BREXIT - Chaos on the Verge
Today final result of the referendum in the United Kingdom surfaced. The UK voted for leaving the European Union. What does it means in a very easy and simple way? From our standpoint, it means chaos. British Pound has felt 9%, reducing PPP and giving us a hint of what is to come.
Approximately 40~50% of import/export trade balance is between the UK and the EU. They will have to renegotiate trade tariffs and even worse than that, as an example, UK electronic and car industry will have to go thru all certification process of standartizing and security testing to get the EU approved certificates. It is expensive and sometimes it takes years. The EU says won't make it any easier.
EU council also said that will not negotiate on smooth terms new agreements, trade tariffs and other themes that are part of the EU institution such as free movement of citizens, migration, health, agriculture and there on. Iron hand will be necessary, as all has to be done to avoid dominos effect on other member states such as Holland, France, Germany and Italy, who already show willing to have their own referendum. This movement obviously weakens the EU and its legacy. A rupture on the EU fundaments can lead the already fragile world economy into a deeper depression, killing for good EU poorer member states, slowing the United States economy recovery and affecting far depressed markets such as Brazil and Argentina.
Well, Scotland now says that want to leave the UK in order to return to the EU. Trade balance will fall. PPP is to be reduced. UK Economy GBP reduction is expected on 7% for the next years and uncertainty is a bad word for business, hence investments will be put on hold.
So why have UK voted this way?
We truly believe that citizens who voted towards the Brexit were not fully informed of the real consequences. International Relations studies are very complex and requires a lot of attention, studying and undertstanding of politics, economy, and diplomacy. Naive people voted and soon will have to lose their naivity to survive the uprising crisis arriving anytime now. More to come and we will follow.
