You can’t say I didn’t tell you. That the United Kingdom’s Brexit vote would be close. That there was a distinct possibility “Leave” would win. That democracy and accountability would prevail.
Well, Brexit happened, and the world didn’t fall in. OK, markets wobbled a bit, currencies a lot more and some latent pressures were released, both in the United Kingdom and in the European Union.
Where do we go from here? In the United Kingdom, attention turned to the Conservative Party election of a new leader to replace David Cameron, to become prime minister and to shape the new British government for a quick or a slow Brexit, depending on which approach is felt to offer the best prospect of obtaining the required results and the United Kingdom’s new place in the world.
It was intended originally that the identity of the new prime minister would be known by Sept. 9, but one by one the leadership candidates dropped out or fell by the wayside, leaving “Remain” interior minister Theresa May as the only choice and Conservative Party members a little peeved that they had been denied an opportunity to express their wishes. May, who has said “Brexit is Brexit,” takes over as U.K. prime minister July 13. That’s, like, today. In fact, by the time you read this, May will have moved into 10 Downing Street.”
Attention will also turn to Scotland and Northern Ireland, regions of the United Kingdom that voted “Remain” and where independence pressures could lead to the break-up of the United Kingdom. In Ireland, that could mean reunification of the two countries.
The European Union has made welcoming noises to the Scottish National Party’s proclamation of its desire for Scotland to become an E.U. member before or after Brexit, but countries such as Spain and Belgium, with their own separatist pressures, have made their difficulties with a Scotland E.U. membership application known.
In the European Union, the Brexit vote has led to the predictable north/south, old/new, have/have-not split; a power-struggle conundrum that sees the European Union revert to the mean and that the E.U. will not easily solve. Already, European Commission president Jean-Claude Juncker, an avowed federalist, has come under attack for his “how-dare-you” petulant attitude to Brexit, for his continuing enthusiasm for centralization of policy and a European “government,” and for attempting to soften the sanctions for breaches of the European Union’s austerity rules for, this week, Spain and Portugal and, for the future, other southern European states such as France, Italy and Greece.
Some people just don’t get it. Memories must be short. It was the European Union’s unwillingness and inability to enforce the Maastricht criteria for euro zone membership (remember the 3 percent of GDP budget deficit and 60 percent of GDP national debt hurdles?) that led to the sovereign debt crisis; and it was that which led to the question of the United Kingdom’s continued E.U. membership being put on the table in the first place.
Grexit (Greece) may be off the agenda for the time being, but Brexit has happened, and calls for an E.U. membership referendum have been mounting in the Netherlands (Nexit), France (Frexit) and Denmark (Dexit). More distinct possibilities? That’s what happens when the people get a say. Discouraging the people from having their say will now be at the forefront of E.U. activity, and the governments in the various “E.U. exit” countries will be doing their best to dampen the moods of their populations.
It is clear that trust is at the heart of the issue; the people don’t trust the European Union with their money (for how many years have the European Union’s auditors pointed to significant failings in the spending of E.U. money? The answer is 21) or to make the right decisions, and the European Union doesn’t trust the people with its continued existence. This lack of trust is not a good basis for a healthy relationship between a political entity such as the European Union and the people it is supposed to represent.
The United Kingdom accounts for some 17 percent of E.U. GDP; actually, maybe a bit more now following the recent years of relative U.K. GDP outperformance. When Brexit happens — next year or two years down the line — what is the likelihood that the European Union will trim its budget cloth by a fifth or so to suit its new, reduced circumstances? Fat chance.
The views, statements and opinions expressed in this article are those of the author and are not necessarily those of Institutional Real Estate, Inc.
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Richard Fleming is editor of Institutional Real Estate Europe.
