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Brexit

A fractured European Union serves no-one’s interests

The body must acknowledge and fix its problems while fighting the urges of any other country to leave, for the greater good of the whole world

PUBLISHED : Friday, 24 June, 2016, 11:16pm
UPDATED : Saturday, 25 June, 2016, 12:15am

Prime Minister David Cameron took the risk of promising a referendum on Britain’s membership of the European Union to unite his divided party ahead of last year’s general election. It was a gamble with Britain and Europe’s future that sparked passionate debate at home and warnings from abroad. They included entreaties from China and the US and an international who’s who of business leaders for politicians and voters to reflect on the folly of Brexit. But against all expectations, the gamble has come stunningly unstuck, sending shock waves around the world. Victory for the leave-Europe campaign has unleashed immediate consequences and future uncertainties, as Britain prepares for complex negotiations on divorce from the EU and a new trade and economic relationship after 43 years of marriage.

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Cameron has taken responsibility by falling on his sword, promising to make way for a new leader later this year. Scotland sees its future in Europe, raising the prospect of another independence referendum. The pound fell to its lowest level against the dollar since 1985 and markets plunged as they reacted to the results and implications, especially for London’s role as a world financial centre wired into Europe.

Brexit supporters may have argued that Britain can do better on its own. Indeed, they can cite its prosperity despite never joining the single-currency euro zone and one of the strongest growth rates in Europe. But this does not take account of the effect on Europe, largely still struggling to restore economic growth after the financial crisis. How did it come to this? The plebiscite tapped directly into hot-button issues with ordinary voters – post-financial crisis austerity policies and immigration of EU nationals, resulting in a leave vote in northeast England and Wales that outweighed the remain vote from London. Hopefully this backlash will force the EU to address long-standing criticism it has failed to admit or address its mistakes.

A weakened union

The decision has economically and politically weakened the EU. It has boosted protectionist and anti-immigration sentiment on the continent, emboldening Eurosceptics to push for renegotiations and referendums of their own; the Netherlands, Denmark, Sweden, Austria and Italy are high on the list. But EU leaders must not succumb to the pressure to allow the grouping to unravel or for governments to control their own trade, borders and migration. Integration leads to economic growth and strength through increasing the size of the market, competition and providing ideas and a reliable workforce.

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That is obviously good for the EU, but it also has global implications. China and the US are only too aware of that, which is why President Xi Jinping and his American counterpart, Barack Obama, had called during campaigning for Britons to vote to stay in the EU. Britain was a crucial part of China’s strategy to strengthen relations with Europe, with London as the financial gateway to the continent. Xi won Cameron’s assurances during his visit last year for British backing of an investment pact with the EU and help with a feasibility study on a free-trade accord. Those agreements have been put in doubt as a result of the vote.

But it is not just the cloud over those arrangements that worries China. A question mark now hangs over Britain’s economy, trade and growth. Chinese companies have been stepping up business and investment in Britain in a range of areas, from power stations to soccer clubs. That exposure and market and currency volatility is likely to impact profits and future prospects.

An opportunity for Hong Kong

Hong Kong’s tycoons, Li Ka-shing foremost among them, will obviously also find their investments hit by any economic negativity that results from Britain’s leaving the EU. But our city, as an international financial centre, should also see it as an opportunity. London could lose its shine to Paris, Frankfurt and Brussels and we are well placed to also take advantage. Currency links to the US dollar and falls in the value of the pound sterling and euro leave us in good stead.

But there is also strength in unity and EU leaders must not forget that as they deal with the fallout of the vote by Britons. For one, they will lose a valuable supporter on the UN Security Council through Britain being a permanent member, leaving only France. The emergence of the EU coincided with the longest period of peace and stability in European history. That is no coincidence; whatever the cultural differences of the nations, together they are best placed to deal with problems and challenges.

The same reasons that led the poor, less educated, disadvantaged and those disillusioned by politics to vote for Britain to leave the EU are now gaining traction in Europe. Allowing such views to break apart the EU is not in the interests of Europeans, Chinese, Americans or any other of the world’s peoples. Brussels has to fight those urges to ensure that the influx of Syrian and African immigrants can be properly handled, economic uncertainty overcome and peace and security assured.