BREXIT

BREXIT

[op-ed snap] Brexit on fast-track: On passage of deal in UK Parliamentop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : Way ahead for Brexit


Context

Prime Minister Boris Johnson’s Brexit deal was passed in the British Parliament. It is now certain that the country would exit the European Union (EU) on or before the current deadline.

Boris Johnson – Brexit

  • Mr. Johnson first reached a new agreement with the EU and then called fresh elections. 
  • With his party’s resounding win in the parliamentary election and a surge in the number of Brexiteers among Conservative lawmakers, the passage of the Bill in the House of Commons was a mere formality. 
  • The deal got the support of 358 lawmakers against 234. 

Agreement

  • Contents of the deal – It deals with issues such as citizens’ rights, the settlement amount the U.K. has agreed to pay the EU and an arrangement to avoid physical barriers between Northern Ireland, which is part of the U.K., and the Republic of Ireland.
  • The accord will be put on a vote in the House of Commons once more, and then the House of Lords will vote on it. 
  • Once the EU lawmakers ratify it, the U.K. will formally exit the union.

Still not the end

  • A formal exit doesn’t mean that the tedious Brexit process is over. 
  • Even after January 31, the U.K. will continue to remain in the EU single market and customs union, at least for 11 months – trade will continue as usual. 
  • Challenge – to reach another agreement with the EU on the country’s future relationship with the bloc. 
  • There are also legislative and political challenges ahead even if the current deal goes through the EU hurdle. 
  • Legislations – His government has to pass a series of new legislation replacing the existing EU laws. 
  • Ireland – He should also be mindful of the impact his deal may have on the delicate peace in Northern Ireland. The deal seeks to erect a customs border between Great Britain and the island of Ireland. This has irked the unionists and strengthened the nationalists in Northern Ireland. 

Conclusion

The uncertainty over Brexit is now over. But the uncertainty on how Brexit will happen still remains. Johnson should be mindful of the speed-breakers. If not, the economic and political costs of Brexit could be huge.

BREXIT

[op-ed snap] The day of Boris: On U.K. pollsop-ed snap

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : Brexit progress - change in government


Context

The Conservative Party’s victory in the Parliament gives British Prime Minister Boris Johnson a clear mandate to take the U.K. out of the European Union without further delay. He built his campaign around the promise to “get Brexit done”,

Election campaign – Conservatives vs Labour

  • Boris Johnson called for an early election after reaching a new divorce deal with the EU. 
  • He turned the poll into a de facto Brexit referendum, arguing that only a stable Conservative government could take the U.K. out of the EU quickly.
  • His strategy was to consolidate the pro-Brexit vote, get a fresh mandate in Parliament and then quicken the divorce process. 
  • The Labour Party has been ambivalent on the question of Brexit. 
  • Mr. Corbyn promised another referendum and declined to state what his position would be during that vote. 
  • His focus was on the economy. He promised a radical expansion of the state, with plans to tax the rich, increase public spending and nationalise utilities. 
  • Labour fought a Brexit election without articulating a clear position on Brexit. 
  • It lost even its traditional working class districts in the Midlands and north of England that had voted to leave in the 2016 referendum.

Brexit

  • Mr. Johnson wants to push the withdrawal agreement through Parliament at the earliest so that Britain could leave the union before the January 31 deadline. 
  • A big victory does not mean that the road ahead is smooth. 
  • Brexit agreement – his agreeemnt itself is controversial; once implemented, it could erect an effective customs border between Britain and the island of Ireland. 
  • Good Friday agreement – His deal might have an impact on the Good Friday agreement that brought peace to Northern Ireland and to the unity of the Kingdom in general. 
  • With EU – more difficult part of the Brexit process is negotiating an agreement on the U.K.’s future relationship with the EU. It could take years. 
  • Constitutional challenges – the poll results pose administrative and constitutional challenges to the Prime Minister. In Scotland, the Scottish National Party’s landslide victory has rekindled calls for a second referendum on Scottish independence. 

Conclusion

Mr. Johnson might go down in history as the Prime Minister who took the U.K. out of the EU. But at what cost is the question.

BREXIT

[op-ed snap] The day of Boris: On U.K. polls


Context

The Conservative Party’s victory in the Parliament gives British Prime Minister Boris Johnson a clear mandate to take the U.K. out of the European Union without further delay. He built his campaign around the promise to “get Brexit done”,

Election campaign – Conservatives vs Labour

  • Boris Johnson called for an early election after reaching a new divorce deal with the EU. 
  • He turned the poll into a de facto Brexit referendum, arguing that only a stable Conservative government could take the U.K. out of the EU quickly.
  • His strategy was to consolidate the pro-Brexit vote, get a fresh mandate in Parliament and then quicken the divorce process. 
  • The Labour Party has been ambivalent on the question of Brexit. 
  • Mr. Corbyn promised another referendum and declined to state what his position would be during that vote. 
  • His focus was on the economy. He promised a radical expansion of the state, with plans to tax the rich, increase public spending and nationalise utilities. 
  • Labour fought a Brexit election without articulating a clear position on Brexit. 
  • It lost even its traditional working class districts in the Midlands and north of England that had voted to leave in the 2016 referendum.

Brexit

  • Mr. Johnson wants to push the withdrawal agreement through Parliament at the earliest so that Britain could leave the union before the January 31 deadline. 
  • A big victory does not mean that the road ahead is smooth. 
  • Brexit agreement – his agreeemnt itself is controversial; once implemented, it could erect an effective customs border between Britain and the island of Ireland. 
  • Good Friday agreement – His deal might have an impact on the Good Friday agreement that brought peace to Northern Ireland and to the unity of the Kingdom in general. 
  • With EU – more difficult part of the Brexit process is negotiating an agreement on the U.K.’s future relationship with the EU. It could take years. 
  • Constitutional challenges – the poll results pose administrative and constitutional challenges to the Prime Minister. In Scotland, the Scottish National Party’s landslide victory has rekindled calls for a second referendum on Scottish independence. 

Conclusion

Mr. Johnson might go down in history as the Prime Minister who took the U.K. out of the EU. But at what cost is the question.

BREXIT

Brexit could be delayed


  1. News: Britain’s exit from the European Union could be delayed until at least late 2019
  2. Why? Because the government was too chaotic to start the two-year process early next year
  3. Context: Britain voted to leave the EU on June 23
  4. Roadblock: Views differ over when it should invoke Article 50, which sets the clock ticking on a two-year deadline to leave the bloc, with some senior politicians calling for a quick departure
  5. Prime Minister Theresa May, who campaigned for Britain to remain in the EU and leads a cabinet of ministers from either side of the debate
  6. She has said she will not trigger Brexit talks this year as Britain needs time to prepare
BREXIT

BoE keeps interest rates unchanged


  1. News: The Bank of England (BoE) kept its interest rates unchanged in minutes of its July meeting
  2. Investors had expected the first cut in more than 7 years with Britain’s economy reeling from last month’s Brexit
  3. The BoE said it was likely to deliver stimulus in 3 weeks’ time, possibly as a package of measures
BREXIT

David Cameron quits, Theresa May the new British PM


  1. News: Theresa May took over as Britain’s new Prime Minister, replacing David Cameron
  2. The new PM promised a ‘bold, new, positive role’ for the country less than 3 weeks after its vote to leave the EU (Brexit)
  3. Immediate concerns: EU leaders are pressing for a swift exit of Britain following the vote
  4. Even Scotland is planning to vote to exit from UK
  5. Cameron had called the referendum and campaigned to stay in the EU
BREXIT

UK-India Free Trade Agreement


  1. News: India and UK are in talks of signing a new bilateral UK-India Free Trade Agreement (FTA) after Brexit
  2. EU-India FTA will see some modifications given that UK has opted to leave EU
  3. Brexit will affect India’s interests on those tariff lines where concessions were being considered in the proposed India-EU FTA
BREXIT

Hungary welcomes Brexit-hit firms


  1. News: Hungary has offered to “incentivise” Indian companies hit by the Brexit
  2. Indian companies may leave the UK as the European Union (EU) is unlikely to subsidise UK-based international companies for long
  3. Context: Hungary is one of the major countries affected by the Brexit referendum as nearly 1 lakh Hungarian workers, facing an uncertain future in the UK, may return home seeking new jobs
  4. Hungary’s quest for finding Indian investment is partly influenced by the need to meet the challenge of Brexit
BREXIT

Scotland considers independence from the UK for the second time


  1. News: Scotland’s government is preparing a legislation allowing a second independence referendum while continuing discussions on its place within the EU
  2. Scotland is a country that is part of the UK and covers the northern third of the island of Great Britain
  3. Context: Though UK voted an overall 52-48% to leave the EU, Scotland voted 62-38% to remain in the EU – ie, sharp contrast with the UK
  4. Background: The first time when Scotland demanded independence from the UK was through a referendum in 2014, which was rejected by 55-45%
  5. Scots opted to remain part of the UK in 2014 because they believed that was the only way to guarantee EU membership
BREXIT

Post Brexit chaos in UK


  1. Scotland might hold a second referendum on independence from the UK, as Scotland wanted to stay in the EU, in sharp contrast with the UK’s decision to leave
  2. If Scotland does hold a referendum, it might lead as an example for neighbours to follow their lead
  3. Even Northern Ireland had voted to stay in the EU – hence they might consider reunificatio with Ireland
  4. Also, even London might declare independence from the UK – a petition to the Mayor is attracting more support
BREXIT

Free trade talks with EU to be modified


  1. News: Proposed India-EU Free Trade Agreement (FTA) will see some modifications and moderations due to Brexit
  2. No immediate impact on India’s trade and investment with the UK and the EU
  3. Because trade and investment with the 2 are currently happening not on the basis of an FTA but on a bilateral basis
  4. There won’t be a separate FTA with the UK due to Brexit
  5. Background: India-EU FTA negotiations have been deadlocked since 2013 due to several differences
BREXIT

Brexit and India – Short-term impacts


  1. Centre and RBI working on mitigating short-term impacts due to Brexit
  2. Trade: No immediate impact on India’s trade and investment with the UK and the EU
  3. Proposed India-EU Free Trade Agreement (FTA) will see some modifications and moderations
  4. Currency: Negative effects as British Pound gets weaker:
  5. Put pressure on India’s exports, especially in the IT sector as Europe is the 2nd largest market
  6. Positives as British Pound gets weaker:
  7. Buying a home in the UK would be cheap
  8. Trips to UK will be cheaper
  9. Increase in Indian students choosing UK for their higher education
BREXIT

Brexit and India – Long-term impacts


  1. Govt: Indian economy has enough ‘firepower’ to deal with the Brexit situation
  2. According to the government and the RBI, India will not suffer from any long-term impact of Brexit due to:
  3. Strong domestic fundamentals
  4. Low short term external debt
  5. Sizeable foreign reserves
BREXIT

Divided Kingdom leaves EU


  1. Official results: The ‘Leave’ side prevailed 52% to 48% in Thursday’s vote, which had a turnout of 72%
  2. Why Leave? To take greater control of its economy and its borders
  3. Impact: Shattering the stability of the continental unity forged after World War II
  4. Financial authorities around the world have warned that a British exit will reverberate through a delicate global economy
  5. The U.K. is the first major country to decide to leave the bloc
  6. EU had evolved from the ashes of the war (World War II) as the region’s leaders sought to build links and avert future hostility
BREXIT

RBI assures market of liquidity in case of ‘Brexit’


  1. News: RBI has assured the market of liquidity if necessary, as fears of Brexit remains
  2. The RBI governor reassured that RBI was prepared to curb any volatility and reiterated that the country has plenty of reserves
  3. Brexit: Possibility that Britain will withdraw from the European Union
BREXIT

Brexit: IMF warns of economic ruin


  1. Context: Brexit- in-out referendum in England to be held on June 23
  2. IMF: Vote to leave the EU would be costly in the long run, even after the uncertainty has been resolved
  3. Short term: Risk of an adverse market reaction to a leave vote
  4. This could be in the form of a depreciation of the sterling and large contractions of investment and consumption
  5. Earlier: The governor of the Bank of England had warned that a Brexit vote could push the U.K. into recession
BREXIT

Greece demands IMF explanation over leaked transcript


  1. Context: Greece demanded an explanation from the IMF after an apparent leaked transcript
  2. Transcript: Suggested the IMF may threaten to pull out of the country’s bailout as a tactic to force European lenders to offer more debt relief
  3. Background: EU/ IMF lenders will resume talks on Greece’s fiscal and reform progress in Athens this month
  4. Aim: To conclude a bailout review that will unlock further loans and pave the way for negotiations on long-desired debt restructuring
BREXIT

Syriza wins again in Greece


  1. The Syriza party won the polls yet again and Alexis Tsipras will be back as the Prime Minister of Greece for the next 4 years.
  2. The newly elected government has to take measures to overcome the debt crisis and to develop the economy of Greece which is down for few years.
  3. The government also has a tough task to take measures for the Refugee crisis with most of the population from war torn countries moving towards Europe.
BREXIT

[cd explains] Greece-waale Bailout Le Jayenge


A Bollywood take on the crisis!

Here is the ultimate block buster in Economics. Isme action hain, drama hain, austerity hain, reforms hain, growth hain, depression hain, there are scams galore and bro-mance to boot! How could Bollywood not move in to create a movie?


 

BREXIT

Germany rules out debt relief


  1. Germany made it clear that no part of Greek debt would be forgiven. However, Berlin was open for a flexible repayment plan.
  2. IMF had earlier criticized the Greek bailout proposals and urged the creditors to give some kind of upfront debt relief.
BREXIT

German Bundestag passes the resolution to initiate talks with Greece


  1. A day after Greece agreed on the austerity measures, German Lawmakers agreed to initiate talks regarding the Euro 86 Billion bailout package.
  2. Germany is one of several EU countries whose Parliaments must sign off any debt deal for Greece.
  3. This German vote was only about resuming official talks — a final deal with Greece will also need the assembly’s approval.

     

     

BREXIT

Europe set to restore funding to Greece


  1. Satisfied with the Greek Parliament’s approval to austerity measures, Europe is ready to provide the next bailout package.
  2. However, the Parliamentary approval resulted in a revolt in the ruling Syriza party which could lead to snap elections in the next few months.
BREXIT

‘Grexit’ will be extremely costly, says IMF chief economist


  1. IMF ruled out further funding for Greece until old arrears are cleared.
  2. Greece defaulted on a loan repayment of €1.55 billion due to the IMF on June 30.

  3. According to the IMF economist, reforms were needed in tax administration, collective bargaining, the judicial system, pensions and reducing barriers to entry for professions, and these were not undertaken to a sufficient degree.
BREXIT

Athens accepts harsh austerity measures


  1. Reforms like tax raises, pension reforms, economic liberalization were included in the package Greece sent to the Eurozone creditors for fund to avert bankruptcy.
  2. The reform package will amount to Euro 12billion over next two years.
BREXIT

Thomas Piketty on European Crisis


Since his successful book, Capital in the Twenty-First Century, the Frenchman Thomas Piketty has been considered one of the most influential economists in the world.

Germany Has Never Repaid its Debts. It Has No Right to Lecture Greece.


 


So you’re telling us that the German Wirtschaftswunder [“economic miracle”] was based on the same kind of debt relief that we deny Greece today?

Exactly. After the war ended in 1945, Germany’s debt amounted to over 200% of its GDP. Ten years later, little of that remained: public debt was less than 20% of GDP. Around the same time, France managed a similarly artful turnaround. We never would have managed this unbelievably fast reduction in debt through the fiscal discipline that we today recommend to Greece.

BREXIT

[op-ed snap] Political implications of the Greek crisisop-ed snap



 

The Greeks have voted resoundingly against the economic policies that its creditors in the European Union want it to pursue.

But what next?

  1. Other weak European countries such as Spain could be tempted to follow the Greek strategy.
  2. The impact of a Spanish or Italian default will be far more severe because of the size of their outstanding public debt.

There is one principal economic lesson from the Greek crisis: a monetary union cannot work well unless there is a fiscal union as well.

The Grand European Project : Genesis

At the end of World War II, visionaries such as Jean Monnet convinced Adenauer of Germany and Robert Schuman of France—that deeper economic engagement between European countries would be the best way to prevent a repeat of the mistakes that led to so much bloodshed in Europe between 1914 and 1945.

Brief Timeline –

  1. 1951 – Setting up a common system for coal & steel
  2. 1957 – European Economic Community was set up
  3. 1992 – The Maastricht Treaty led to the creation of the European Union
  4. 1999 – Euro made its debut

A few Trivia questions –

  1. What is the difference between the European Union and Euro Zone?
  2. Latest country to join them respectively?

 

BREXIT

Finance Minister resigns to smoothen talks with creditors


  1. After Greece’s astounding ‘No’ in referendum, FM resignation has removed a major obstacle to any deal to keep Athens in the euro zone.
  2. Greek PM said that Greece would bring a proposal for a cash-for-reforms deal to an emergency summit of euro zone leaders.
BREXIT

[op-ed snap] Lessons from a Greek tragedyop-ed snap



 

The Greek episode has exposed fundamental assumptions about the role of the state and its capacity for reform to a searing examination.


 

Two key takeaways:

  1. The idea that nations in different stages of development could be yoked harmoniously under a common currency without sufficient fiscal oversight might never truly be a sustainable one.
  2. From a comparative Indian perspective, there are long term challenges looming for the NDA government too.

In this year’s budget, the government pushed back by a year, to 2017-18, a deadline for cutting the fiscal deficit to 3% of the gross domestic product. For now, the government has largely chosen to focus on disinvestment as a means of deficit reduction but ultimately it will need to tackle the revenue deficit and unfunded welfare subsidies.

BREXIT

Greece to move ahead with referendum


  1. Greek PM has urged the people to vote ‘No’ in the referendum due on July 5.
  2. He says that a ‘No’ vote does not signify a rupture with Europe, but a return to the Europe of values.

  3. Crisis has also opened another rift in Europe with France in favor of an immediate agreement with Greece and Germany stern on its stand of no agreement before the referendum.
BREXIT

Greece proposes a 3rd bailout!


 


 

  1. The Greek government has proposed a new Two-Year bailout programme, according to news breaking in Athens.
  2. This two-year programme would be supplied under the European Stability Mechanism (Europe’s bailout fund).
  3. And – crucially – would run alongside a debt restructuring.
  4. And it wouldn’t include the International Monetary Fund!
BREXIT

Greece to hold referendum on debt deal


 


The Greek Prime Minister has declared that the country will hold a referendum on July 5 on whether or not to accept the debt deal that has been proposed by its international creditors.


  1. Greece has refused to accept cuts to pension payments or public sector wages.
  2. The IMF is pushing for deeper spending cuts, not just more tax rises
  3. A key point of friction is a special benefit paid to some low-income pensioners, which creditors want scrapped.
  4. Creditors also want a wider VAT base; Greece says it will not allow extra VAT on medicines or electricity bills, and has also resisted calls for VAT hikes on hotels and restaurants.
  5. Athens wants a concrete commitment to debt relief, something its creditors are not offering

 

 

BREXIT

Greece Is in a Worse Spot Than America Was in 1933


  1. Using the second definition of depression, most economists refer to the Great Depression as the period between 1929 and 1941.
  2. Economic depression is highly subjective and includes the depth of contraction with the chronic nature of a given slowdown.
  3. What is certain is the plunge in output qualifies Athens to scream: “depression.”
BREXIT

Greece yields, world hopes


Greece’s creditors suggested for the first time that a deal to avert bankruptcy is in sight after a proposal by Athens made significant concession on pension cuts. They will be coming to the table for discussions on tax cuts & EU + IMF might just unlock an aid.


But first things first, Greece makes up just 2% of the euro zone economy, so should you even care about what finally happens?

Yes.

Above and beyond the economics of the Greek crisis, however, what is clear is that the political implications of a default and possible euro exit would be huge and largely negative.

BREXIT

If Greece melts down, who really cares?


  1. Athens is facing another deadline to repay its debts, putting Greece again in spotlight.
  2. Greek default does not imply Greek exit from the EU or euro.
  3. But the political implications would be huge and largely negative.

    Governments in the other countries on the receiving end of EU-mandated austerity having been closely following events there. Debt relief offered to Athens might inflame their own opponents of austerity. Should Greece exit the euro and perform relatively well, such pressures would increase!

What has happened?

A referendum – a vote in which everyone of voting age can take part was held to decide whether the UK should leave or remain in the European Union and Leave won. <what is the difference b/s referendum and plebiscite?>

What is this UK, Britain, Ireland, Republic? What’s going on? Is Scotland a separate country?


Without going into the history- 

  • Full name is United Kingdom of Great Britain and Northern Ireland i.e Great Britain plus N.I.
  • Great Britain – It contains 3 somewhat autonomous regions – England, Wales and Scotland
  • Republic of Ireland separated from northern Ireland and UK in 1920s and is a separate country now <Belfast is capital of which Ireland and what is the capital of Wales and Scotland?>

But why this referendum

Conservative govt led by David Cameron had promised this referendum if they won the general election and as they won this referendum was held

What is European Union?

  • It is an economic and political partnership involving 28 European countries <latest country to join EU?>
  • It is a single market (common market) allowing goods and people to move around, basically as if the member states were one country. So basically any French citizen can travel to Germany and work there without visa.
  • You can visit whole of EU with a single visa <no internal borders>

I had to take a separate visa to travel to London. How about that?

  • So this common visa thing is applicable only to countries that are party to Schengen area <where is Schengen btw?>
  • There are 26 Schengen countries (22 EU + 4 Non EU)
  • 4 Non EU – Iceland, Norway, Switzerland, Liechtenstein <btw Liechtenstein is a double land locked country. Look in the map and find out which other country is doubly landlocked, There’s only one other>
  • 6 EU not party – Bulgaria, Croatia, Cyprus, Ireland, Romania and the UK.

So as UK is not party to Schengen, you had to take Visa.

What about euro? I had to use pound in UK. Isn’t the Euro currency of EU?

  • Euro currency is used by Eurozone countries. Eurozone is subset of EU. Only 19 EU countries are part of it. Obviously UK is not party to it. 
  • Euro is also used by 4 other European countries – Vatican, Andorra, San Marino, Monaco

Any history ? How did EU begin?

  • It grew out of a desire for peace in a war-torn and divided continent. It started in 1951 with European Coal and steel community of 6 countries by treaty of Paris <France, Germany, Italy, the Netherlands, Belgium and Luxembourg>
  • 1957 – European Economic Community (EEC) or common market was formed by treaty of Rome,
  • 1973 – Britain, Denmark and Ireland joins the EEC <total 9 countries now>
  • 1992 – Maastricht treaty was signed and comes into force in 1993. Formal beginning of EU
  • 2002 – Euro replaces national currency in eurozone

What does EU do?

  • Eu oversees co-operation among its members in diverse areas, including trade, the environment, transport and employment
  • Common security and foreign policy
  • coordinates policy on asylum, immigration, drugs and terrorism <that’s why so much concern over migration fro middles east and north Africa>
  • EU policies on workers’ rights and other social issues <UK not part of this social chapter either>
  • Promotes human rights, give aid to agriculture, fisheries etc

Okay, sounds great but how does it all work?

EU works through 4 main institutions

  1. European Commission – All powerful bureaucracy of member states <each country, one representative>, propose laws, implement laws, job is to promote European interest, not the interest of member countries, HQ in Brussels <where is Brussels>
  2. European Council – It’s a political body, leaders meet here
  3. European Parliament – Directly elected MPs <MEPs> vote on almost all the issues now days. It sits in Strasbourg <where is Strasbourg?>
  4. European court of rights – name explains everything <where is its headquarters?

Why do Brits want to leave EU?

  1. Sovereignty – that Britain ceded its sovereignty, right to pass its own laws to bureaucrats sitting in Brussels <Doesn’t India lose its sovereignty by being member of UN?>
  2. Regulations – That Brussels imposed too many regulations that hurt British business interest
  3. Money – Billions of pounds of entry fee with very little to show in return <Britain don’t have many farmers to get agriculture subsidies>
  4. Open borders/ migration – even though Britain is not part Schengen, workers from rest of the EU can come their freely and work there. Large numbers from eastern europe came just to claim British benefits, social security and all <so called welfare tourism>
  5. Ever Closer Union – detested the idea of United states of Europe <closer political union, confederation sort of thing>

Why did Cameron want UK to stay in EU?

  1. Single market – much easier to sell things while being member of single market
  2. Security
  3. Britain’s status in the world is enhanced as part of EU

How is single market different from free trade area?

  • In FTA there are no tariffs except on some negotiated goods and services but in single market, even labour mobility is free
  • In Single market, you impose common tariffs on all imports, it;s like a single country for the purpose of trade and commerce
  • There are common standards etc. <environment, labour, quality etc.>

What is European free trade association (EFTA)?

  • It is FTA of 4 European countries -Iceland, Norway, Switzerland, Liechtenstein <do you recall they are all part of Schengen>
  • All of them have signed FTA with EU. Britain can sign similar FTA with EU now

What happens now?

  • Britain would negotiate its exit <under Lisbon treaty>, But the fear is of contagion. Eurosceptic parties of other countries would also press for similar referendums.  
  • Plus as Scotland has voted overwhelmingly in favour of stay (68%), there would be fresh demand for referendum on Scottish independence. Similarly is the case with northern Ireland.

Impact on India

  • No direct impact but expect turbulence in stock and forex market. Panicky investors may withdraw their hot money out of India
  • On positive side, India can sign FTA with Britain

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