Weekly Geopolitical Report – The Real Risk of Brexit (June 20, 2016)
by Bill O’Grady
In February, we presented an analysis of Brexit, which is shorthand for Britain’s potential departure from the European Union (EU). The referendum is slated for June 23. In general, the points discussed in the aforementioned report on the economy, trade, regulatory policy, immigration and the U.K.’s geopolitical “footprint” all still hold. There are potential risks to the U.K. political system and economy from leaving the EU. However, there is also, in my opinion, an underappreciated risk to the EU as well.
The problem can be summed up in this question—what if the U.K. leaves the EU and prospers? This has the potential to be a major problem for the postwar European political environment. In this report, we will discuss the role of the EU in shaping the postwar geopolitical environment in Europe and the multiple threats Britain’s exit presents for the EU. As always, we will conclude with the impact on financial and commodity markets.