Earlier this week, the folks at Stratfor put together a piece on the implications of the British vote and exit. Their view was that the impact would be more in the realm of geopolitical than economic. Here are some of the highlights from that article:
“If Britain quits the European Union, though, it risks disrupting the base of power the bloc has come to rest on. Germany relies on Britain's backing when it comes to promoting free trade in the face of France's protectionist tendencies. France sees Britain as not only a key defense partner but also a potential counterweight to German influence. Removing Britain from the equation would shatter this tenuous arrangement at a particularly dangerous time for the deeply fragmented Europe, when neither Germany nor France is satisfied with the status quo.
Should the "leave" camp win the British referendum, tension would rise between the Continent's north and south. Countries in Southern Europe want to turn the European Union into a transfer union that redistributes wealth from the relatively rich north to the less developed south and shares risk equally among members. Northern Europe, by comparison, is eager to protect its affluence and would agree to share risk only if the bloc assumed greater control over the south's ability to borrow and spend. The regions also disagree on how the European Union should use its funds. Southern Europe advocates generous subsidies for agriculture and development, a view most Eastern European states share, but Northern Europe would prefer to freeze or even reduce the bloc's budget…
The north-south divide would not be the only gulf to widen on the Continent, either. Should Britain leave, the European Union would split between east and west, too. Countries in Central and Eastern Europe see Britain as the defender of non-eurozone members' interests, and many share London's views on the sovereignty of member states. Poland, Hungary and the Czech Republic, for instance, are generally supportive of the European Union but suspicious of Brussels' attempts to interfere with their domestic affairs. In particular, these countries have sympathized with British Prime Minister David Cameron's campaign to give national parliaments more power to block EU legislation. Poland and the Baltic states also see Britain as a critical partner on the issue of Russia, since London has fought for a tough European stance against Moscow in response to its annexation of Crimea. In the event that Britain leaves the Continental bloc, its Central and Eastern European allies may eventually become more isolated from Brussels…
No matter what British voters choose, the damage to Europe has already been done. If Britain leaves the European Union, it would throw the Continent into yet another political and economic crisis, giving Euroskeptic forces greater ammunition against the bloc and voters fewer reasons to defend it. But if Britain keeps its membership, it would have proved to other European governments that it is possible to demand concessions from Brussels while winning support at home. And so, regardless of what happens June 23, Britain has set a precedent that Brussels cannot stop other EU members from following.”
