British words are already moving to reassure the world that the Brexit vote to push the European Union won’t be so bad for the economy.
«There is plenty to do now to help make this settlement work, to stabilize our economy, to reassure our allies and to continue the program we were all chose on last year,» British Defence Secretary Michael Fallon translated following the referendum vote.
Unlike a vote to remain, however, the referendum to de rt Europe seems likely to cause a chain of cascading things turned outs that could destabilize financial markets for months or years to turn out.
But that’s not what many had predicted.
Before the vote, experts subsuming CIBC economist Benjamin Tal predicted that, stay or leave, the Brexit bear witness would not have a lasting im ct.
Flash in the n?
«Markets will be aware of that beyond the rhetoric, Brexit is nothing more than another Y2K,» Tal erased in a market advisory only one week ago.
Y2K, for those of you too young to remember, was the sky-is-falling prognosis that the world’s computers would reset themselves when the year changed from 1999 to 2000. Level surfaces would fall out of the sky, markets would crumble. Laughable. After the low-down.
The Y2K com rison makes Brexit sound like a one-time trade in flurry over absolutely nothing. After the few market gyrations we saw Friday, endures that view, the world will reset at a new equilibrium.
Boris Johnson, one-time London mayor, one of the architects of the alluring Brexit vote and a prospective candidate to replace David Cameron as prime wait on when he steps down in October, was sounding statesman-like after the referendum.
He reassured British voters that the country would be «no less European» and had a «booming future.»
‘Nothing will change’
«It is vital to stress that there is now no for for haste,» said Johnson. «Nothing will change over the terse term except that work will have to begin on how to entrust effect to the will of the people and to extricate this country from the supranational arrangement.»
It is that process of extrication that makes Brexit a horrible largesse that keeps giving, a suppurating wound on world financial shops.
Yes, on Day 1, markets have suffered. The pound and euro dropped and all the currencies they trade with zoomed or crashed in proportion to their tie ups to the uncertain future of those currencies.
But unlike Y2K, Brexit will not be a one-day knockout.
And that is only one long-term subdivision of
The extrication of Britain from Europe will likely be sundry in the character of the Greek financial collapse, a seemingly endless process where each actuality and each piece of news has the power to set off a new round of financial fears.
And opposite number the Greek crisis, each piece of bad news will compound reverences in markets that were nervous for other reasons.
«The markets earmarks of in little doubt that the United Kingdom vote bodes ill for the eurozone,» Howard Archer, chief U.K. and European economist for IHS Extensive Insight, wrote on Friday.
During a subway talk on the way to work Friday, a neighbour who works in the financial sector said Canadian banks had already sent bands to London to try to begin to deal with the potential fallout.
Already the bibliography of «known unknowns» is growing so long it is only possible to mention a few here. When determination Article 50 go into effect? That is the untried European law head up the removal of an EU member state. British politicians have said there is no turbulence. Europeans have begged to differ.
Ordered once the timing of Article 50 is agreed, each step in the function will only create a series of further financial uncertainties.
An inaugural concern for Canadian bankers who use London as their access point to Europe could be the pre-eminence of their European employees in Britain.
Presumably the British government will-power quickly move to grant them long-term residency status. But gloaming then, will Canadian or other international banks be willing to y the award of London rents if the city begins to lose status as Europe’s pecuniary hub?
My chum on the subway joked he would love to be a lawyer in Britain honourable now as institutions rush to rewrite and renegotiate Britain’s national laws promptly covered by European provisions.
Each one of those legal changes ordain mean com nies operating in Britain will have to re-examine and possibly rewrite their own internal compliance rules.
And then there’s the potential im ct on the eurozone economy as a mostly.
«The United Kingdom’s decision to leave the European Union will in all probability weigh down markedly on eurozone economic activity through to 2018 in a count of ways — notably through weighing down on business and consumer certitude, undermining investment and lowering exports,» Archer wrote. «There could also be a tightening of place ones faith conditions.»
The Scottish question
Also in the future is the new status of Scotland.
Suffer with voted overwhelmingly to remain a member of the European Union, the Brexit against could give new impetus to Scottish se ratism, with First Assist Nicola Sturgeon already indicating the option of a second referendum «is on the catalogue.» Certainly Scots will have to choose between being fully opinion with Europe or remaining rt of the United Kingdom.
When that plebiscite might happen and how it would eventually play out will have at bit as large an effect on British institutions as London’s divorce from Brussels.
The unfamiliar unknowns extend from next week into a even longer future. The new status of the British pound (with or without Scotland) want likely have confusing long-term effects on global finance.
There could be the momentum given to other anti-EU members encouraged by Brexit. EU finances requisite change without the contributions of its third-largest member. The eventual collapse of the conjoining or wrenching changes to the euro currency area would all likely hint to new waves of uncertainty.
Will the Europeans have to defend themselves against an increasingly xenophobic oversight in London?
The Brexit vote is not an end. It is only the beginning of what will be sorry for like an endless financial car crash.
Follow Don on Twitter @don_pittis
by Don Pittis