Economics / Finance / International Business

We Experienced the Brexit, but What About the ReBrentrence?

brexitbrentranceThe United Kingdom’s (UK) referendum on whether or not to leave the European Union (henceforth called Brexit), sent the world into a “bit of a tizzy” when the vote came down on Thursday, June twenty-third. Stock markets plunged, the Pound Sterling (the British currency) hit a 30-year low, and the UK’s Prime Minister, David Cameron, announced his resignation. The startling fact is that all that happened only the day after the referendum was held, and there is still much more uncertainty and anticipation in the air as the UK could be the first country to leave the European Union (EU). One of the most far-fetched uncertainties at this time is that the UK could in fact not leave the EU, going against the will of the majority by either holding a second referendum, having Parliament vote on the matter, or any other number of courses of action. How likely is this to occur? Can or should Britain change the direction it seems to be heading in, that is, alter course and stay within the union?

The question as to whether Britain should stay within the EU has already been settled in the mind of this author. However, even if you don’t believe my in-depth, fact driven research on the subject, consider that already over 3 million British citizens have signed a petition arguing for a new referendum. In addition, primary figureheads in the “Leave” campaign like Nigel Farage of the UK Independence Party and Iain Duncan Smith, the former Secretary of State for Work and Pensions, are back peddling on promises they knew they couldn’t keep about what the Brexit vote to leave would mean. These promises include lying about the control of immigration and to where the current EU payments would be redirected, representing about £19 billion a year). A majority of that money was promised to go toward paying into programs like the National Health Service, the UK’s state sponsored healthcare system, and the Leave campaign’s leadership was so confident in that pledge, they tattooed that promise to the side of a bus that they drove around the country.

It turns out that the campaigners have little control over where that money goes, and the UK may have to use it to settle outstanding debt if the country does decide to leave. It just goes to show that no matter which side of the street you drive on, you can still be disingenuous. We’ve also seen confusion and bewilderment on the part of the ordinary British citizen who voted Leave, in part shown through the uptick in Google searches like “What is the EU?” and “What happens if we leave the EU?” and a new poll that shows over 1.1 million “Leavers” would change their vote in a second referendum. There is clearly some conflict that would make a smooth and stable transition out the EU impossible for the UK, so what happens if you can’t beat them?

You join them (or at least remain a part of them), which has a very possible path to becoming reality. We know for a fact that not only is the referendum not legally binding in any way (meaning the British government could, theoretically, ignore the results), but that there isn’t even a formal timetable for the UK leaving until Article 50 is activated (which stipulates that a country then has 2 years to formalize separation agreements from the EU). We are also aware that because the petition to hold a second referendum accumulated more than 100,000 signatures, it now has to be debated in Parliament. This would give politicians a chance to reflect on the current turmoil and regret and make a meaningful decision, at least one way or another, so as to escape this period of limbo. And again, while it would be political suicide to go against the will of the people, it seems that will is itself not fully grounded.

The other side to this story, the one in which the UK formally exits the EU, has far more proponents outside the UK than first expected. Many EU countries want to make an example of Britain and have them leave quickly and quietly, so as to not give other countries looking to leave any excuse to follow in Britain’s wake. Some politicians, like German Foreign Minister Frank-Walter Steinmeier have expressed their desire for Britain to leave post-haste, saying that “[t]his process should get under way as soon as possible so that we are not left in limbo but rather can concentrate on the future of Europe.” Others have expressed caution and a level head, like Mr. Steinmeier’s colleague, German Chancellor Angela Merkel, who noted in a conference that “[t]he negotiations must take place in a businesslike, good climate…Britain will remain a close partner, with which we are linked economically.” Still, the attitude across Europe seems to be that Britain should pay the price and not test the waters, which makes upcoming negotiations all the more tense and important for Britain. Should a new referendum fail to materialize, getting a good deal with the EU in terms of participation in the single market and access to foreign direct investment on the part of European creditors could make or break how the UK interacts with not only the EU, but also the rest of the world.


Sources:

http://www.telegraph.co.uk/news/2016/06/25/could-britain-actually-have-a-second-referendum-on-brexit/

http://www.nytimes.com/live/eu-referendum/whats-next-for-britain-brushing-up-on-article-50/

http://www.reuters.com/article/us-britain-eu-wrapup-idUSKCN0ZB090

http://www.inc.com/minda-zetlin/could-britain-change-its-mind-about-brexit.html

https://www.washingtonpost.com/news/worldviews/wp/2016/06/26/brexit-leaders-are-walking-back-some-of-their-biggest-promises/

 

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