Why Britain? Why?

WASHINGTON DC - There were two main questions tormenting the USA as its citizens turned in for the night reading that, according to the BBC, the United Kingdom had voted to leave the European Union. The first, more obvious, point concerned the economic repercussions: the real costs of leaving, costs that could have an impact, and in some cases already have, on the international financial markets from Seoul to Tokyo, and not forgetting London itself. The second, less immediate point concerns the future of the entire European Union, which is now set to lose one of its leading players. This latter point is causing shivers of apprehension everywhere.

REUTERS/Toby Melville

When on Saturday 13 September 2008 Wall Street’s traders began to exchange concerned glances in a way they had never done before, it was a sign that the tsunami had become unstoppable, heading ashore with a speed and power that could not be repelled. Nobody could have known what was going to happen. That particular tsunami had a name: Lehman Brothers. America’s fourth largest bank was collapsing, even though many did not want to believe it. “It will be rescued, nothing to worry about,” a Californian hedge fund manager told me at the time. On 15 September 2008, however, the world discovered what it really meant to deal with such an exceptional situation: events so unique and bizarre are difficult to predict. It’s as if one day we wake up to find that the sun has not risen and it will never rise again. In a way this is how it feels waking up this morning following yesterday’s referendum in the UK.

After months of constant media bombardment from the Remain and Leave camps, the latter faction came out triumphant. It is worth bearing in mind that had the Remain campaign won with anything less than a 20 per cent margin, the outcome would have been much the same anyway. The country, the United Kingdom, is divided. Divided on the subject of belonging to what should be perceived as one of the greatest successes of the European continent. After centuries of war there has never been such a period of peace as that enjoyed since the 1945. Yet, in spite of this, the United Kingdom has chosen to leave.

There are many reasons and they cannot all be covered in one brief editorial. Dozens of books would be required to explain what led the UK to vote in this way. The focus must know shift to the consequences. The wave of populism in Southern Europe is sure to grow, with more of the ugliness that we have come to know well. The UK vote has destabilized an economic area that is already fragile and troubled by variations and inconsistencies. Valentijn van Nieuwenhuijzen, Chief Strategist at NN Investment Partners, explains. “The political consequences are considerable. Brexit would not only lead to further political disintegration within the United Kingdom but uncertainty deriving from it could also spread across the channel, encouraging other countries or political movements within the European Union to seek independence”. Italy, Spain, Austria and Greece may well feel justified to do the same, thus fulfilling the dreams of Europe’s populists and nationalists: the disintegration of the EU.

At the same time it would be naïve to think that the markets can remain immune to what has occurred in the United Kingdom. Up until the eve of the vote the majority of analysts said that a Brexit could be manageable. Nevertheless, central bankers and policy makers heightened the alerts to the control centres of their respective institutions, fully aware of what happened with Lehman Brothers in 2008. It is no coincidence that Mario Draghi, head of the European Central Bank, spent the last three days on the phone with colleagues at the Commission Directorate-General at Eurotower to organize a containment plan on a global level, in collaboration with Janet Yellen, President of the Federal Reserve, Mark Carney of the Bank of England and Haruhiko Kuroda of the Bank of Japan, in an attempt to manage uncertainty, the underestimated uncertainty called Brexit. Will this be the new Lehman Brothers crisis that drags the global economy into a new recession? Maybe, yes, but only time will tell.

Before discovering the full impact of the adaptions of the financial markets, it is necessary to make one final reflection, one that is no less important. Those like me, who were born in the 1980s, cannot imagine a world without the European Union. Many of us feel a European sense of belonging stronger than our own national identities. In the United Kingdom, in fact, the large majority of under 35s voted for Remain. We know the advantages of a united Europe without borders with a single market. Is this union perfect? No, because humans are fallible, but the EU is perfectible. It can be fixed, it can become better, but only if this is the will of its members. The events today and yesterday showed that this is not the case. Those who believe, as I do, that Europe is an enduring value and a success worth defending at any cost, will today be experiencing a bitter taste in their mouths. One question remains, a question that perhaps has no answer: Why Britain? Why?


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