Macroscope | With the world economy on the brink, Brexit negotiations aren’t the place to settle political scores
The British split from the European Union needs to handled with maturity and cool heads
“The Brexit vote has the potential to create new headwinds for economies around the world, including our own,” said US Federal Reserve governor Jerome Powell on June 28 in what could prove to be an understatement unless politicians in Europe avoid grandstanding and face facts.
The harsh reality is that if Great Britain’s exit from the European Union is mishandled, it could turn into a Lehman moment with implications for Asia and indeed the global economy.
It’s time to dust off International Monetary Fund (IMF) Managing Director Christine Lagarde’s memorable phrase from June 2015 on Greece’s plight and make sure there are “adults in the room” for the negotiations.
Asia must hope that there will indeed be adults in the room when negotiations proceed
Perhaps the start point should be the existing trade relationship between the United Kingdom (UK) and the European Union (EU) in general and with Germany in particular.
“In the three months to April 2016, the UK’s trade in goods deficit with the EU widened by £0.6 billion, to a record three monthly deficit of £23.8 billion,” said the British Office of National Statistics on June 9, underlining the fact that the EU sells a lot more to Britain than the United Kingdom exports into the EU.
A bitter divorce would therefore have material negative impacts on EU exporters and would not be in the EU’s self-interest.
In the case of Germany itself, 2015 data released on June 20 by the German Federal Statistics Office, places Britain as Germany’s third largest export destination behind the United States and France.
Germany ran its second-largest trade surplus with the UK, exporting some €89.3 billion of goods there while importing British goods to the value of €38.3 billion.
