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What is Brexit?

It is a short form for Britain exiting the European Union (EU) i.e. Britain + Exit= Brexit. 

The United Kingdom has opted for leaving the European Union in a closely-fought referendum held recently. 52% people voted in favor of leaving the EU.

The referendum saw a turnout of 72%. ‘Leave’ won in all the regions, except, London, Scotland and Northern Ireland voting to leave.

This is the second referendum on Britain’s relationship with the European project. In 1975, in a referendum on whether the U.K. should stay or leave the European Community (Common Market) Area, the country voted for staying in with a resounding 67.2% vote.

What is the European Union?

The European Union is an economic and political partnership involving 28 European countries. 

The EU was created by the Maastricht Treaty, which entered into force on November 1, 1993. The treaty was designed to enhance European political and economic integration by creating a single currency (the euro), a unified foreign and security policy, and common citizenship rights and by advancing cooperation in the areas of immigration, asylum, and judicial affairs. It began after World War Two to foster economic co-operation, with the idea that countries which trade together are more likely to avoid going to war with each other.

There are four key institutions which work together to run the EU - the European Commission, the European Parliament, the Council of the European Union and the Court of Justice.

What is the official mechanism for leaving EU?

Article 50 of the Lisbon treaty states that:

• Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

• A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.

• The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

• The member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it.

• The process will take about two years. In this time the U.K. will negotiate with the EU’s other 27 members on how to extricate itself from the bloc. The U.K. remains an EU member, with all the rights and privileges associated with that, until then. 

Why Britain wanted to leave EU?

• EU threatens British Sovereignty.

• Many foreigners (from other EU countries) were moving to Britain after EU was formed. During 2008 crisis, people from those countries who couldn’t find jobs at home, went to countries like UK. This puts an extra burden on existing resources of UK- Immigration issue.

• It will be able to secure trade deals with important countries such as China, India and America, which was difficult within the EU, given the large scale negotiation.

• It may save money, that could be used for scientific researches and for building new industries.

• Leaving will return control over areas like employment, law, health and safety. Currently, Britain has little influence within the EU. 

Consequences – For Britain

• In the short run, uncertainly about Britain’s future relationship with the EU, its largest trading partner, could push the UK into a recession. Falling value of currency may have great implications on its imports and exports, it may increase no. of tourists, students etc.

• Britain products could lose its easy entry into other European markets (currently about 45% of UKs trade is with EU).

• IMF forecasts UKs economy to be 5% smaller by 2019 due to leaving EU market.

• It will become tougher for people to move across the borders. 

• It may trigger job crisis in UK (At present about 3 million jobs are tied to EU).

• Brexit could encourage disintegration of United Kingdom

• People from other EU countries may find it difficult to access UK’s jobs. 

• The EU referendum outcome will not lead to any immediate change to the immigration status of current EU students or those about to start a course in the coming academic year (2016–17).  The longer term implications for EU students who want to apply to study in the UK (ie from 2017–18 onwards) will depend on the outcome of negotiations and what kind of relationship the UK agrees with the EU. 

How Brexit affects India?

• Markets across the world will be affected. The pound will depreciate against most major economies. Sensex and Nifty might fall in the short-run.

• India is presently the second biggest source of FDI for Great Britain. Indian companies that would set up their factories in the UK could sell their products to the rest of Europe under the European free market system. However, now it will not be an attractive destination as before for Indian FDI as before.

• With Brexit, India will lose its gateway to Europe. This might force India to forge ties with another country within the EU, in order to access the large EU market.

• With Britain cutting off ties with the EU, it will be desperate to find new trading partners and a source of capital and labour.  With migration from mainland Europe drying up, Britain would be able to accommodate migration from other countries, which will suit India’s interests.

• Britain is one of the most important destinations for Indians who want to study abroad. Presently, British universities are forced to offer subsidized rates for citizens of the UK and EU. With Brexit, however, the universities will no longer be obliged to provide scholarships to EU citizens, which will free up funds for students from other countries. Many more Indian students may be able to get scholarships for studying in the UK.


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