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4 reasons behind Britain leaving the European Union

By Syed Firdaus Ashraf
Last updated on: June 24, 2016 21:24 IST
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'Britain always had a very special relationship with the EU -- it always was an on/off relationship. It retained its own currency and visa.'
'Britain always had what you call in EU lingo 'opt out clauses', which other countries don't have.'

IMAGE: A vote leave supporter holds a poster in Westminster, London, June 24, 2016. Photograph: Toby Melville/Reuters

India woke up to the Brexit shock on Friday, June 24, with the United Kingdom deciding in a referendum to move out of the European Union.

The stock markets crashed, and the rupee fell. Even as panic was slowly setting in, finance ministry officials stepped in with words of assurance. The Bombay Stock Exchange Sensex, which had crashed 1,000 points in the morning, recovered enough to close reasonably well.

So what are the implications of Brexit for India? What needs to be done?

Ummu Salma Bava, professor of European studies at Jawaharlal Nehru University, New Delhi, shares her thoughts with Syed Firdaus Ashraf/Rediff.com

What will be the implications of the United Kingdom leaving the European Union?

There are multiple implications: Economical, social and political.

As you can already see, the markets are falling and they are calling it 'Black Friday.' Markets across the globe are tumbling; the British pound is falling dramatically.

This is the immediate impact and it will take a while to adjust (to it). It also means that Britain will now formally initiate the process for getting out of the EU.

Now that the referendum is done, it is a policy issue for the government to take. There is a whole procedure under Article 50 of the Treaty of Lisbon (external link) on how the State will get out, and all of those modalities will have to be worked out.

Why did those who voted to opt out of the EU do so? What were their apprehensions?

There were four major issues. The first: Competitiveness; the second: Jobs; the third: Immigration; and the fourth: Sovereignty.

Common Britishers think they were losing power as a country because everything gets decided in Brussels (capital of the EU), and if they get out of the EU they would be more independent.

Or that they would do their own trade deals and decide their own laws -- basically, having their sovereignty back.

But do everyday people actually understand this issue?

Politicians packaged sound bytes that sold very well. A very interesting perception that jobs were going to return was played out by the 'Leave' lobby. Also, stuff such as the economy would become more buoyant and social handouts to immigrants would go down went down well with the common man.

But will it actually happen? That has to be seen.

What about Scotland? Do you think it will part ways with the UK in the future because Scots voted to remain with the EU?

At this point, they are not going anywhere.

What about the future of the EU? Do you think other countries will follow suit?

No country can demand it unless the leadership of that country decides to take the matter to the people.

This (the British vote) could lead to an increase in the sentiment of those political forces in the remaining 27 (EU) countries where it can have some kind of domino effect.

Will be there a similar effect? I don't think so. Britain always had a very special relationship with the EU -- it always was an on/off relationship. It retained its own currency and visa.

Britain always had what you call in EU lingo 'opt out clauses', which other countries don't have.

Denmark and Sweden have their own currencies though they are a part of the EU. The leaders will have to respond because if people feel that Brussels and the EU are interfering, then people will say 'Let us also have a referendum.'

It has never happened that a State has left the EU. As you said, if one State leaves, it encourages the other States to do so too. It would be called the 'British formula,' but this leaving could be a very painful and cumbersome process.

Do you think it was political suicide for British Prime Minister David Cameron (who stepped down after the referendum) to call for the Brexit vote?

When you are a politician, you put different things at stake thinking they would pay off, which Cameron probably thought.

If you look at the margin, it is not dramatic for a difference between those who wanted to exit and those who wanted to remain. It could also be a miscalculation. He must have thought he would convince the population of the benefits (of staying with the EU).

He tried to negotiate a deal in February with the EU where he was partially successful.

The weather too played spoilsport. There was a huge storm and some polling stations were flooded. It was a game of chance.

What will be the impact on India?

There are more than 800 Indian companies in the UK. For certain companies such as the Tatas who have Jaguar Land Rover in the UK, Britain was a good market where they produced cars and sold it across the market in Europe.

It was a single market. Now they will have to technically 'export' from Britain to Europe, which will raise their costs. It would not be immediate, though. Earlier, the most immediate reaction the Indian government gave was that the economy would be able to take the shock because the British pound was falling.

That confidence has been shattered. The markets will stumble and settle at a new low, and then come back.

In layman terms, what is the link between the Indian rupee's fall and Brexit?

There is a basket of currencies and the rupee is not fully convertible. There is a median value at which the rupee is pegged against, say, the dollar or the pound. A lot of things are based on how the market would function and the state of the economy on both sides.

Since Brexit, the markets are in turmoil because they don't know what the ramifications would be. When a crisis like this happens, there is greater speculation. There is a fear that imports and exports would be hit in some way -- and when that happens, the rupee falls.

It will take time because the confidence of investors is down as they don't know what is next. This is one of those mysteries where you don't know the ending. And when everyone is speculating, it leads to currency fluctuation. This is what is known as the 'crisis of confidence.'

What does Brexit mean to the immigration and the refugee crisis?

Because of the civil war in Iraq and Syria, the EU had decided that they would distribute the refugees all across its member States, and Britain was against it.

There are two issues here: One was internal mobility, which meant that anybody could move from one part of the EU to another.

In the last one year there was a lot of movement from Central and Eastern Europe, Poland and Hungary. More recently, mobility was opened up for Bulgaria and Romania. A lot of these people from Central and Eastern European countries were moving to the UK because of better job prospects.

So all of that will stop. Britain will no longer be bound by EU regulations to take any more refugees. That comes as a surprise because Britain has a history of migration post 1945.

It took in massive numbers of people in the '50s, the '60s and the '70s from India and South Asia. It also took people from Uganda (after Idi Amin drove Indians out in 1972). Britain was always open about taking people in.

Do you think the refugee crisis played a role in Brexit?

You can say that it allowed the 'naysayers' to especially heighten the emotional perception. 'Okay, if you get out all of this will be over.'

Does that mean Britain will close their doors permanently to those who want in?

That will not happen. People will still go to Britain.

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Syed Firdaus Ashraf / Rediff.com in Mumbai
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