Europe has just witnessed a mega exit. With the UK voting to exit the European Union, the world’s worst fear has come true, leading to the demise of the 28-nation economic bloc itself of which Britain has historically been very skeptical. And that could bring an end to the single euro currency — leaving the continent and much of the world beyond in chaos.
What seemed a distant possibility has now become a disturbing reality. Just a few weeks before, it was believed that British voters would reaffirm their faith on the European Union. But on June 23, 2016, they voted to “Leave”. Brexit — the term coined to denote the exit of Britain from the EU —won.
An undercurrent of fear is very evident across financial markets already. The pound has sunk to its lowest value in 31 years against the US dollar. The devaluation of the pound will mean that imported goods and services will be costlier for the British public. Trillions of dollars have been wiped off the global stock exchanges, with UK shares naturally taking most of the beating. Also, major agencies have downgraded Britain’s credit rating.
Summer of 2016 will be a time of “political reflection” for the EU as it organises its Brexit taskforce and focuses on the future of a union of 27 member states. But it will also be waiting to see how the turbulent British political situation plays out, with both the Conservative and Labour parties bogged down in leadership battles. Until then it is not clear when — or even if — Britain will invoke Article 50 and get the Brexit process underway.