Know About Brexit

The IMF Chief Christine Lagarde has warned that the British exit from the European Union (EU) or Brexit will ruin the country’s economy. She said this at the World Government Summit in Dubai on 10^th February, 2019.

What is Brexit?

• Brexit = Britain + Exit
• It is the idea of Britain leaving EU or the European Union
• UK had voted for Brexit in a referendum in June 2016
• UK and EU are not able to reach an agreement in which they can split amicably.

What is the Difference Between England, Great Britain and the United Kingdom?

• The United Kingdom has 4 countries – England, Scotland, Wales and Northern Ireland.
• Great Britain is the island that has England, Scotland and Wales.
• England is the most populous part of UK and has the capital London.

What is the EU?

• The European Union is a bloc of 28 European countries
• Its headquarters is in Brussels, Belgium
• The inception of EU starts in the 2^nd World War, when the European countries understood that they need to stay united to help their economies and thus the EU bloc was started.
• The bloc has developed an internal single market through a standardised system of laws that has free movement of people, goods, services and capital within the internal market
• It was under the Maastricht Treaty on 1 November 1993 that the European Communities became the European Union. This evoluved the organisation from an economic union into a political union.
• A monetary union was created in 1999, that came into force in 2002, wherein 19 of the 28 members started using the euro currency.

Why Brexit?

• Since 1994, many anti-EU political parties emerged in the UK including the Referendum Party, the UK Independence Party (UKIP)
• The European Parliament is an Parliament for the EU and has 751 members directly elected by EU citizens aged 18 or older. The UK has 78 seats in the European Parliament. The UKIP won the first place in the 2014 European Elections from UK. This was stated as the biggest reason for Brexit.
• There was widespread discontent on the matters of number of refugees to be accepted by EU countries, debates on economic matters, no consensus on whether or how to bail-out economically weaker countries.
• All these led to widespread discontent and in 2016 the then UK Prime Minister David Cameron announced a referendum date of 23 June 2016
• 89% voted for leaving EU, while 48.11% voted for staying.
• England and Wales voted for Brexit. Scotland and Northern Ireland had voted for staying in the EU.
• Consequently Cameron resigned resigned on 23 July 2016, and Theresa May took over as the Prime Minister of UK.
• No country has left the EU, but Greenland, which is part of Denmark, left in 1985

What is the Article 50 of the Lisbon Treaty?

• The Treaty of Lisbon was signed in 2007 and came into force in 2009. It amends the Maastricht Treaty and the Treaty of Rome.
• Article 50 of the Treaty gives an EU member state right to quit the bloc unilaterally and outlines the procedure for doing so. It gives the leaving country two years to negotiate an exit deal.
• Under it the UK decided to quit the EU on Friday, March 29, 2019. However, the UK would remain in EU’s single market and be subject to EU laws and regulations until the end of 2020.
• The agreement guaranteed protections for over 3 million EU citizens who live in the UK, and also over 1 million UK nationals who live in EU countries to continue with their current status.

What is the Problem Now?

• There is an open border between the Northern Ireland and the Republic of Ireland, which is in the EU. There is easy trade and movement of people.
• After Brexit, Northern Ireland won’t be in EU. This would require a “hard-border” between the two nations, with checkpoints, border crossings and other infrastructure, thus, slowing trade and economic activity.
• Irish politicians fear the return of the Troubles (An ethno-nationalist conflict in Northern Ireland from 1960s-1998, that engulfed Ireland, England. It ended with the Good Friday Agreement in 1998) with the establishment of hard-border. Pro-Brexiters are okay with that.
• Draft agreement maintains status quo on the Irish Borders, while going ahead with the Brexit. This was Theresa May’s Plan.
• However, the UK Parliament voted a huge rejection to May’s Plans on January 15, 2019. More than a 100 naysayers were from her own Conservative Party.
• Jeremy Corbyn, the leader of the Opposition Labour Party triggered a no-confidence motion, which was narrowly survived by May.

Will Brexit Happen?

May is trying to salvage a deal and come up with a Plan, however, there is little chance that that would be passed before the Brexit date of March 29. If no deal is made Britain would leave in a “no deal” scenario, which would be devastating for business. However, Parliament may force May to extend the Article 50 and the March 29 date would become irrelevant. Britain also has the option to revoke Article 50, but that would leave millions of Pro-Brexiters disappointed.

Comment

Almost half of UK’s exports go to EU and over half of UK’s imports come from EU. Brexit would cause a huge downturn for trade. For non-European nations, any imbalance in trade will hurt their markets. So Brexit will leave some huge problems for the world economy. There would also be political problems as we see England and Wales had voted for quitting EU while Scotland and Northern Ireland had voted for staying in EU. Coupled with the ongoing “Irish hard-borders” issue, there can be dangerous consequences to Brexit.