A week after British voters shocked world financial markets and sent the pound plunging to historic lows with their decision to exit the European Union, the world still has more questions than clarity.
As European leaders met in Brussels Wednesday — minus outgoing British Prime Minister David Cameron, who had returned to London — academics from Florida International University and David Prodger, British counsel general in Miami, took on some of the thorny issues raised by the so-called Brexit. They explained their take on the possible geopolitical, economic and financial consequences of Brexit and the turmoil in Europe during a teach-in before a packed hall of students, faculty and the public at FIU’s Modesto A. Maidique Campus
Already, the Brexit vote results have roiled stock markets, prompted Cameron’s resignation, thrown British politics into disarray, raised questions about a possible contagion with other nations exiting the European Union, and revived talk of Scottish secession and Irish reunification. The electorate in Scotland and Northern Ireland voted to remain in the EU.
In last Thursday’s election, voters in the United Kingdom chose to leave the EU by a margin of 51.9 percent to 48.1 percent.
Prodger downplayed the negative consequences. He emphasized that at the moment, Britain is still a UK member and that it is still business as usual. “We should remember that lots of the fundamentals of relations with the EU haven’t changed,” he said.
But German Chancellor Angela Merkel said Wednesday that there would be economic consequences with the exit from the EU of the world’s fifth-largest economy. Speaking at a news conference at the conclusion of the Brussels summit, she said: “This will be a difficult road ahead for trade relations, for many other areas. The faster any uncertainty is removed here, obviously, the better it is.”
Cameron has said his successor, who may be seated by September or October, is the one who should negotiate the UK’s departure from the EU. The clock won’t start ticking on a British exit until the UK submits a formal notice, called Article 50, to the EU. After that, the withdrawal is expected to be a two-year process.
There has been a message from the EU, Prodger said, that the UK “needs to get it own house in order before the start of exit negotiations.”
There also have been suggestions, however, that Brexit negotiations should begin as soon as possible. “There is a strong view that continuing uncertainty is inherently destabilizing and bad for financial markets and investor confidence,” said the London law firm Gibson Dunn in a news alert to its clients.
Prodger, who said he has spent about half his career working with EU institutions, called the election a “seismic moment” that was long overdue. He said the public hadn’t been consulted on Britain’s relationship with the European Union since 1975.
But Gwyn Davies, an associate history professor at FIU, said he was “appalled” at the vote and said it was “entirely unnecessary.
“It was not an informed debate,” he said. “We have to blame European elites as much as the British public.”
Britain, he said, will be living with the consequences of the vote, and the widespread hope is that the “parties will involve themselves in a constructive dialogue.”
Cem Karayalcin, chairman of FIU’s Department of Economics, predicted Britain EU exit will result in an estimated loss of 3.4 percent in GDP, or $3,000 per household. “Clearly there are large costs,” he said. “Leave” proponents had argued that the sluggish economic recovery of the EU after the recession was pulling down the UK economy.
But costs are likely to hit the EU as well. According to Bloomberg, European Central Bank President Mario Draghi said during the closed-door session in Belgium that growth in the euro zone might decline by as much as 0.5 percent for the next three years cumulatively because of the exit.
Merkel acknowledged as much and said there was a need “to offset what we lose here by the UK leaving us.”
Key to how Brexit will play out are the exit negotiations.
For Britain, it’s important that the UK continue to have access to the EU market, Prodger said. The UK’s exit discussions would be framed by British values such as trade and a globalized, competitive economy, he said.
But Merkel and French President François Hollande made it clear in Brussels that Britain couldn’t expect to keep its benefits if it didn’t contribute to the EU monetarily and accept the principle of free movement of workers.
A soft separation scenario would allow the UK to participate in some of the benefits it enjoyed as a EU member but would not allow it to vote on EU policies.
“The critical question is, is there a soft option left for the UK?” Karayalcin said. “It doesn’t seem likely the UK can get the free ticket.” Allowing a Brexit without dire consequences, he said, would leave the door open for all sorts of other exits from the European Union.
Markus Thiel, director of FIU’s European and Eurasian Studies Program, said that despite all the talk about exits, few will actually occur and fewer still “will lead to drastic results.”
Meanwhile, the fall of the pound against the dollar could make Florida vacations more expensive for Brits. The Sunshine State hosts 1.7 million British visitors annually and the state has 400,000 British residents, Prodger said. Even though it may cost more for British tourists to visit the state, he said Florida will continue to be a very popular destination.