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30 Jun 2016

Brexit: No Economic Access without Free Movement

David Cameron’s last supper with the 27 European leaders was followed by the first indications of Brussel’s post Brexit mood. Firmly uniting against the instability that threatens the Eurozone was the primary focus of the two-day meeting called in response to the UK’s referendum vote.

EU Council President Donald Tusk spoke for the 27 remaining presidents, chancellors and prime ministers, declaring they’re “absolutely determined to remain united”. As a united EU they insisted the UK could not request any special deals, especially with regard to free movement of EU citizens.

This is the bargaining chip the leaders are employing, as French President François Hollande said, “If they don’t want free movement, they won’t have access to the single market.”

After the brief talks, it was clear that the free movement of people, services, goods and finances, (“the four freedoms”), will be the sticking point ahead.

The vote to leave had implied that the UK hoped to continue to trade with the single market without permitted immigrants from poorer EU nations to enter the country. EU leaders dismissed this possibility, sending a strong message to other countries where anti-immigrant sentiments have also sprung up.

Nexit, Frexit, Itxit: Euro Sceptics Unite

With poor economic growth amid immigration pressures driven by an increasing refugee crisis, other EU countries were anticipated to exit in ‘a domino effect’. “We may be close to a Nexit,” as the Netherlands flees the “dying” EU, Nigel Farage said.

Marine Le Pen, leader of the Front National, hailed the Brexit vote as the beginning of “a movement that can’t be stopped, raising notions of a Frexit. At the weekend, far-right Le Pen met with Hollande to put forward a request for such a vote in France. His government rejected the proposal.

Matteo Salvini, leader of Italy’s Northern League saw Brexit as an opportunity to press his anti-immigration agenda, tweeting “Hurrah for the courage of free citizens! Heart, brain and pride defeated lies, threats and blackmail. THANK YOU UK, now it’s our turn.” However, when Italians were polled in March, 61% were in favour on remaining.

Leaders Divided on Immigration Policy

The 27 remaining EU members have not yet been able to agree on how to cope with record migration figures. Hungary refuses to accept imposed EU refugee quotas, as do other Central European nations. Arrivals of over 1 million migrants has north European countries tightening border controls. Greece has struggled to deal with immigrants coming ashore without the support it needs from having a migrant policy in place within the EU zone.

A leaner, kinder EU after Brexit

The EU leaders must now adjust to the criticism that it has become an unresponsive bureaucracy unable to deepen European cooperation. “We all need to wake up and smell the coffee,” said Lithuanian President Dalia Grybauskaite.

German Chancellor Angela Merkel said: “this is not about more or less Europe as a principle, but about achieving results better.”

Hollande said, “The coming weeks will be decisive, Europe must show its solidity.”

EU council president Tusk has convened a special EU summit on September 16 in Bratislava, Slovakia. As the markets absorbed the reality of Brexit, the pound was mounting a recovery after falling to levels not seen in 31 years.

Exchange 1,000 GBP for USD and you’ll have $1,346.19. The euro is still weakened by the shock news of Brexit, so £1,000 buys you €1,208.19, using the exchange rate today.