plus Ireland; and Great Britain comprises of England, Scotland and Wales. Great Britain, United Kingdom and sometimes England too, are often used inter-changeably, unless there is a clash between these constituents.
The referendum was markedly important because of a couple of reasons.
One, the discourse to the possibility of independence of Scotland was rather dispassionate from a point of view of identity of the Scots, and focussed more on the tangibles, for e.g. the economy, social cohesion in either of the eventuality, healthcare and other benefits of the citizens et cetera. Two, the European markets – highly mature – threw jitters at each of the opinion polls preceding the actual referendum, whenever they hinted at a reasonable possibility of secession of Scotland. Though Scotland secession would have had a small effect for UK’s economy and lesser effect for Europe’s; the anxiety was palpable. Since the secession did not happen, the differences it would have created remain unknown. Exit of Britain, if it happens will cause a stronger effect on the economy in long run, and will see a more jumpy market.
BREXIT – What it bodes for the world
This is probably the question everyone seems to be asking. What if it actually happens? What if the decades long association evaporates in a jiffy? What with the economy? What with the commerce? And Politics?
In this [Link2] article from The Economist, some precise arguments are listed from both the parties.
Arguments in favor of stay: –
1. Britain avoids exporter tariff and red tape for trade in EU which is 51% of its exports.
2. Britain gets benefits worth around 3000GBP per household, which they will forego after the withdrawal. However they will still have to pay 340GBP per household to EU for accessing their market.
3. Britain, one of the largest players in EU can fight for tweaking the laws and can hold commanding position in EU, which has the highest GDP in world if taken as a group.
4. Stronger representation for Britain, in the form of EU as a current practice.
Arguments for the BREXIT: –
1. Britain can negotiate new deals with not just EU at their terms, but enhance co-operation with China, India and other emerging economies which is somewhat impeded by EU laws which favour trade with the member states. Summarized, Britain is bearish on other EU members, and bullish on China (and to a huge extent India) which makes them do a desperate attempt to abandon the sinking ship of Europe.
2. Direct transfer of 350millionsGBP from Britain to Brussels (EU headquarters) will be saved.
3. Britain can take independent decisions on employment, law, health and safety; which no longer will be dictated by Brussels.
4. Can have a flexible migrant system, like in the USA. Basically they would be able to take talented non-EU immigrants hitherto banned; and refuse undesirable EU migrants. It is to be noted that such an arrangement would ban highly undesirable migrant population, say the African ones normalised in Brussels for vote-bank, who have proved to be nothing but explosive(quite literally) for EU states.
5. Would bring independence in world affairs, as opposed to a joint decision system of the EU states.
BREXIT: Third Parties’ Interests
HSBC, the biggest bank in country, which employs some 45000 in Britain, and among the top five in market capitalization of those listed on London Stock Exchange has said (rather warned) [LINK3] that it will move at least 1000 (all in the high-end Investment banking) jobs to Paris if Britain leaves EU.
In an attempt to pre-empt the strategy execution preceding referendum, a number of banks have voiced their concern. CEO of RBS said the uncertainty of Brexit will slow down banking. Analysts have warned [Link4] of a possible devaluation of Euro to the tunes of 20%, racking havoc at net importers among EU nations. With interest rates in EU flirting in the negative territory, a further dampening of trade would be devastating for the economy at large. Mark Carney, head of Bank of England has warned Brexit will destabilize [LINK5] Britain like never before.
While bankers’ warnings may be taken with a pinch of salt, but the reality remains same – that though initial hiccups may be faced by Britain in the event of an exit; in the longer term it will be in a better and commanding position to negotiate trade and actions with the rest of world. As we approach the referendum dates and a mire of data emerge for voters’ preferences, one casualty will be markets – be it stock or currency or bonds. While the high volatility that is expected is not great for economic stability, trading vultures in the world across will try to milk the uncertainty. Months ahead till June 23rd will be closely watched as Brexit would start a process what some believe as disintegration of European Brotherhood. Grexit, exit – rather kick out – of Greece would have started it an year back, and it will be interesting to watch the times ahead.