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Brexit and Beyond

Zafri Mudasser Nofil

Brexit is the buzzword these days. A portmanteau of “Britain” and “exit”, it means the country’s departure from the European Union (EU). The term is believed to have been coined in 2012 on the lines of ‘Grexit’ (Greece’s potential withdrawal from the Euro zone).

In a historic referendum on June 23, 2016 Britain voted to leave the EU, after over four decades of the UK's membership of the union.  The world waited with bated breath as the UK Electoral Commission's chief counting officer Jenny Watson declared from Manchester Town Hall on June 24 that 51.9 per cent people voted in favour of Brexit and 48.1 per cent in favour of Remain.

Over 30 million people turned out to vote, the percentage of voting being 72.2. Britain, which is the second largest economy in Europe after Germany, became the second country after Greenland to quit the bloc. Greenland departed way back in 1982, when the EU was known as the European Economic Community.

Disentangling from the union is foreseen as the relatively simpler process, with renegotiating a lucrative trade deal and establishing acceptable tariffs and barriers with the UK's biggest trading partner seen as the toughest and most uncertain aspect.

Quitting the EU could cost Britain access to the EU's trade barrier-free single market which means it has to seek new trade accords with countries around the world.

The vote result also opened a fresh debate over issues like immigration and advance of the right-wing across Europe.

The immediate fallout of the vote was that British Prime Minister David Cameron, who campaigned for the country remaining in the EU, announcing his decision to resign saying a new Prime Minister should take charge in October to launch the process to leave the 28-nation bloc.

The process of departure of Britain from the EU will involve invoking Article 50 of the 2009 Lisbon Treaty, which deals with the exit for any member country. Article 50 has provision for a two-year timeframe for negotiations with a scope to extend the negotiation period if all parties involved agree. However, European leaders are said to be keen to conclude Brexit proceedings as quickly as possible to avert any further divisive referendums among its 27 other member-countries.

The terms of exit will be negotiated among EU’s 27 counterparts, and each will have a veto over the conditions, according to reports.

It will also be subject to ratification in national parliaments, which means MPs from individual member countries could squash aspects in their own Parliament.

Two negotiating teams will be created, with the EU side likely to be headed by one of the current commissioners and the British side most likely by a new Prime Minister.

EU President Donald Tusk, after the outcome of the referendum, said the Union was prepared for any negative scenario.

“There's no hiding the fact that we wanted a different outcome of yesterday's referendum. I am fully aware of how serious, or even dramatic, this moment is politically. And there's no way of predicting all the political consequences of this event, especially for the UK. It is a historic moment but for sure not a moment for hysterical reactions. I want to reassure everyone that we are prepared also for this negative scenario. As you know the EU is not only a fair-weather project,” he said in a statement.

He also pledged unity among the remaining members. “Today, on behalf of the 27 leaders I can say that we are determined to keep our unity as 27. For all of us, the Union is the framework for our common future. I would also like to reassure you that there will be no legal vacuum. Until the United Kingdom formally leaves the European Union, EU law will continue to apply to and within the UK. And by this I mean rights and obligations.”

THE EU STRUCTURE:

The EU describes itself as a unique economic and political union among 28 (now 27) European countries that together cover much of the continent. It was created in the aftermath of World War II. The first steps were to foster economic cooperation: the idea being that countries that trade with one another become economically interdependent and so more likely to avoid conflict.

The result was the European Economic Community (EEC), created in 1958, and initially increasing economic cooperation among six countries: Belgium, Germany, France, Italy, Luxembourg and the Netherlands. Since then, a huge single market has been created and continues to develop towards its full potential.

What began as a purely economic union has evolved into an organisation spanning policy areas, from climate, environment and health to external relations and security, justice and migration. A name change from the European Economic Community (EEC) to the European Union (EU) in 1993 reflected this.

The EU is based on the rule of law: everything it does is founded on treaties, voluntarily and democratically agreed by its member countries. It is also governed by the principle of representative democracy, with citizens directly represented at Union level in the European Parliament and Member States represented in the European Council and the Council of the EU.

GLOBAL IMPACT:

Brexit has raised apprehensions in the world community on its impact.

The International Monetary Fund said Britain's referendum has created uncertainty that poses a major threat to the global economy.

"We see the uncertainty right now as probably the biggest risk to the global economy," IMF spokesman Gerry Rice said and called on European leaders and other policymakers to take "decisive" actions that could lower the threat.

"Brexit has created significant uncertainty and we believe this is likely to dampen growth in the near term, particularly in the UK but with repercussions also for Europe and for the world economy," Rice said, adding, "We need to be ready, all of us policymakers, with decisive actions that can help mitigate that as much as possible."

English language may also be one of the casualties of Brexit as it emerged that no state other than the UK has registered it as a primary language among the member countries within the EU. English has been the top choice for EU institutions but Britain's referendum could trigger a ban on its use.

"We have a regulation where every EU country has the right to notify one official language," said Danuta Hubner, the Polish Member of European Parliament who heads the European Parliament's constitutional affairs committee.

"The Irish have notified Gaelic and the Maltese have notified Maltese, so you have only the UK notifying English."

Stock markets around the world fell sharply on June 24 following the referendum result and businesses said they would be forced to review their UK operations, putting thousands of jobs at risk. The result drove sterling down 10 per cent to a 31-year low of USD 1.3229. European stock markets dropped around eight per cent at the opening bell. British banking shares lost a quarter of their value in morning trade.

However, Britain’s Business Secretary Sajid Javid appealed to UK businesses not to be panicky           saying the country’s economic fundamentals are strong enough to weather any short-term market volatility.

(The author is a senior journalist based in New Delhi)