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UK’s seismic vote tomorrow

UK’s seismic vote tomorrow
Highlights

The United Kingdom is in for a watershed moment tomorrow as it decides on staying within the 28-member European Union bloc.  And should Thursday’s result favour Brexit, it will trigger volatile times for the EU as it braces for the exit of its No. 2 economy over the next two years. It will also spur euroskeptics in other nations. 

The United Kingdom is in for a watershed moment tomorrow as it decides on staying within the 28-member European Union bloc. And should Thursday’s result favour Brexit, it will trigger volatile times for the EU as it braces for the exit of its No. 2 economy over the next two years. It will also spur euroskeptics in other nations.

It will have serious global ramifications, too. The situation is in stark contrast to the 1975 referendum which saw the British vote to remain in the European Economic Community, as the EU was known then.The EU is a politico-economic union of around 500 million people in 28 nations. Formed in 1999, it works as a single market.

There is a free movement of people, goods, services and capital. EU even won the 2012 Nobel Peace Prize for advancement of peace and reconciliation, democracy and human rights in Europe. The same values are at stake now.

Why does the UK want to leave the EU? Excessively debt-funded welfare programmes in countries like Greece, unbridled migration causing fall in wages, increasing policy oversight by an ‘ever closer Union’ etc have fired the nationalistic feelings among the Britons. The British always wanted a common market but not a closer Union.

UK contributed £9.8 billion to EU last year, which Brexit campaigners say could be spent at home. They also reason that Britain can withstand any shock as it is clocking a robust growth and is next to the US in the G7 bloc. IMF projection of faster growth this year is also bolstering their position. Britain currently world's fifth largest economy with $3.04 trillion GDP is set to be 4th largest economy in next decades, says CBER, a major economic consultancy.

Brexit supporters are even pooh-poohing warnings by Bank of England Governor Mark Carney of sharp depreciation in Pound value. Goldman Sachs fears it will be 11 per cent, brought on by global volatility in forex markets. That UK would face same tariffs as other countries outside the US-EU free trade network also doesn’t seem to count much. Pleas are also made by PM David Cameron and US President Barack Obama against a Brexit vote.

As far as India is concerned, its nine-year-long FTA talks with the EU, its second largest trading partner, will be in jeopardy. Its companies operating out of UK, its biggest partner in the bloc, could face access and tax issues from the EU. Exports from UK to EU may take a hit and be costlier as the EU would not take kindly to Brexit.

Likely curbs by the UK on migration, higher education or work visas, visitation rights for kin of Indian diaspora are also of concern. India may have to start separate FTA with the UK afresh. Thus, goings-on in world markets over the next two years, if UK says yes to Brexit, pose enormous challenges for the world’s fastest growing economy to stay the course.

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