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Europe Shocked By Brexit, Integration In Setback

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BRUSSELS – The Leave camp won Britain’s Brexit referendum on Friday morning
by obtaining nearly 52 per cent of ballots, pulling the country out of the
28-nation European Union (EU) after its 43-year membership.

British Prime Minister David Cameron, who had led the campaign to keep
Britain in the EU, said shortly after the results that he would step down by
October.

Britain has become the first country to quit in the EU’s 60-year history.

EUROPE IN SHOCK, RESOLVE EXPRESSED

“Today is an incisive day for Europe,” said German Chancellor Angela Merkel
during a press conference in Berlin Friday on the outcome of the Brexit
referendum.

It is “with great regret that Germany must now accept the decision of the
majority of British population who wish to end membership of the United Kingdom
in the EU,” said Merkel. However, she warned of “quick and easy conclusions.”

“The European Union is strong enough to give the right answers to the
present day,” Xinhua quoted her as saying.
Besides Merkel, leaders from across European capitals all expressed their
dismay and surprise on Friday following the “sobering, unexpected” outcome of
the Brexit referendum.

French President Francois Hollande said he “respects” the choice of the
British. He admitted the Brexit vote signalled difficulties for the EU,
especially for the euro.

“I will do everything for us to adopt profound changes rather than a
retrogression,” he stressed.

Italian Prime Minister Matteo Renzi stressed the country’s unchanged
commitment to the path of European integration.

“If I have to pick a name for Europe, that name is ‘home.’ And home is not
only a physical space, but a place built up on sentiments and emotions where to
feel solid and safe,” Renzi said.

In Athens, Greek Prime Minister Alexis Tsipras called for imminent action
to change course and rebuild a better EU.

“The decision of the British people is respected, but it confirms a deep
political crisis, an identity crisis and a crisis in the European strategy,” he
said.

Speaking to Xinhua in Vienna, former Austrian Vice-Chancellor Erhard Busek
said he does not see the British decision as a rational choice.

During a plenary session in Strasbourg, president of the Parliamentary
Assembly of the Council of Europe Pedro Agramunt said: “A bit of the European
ideal has disappeared today following the British vote in favour of leaving the
Union.”

Countries aspiring to join the EU, such as Albania and Macedonia, called
Britain’s vote “a sad decision for the EU.”

Albanian Minister of Integration Klajda Gjosha said: “It is sad for
Albanians who aspire to join the EU. Although, as long as the EU project is
underway, the process of enlargement will and should continue.”

Macedonian Foreign Affairs Minister Nikola Poposki said: “For Macedonia and
for the Balkan as a whole it will mean losing a fierce supporter of the EU
integration process.”

Swiss President Johann Schneider-Ammann warned that Switzerland’ s economy
stands to be affected by the United Kingdom’s withdrawal from the EU, with
political uncertainties likely to hamper Bern’s ongoing negotiations with
Brussels.

Though not an EU member state, Switzerland participates in the EU single
market as a party to the European Free Trade Association.

SECOND SCOTTISH INDEPENDENCE REFERENDUM POSSIBLE

Scottish First Minister Nicola Sturgeon said Friday a second independence
referendum was “highly likely” after Britain voted to leave the EU.

It was “democratically unacceptable” that Scotland faced the prospect of
being taken out of the EU against its will, Sturgeon said at a press conference.

In Thursday’s Brexit referendum, the Leave campaign received about 52 per
cent of the votes, against 48 per cent for the Remain side. However, Scotland
voted 62 per cent in favor of remaining in the EU, with the majority in each
council of its 32 local authority areas voting to remain.

The Brexit vote would lead to a “significant and material change” to
Britain’s constitution, and an option was now “on the table” since many people
who voted against Scottish independence in 2014 would be reassessing their
decision, said Sturgeon.

The Scottish government would begin preparing legislation to enable another
independence vote, she added.

BRITAIN’S ECONOMY ENDANGERED

According to the latest predictions of the International Monetary Fund
(IMF), Brexit could leave Britain’s economy more than 5 per cent smaller by 2019
than if it stays in the 28-nation club.

“In the short run, the uncertainty generated by navigating a complicated
and untested exit process could be damaging for investment, consumption and
employment (in Britain),” the IMF said in its report.

According to research commissioned by employers’ group the Confederation of
British Industry, a British vote to leave the EU could cost the economy 100
billion pounds (US$137 billion) and 950,000 jobs by 2020.

In an op-ed piece written for The Guardian on Monday, billionaire George
Soros said that Britain leaving the EU would have disastrous effects on the
British economy.

Soros used data from the Bank of England, the Institute for Fiscal Studies
and the IMF, which calculated that the long-term economic consequences of Brexit
would reduce annual household incomes by between 3,000 pounds and 5,000 pounds
(about US$4,110 to US$6,850).

Trade is another tricky issue. Britain’s withdraw from the EU’s single
market is costly as it has to renegotiate trade agreements with the EU member
states, 52 economies which enjoy preferential trade agreements with the EU, or
with over 100 members of the World Trade Organisation.

BREXIT TO WEIGH ON EU ECONOMY

Brexit is set to create chaos to EU’s budget plan as well as the ongoing
capital market integration, bringing negative impact to the EU financial
institutions and eventually weigh on the bloc’ s economy, experts say.

Britain is the fourth largest net contributor to the EU’s budget, after
Germany, France and Italy. This year, it would have to contribute 19.4 billion
euros (US$21.59 billion) to the EU budget and gain back rebate and custom duties
worth 5 billion euros.

Experts said the budget gap caused by Brexit has to be filled by other EU
member states, of which Germany is expected to contribute the biggest share.

Brexit means Britain will leave the EU’s would-be capital market union,
which aims to remove barriers for investors and help mobilise money for
infrastructure projects and, most importantly, SMEs.

Brexit is expected to be harmful to the EU’s capital market union as
Britain has long stood as a significant part of the EU’s capital markets.

Meanwhile, experts cautioned that Brexit would as well have negative impact
on the bloc’s financial institutions.

For instance, the European Investment Bank (EIB), whose capital relies
heavily on the bloc’s major economic powers, is faced with the reduction of
Britain’s share which accounts for some 16 percent.

Brexit as well puts the bank’s high rating on risk, leaving the bank’s bond
in a vulnerable position and may drive investors away to look for safer bonds.

Economists warned that Brexit raises great uncertainties on the bloc’s
growth, which unfortunately is still sluggish.

It was predicted that the growth of EU’s gross domestic product may slow to
0.5 to 1.0 per cent in 2017, compared with the previous predication of around
1.6 per cent.

BREXIT MAY SLOW PACE FOR TURKEY’S ACCESSION TO EU

“Britain’s departure may further delay Turkey’s accession process,” Turkish
columnist Serkan Demirtas said. “Brexit would introduce ideas of special
relationship between the EU and the non-member countries such as Turkey.”

“Britain was a main country of the Trans-Atlantic wing of the EU. Its
departure is a strategical loss for Turkey,” said Serhat Guvenc, Professor of
Kadir Has University.

He added that due to Britain’s belonging to Trans-Atnaltic wing of the EU,
it has always supported NATO member Turkey’s relations with the EU. In the long
term, Turkey will lose its supporter inside the EU.

Sait Akman from Turkish Economic Policy Research Foundation recalled
negotiations between the EU and Turkey which aims to upgrade current Customs
Union agreement and said the process might delay after Britain’s departure since
the bloc would be busy with its internal problems.

DIVORCE PROCESS TO TAKE YEARS

Donald Tusk, President of the European Council, has warned that
renegotiating the relationship between Britain and the EU could take up to seven
years.

In accordance with EU law, the British government first has to launch a
proposal to activate Article 50 of the Lisbon Treaty, which sets out the
procedural requirements for a member state to terminate its membership.

Then a “withdrawal agreement” needs to be negotiated on such things as
tariffs on British goods and freedom of movement between Britain and the
remaining EU member states. Legal withdrawal would mean that EU treaties and
their protocols no longer apply to Britain, and EU financial programmes would be
phased out.

After the signing of a new deal between Britain and the EU, which according
to the Lisbon Treaty should be concluded in the course of two years, “every
single one of the 27 member states as well as the European parliament would have
to approve the overall result. That would take at least five years and, I’m
afraid, without any guarantee of success,” Tusk told German magazine Bild
earlier this month.

The ratification process could be long and painful, Tusk warned. It is
predicted that the EU would offer a tough deal to Britain to dissuade others
from leaving.
– BERNAMA

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