In one of my recent posts, I had already opined on the Brexit dilemma facing the UK voters and my opinion of it as far as I can see and understand the issue. But in this post, I am going to opine from the other side – that is, how important it is for the rest of the world (and that includes Britain in my opinion) for the UK to stay in the European Union.
First of all, as I have already stated in my previous post, this Brexit referendum comes at a worse time for the global economy. And one of the worse spots of the global economy today is Europe. Their recovery from the Great Recession is still very much incomplete and a British exit from the EU would make matters much worse. To put things in perspective, the unemployment rate in countries like Spain is still in double digits. When one cannot blame the UK for that, this is what would happen if the British voters decide to leave the EU – The British pound would weaken drastically due to a fear of the future status of trade between the UK and EU (which is a significant portion of UK’s overall trade). While British voters might not be too worried about this – as there seems to be a common consensus that some kind of trade agreement could be worked with the EU, we still do not know the extent of damage it can do the British economy over the short and long run.
But more importantly, from the EU side – this could drastically weaken the euro; and significantly increase the yield-premiums of some euro-area government bonds – especially those of countries like Spain and Portugal where this is a high level of double-digit unemployment. This will once again trigger the worse memories of sovereign-debt crisis and fear of sovereign defaults. Not only that, this could once again trigger the question of the longevity of the entire EU project and the euro currency.
And today, I see this Brexit scenario as a greater threat to the stability of the global economy than China, oil, deflation or negative interest rates. I think it is important for the other EU leaders to state clearly how their relationship with UK would be if Britain were to decide to leave the EU. This fantasy that Britain can just leave the EU and work out all agreements to their benefit – even while threatening the stability of the entire European Union project and the euro currency – needs to addressed (and probably killed) in clear and unequivocal terms by the rest of the EU countries.
Because of the anger that is simmering from weak global growth, there is a general trend going around the world today by the public to requite against the (career) politicians by voting against whatever those politicians say or propose. While this anger is clearly understandable and might be justified in many cases, it is also vital to not just vote against something or someone, but also to clearly understand what you are for! Becoming emotional and deciding to vote against something by voting for something even more terrible will ultimately act against all of us.
And while we all respect the sovereignty of the British voters to decide about their future path, it is also important that we speak out against the dangers that are posed to us by an adverse scenario that might emerge from a British exit from the European Union. And I think it is about time for the world leaders to speak up too!