Brexit: to be or not to be (part of the EU bloc)?
- Written by Victor Lupu
The great test is approaching both for the UK and for the EU as a whole. On June 23 the UK referendum will address the British electorate the question related to their wish to remain or to leave the EU, following the passage of the EU Referendum Act 2015. A ‘no’ answer would trigger unknown consequences for the Britons and for Europe, although various analysts try to decipher the effects on short and long term. It’s not the first referendum of this kind for the UK, in 1975 a first one was called to decide to remain or leave the EEC. The votes cast on June 5, 1975 were 67.2% in favour of remaining in the EEC, while 32.8% were against, with a turnout of 64.5%. Several years later, in 1983, the opposition Labour Party campaigned during the general election to withdraw from the EEC, but was heavily defeated by the Margaret Thatcher Conservative government. On November 1, 1993, as a result of the Maastricht Treaty, the EEC became the European Union. Nevertheless, this time things are different. The pro and against campaigns are not carried out by political parties, but by various organisations, while the parties themselves are divided. PM David Cameron himself has allowed cabinet minister to campaign according to their conscience, even for EU withdrawal. For example, one of the important supporters of the Brexit is former London mayor Boris Johnson, Conservative, while the Premier is a constant supporter of remaining in the EU. In the Labour Party as well the opinions are divided. Most likely, UKIP is the party united along the idea of leaving the European bloc.
PM Cameron pleads for staying, EU leaders deliver warnings
The very idea of a referendum and the wave of dissatisfaction towards the EU come mainly from the increasing migration influx to the UK in past years and from the Britons’ dissatisfaction regarding the use of public benefits by the newly arrived, by the health insurance issued, public expenditures and access to the NHS. Thus, there is a huge public concern that, according to latest surveys, if Britain remains in the EU, there will be 3 million more migrants in the UK by 2030 - with 62% of the public saying this is ‘too high’ and an overwhelming 69% saying it would increase pressure on the NHS and public services. On the other hand, for the ‘remain’ supporters, economy is the most important issue, as 68% of them say.
In his campaign to stay in the EU, PM David Cameron went as far as saying that if the UK quits the EU, the continent will be at greater risk of war and genocide, an argument rejected by most Britons, as they don’t see a conflict looming. Nine in ten voters said the UK quitting the Brussels club would either make no difference to the prospects of conflict on the continent or make a war less likely, according to Daily Mail. About the prospects of an enlarged EU, around half of the public think that Albania, Macedonia, Montenegro, Serbia and Turkey joining the EU - which they are in line to do - would make it less secure (47%) and worse off (48%). This is considerably more than the percentage of those who think it would make them more secure (14%) and better off (16%).
British Chancellor of the Exchequer George Osborne warned in his turn, while at the G7 summit in Japan in May, about the economic damage a Brexit will result in, adding that it would be bad for British economy if the UK leaves the EU.
But speculations go further - what if Scotland wants to remain in the EU and calls for another referendum?
On the other hand, the European Union officials do not leave much room for interpretations. Brussels’ official position is that UK’s place is with the EU and that’s it. Any other option is not considered, they say. Thus, European Union commissioner Pierre Moscovici said that policymakers “have no plan B” if Britain voted to leave the EU. On the sidelines of the G7 finance ministers’ summit in Japan in May he said plainly: “We have no plan B for Brexit. Our only plan is for Britain to remain in a united Europe.”
The European Commission President Jean-Claude Juncker was even blunter: “deserters will not be welcomed back with open arms.” In an interview for ‘Le Monde’ he said Britain’s relationship with the EU would suffer in the event of a ‘no’ vote and that the relationship will no longer be as it is today. “The UK will have to get used to being regarded as a third party state,” Juncker added.
No move from Moscow
Unlike US President Barack Obama, who called on Britons to remain in the EU, Moscow seems uninterested in the issue, uninvolved in the pro or against campaign. Some analysts say this comes from the fact that, given the way Russia is perceived, it is not much to do anyway. If revealed as a Brexit support, the public reaction might be contrary, so the best way is to keep the distance. Nevertheless, British politicians have involved the Russia issue in the campaign. PM David Cameron said recently Russian President Vladimir Putin might be happy if the outcome of the vote is ‘yes’ for leaving the EU. British Foreign Secretary Philip Hammond had said in March that the only country wanting Britain to leave the EU was Russia, while David Cameron previously had said that what he called Putin’s aggression meant it was no time to drop out of the EU.
The Kremlin criticized the accusations, saying that President Putin has spoken repeatedly about Russia’s interest to forge good partner-like and mutually beneficial relations with the EU nations. On the other hand, Moscow says it has no opinion about Britain’s place in the EU.
And yet... Some say the Brexit would rather be an opportunity for Moscow than a tragedy, as analysts point to Russia’s interest towards a weaker Europe. Some even say Moscow is the only one who stands to gain from a Brexit. On the background of the migration crisis in Europe, Britain leaving the EU would add to the problems of the European bloc. One analyst said: “Official propaganda tries to tell Russian citizens that they are better off in Russia than in rotten Europe. With migration, security challenges and everything else, life in Russia is better. Brexit would be another piece of this ideological claim that Europe is falling down.” Furthermore, others say that with an EU angry at the UK for leaving, Russia may see some opportunities. According to a Ukrainian MP, “Russia is enjoying the disintegration of Europe. The refugee crisis is in Russia’s interests and Russia is inflaming it.”
What about the North Sea oil?
As in political terms things are rather tensioned, the economic side is not far different - as the British government says the GDP could fall by 6% after 15 years. However, analysts seem rather calm when talking about the oil and gas field, they see a limited impact on the UK upstream sector.
One of the reasons is that the North Sea oil has been regulated by London ever since joining the EU and Brussels has limited influence. The current rules will not fall apart if the outcome of the vote is to leave the EU and the rules are not to be repealed either. Brexit will not change the key tax regime for the North Sea, analysts say - sovereignty over corporation tax, licensing and other regulations would not be affected in the short term. Others underline that Brexit would not have huge impact on existing contracts, as anyway it would last a decade until the UK disengages from the EU.
Taking as example the referendum in Scotland in 2014, the oil and gas industry in the North Sea see implications on costs and red tape and further on in attracting skilled workers. So, despite wanting to counter the migration to Britain in general, London might be in the position to sign labour migration deals if the EU member workers are to leave the British labour market.
However, oil British oil giants play it safe in favour of remaining in the EU. British Petroleum’s head Bob Dudley said Britain’s role would be “much diminished” if it exits. Shell’s management has signed a pro-EU letter saying leaving “would deter investment and threaten jobs.”
Visas for Romanians, volatile European markets. Possible effects
It’s highly probable that a Brexit decision would lead to the review of UK’s visa regime. As British Labour MP Keith Vaz (an opponent to leaving the EU) said recently, soon after a ‘leave’ vote Romanians might need once again visas to travel to Britain, even more so for working there. It is however uncertain what would happen for the Romanians already working in Britain.
The British economy is expected to be affected if the outcome of the vote is to leave the EU. As said, the GDP could fall by 6%, the sterling pound, already signalling weakness, could become even more unreliable, analysts say, adding that the currency’s latest developments are concerning and with or without the referendum the sterling would be considered risky for investors. Most analysts expect the sterling pound to weaken as the date of the referendum closes in, but a Brexit vote would trigger another steep fall.
Bayerische Landesbank analysts anticipate not only the sterling pound would be hit, but the EUR as well. By June 30 the EUR/USD exchange rate will reach 1.09 and 1.04 by year end, on the background of uncertainties (down from the current 1.11 rate).
The IMF has warned repeatedly about market volatility and uncertainty following the Brexit and has called on politicians to be ready to react.
Investors however are concerned about their capital and the impact on economy. After the first shock, a gradual return to market stability is foreseeable, despite the fact that the investor’s confidence would be hard to restore.
Among the consequences the Britons are warned about is that the damages caused by Brexit would be permanent, not temporary, with falling budget revenues and expected cuts in health and defence expenditures. A GDP fall by 6% would mean a USD 6,090 loss for every household in Britain.
According to a PwC survey, the GDP could fall by 5% until 2020 and economic growth would be affected to stall at zero percent in 2017 and 2018.
The British Industries Confederation has announced the Brexit would cost the UK some USD 145 billion and would lead to a loss of 950,000 jobs.
Last but not least, the Britons’ rights to work and have pensions, health and public services in the EU countries would become the main issues to be negotiated following a Brexit vote, leaving room for uncertainties and annulling them, with a huge impact on lots of them. In order to prevent such events, more and more Britons living abroad have decided to apply for other countries’ passports, mainly French. “I don’t really want to become French, but facing the current risks I prefer not to remain empty handed,” one of the Britons living in France said.
There’s a saying going around: Britain may be EU’s biggest problem now, but EU might not be Britain’s biggest problem... Let’s wait and see. The latest opinion poll on June 7 revealed 43% of Britons would vote to remain, 42% to leave the EU and 11% don’t know.