After years of keeping (not very) calm and carrying on with their half-hearted and quite hostile relations with neighbours, Britain, in a historic referendum on Friday decided to call it quits — ending their bitter relation with the European Union. The nation's rocky ties with the EU are rooted in its island history and defiant sense of independence. Britain's vote to become the first country to leave the EU is a shattering blow that threatens the survival of the post-war European project, officials and analysts said. The loss of one of its biggest members will at the very least force major changes on an embattled bloc already struggling to deal with growing populism, a migration crisis and economic woes.
A 'domino effect': More referendums to follow?
In the long-run, 'Brexit' may lead to other countries holding referendums, a far looser union, and possibly even the disintegration of a grouping set up 60 years ago to bring security and prosperity after World War II. According to an AFP report, the main fear in many European capitals is that either way, the result could trigger a domino effect of referendums in other countries. French far-right leader Marine Le Pen immediately called for a referendum, a call also made by far-right Dutch MP Geert Wilders. As soon as news of Britain leaving EU became official, Dutch MP, Geert Wilders, vocally anti-Islam released a statement that The Netherlands should also hold a referendum on leaving the EU. "The Dutch people deserve a referendum as well. The Party for Freedom consequently demands a referendum on NExit, a Dutch EU exit...we want to be in charge of our own country, our own money, our own borders, and our own immigration policy," he said in a statement.
Vivien Pertusot, Brussels-based analyst with the French Institute of International Relations (IFRI), said the EU was likely to survive but be weakened. "Institutions rarely die," he said. "Maybe there will not be disintegration, but a loss of relevance. The EU will lose, bit by bit, its centrality for all the most political projects."
The danger for the EU is that even after if makes changes following the British referendum, it will still not be able to quell the forces of history tearing it apart. "The EU is in a negative spiral," Janis Emmanouilidis, director of studies at Brussels-based think tank European Policy Centre, said. The question of what could replace the EU if it does collapse is even more vexed. "It might sound as if yes, this story has ended, a new one has began, but that's not easy. Especially after the experience of failure," said Emmanouilidis.
Think globally, act locally: Trade and markets look shaky
First, speaking of money and economy, the Brexit is going to have a massive impact on the global markets. According to an AFP report, Britain's economy plunged into a "dizzying unknown" and the "world economy bracing for a hit on growth and development." Financial markets on Friday indicated the turbulence that lies ahead for the world's fifth biggest economy, with the pound falling to its lowest level against the dollar since 1985. World Trade Organization has predicted that British exporters risk an extra £5.6 billion ($8.2 billion, 7.2 billion euros, Rs 52111 crore) of extra annual customs duties following Brexit.
The European Union is the world's biggest economy and the UK's most important trading partner, accounting for 45 percent of exports and 53 percent of imports. In addition, the complex nature of Britain's integration with the EU means that breaking up will be hard to do. The negotiations will go far beyond tariffs, including issues such as cross-border security, foreign policy cooperation and a common fisheries policy.
Among the biggest challenges for Britain is protecting the ability of professionals such as investment managers, accountants and lawyers to work in the EU. As long as the UK is a member of the bloc, firms registered in Britain can operate in any other member state without facing another layer of regulation. It's the same principle that allows exporters to ship their goods to any EU country free of tariffs.
AP reported that financial markets across the world were rocked Friday by Britain's unprecedented vote to leave the European Union, with stock markets and oil prices crashing and the pound hitting its lowest level in three decades. The uncharted, unexpected path of a European Union without Britain sparked the sell-offs, with more jitters expected as global markets try to digest the shock result. Crude oil prices and U.S. futures also took a big hit. The British pound plummeted more than 10 percent in six hours while the yen surged about 3 percent to the U.S. dollar as investors seeking safety snapped up the Japanese currency.
London bridge is falling down: What happens to tourism?
According to Euro News, tourism is an area that will be hit by the Brexit, head of UKinbound — British domestic tour companies told the website that Brexit is an "economic suicide." According to major research the leave vote will cost the UK's tourism industry as much as £4.1 billion per year.
75 percent of international visitors come from within the EU and according to surveys, they stated being less inclined to travel to the UK, post-Brexit.
Joel Brandon-Bravo, head of tourism company said, "Our neighbours in Europe clearly don’t want the UK to leave the EU, and the impact of this sentiment could translate into a significant drop in bookings to the UK from the largest European countries. When combined with a potential loss of more than 10 per cent of visitors from North America, as indicated in our research, it’s clear that Brexit could be very bad news for the UK’s domestic tourism industry. Similarly, UK consumers looking to travel abroad also have concerns about Brexit impacting the outbound tourism industry."
Others keep out: Labour and immigration
Immigration was one of the primary drivers of the Brexit vote.
The total number of EU migrants living in Britain doubled between 2004 and 2015 to three million people, according to the Migration Observatory of Oxford University.
The rise is due to the EU taking in eight central and eastern European states in 2004, including Poland, but in the more recent financial crisis, immigrants from eurozone countries such as Spain and Italy also headed to Britain. The pro-Brexit Justice Secretary Michael Gove claimed that if Britain stayed in the EU, more than five million immigrants may arrive over the next 15 years, putting "unsustainable" pressure on the health and education systems.
Following a decision to leave, Britain's immigration landscape will also change as fewer people from the EU enter the country to work — another factor which risks impacting on UK economic growth.
The International Monetary Fund last week argued that "while there is much uncertainty about the precise economic effects of an exit from the EU, they are likely negative and substantial".
In the worst-case scenario, the economy could sink into recession next year and overall economic output would be 5.6 percent lower than otherwise forecast by 2019, with unemployment rising back above six percent from 5.0 percent currently.
Experts have warned also of tumbling tax receipts and of Britain potentially losing its AAA credit ratings — affecting the amount of money it can borrow on markets at a time when it is still slashing state spending under a severe austerity programme triggered by the 2008 global financial crisis.
With inputs from AP and AFP
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Updated Date: Jun 24, 2016 16:17:49 IST