COSTAS MILAS *

Brexit and the weakest link

COMMENT

TAGS: Politics

Pythagoras said that a number rules the universe. For Brexiters, this number, is 1,269,501: the number of voters who gave a clear win to the “Leave” camp.

So what is to happen after the Brexit vote? Prime Minister David Cameron tried to put on a brave face but the reality of the matter is that he will have to step down possibly sooner than October, which he mentioned in his post-referendum statement. Indeed, eurosceptic Tories would hardly trust Mr Cameron’s initial Brexit negotiations with the remaining EU leaders when he has passionately fought against it. Whether the transition to a new leadership proves smooth or turbulent remains to be seen.

What is clear, however, is the lack of preparation and/or planning in regards to how British politicians will handle Brexit developments during negotiations with our European partners. With this in mind, it is more likely than not that we will witness substantial political instability, a capital flight from the UK and (as predicted by both the Treasury and the International Monetary Fund) economic recession. Given that the UK economy relies largely on consumer spending, the immediate question is whether the Brexit supporters (17,410,742 in total) will be prepared to put back their vote by continuing to spend in order to keep the economy going. This is something I doubt very much.

What are the obvious implications for Greece? Not great I'm afraid. As Europeans are see one of its most powerful economic engines leaving the Union, it is more likely than not that they will also be more than happy to see Greece – their most problematic and weakest link that is – leave at the first available opportunity.

Brexit leaders, such as Michael Gove, have attacked economic experts (including myself) who overwhelmingly warned against the huge economic risks of Brexit. Their unusual argument is that economic experts must be wrong because they did not predict the 2008-2009 financial crisis. With Brexit now on, I am delighted to report that we will know pretty soon whether economists (including myself) are going to be wrong this time around.


* Costas Milas is a professor of finance at the University of Liverpool

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