EU Referendum

What happens after Brexit?

UK votes to leave the EU, Cameron resigns as PM.

June 29th 2016 | London | Francisco Morales & Bartu Kaleagasi

Photograph by Reuters

In the aftermath of the EU referendum that shocked the world, many are left wondering how it happened, and what will come of it.

The UK had been a leading member of the European Union since 1973, bringing both economic prosperity and global influence to the country. So how did almost 52% of British voters end up supporting Brexit, and what are the future economic and political implications?


A demographic divide

As the polls had suggested before, there was a large difference in voting patterns by age. Whilst almost 75% of young people voted to Remain, 60% of the elderly voted to Leave.

On social media, millennials have been voicing out their qualms with the way the results went down, and especially with regards to the older generation. As young voters are the ones who will face the long term consequences of this historic vote, for better or worse, they feel understandably let down by the outcome.

Diagram by BBC

However, youth turnout was also much lower than that of older age groups. Although this is not a surprising trend as far as elections are concerned, a referendum with repercussions of this magnitude should have as much informed input as possible in order for direct democracy to serve its intended purpose.

On the other hand, overall participation was much higher than in last year’s General Election, with 72% of the nation casting their vote. This was one of the highest turnouts in recent years.


United Kingdom or Kingdom of England & Wales?

Another notable difference was between the United Kingdom’s various countries and regions. Whilst England (53.2%) and Wales (51.7%) voted to Leave, Scotland (62%) overwhelmingly voted to Remain, as did Northern Ireland (55.7%).

In England, many cities including London, Oxford, Cambridge, Bristol, Manchester, Liverpool, and Brighton voted to Remain, whereas less urban regions were mostly in support of Leave.

EU membership was one of the most important parts of Scotland’s vote to stay in the UK in 2014, and the Better Together campaign had even used it as their main argument against Yes Scotland. Our previous analysis on the issue can be found here.

Diagram by The Telegraph

In fact, just today, Scottish MEP Alyn Smith demanded that Scotland be given the right to remain a member of the EU, parting ways with its southern neighbours in disagreement over their future. Likewise, SNP MP Angus Robertson told Parliament that they have “absolutely no intention whatsoever of seeing Scotland taken out of Europe” and that they refuse to be part of a “diminished little Britain”.

Indeed, since the UK outside of the EU is not the same country as Scotland voted to stay in, it is likely that they will get another independence referendum in the next few years. On top of this, the prospect of Irish unification has also been gaining momentum, with Sinn Fein calling for a national poll on the day of Brexit.

It seems then that the EU referendum was fundamentally a choice between (a) the United Kingdom as a leading member of the EU, and (b) the Kingdom of England & Wales. Perhaps such a constitutionally significant decision should have required a super-majority of 60%, rather than having been decided by a simple majority margin of 3-4%, vulnerable to the whim of public opinion.


The immigration question

Immigration was perhaps the most contentious and important factor for voters heading into the referendum, and one in which both campaigns intentionally misinformed the public.

Many voters, particularly in the lower-income areas, appeared to believe that a vote for Leave was actually a vote for less immigration, rather than anything to do with the EU. Yet, the actual position that the UK will take with regards to immigration is uncertain at this moment.

Boris Johnson, likely to become the next Prime Minister, suggested that Britain would only make changes in its laws and taxation, claiming that immigration would actually be left untouched. Tory MEP and Leave campaigner Daniel Hannan also echoed similar sentiments, stating that free movement of labour between the UK and the EU would be likely to remain.

Photograph by Alamy

This strikes an odd chord among both Leave and Remain voters, as it seems almost impossible that the EU would agree to give UK the benefits of staying in, without any of the obligations that come with it. Britain would be enjoying an incredibly luxurious position within Europe, without having to take on many of the burdens that other EU nations do.

It is certainly regrettable that a lot of misinformation seems to have been bred by both campaigns, and it is even more regrettable that the picture on immigration is no clearer than before. The tensions that come from immigration in the UK seem to have been rising ever since 2004 saw the enlargement of the EU, whereby many Eastern European countries joined and were thus given the opportunity to move into Europe.

This growing resentment for immigration was then substantially amplified by the Syrian refugee crisis, and many people could not agree on the difference between war refugees and economic migrants. As it stands, the statistics suggest that there has been very little correlation, if any at all, between British wages and higher levels of immigration.

However, for many, the issue is also a matter of cultural clash between western values and foreigners, which is an argument with somewhat more merit than the economic one.


Trade and finance

One of the key concerns from people in the Remain camp was how trade would continue to prosper in a post-Brexit economy.

Leaving the EU would affect trade substantially, and that was one of the main reasons why Scotland voted to remain. Excluding trade with England, the EU is one of Scotland’s two largest trading partners, the other one being the US.

Now, with Brexit being a reality, Scotland will not only call for independence, but also seek to remove itself from the arrangement of leaving the EU. Nicola Sturgeon has already entertained the idea of the former, and she has confirmed that the latter will happen in whatever way possible.

If it invokes Article 50, the UK will have to seek the advice of its best legal and financial experts in negotiations with the EU. The clause, which finds its origin in the Lisbon Treaty, triggers a 2 year period in which the member state must negotiate its deal to leave the union.

If no deal is reached within that time frame, the UK must leave the EU without any trade agreements, reverting back to WTO standard tariffs. Essentially, the economy would collapse. However, this period can be extended upon mutual agreement between the UK and the EU, so that scenario would be unlikely.

Photograph by Georg von Wedel-Goedens

Evidently, striking a deal with the EU which will please the general public is going to be a difficult task, and particularly so in a time frame of just 2 years. It is likely that the UK will negotiate to stay in the single market, much like Norway, accepting all of the EU obligations that come with it.

The United States, who had previously claimed that Britain would be at the “back of the queue” to strike a trade deal with them if they chose to leave the EU, has now softened their stance and expressed eagerness to co-operate. With trade partners like China, Britain is not limited to trading within the EU, but it is almost certain that both the EU and the UK will still need each other for economic prosperity.

Another worrying issue with the post-Brexit economy is that of the financial services industry – banks, accountants, corporate lawyers, and investment managers – all of which will be unable to provide their services to the EU without the UK’s membership. London could risk seeing its status as Europe’s financial centre be taken away by others like Frankfurt, and its global reputation be taken over by others.

Unless some sort of exemption is granted to London, Brexit presents a huge risk and danger for the same industry that provides 12% of Britain’s GDP. To that end, it is certainly no surprise that London voted emphatically to remain.


Economic depression?

It is worth noting, however, that Britain’s trading power is certainly not a small one. The aftermath of Brexit only gives evidence to such, as financial and trade markets crashed all over the world.

Most notably, the Pound reached its lowest value in over 30 years, France overtook the UK as the world’s 5th largest economy, and S&P downgraded its credit rating from AAA to AA.

Since Monday morning, the pound has continued to fall, despite assurances by George Osbourne, the Chancellor, that the economy would stabilise. The level of fear and uncertainty prevailing over financial markets has given Leave supporters further cause to pause their celebrations in the meantime. A country in isolation, in a world of increasing globalisation, may indeed find itself struggling to keep afloat.

Photograph by Reuters

Yet, some economists have spoken out against these observations and suggested that the economic effects will not be as drastic as the Remain camp makes it sound. In their view, the British economy has faced far worse in the past, and so has the Pound itself, as seen in the 1970s when it fell to a third of its value.

Reassuringly, a multitude of large firms have remained resilient in continuing to do business in the UK and braving out the effects of Brexit. This comes after a period where even HSBC, one of the UK’s most prominent banks, were in talks to move their headquarters to Hong Kong.

As it appears, the economic future of the UK and the EU may not be as bleak as some regard it, but there is no conclusive answer at this moment in time. It will depend largely on what sort of deals are negotiated, and how much international business the UK can continue to attract.


Political turmoil

Over the weekend, several anti-Brexit protests took place, with millions voicing a strong sense of dissatisfaction at the Leave campaign’s misinformation, at tabloids for their highly anti-EU and dishonest approach towards the referendum, and at the false promises of prominent campaigners.

For instance, the Leave campaign’s pledge to spend Britain’s weekly EU payments on the NHS was refuted by Nigel Farage, sparking public outcry at the perceived change of position.

Whilst it is worth noting there were very realistic and noble reasons to vote Leave, it appears that a large amount of the public were grossly misinformed on issues like immigration. Both the UK and Europe are seeing an increase in xenophobia, racism, and populism, and Brexit appears to have only exacerbated this hostility. As of last Wednesday, the police and media have reported a large spike in the number of hate crimes targeted at foreigners living in the UK, particularly in England.

Whose fault is it, however? As Krugman pointed out, it appears “the big mistakes were the adoption of the Euro without careful thought about how a single currency would work without a unified government, the disastrous framing of the Euro crisis as a morality play brought on by irresponsible southerners, and the establishment of free labour mobility among culturally diverse countries with very different income levels, without careful thought about how that would work”.

Photograph by Jeff J Mitchell

Perhaps a Remain win would have dampened criticism of the EU, but not for long. It appears that some of the long-term issues which exist as a result of the European project have far-reaching consequences that Brexit only brought to the forefront of discussion.

Inside Britain, political turmoil is afoot. Among the Conservatives and Labour, campaigning for either side of the referendum has divided the parties in two. This was clearly evidenced by David Cameron’s resignation as Prime Minister, as well as the Labour Party’s coup against Jeremy Corbyn, which saw over 25 resignations and a vote of no confidence by a margin of 172 to 40 MPs.

Politicians from both camps are now treating each other as traitors to the British public, at a time when unity is most essential. As support for the two main political parties continue to dwindle in the face of modern challenges, a worrying cloud is cast over Europe.

Perhaps a new form of politics is necessary to see this wave of nationalism and rejection of globalisation through. The solution may in fact come from Britain’s youth, who have shown interest in leading a unified Europe.


Future scenarios

Since the fallout of Brexit, despite Cameron’s statement that there would be no such thing, a second referendum has been petitioned by those unsatisfied with the result, reaching over 3 million signatures over the weekend.

In media, several reports have surfaced of Leave voters who seem to be regretting their decision, many of whom voted out of protest, rather than actually expecting to win the referendum. Once again, there comes the argument that constitutional decisions should require a qualified majority of at least 60%.

Parliament is sure to be discussing these matters shortly, but developments on this front seem unlikely. As Cameron is set to step down in October, whoever steps into his shoes will seek to invoke Article 50 and start negotiations with the EU. If Boris Johnson is indeed the next Prime Minister, his over-optimism about the future, as evidenced by his latest column on the referendum, is bound to hit the brick wall of reality.

Photograph by European Parliament

On the other hand, many commentators suggest that Brexit will never actually happen, despite the referendum’s result. In that view, both the UK and the EU have simply too much to lose, and the margin was too tight for such a drastic outcome.

This points towards several possible scenarios: (a) Parliament simply votes against invoking Article 50, (b) Parliament calls for an early General Election, giving Labour and Liberal Democrats a chance to reject the referendum, or (c) Parliament negotiates with the EU, and then announces a second referendum on the precise terms of exit. In the latter case, it is likely that Remain would win by a substantial margin.

Unfortunately, direct democracy only works if everyone is well-informed and rhetoric is shot down by facts. For now, one thing is certain: the EU will continue its project to improve the lives of 400m+ people, regardless of the UK’s outcome.

Catalan Independence

Catalonia declares itself a sovereign state

The past and future of Spain’s north-eastern separatism

January 17th 2016 | Barcelona | Martin Rogard

Photograph by AFP

In recent months, the possibility of an independent Catalan Republic has been rapidly materialising.

The election of a separatist coalition by a slim 51.7% majority on September 27th was shortly followed by the passing of a resolution on October 27th, by the regional parliament, which declared “Un Estat Català Independent”, essentially declaring Catalonia a sovereign state. Growing political salience for independence has pushed political parties to form a majority coalition in the regional parliament called Junts pel Sí, or ‘Together for Yes’, which now claims it has the electoral mandate for secession.

However, although separatists won a majority of seats, they did not receive a majority of the popular vote. Due to the way constituencies are divided, just under half of the electorate actually voted for the pro-independence coalition.


Spanish reaction

In light of these developments, Spanish president Mariano Rajoy maintains that “Catalonia is not going anywhere, nothing is going to break”.

In fact, the independence resolution was immediately followed by an extraordinary meeting of the Spanish Council of Ministers, which approved an appeal to the Constitutional Court for the nullification of Catalonia’s parliamentary ruling.

In its report, the advisory body suggested that “there is sufficient legal basis” to challenge the claim before the Constitutional Court since it “disregards the core of the Spanish Constitution by declaring disobedience to the sovereign Spanish state”. Whilst such quarrel between regional Catalan and federal institutions has not been infrequent in the past, the pressure for independence has been rapidly escalating in the midst of national elections.

Diagram by The Economist

This rising tension is difficult to ignore when walking the eclectic streets of Barcelona. A couple of days ago, a middle-aged man who was standing with a separatist flag in front of the Town hall told me that an independent Catalonia had been the dreams of his father, grandfather and great-grandfather, but that it would now be him, his children and grandchildren who would finally see it happen.

In his mind, the current “oppressive” and “corrupt” Spanish Monarchy is fighting the same losing battle as the Spanish Empire had with its former colonies. “We, Catalans, are no different than Columbians or Cubans” alliterated the interviewee


Historical roots

When did this zeal for separatism actually begin? And why?

Well, the Catalan separatist movement can be traced back to the creation of the Estat Català revolutionary movement in 1922. Historically, Catalonia has always been a notorious critic of unitary and monarchical power, advocating for greater regional autonomy and a Republican nation-state.

When a Second Spanish Republic was attempted in 1931, the independence movement died down with the creation of the self-administrative ‘Generalitat de Cataluña’, still under Spanish authority, but enjoying unprecedented levels of self-rule. In fact, when the Civil War erupted, following Franco’s coup in July 1936, Catalonia was actually one of the strongholds in defense of the Spanish state.

As described by George Orwell, who fought in Barcelona, the ‘Generalitat’ in 1937 was a place of “no boss-class, no menial class, no beggars, no prostitutes, no lawyers and no priests”.

Photograph by AFP

Today, Catalonia remains disconnected with some of the most traditional Spanish values in its commitment to progressive politics. Such cultural differences are mirrored in their use of the ‘Catalan’ as the official regional language, instead of Spain’s ‘Castellano’.

Having won the conflict, Franco immediately reinforced national unity, thus curtailing the region’s autonomy. Under the dictatorship, separatist movements were silenced, but Catalonia remained tacitly critical.

In 1975, after Franco’s death, the proclamation of a constitutional monarchy rather than a republic sparked a revival of the independence movement, which continues to this day.


Economic considerations

Recently, ‘Junts Pel Si ’ has been arguing for independence so that Catalonia is no longer required to provide funding for other regions as part of the fiscal redistributive policies imposed by the Spanish government.

In keeping all tax revenues to itself, the Generalitat would enjoy a larger budget for infrastructure, education, and healthcare, estimated between 5% and 9% of GDP. As such, the past seven years of fiscal austerity have intensified the population’s eagerness to secede, demanding a different recipe for economic growth.

On the other hand, being a part of Spain allows it to export local products such as its ‘Cava’, a form of sparkling wine, anywhere in Spain and in the EU. Catalonia greatly benefits from Spain’s membership to the European Union, which offers low export costs, consistent tourism, and infrastructure funding to the region.

Photograph by David Ramos

As a result, the economic argument for independence is entirely dependent on Catalonia’s ability to negotiate favourable relations with the Spanish state and the EU on a bilateral basis if it becomes a sovereign state.

Such issues are reminiscent of similar conflicts in Scotland, which faced many of the same debates over the last few years. Indeed, while EU accession laws may grant temporary membership to a seceding territory, any new member must be unanimously vetted by all member states, including Spain, which puts separatists in an awkward bargaining position.


Corruption and democracy

Beside the long-term explanations for Catalan independence, it appears that the recent escalation in separatism has been catalysed by an ongoing democratic crisis in Spain, and Europe in a wider context.

Indeed, for the past ten years, the Spanish political landscape has been plagued with corruption scandals of illicit party funding, such as the infamous ‘Bárcenas affair’, tax evasion scandals, and abuses of executive legal immunity provisions. The Monarchy has also been engulfed by scandals as Spain’s former King Juan Carlos I engaged in elephant hunting in Botswana, as well as the ‘Urdangarín affair’, which found him accused of embezzling large sums of public money.

If the general lack of transparency, rule of law and accountability of public officials has resulted in great dissatisfaction for the general electorate, this has been exacerbated even further for Catalans.

Photograph by Paul Hanna

This democratic crisis can be statistically illustrated by a Transparency International report, which found that 74% Spaniards felt that their government’s efforts to fight corruption are ineffective. An even higher percentage of people felt that from 2007-2010, the level of corruption in the country had actually increased.

According to the independent NGO, the most corrupt institution in Spain are the political parties. The mistrust of established political parties has created an electoral vacuum in Spain, which rapidly gave rise to newer parties such as the socialist and anti-austerity Podemos, and the mostly neo-liberal Ciudadanos.

Both parties call for profound political reform, and stand to the respective political left and right of the two largest parties, PSOE and PP.


Un Estat Catala independent?

The rise of new parties, coupled with general mistrust of institutions in Spain, have produced largely fragmented results in the national elections held in December 2015, crippling the ability of any party to form a coalition government.

In fact, many in Spain now believe there will a re-run of the elections, and a large portion of the electorate seems to be calling for political change.

In Catalonia, this surely means the independence movement will continue pushing forward until serious political reform is achieved.