BREXIT
B SAI KUMAR SWAMY
PGP, IIMB
England,
Britain or
the UK?
What is the EU?
EU & its Genesis
WW II Marshall Plan, World Bank, IMF
Council of Europe United States of Europe, 1946
Schuman Declaration - 9th May,1950
"Europe will not be made all at once, or according to a single plan. It will be built
through concrete achievements which first create a de facto solidarity”
Treaty of Paris - 1951
European Coal & Steel Community, ECSC, 1951
Six members (West Germany, France, Belgium, Netherlands, Luxembourg, Italy)
23rd July, 1952 – 23rd July 2002
Objective – Sharing of Coal & Steel Resources central to WWII
What is the EU?
Treaty of Rome - 1957
Led to formation of European Economic Community, EEC, 1957
EAEC or EURATOM - 1957
What did this envisage?
Reduction of Custom Duties Customs Union
Single market for Goods, Labour, Services & Capital
Proposed the creation of:
Common Agriculture Policy – Common Transport Policy
European Social Fund - European Commission
Shengen Agreement – 1985
Created the Shengen Area
Abolition of internal border controls - Common rules on Visas
What is the EU?
Single European Act – 1986
Revised Treaty of Rome Establish single market by 31st Dec, 1992
EPC – European Political Cooperation
Response to complaints about lack of ‘free trade’
European Parliament given more powers to legislate
Maastricht Treaty - 1993
Borderless Europe Framework for Common Currency – Euro
Convergence Criteria
Inflation – Deficit – Debt to GDP Ratio – Exchange Rate – Interest Rates
European Union created
Common Foreign & Security Policy, Justice and Home Affairs,
Delors Commission
What is the EU?
Post Maastricht
1995 Schengen is operational
1995 Austria, Finland, Sweden join Ireland, UK opt out
Amsterdam Treaty – 1999
Greater power to European Parliament
2002
Euro Common Currency launched for 12 countries out of 15
UK stays out Today 19 countries use it
2nd largest reserve currency in the world
Treaty of Nice – 2003
expands European Parliament
2004 Largest enlargement ever of EU – ‘A10’ Countries
Convergence or Submergence?
What is the EU?
2007
Bulgaria and Romania join
Treaty of Lisbon – 2009
Charter of Fundamental Rights
President & ‘Foreign’ Minister Citizens Initiative
2012 Nobel Peace Prize awarded to European Union
EU had helped to transform Europe "from a continent of war to a
continent of peace"
2013 Croatia joins as 28th EU member
EU is the world’s 2nd largest economy at 17 Trn $
PCI - $ 33,551; Population – 511Mn; HDI – 0.874 (Very High)
EU is not really a military grouping NATO
What the founders envisaged?
UK & the EU
UK & its entry into the EEC
1938 - Churchill
"We are with Europe, but not of it. We are linked but not comprised. We are
interested and associated, but not absorbed.“
1946 – Churchill urges France & Germany to take lead in creating EU
UK invited in 1957, declines
Why?
Economic Reasons Commonwealth ties
Political Reasons Problem of Sovereignty
Failure of EDC – Set up by the 6 European countries
1963, UK applies but application vetoed by France
‘England in effect is insular, she is maritime, she is linked through her interactions,
her markets and her supply lines to the most diverse and often the most distant
countries; she pursues essentially industrial and commercial activities, and only
slight agricultural ones. She has, in all her doings, very marked and very original
habits and traditions.’ - CdeG
UK & its entry into the EEC
Reasons for De Gaulle’s ‘Non’
Didn’t want it to become an ‘Atlantic Community’ with USA in it
Didn’t believe that ‘UK endorses the Europe Union concept’
1st Jan, 1973 – UK Joins EU – Denmark & Ireland also join
1975 – UK Referendum on EU
1979 – European Parliament Elections
First Elections 410 MEPs from 9 member states
2014 Elections
1984 – UK Rebate (reduces UK contribution to EU budget)
1992 – UK drops out of Exchange Rate Mechanism(ERM)
Implication UK out of common currency EURO
1981, Greece joins
1986, Spain, Portugal join
BREXIT
Portmanteau word from British + Exit
British exit from the European Union
Conservative party wins the 2015 general elections
Campaign promise to renegotiate British membership of EU
Referendum was a manifesto commitment of the Conservative party
Referendum on 23rd June, 2016
Turnout was 72.2%
Yes wins with 51.9%
Article 50 of EU Withdrawal from EU
Triggered on 29th March, 2017 – Exit date is 29th March, 2019
DExEU
Dept. for exiting EU create in July, 2016
David Davis (prominent Eurosceptic) appointed as Secretary of State
Key Issues – Post Brexit
Key Issues emanating from Brexit
Soft vs. Hard Brexit
Single Market
Free Trade Area
Customs Union
Size of ‘Divorce Bill’
Scottish Secession
Status of Ireland
Status of International Agreements
Key Issues - Negotiations
Status of Territorial borders
Status of EU state citizens living in UK
Status of UK citizens living in EU countries
Access to Single Market
Why did UK choose to exit?
Perceived high-handedness of EU
Loss of sovereignty As a result of greater integration with EU
Immigration from Eastern European nations
Un-Employment
Migrant Crisis
Political manoeuvring
Cameron, Boris Johnson (Conservatives)
Labour (Jeremy Corbyn)
UKIP
Vote is not binding. Divorce long, complex and unprecedented.
Impact on the UK
Pound at 31 year low against USD
Imports costlier
UK shares have fallen, wiping off investor wealth (they have since
then regained their value)
Britain’s credit rating has fallen
Businesses looking to enter Europe may now move to Ireland as it
speaks English
UK economy may shrink by 5% by 2019
Scotland may revisit Referendum to leave UK and rejoin EU
Northern Ireland may leave UK and join Ireland
Impact on India
Short term
Negative as Indian businesses exporting to UK or EU face uncertainty
Currency volatility
Falling Pound
Reduces margins for Indian exports
Boost for outbound tourism to UK
helps lower cost of funds for Indian companies who raised money in the UK
Business contraction in EU and UK reduces demand for Indian exports
Indian companies competing with UK companies for EU business will
gain
Impact on India
India third largest source of FDI for UK
Indian invests more in the UK than all other EU countries combined
UK is the largest G20 investor in India
Impact
Cheaper Imports
Free Trade Agreement with UK a possibility
Stock markets impacted by negative news
Global outlook turns gloomy which impacts Indian growth
Indian companies, especially the IT industry, using UK as base for EU
exports will face higher overhead costs and more uncertainty.
Approximately 800 Indian companies have EU HQ in London
Impact on India
FIIs may move out of riskier markets like India. Indian markets lose,
at least initially
India negotiating free trade pact with EU since 2007. Now separate
pact required with UK
Demand for Indian professionals may increase in the UK.
Xenophobia is on the rise though
UK is likely to woo Indian companies to enter and invest in the UK
In the long run, India will gain due to this
Impact on the World/EU
Trigger other ‘exit’ referendums
Rise in US $ value will impact US Exports & Economy
Capital flight from EU on account of uncertainty
Vulnerable Eurozone economies under further pressure – Italy
Anti-globalisation tendencies will increase
Protectionism ↑
Anti-Immigrant
Chinese and Indian exports to UK would suffer
EU’s monetary contributions ↓
Weakens the EU
Gains for USA and China
Annexures
EU
Marshall Plan
Schengen
Schengen Area
A10 Countries – Population & GDP
Growth of EU – Time lapse
Fun in Pics – View on new entrants
Entry Milestones
Event Milestones
UK Referendum - 1975
UK Referendum - 1975
UK Referendum - 1975
UK Referendum – 1975 – Govt. Position
EU Parliament - 2014
EU Parliament - 2014
Commonwealth or EU - Dilemma
UK Rebate
EU Budget - Constituents
UK – How are my Taxes spent?
Brexit Vote
Brexit Vote – Deep Divisions
Brexit Vote – Change from 1975 to 2016
Brexit – Key Challenges
Divorce Proceedings
Impact on the UK
Post War - Europe
War was meant to become "not merely De Gaulle said Britain was "insular and
unthinkable, but materially impossible" maritime"
UK - 1975
Edward Heath promised an economic Margaret Thatcher campaigned for EEC
boom, but it never materialized membership in 1975
Deeper Integration - Delors
Jacques Delors met fierce, but ultimately PM John Major looked happy enough
futile, resistance from Britain agreeing the Maastricht Treaty
A pro-European Tony Blair was well The Tories made clear their opposition
received in Europe - until the Iraq war to the euro
David Cameron became the first British The sea separates Britain from Europe
PM to block a new European treaty and links it with the world beyond
EU - Budget
EU - Budget
UK - Migration
UK - Migration
Grouping Conundrum
Bibliography
http://www.bbc.com/news/uk-politics-32810887
http://www.telegraph.co.uk/news/2016/06/20/what-is-the-eu-why-
was-it-created-and-when-was-it-formed1/
http://www.thehindu.com/specials/history-of-eu/article8765088.ece
http://www.thehindu.com/opinion/lead/a-brexit-from-economic-
wisdom/article8807936.ece
http://www.livemint.com/Politics/oS6jJi0YjwvZsNcTwEQlSM/The-ins-
and-outs-of-Brexit-and-the-consequences-for-India.html
http://www.testcurrentaffairs.com/2016/06/ten-impact-on-india-
britain-exit-eu-european-union.html
http://www.firstpost.com/world/brexit-as-referendum-draws-near-
heres-why-india-is-on-its-toes-2851018.html
THANKS !
Questions?
