The Day After - A Brexit Summary
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Brexit Emotional Reaction:
In Europe, the primary reaction or "feelings" to the Brexit has been shock and disappointment. Perhaps some people in Europe will be pleased with the Brexit as the UK was constantly trying to revise its role in the EU. This UK has a history of asking for an exception(s) to the rules and systems that everyone else had to live with. For many Europeans, the EU flawed as it is, is an attempt to build a peaceful, more equitable Europe. That is an idealist goal. For the UK to sign out of that goal is a shock to many. Ironically it was voted in mostly by people over 45 and particularly over 65 who one would think would have some relation to the idea of a peaceful Europe.
This weekend (24-25, June 2016) is a full rush to put fingers in the dike to prevent markets and systems from collapsing. It is a bit of a 2008 crash kind of feeling. Markets were down on Friday, if that continues till Wends we will be having another global recession. In European financial terms, this is like having New York succeed from the United States. London is the primary financial hub in Europe. Europe can be assured of another year or two of recession.
Populist figures in politics are stirring up hate and virulence. This is creating a new political situation on the ground. The example of the murder of the Jo Cox is an extreme case in point. Post-election polling has put immigration as the primary issue in people's minds.
Brexit in Pragmatic Terms:
David Cameron has resigned as PM. He will stay on for 3 months to ensure a smooth transition. However, he will not negotiate a new policy for the UK in relation to the EU. That seems to create a situation in which there is a stalemate in policy, which might mean there is a stand still in business in the UK. Does this mean that the UK will have to wait till New Elections for policy negotiations? Officially the UK has 2 years settle treaties (via Article 50 in the EU Constitution). The EU wants to start ASAP. However, the EU wants formal negotiations. In contrast, the Pro Brexit camp would prefer an informal discussion as soon as possible. We will see over the next weeks where this issue falls
The United Kingdom:
The United Kingdom is itself in doubt: Scottland seems likely to have a vote to join the EU. North Ireland is talking about voting to join Ireland. Spain is suggesting that Gibraltar joins Spain. That leaves Wales and England. That ends in a much less great Great Britain.
Credit and Business:
The Pound is falling in value and The UK credit rating has been downgraded to +AA from AAA. This means the borrowing will increase, looking at other countries with similar ratings one could guess that this would be ca. 0,5%. In 2016 that was about £70 Billion Debt pre-Brexit. That figure will now go up as the budget department is projecting £30B "hole" in the budget due to the Brexit. This will have to be solved via new taxes and cuts in services.
Many businesses have said that they will relocate to Europe with the Brexit. Frankfort, Paris, Amsterdam and Dublin would seem to be the main beneficiaries. JP Morgan could move up to 4000 jobs and HSBC has said that it will move 1000 traders from London to Paris. Keefe, Bruyette & Woods estimates the total impact on London at 11% of Jobs or 40,000 jobs. All sectors of business are looking at the same options and business problems. The main question will be, "Is London still the Financial Center of Europe?" There is a lot of uncertainty and this will take some time to become clear.
"One tech investor Business Insider spoke to (who wished to remain anonymous) said: "Whole thing is shit. Fuck me." ... On the otherhand London VC Saul Klein said in an interview with Business Insider that he wasn't concerned about Brexit. "Nothing changes for at least two years," he said
The Right and the Far Right:
Across Europe, extreme Right Wing Parties are looking at this as a win. Denmark, Sweden, Italy, France, Germany. The extreme right is looking to sponsor similar proposals. FrExit, DeExit and so on. The alliance of fractions of the Tory/Conservative Party (Boris Johnson) and UKIP have taken this vote as a mandate for a presumptive success in elections. These elections still need to be arranged and voted on. It seems unlikely that this platform will be as popular once all it's implications are felt. Nigel Farge recanting on the budget surplus of £350 million per year for the NHS that was center piece in the Brexit campaign is a good example of this.
EU Reforms:
There is an increased discussion of the Democracy Deficit in the EU and other EU reforms improve the functional quality of the EU and stem the tide of FUExits. Poland has already said they will introduce proposals for reforms. It seems inevitable more will follow.
Foreign Nationals:
Foreign Nationals both from the UK living in Europe and Europeans living in the UK have just entered a never-never land where they do not know their immigration status. Or the status of social services such as retirement and health care. That said it is unlikely that any politician wants to tip over this particular apple cart.
Brexit - Wait and See:
Right now there is a lot of unknowns: It will take a week or so to get real info on all the issues. However, right now Europe's Economy is more or less frozen until things are made clear. One hopes that this will serve as a wake-up call for political elites. The tendency in the last years has been to focus on political niches rather than "whole-nation" parties. It seems we are on the cusp of demagoguery and nativism. Historically this has been rather unhealthy for civilization.
On the positive side: As of this morning, 520,000 people have signed a petition for a second referendum. (Update 15:00 25/06/16 - +1m signatures in 24 hours.) This has crashed the uk.gov servers and is 5x (10x) more than needed to bring the issue to Parliament. Looks like more storms ahead.
References:
http://www.bbc.com/news/uk-politics-eu-referendum-36534192
http://www.bbc.co.uk/news/magazine-36619342
http://www.economist.com/blogs/economist-explains/2016/06/economist-explains-23
https://www.moodys.com/research/Moodys-changes-outlook-on-UK-sovereign-rating-to-negative-from--PR_350566
https://en.wikipedia.org/wiki/Killing_of_Jo_Cox
http://www.ft.com/cms/s/0/a5193686-39c2-11e6-a780-b48ed7b6126f.html
http://www.ft.com/cms/s/0/23d576b0-386a-11e6-a780-b48ed7b6126f.html
http://www.bbc.co.uk/news/business-35707141
http://fortune.com/2016/06/24/london-brexit-jobs/
http://uk.businessinsider.com/heres-how-the-world-of-uk-tech-is-reacting-to-brexit-2016-6?r=US&IR=T
http://www.reuters.com/article/us-britain-eu-wallstreet-idUSKCN0ZA2UL
http://www.telesurtv.net/english/analysis/6-Right-Wing-Reactions-to-Brexit--20160625-0002.html
http://www.bbc.co.uk/news/uk-scotland-scotland-politics-36626522
http://www.politico.eu/article/spanish-minister-calls-for-gibraltar-to-be-returned-to-spain-on-back-of-brexit-vote-eu-leave-sovereign/
http://www.vox.com/2016/6/23/12005814/brexit-eu-referendum-immigrants
http://www.independent.co.uk/news/uk/politics/eu-referendum-result-nigel-farage-nhs-pledge-disowns-350-million-pounds-a7099906.html
https://jobspotting.com/en/journal/what-the-brexit-could-mean-for-european-workers/
https://en.wikipedia.org/wiki/Democratic_deficit_in_the_European_Union
http://news.trust.org/item/20160624160456-yen1b
http://www.politico.eu/article/demand-to-sign-petition-for-2nd-eu-referendum-crashes-uk-site/
