It’s a new world now, as the UK votes to exit the European Union
The US wakes up to falling stock markets, a collapsing British Pound, and the prospects that the UK’s own version of Donald Trump may be the next resident of 10 Downing Street
The English have gone and done it. They played with matches and now much of the world, at the financial world, is in flames this morning. Those in the US that hadn’t given much thought to yesterday’s Brexit vote in the UK are waking up this morning to face collapsing stock markets, a collapsing (though somewhat recovering) British Pound, and the resignation of the Prime Minister David Cameron.
Voters shocked the polls (again) and did the unthinkable, voted to have the United Kingdom leave the European Union. The vote was fairly close, 52-48 percent, but the reverse of what had been expected right up until the votes began to be counted. Neil Farage, leader of the far-right party UKIP, even conceded defeat before reversing himself too late for The Sun, which ran an early edition front page with the news.
As the results trickled in it looked like ‘Remain” would, indeed, win and so investors drove up the value of the Pound in celebration. At one point the Pound was trading above $150. But then reality set in and the Pound’s value collapsed in value, dropping over 10 percent in value within a few hours.
Also sinking have been world stock markets. The FTSE in the UK was down over 5 percent at various points today, the German DAX over 7 percent, and the French CAC down 8 percent. The worst performing market is in Italy where the FTSE Italia is down over 9 percent.
In the US, Dow futures point to the market opening over 500 points to the negative.
Because the Bank of England had been forced to contemplate what a vote for ‘Leave’ would mean, and was ready to reassure the markets that they would intervene if necessary, the FTSE has actually recovered somewhat. But other world markets were caught by surprise and so have been in hit by larger declines.
For Americans, the news from overseas has ominous consequences. Not only are their investment and retirement accounts about to take a hit, but the fact that the Brits did the unthinkable means the same thing could happen here.
This was not lost on Donald Trump, who tweeted his delight in the vote:
Just arrived in Scotland. Place is going wild over the vote. They took their country back, just like we will take America back. No games!
— Donald J. Trump (@realDonaldTrump) June 24, 2016
But ever ignorant of the facts, Trump apparently did not realize that the Scots actually voted strongly to remain in the EU. In fact, a map of the voting shows that in and around London the vote was overwhelmingly in favor or ‘Remain’, as if was in Scotland and Northern Ireland. But elsewhere, the English and Welsh voted overwhelmingly for ‘Leave’. As one journalist remarked last night, now the UK looks as divided politically as the US.
There will now be pressure to have a second independence vote for Scotland, and Sinn Féin has already called for a vote in Northern Ireland on the question of reuniting with Ireland, an EU member.
“Scotland sees its future as part of the EU. Scotland clearly and decisively voted to remain part of the European Union, 62 to 38 per cent,” said Nicola Sturgeon, Scotland’s First Minister and leader of the Scottish National Party. Later she issued a statement further making it clear her intention to seek a new referendum and to attempt to negotiate Scotland into the EU on its own.
“The British government now has no democratic mandate to represent the views of the North in any future negotiations with the European Union and I do believe that there is a democratic imperative for a ‘border poll’ to be held,” said Northern Ireland’s deputy leader Martin McGuinness.
FT journalist: “It’s a rather strange day. The Prime Minister resigning is only our third most important story”.
— Matthew Goodwin (@GoodwinMJ) June 24, 2016
The British tabloids, including Rupert Murdoch’s The Sun, were generally in favor of Brexit. But financial publications such the Financial Times and The Economist have warned voters of the potential consequences of the UK exiting the EU, warning that a recession would be likely.
“The liberal Leavers are peddling an illusion. On contact with the reality of Brexit, their plans will fall apart,” The Economist said a week before the vote. “If Britain leaves the EU, it is likely to end up poorer, less open and less innovative. Far from reclaiming its global outlook, it will become less influential and more parochial. And without Britain, all of Europe would be worse off.”
This morning the magazine was forced to explain the debacle:
“The vote to Leave amounts to an outpouring of fury against the “establishment”. Everyone from Barack Obama to the heads of NATO and the IMF urged Britons to embrace the EU. Their entreaties were spurned by voters who rejected not just their arguments but the value of “experts” in general. Large chunks of the British electorate that have borne the brunt of public-spending cuts and have failed to share in Britain’s prosperity are now in thrall to an angry populism.”
Now the UK. or what will be left of it, is in the hands of former London mayor, now MP, Boris Johnson, and far-right party leader Nigel Farage. The Tories, having won the last election, will not be eager to call a snap election, but will instead have to select a new Prime Minister. Johnson, the only politician sporting hair that competes with Donald Trump, was booed and hissed this morning by Londoners upset that he led the ‘Leave; campaign.
Far more dangerous, though, will be Farage, who inexplicably said last night that the ‘Leave’ side had won “without a single bullet being fired,” completing ignoring the murder of Labour MP Jo Cox by a Brexit supporter.
Johnson this morning, realizing that his constituents are mad as hell at him, said there would be no rush to exit the European Union.
“In voting to leave the EU, it is vital to stress there is no need for haste, and as the prime minister has said, nothing will change in the short term except how to give effect to the will of the people and to extricate this country from the supranational system. There is no need to invoke article 50,” Johnson said.
But European ministers are meeting this weekend to discuss the situation, and the UK is not invited to participate. EU ministers will likely seek to punish the UK for its decision for fear that other members might consider holding a similar referendum.