World Economy

Brexit & a Lesson for the Future

Brexit & a Lesson for the FutureBrexit & a Lesson for the Future

With 72.16% participation, the European Union referendum in Britain revealed that a majority of the people in that country (51.9%) want a permanent end to the membership in the club.

“A nation should not decide its future by tossing a coin, nor subject its legal and political stability to stress simply to resolve the problems of a political party,” said Jose Maria de Areilza, law professor ESADE Law School and holder of the Jean Monnet Chair at ESADE after the results of the British referendum were announced on Saturday, TNN reported.

Robert Tornabell, emeritus professor of banking and international finance at ESADE, observed that: “Without Europe, it is likely that Britain will become poorer and remain isolated.”

He added that: “Brexit, as the IMF said, could lead to a UK recession in 2017 and a loss of up to 5.5 points until 2019. Nearly half of British exports go to Europe and access to the single market is vital for the country and to attract foreign direct investment.”

Maria de Areilza believes that: “the Conservative Party will suffer a deep division and British society will be split in two.” He also agrees with Tornabell that “these wounds will take time to heal”.

“Asian markets were the first to react to the change of trend in the count shortly after polls closed (during polling day, Thursday 23, the markets were betting on a ‘Remain’ result)”, stated Robert Tornabell. “Asian markets have seen the start of a high level of volatility in all currency markets, and so the Bank of England is looking to stabilize and support the pound, which lost more than 10%. Meanwhile, Tokyo fell 8% and the euro lost 3%”, he added.

  Supporting the Pound

The expert observed that: “Central banks, particularly the European Central Bank and the Federal Reserve of USA, in addition to the National Bank of Switzerland, Sweden, the Bank of Japan, and the National Bank of China, will be forced to support the pound. These banks will have to buy sovereign debt in pounds and give liquidity to stock markets so that the shares and corporate debt of British companies do not sink,” he added.

In such a scenario of legal, political, and financial uncertainty, those who wanted the referendum and many other Europeans “should learn urgent lessons for the future. The EU must address the worries of those citizens who feel neglected and direct democracy should not be used to decide complex issues that divide a nation in two,” concluded Jose Maria de Areilza.

  People Frightened

Leader of the UK Labor Party, Jeremy Corbyn, said many people have been left “frightened” by the outcome of the EU referendum. “We have to bring the people together.”

The Labor leader says he will not allow the Conservatives to replace EU environmental regulations with “Tory polluting charters”.

He said it was “important to learn from the result”, saying that many former mining communities across Britain had been “abandoned” since the 1980s leaving them with a feeling they had to get out of the EU. People had been left feeling “very concerned” and the poorest were “hit the hardest”. Those communities had “taken the full force of austerity” in recent years, he added.

Corbyn blamed the housing crisis for many people’s fears. He said: “The chronic housing crisis across this country is a direct result of this government’s housing policy.”

He also recognized the divide across the country in the vote. “The referendum revealed a very divided Britain,” he said. “There is a divide between the thriving multicultural cities that voted to remain and the smaller, post-industrial towns that voted to leave.”

He warned that Labor would not allow “working people” to pay for any “instability” as a result of the Brexit vote.