Concern about double crisis

Friday, 2019-08-16 17:08:41
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A river boat cruises down the River Thames as the sun sets behind the Canary Wharf financial district of London, Britain, December 7, 2018. (Photo: Reuters)
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NDO - The stagnant and unpredictable Brexit process (the UK leaving the European Union - EU) is negatively affecting the UK and other European countries. Analysts are concerned about the risk of the double crisis both in the economy and politics in the UK in the coming time.

According to the UK Office for National Statistics, the UK gross domestic product (GDP) in volume terms was estimated to have fallen by 0.2% in Quarter 2 (April to June) 2019, having grown by 0.5% in the first quarter of the year. Accordingly, production output fell by 1.4% in the latest quarter – the largest decline since Quarter 4 (October to December) 2012 – driven by a 2.3% fall in manufacturing output.

The cause of the UK economic decline is due to the fact companies are reducing the amount of goods they have previously stockpiled to prepare for Brexit and automated factories have stop working for annual maintenance in April. Brexit is still not clear, with adverse external factors are also seriously damaging the economy of EU countries. According to a flash estimate published by Eurostat, the statistical office of the European Union, seasonally adjusted GDP rose by 0.2% in both the euro area (EA19) and in the EU28 during the second quarter of 2019, compared with the previous quarter. In the first quarter of 2019, GDP had grown by 0.4% in the euro area and by 0.5% in the EU28.

Analysts commented that difficulties of the global economy and the risk of a no-deal Brexit have led to gloomy prospects for the EU economy in general and the UK economy in particular in the third quarter. If the GDP growth continues to decline in the next quarter, the UK economy will officially fall into recession just before leaving the EU at the end of October as scheduled. Many analysts are concerned that a no-deal Brexit will shock the world economy, push Britain into recession, disrupt the financial markets and weaken London’s position as an international financial centre. In addition, the UK Food and Drink Federation has just warned that a no-deal Brexit could disrupt food supplies in the UK for several weeks or months.

In fact, a scenario of a no-deal Brexit may become a reality as Prime Minister Boris Johnson, who took power last month, has pledged to leave the European Union on October 31 without an agreement on the terms of Britain’s departure, unless the EU agrees to renegotiate a deal reached by his predecessor Theresa May. However, the EU has refused.

Foreign Minister Dominic Raab has recently pressed the EU to amend the terms of the UK’s EU withdrawal agreement, saying Brussels would have to take responsibility for a no-deal Brexit if it does not compromise. He affirmed that London would cope with the risks that might arise from leaving the EU, and underscored the determination to implement Brexit.

However, the EU seems to be refusing to negotiate with the UK over a new Brexit deal. EU negotiators told European diplomats there was currently no basis for "meaningful discussions" and talks are still back where they were three years ago.

Along with the disagreement about Brexit between the UK and the EU that has not been resolved, the internal disagreement on this issue is still serious. On August 14, Jeremy Corbyn, leader of the opposition Labour Party, again threatened a no-confidence vote on the country's new prime minister. PM Johnson has pledged to take the UK out of the EU at the end of October, with or without a deal, setting himself up for a clash with lawmakers who have vowed to try and stop a no-deal Brexit, including by even trying to collapse the government.

Meanwhile, a ComRes opinion poll showed 54% of respondents with an opinion on the matter said they agreed with PM Johnson on the need to deliver Brexit by any means, including suspending parliament if necessary, in order to prevent MPs (Members of Parliament) from preventing it.

Differences in the EU and UK officials' claims and people's views showed that the disagreement related to the UK leaving the EU is still profound. It seems that, besides the risk of economic recession, the risk of political instability in the UK is increasing. ING, one of Europe’s largest banks has said its central assumption was Brexit would be delayed, with a 40% chance of a national election in the UK.