Conference Presentation, Panel, Fireside Chat
Europe in the Post-Brexit Age
Milken InstituteMarieluise Beck, Niall Ferguson, Sergei Guriev, Anton Muscatelli, Roland Rudd, Louisa Bojesen, Louisa Borgeson
- Brexit is predicted to leave the UK economy suffering costs ranging from 2.7% to 9.5% of GDP by 2030, with soft Brexit scenarios subtracting approximately 1 percentage point from GDP by 2021 and hard Brexit scenarios subtracting around 5 percentage points.
- Other nations may lose between 3% and 4% of GDP by 2021, while specific companies could face losses of 2 percentage points due to the trade realignment.
- Immediate economic impacts include depreciation of the pound, which is expected to drive up wage and price inflation, alongside potential reductions in labor inflows that will lower living standards.
- The trading relationship with the EU requires agreement from all 27 remaining countries, who may lack interest in maximizing trade, meaning any arrangement short of full single market participation will cause significant economic damage.
- Political instability and uncertainty are anticipated to spread across Europe and other regions, driven by a trend toward protectionism and the formation of distinct trade blocs linked to movements like Brexit and Trump.
- Lower to middle-income groups that supported Brexit are expected to be disproportionately damaged by the shift toward protectionist attitudes, potentially leading to social division.
- A long transitional period is foreseen where no sensible two-year negotiation is possible, with some experts suggesting the UK adopt the EFTA European Economic Area Solution as a temporary truce.
- The UK government may become "poorer or meaner" if inequality is not addressed, risking the loss of its status as an open, liberal country and causing rapid erosion of support.
- There is a risk of a significant "jolt to the far right," which is viewed as a major mistake that could push countries to reverse reforms and move toward anti-European or less democratic policies.
- Western countries face challenges similar to 1990s transition economies, including potential major reversals and increased authoritarianism, while populist forces may prioritize certainty over necessary changes.
- The EU's failure to satisfy citizens over the last decade, including the persistent consumption decline in 90% of Greek households, is seen as justifying the revolt in provincial England and shaping future EU dynamics.
- Future political shifts include potential reforms in the Eurozone if Emmanuel Macron is elected in France, and a belief that the EU will change shape in 2017 as more Europeans accept British dissatisfactions.
- Global geopolitical risks include Western denial of European problems, far-right leaders admiring Putin, and the possibility that countries might turn toward anti-European policies following the Brexit event.
- Specific geopolitical concerns involve the UK likely not joining future EU sanctions on Russia, the potential reopening of migration gates if Turkey decides to act, and the warning that failing Ukraine would signal that the West cannot be relied upon.
- Migration is expected to be restructured rather than ended, while the long-term outlook suggests the EU may eventually mirror the separation trend seen in the UK as a recurring shape of events.
- The negotiation timeline is described as a "divorce" taking much longer and costing more than anticipated, with the process potentially defining the future trajectory of the EU as a whole rather than remaining an aberration.