What is Next for Europe After Brexit?
- Author: Todd Kelly Jul 19, 2016,
Jul 19, 2016, 13:20
When David Cameron called for a referendum on whether to leave the European Union, few believed that Brexit would happen. The consequences of a “Brexit” would be too major, possibly bringing on a recession and a dire impact on the currency. However, “Leave” campaigners stirred up nationalist sentiment and ultimately won. People around the world are panicking about what this means for the economy, the survival of the European Union, and whether the UK itself will fall apart.
While it’s impossible to know what the future of Europe holds, there are already some indicators of what is next. The following consequences are the most likely, at least in the short term.
A weakened EU
The European Union is a big loser in the wake of Brexit. Voters were swayed by a disillusionment with the globalist objectives of the EU. The freedom of movement in and out of Britain for foreign migrants was a major factor. With nationalist sentiment not uncommon throughout individual EU states, other countries may wish to follow suit in order to tighten up their borders.
Then there are the burdensome trade regulations imposed by the EU. Many of the electorate believe that the EU has too much control of trade, and point to the massive amount of legislation on products and policies.
Others believe that the EU has stifled economic growth, by making the whole of Europe responsible for the survival of struggling states. Taxpayers have been upset particularly by the consequences of the Greek financial crisis on them. They were forced to pay for the mistakes of others.
Now that the “Leave” campaign has won in Britain, nationalist politicians in other European states have recognized the potential to pull off a similar result. The European Union faces a struggle in staying together through the next few volatile years.
While voters were hoping for things to get better in the wake of a Brexit, economic signs indicate that things might get much worse. The pound sterling (GBP) tumbled to its lowest levels in 30 years. It slid 11.89% against the US dollar (USD).
This caused panic among investors around the world, causing them to pull money from the currency and stocks and place it in safe haven investments. The chances of the UK economy going into recession look unsettlingly high, as potential big investors have also been put off. Richard Branson is one of the latest big business leaders to cease plans for new business in his native country. He reported that his Virgin chain has lost a third of its value already.
On the other hand, the devalued pound may help boost the economy in the medium term, as export competitiveness will increase.
While things look bad at the moment, this is not necessarily “the end” for the British economy. As things stand, no one knows the impact this unprecedented move will have. The markets were always likely to crash in the wake of such uncertainty. There is the chance that they will rally once steps are taken to manage Britain’s exit and the future becomes clearer. For now, volatility all around is all that is certain. Brexit may not be a fatal blow to the European Union or destroy the economy, but in the coming days, the markets will react as if it already has.