Monday, June 27, 2016

SOS John Kerry to Visit London, Brussels to Address Brexit Fallout

U.S. Secretary of State John Kerry will visit Brussels and London on Monday to speak with EU and UK leaders about the United Kingdom's vote to leave the regional bloc.
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Kerry called the vote "a decision that the United States had hoped would go the other way," but also said that leaders needed to carry out the will of the voters. The British pound continued to lose value (FT) while the investment bank Goldman Sachs predicted a recession (Reuters) in the United Kingdom and Moody's cut the country's credit rating outlook to negative (BBC). Meanwhile, the Labour party faces an upheaval following a wave of resignations (BBC) by shadow cabinet members protesting Jeremy Corbyn's leadership.
"The historic accomplishment of European integration launched in the wake of the second world war, which brought with it unprecedented stability and prosperity, is at risk. The Brexit vote comes in a context in which Europe is already reeling from low economic growth, Russian aggression in Ukraine, and an influx of refugees. Making matters worse is the likelihood that EU officials are more likely to threaten other countries not to follow the UK's lead than they are to address the EU’s flaws that in part fuelled the vote," writes CFR President Richard N. Haass for the Financial Times.
"Market analysts predict a sharp fall in UK growth over the next year, on the order of 1-2 percent lower, with some predicting an outright recession. At the same time, the rating agencies have signaled that they are likely to downgrade the UK. Uncertainty will be felt on investment most importantly, as well as consumer sentiment. Even if you are optimistic about the long-run future of the British economy outside the EU, the cyclical effects appear likely to be significant. The shock will drag European growth lower, adding to political strains on the union," writes CFR's Robert Kahn in this Macro and Markets blog post.
"The largest consequences will be for Europe — both for the reality and the idea. Britain’s vote will encourage populists elsewhere: Already, Euroskeptics in Sweden, France and the Netherlands have demanded a copycat referendum. Spain’s neo-Marxist far left is expected to win a quarter of the vote in Sunday’s election. Polls suggest that French voters are more skeptical of the E.U. even than British ones, a sentiment that will assist the far-right populist, Marine Le Pen, in next year’s presidential contest. Populist governments are already in power in Greece, Hungary and Poland," writes CFR's Sebastian Mallaby for the Washington Post. Published on Council on Foreign Relations