The Rise of Euroscepticism, Brexit and what could be next!
“Our destiny is in Europe, as part of the community. That is not to say that our future lies only in Europe, but nor does that of France or Spain or, indeed, of any other member. The community is not an end in itself.”
- Margaret Thatcher in The Bruges Speech, 1988.
It was in the ‘Bruges Speech’ that Margaret Thatcher’s views on Europe were brought to attention. Her speech highlighted five guiding principles; the first being an “active cooperation between independent sovereign states” which she said was the best way to build a successful European Community. The speech had celebrated the individualistic traditions, customs and identities of nations in the community. She had further added, ““It would be folly to try to fit them into some sort of identikit European personality.”
Since 1973 Britain has been an integral part of the European Union. But June 23 ended this 43-year long association. Through the EU Referendum, Britons voted to leave the EU (popularly known as Brexit).
The news around Brexit fear already increased market volatility and even resulted in the pound falling to its lowest since 1985.
Are you still googling what EU is….
The origin of the EU dates back to 1946, which was initially an attempt by Winston Churchill to reconcile France and Germany. As a result, European Coal and Steel Community was formed with six members in 1951 and eventually, the European Economic Community in 1957 under the Treaty of Rome. Following the ratification of the Maastricht Treaty in February 1992, the EU (formerly known as European Economic Community or EEC until 1993) was created in the aftermath of two tragic world wars. The Union came into force in 1993.
The economic and political partnership currently unifies 28 nations of Austria, Belgium, Bulgaria, Croatia, The Republic of Cyprus, The Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden. A single market helps Europeans gain access to a single market, promotes economic prosperity and allows people to move around freely within the nations.
The UK’s role in the EU has been a crucial one but has also been termed as “anawkward” one. The United Kingdom is EU’s second-largest economy after Germany and has a powerful military with great influence in global affairs. But time and again, many member nations including the UK have questioned the benefits of their association with the EU, giving rise to ‘Euroscepticism’.
The Vote to ‘Leave’
Brexit was one of the most important uncertainties that the US Federal Reserve considered during its recent two-day FOMC meeting. The chair of the International Monetary Fund, Christine Lagarde, had recently warned that the Brexit consequences might range from “bad to very, very bad.” A study conducted in 2016 showed that 70%of Europeans in the survey believed that Britain exiting the EU would be a bad thing for the EU. An IMF report highlights that Brexit could adversely impact the investment in key areas and affect the country’s current account deficit.
Leave campaigners (or the Proponents of Brexit) argued that will give it more control over its economy since it would be free from the common EU regulations. The country would have more opportunities to establish more favorable and independent trade terms with other developed countries. It would be able to negotiate deals as a neutral nation. Leave campaigners feel that Brexit will create more jobs in their own country. The campaigners believe that with a Brexit, $36 billion would be added to London’s economic output, creating more than 200,000 jobs in financial services by 2020. Advocates of Leave camp say a Brexit would save additional costs that are associated with the EU membership. In 2015, the UK’s net contribution to the EU was estimated at about £8.5 billion.
What’s Next….
- Markets : As far as the markets are concerned, a lot has happened already. Intense volatility in the markets clearly shows that no one predicted a Brexit vote, especially since many polls pointed towards VoteRemain. Markets will remain volatile and sensitive in the short run as Brexit chaos spreads.
- Immigration Debate: The decision to exit from the EU is vital for Britain and highlights a concern that goes beyond politics and economics. Britain’s need to exit could also trigger decisions around the immigration policies.
- Increased Euroscepticism: The repercussions could be worse for the EU member countries.Brexit could lead many Euroskeptical nations to believe that holding a similar referendum will help them gain independence. So far, the reasons for increasing Euroskepticism are different for each country. From unemployment and unfair economic policies to terrorism and the more recent issue of increased immigration, the issues faced by member countries differ widely.
- Scotland’s Future: Scotland voted to be with the UK in 2014 but finds a future with the EU. It is very much likely that Scotland will hold a UK Referendum so as to decide whether it still wants to be with the UK or not.
- Monetary Policy and Politics : Bank of England has pledged £250bn liquidity but Britain’s economic future faces an uncertainty. Prime Minister already resigned after Britain voted to leave the EU.
Here is more news on Brexit on Financial Keyhole
