THE United Kingdom has, by a narrow margin of 1,219,501, decided to leave the European Union. This is a deeply unsettling and disruptive vote and its consequences are already being felt across the world. It will be weeks of uncertainty and confusion before the British political establishment itself would be able to figure out how to proceed on the divorce. Details of the vote revealed a nation fractured and divided down the middle. The kind of anchored equilibrium that characterised the English society, politics and economics for a century appears to have dissolved within a fortnight. Prime Minister David Cameron, who led the ‘stay’ campaign, had taken a gamble in calling for the referendum — and, has, now, lost it. This man was voted back to power only a year ago and handed a sturdy mandate. He now stands rejected.  He has been left with no choice but to step down. Till the Conservative Party finds a new leader, Cameron would remain a wounded and crippled Prime Minister. The formal leadership of the Labour Party, too, stands diminished. The Labour Party also favoured a continuation in the European Union but it never demonstrated sufficient energy or verve in its advocacy. Its internal divisions and factionalism would get further aggravated. The two established parties should feel soundly rebuked by the voter. Thursday’s ‘out’ vote is deeply troubling because it represents a symbolically potent victory for politics of anger, hate and xenophobia. The ‘out’ campaign was openly nasty and ugly; it was directed at the average British voter’s fear of the immigrant. The ‘out’ success will give a decided fillip to all the right-wing political leaders and outfits in Europe and beyond. It would be noted that the British voter also spurned President Obama’s advice to ‘stay’, whereas the Republican presumptive nominee, Donald Trump, had championed an ‘out’ vote. The British voter had unwittingly bestowed some kind of respectability on all kinds of demagogues around the world, who would now feel emboldened enough to invoke narrow nationalism and isolationism to crank up a sectarian agenda in their respective domestic politics. The voices of openness, pluralism and tolerance have suffered a definite setback. It is a defining moment — and, not just in England.

India must brace for change

WITH Britain’s ‘Leave’ European Union vote, global financial markets got a nasty jolt, reviving bad memories of the Lehman moment. Its ramifications could be more complicated and even worse. The impact on India will be relatively limited largely because of our domestic-focused economy. The Britain and EU-centric export-led economies will feel the real heat. The reassuring words from Finance Minister Jaitley and RBI Governor Raghuram Rajan about India’s good fundamentals, low short-term external debt, and sizeable foreign reserves did soften the initial blow but long-term concerns remain. Remember after the Lehman collapse, capital outflows continued for five long years. The business sentiment here was just beginning to improve, economic growth was picking up and the government too opened up various sectors of the economy to woo foreign investment. All this would be in danger until stability returns. India’s exports, already shrinking, will suffer further. The $8.83 billion trade with Britain will be in jeopardy as also the auto and pharmaceutical exports to Europe. Foreign funding expected to pour in infrastructure, defence, civil aviation, real estate and other areas may get delayed or shelved.In turbulent times fund managers look for safe havens like the dollar and gold, which appreciated significantly on the very day the news of divorce came. But the other infected assets — stocks, currencies, commodities — could fall further, impacting the performance of economies and companies. A cheaper pound will make trips, holidays and education in Britain cheaper for Indians. A fall in oil prices is expected and it will benefit India. Low commodity prices, however, can also hit corporate performance and poor corporate earnings would derail the plans on managing bad loans of public sector banks and trigger capital outflows, weakening the rupee. How effectively the RBI handles the situation, how monetary policy is shaped and whether the new RBI Governor generates Rajan-like confidence in investors will decide the fate of India’s financial markets, businesses and economy.

Britain leaves EU

S Nihal Singh
Time to fix a broken institution

happy hour: The ‘greatness’ of Britain weighed heavy.

BRITAIN’s decision to leave the EU after a bitter and divisive campaign symbolised by the murder of the British MP Jo Cox has roiled world markets and posed the most serious crisis for the 28-nation group since its inception. The post-World War II idealism that brought warring nations together has undergone a dramatic change. Britain must now begin the process of formalising the divorce over two years and sort out the ramifications of separating from the EU, most notably in its relation to the common market, and possible domestic fallout in terms of Scotland that largely voted to remain in the EU seeking another referendum to seek independence from the UK. It is indicative of the joy of supporters of Brexit that the leader of the UK Independence Party, Mr Nigel Farage, should declare the referendum result as independence day. And far right leaders in France and the Netherlands, Ms Marine Le Pen, and Mr Geert Wilders, have been quick to call for votes in their countries to leave the EU.The major European members, Germany and France, must now act quickly to steady the EU ship by calling an early summit to reassure members that the British act is not contagious. There are good reasons for the rest to stay together, despite dissension.   The EU is facing three kinds of crisis: a large dose of Euroscepticism, inability to act together in the face of a major crisis such as the flood of refugees and the still shaky foundations of the common currency, the euro, with its members in an unequal relationship.Beyond these crises looms the central question that was not resolved through two world wars: how to tame the power of Germany? Britain, together with such countries as France, was a balancer, but since the UK has opted out, it will disturb this balance.Ironically, the very evils of nationalism the EU and its earlier avatars were meant to banish are raising their heads again. In the case of Hungary and Poland in particular, nationalistic and nativist tendencies are being blatantly promoted and the rise of the right and anti-EU rhetoric in major member states are ominous signs. It is ironic that Germany, which dominates EU policy-making, should host an Alternative for Germany party which has gained strength in the face of the unique welcome Chancellor Angela Merkel gave Syrian refugees.Ms Le Pen’s National Front has never been shy in proclaiming its Euroscepticism and is now considered a likely run-off candidate in next year’s French presidential election. Italy, Greece and Spain have their own anti-establishment parties, with anti-establishment candidate winning Rome and Turin mayoral contests against a once anti-establishment party candidates, now ruling dispensation.Where does the task of fixing a broken EU begin? The idealism that built the EU vanished in the 2008 recession and the feeble growth of most member states. The young, of course, take for granted the great benefits of visa-free travel and the ability to work anywhere in the EU. There are other tangible benefits of a common market in boosting trade. Yet the deep shoots of nationalism are negating the very rationale of a group like the EU.The most shameful aspect of the EU in recent times has been the refusal of many members to share the burden of hundreds of thousands of refugees from war-torn Middle East, some signifying their Muslim faith in refusing to give them asylum. Ms Merkel was left holding the baby. She paid a political price at home and completed a shady deal with Turkey for stemming the flow of refugees.Many critics of the EU decry the bureaucracy of Brussels, the group’s headquarters. Like all large organisations, the EU has its share of bureaucrats who guard their turf and take rigid positions. It is the task of the leadership to undertake spring cleaning. But the more immediate problem is of fixing the major fault lines that have emerged.Germany must take the lead because it is the largest aid-giver while Greece is at the other end of the scale. Apart from Athens’ continuing economic woes, there is widespread dissatisfaction with the traditional Berlin cure of following austerity policies for debt-ridden economies. Perhaps it is time to loosen the purse strings, although German hesitation is understandable, given that it is the main banker in doling out money, which comes from the country’s taxpayers.The present state of the EU highlighted by Britain’s own problem of reconciling itself to the fall from a once Great Britain to its present more humble status, poses a broader question: how to make the group useful and beneficial as it is in so many ways, more attractive and sexy to the young?The turn to the far right and nationalist jingoism are expressions of the citizens’ search for something they are missing in the EU. Tawdry deal-making at interminable summits are no substitute for enthusing EU citizens.Besides, the virtual common membership of the EU and the North Atlantic Treaty Organisation (NATO) has given a new twist to a problem familiar to all in the days of the Cold War. We are not quite in a new Cold War but Russia’s understandable resentment over the West’s attempt to swing Ukraine to its side has raised knotty questions.Despite Russia’s reduced status, Ukraine is the cradle of Russian roots in the Orthodox faith, with eastern parts of the country, largely Russian speaking, still attached to what many view as their motherland. The events on the Maidan in Kiev that led to regime change and an aggressive swing to the EU encouraged by Washington resulted in Moscow’s backing for pro-Russian rebels in the east, leading to two Minsk agreements with Western powers with an imperfect peace in place. It did not make sense for the EU to assume that Moscow would accept a country with a vast population so intimately connected with Mother Russia and sharing borders with it to be hived off.In any event, Moscow’s relations with the West have entered a turbulent phase with NATO gearing for reinforcing troops and equipment on states bordering Russia to reassure nervous neighbours such as Poland and the Baltic states. These moves detract from the central purpose of the EU.Britain’s exit gives an opportunity to EU members to revisit their organisation to correct its deficiencies in order to return it to the outlook of its founders in a vastly changed Europe and world. It would be a pity if the opportunity were lost.