What Brexit means to the EU and global economy

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Hapa chini taarifa 2 kuhusu uamuzi wa Great Britain kuondoka Umoja wa EU.
Tafsiri kamili labda mods watupw kwa ufupi

Factbox: How Brexit would affect economy, trade, foreign policy.

Britain is expected to submit an application to leave the European Union following Thursday's referendum, after which it would have two years to negotiate an exit.
Below are possible consequences for Britain and the EU of a Brexit.

Economy
Britain would no longer be subject to EU budget rules, which limit a government's budget deficit to 3 per cent of gross domestic product and public debt to 60 per cent of GDP.
It could therefore run whatever budget shortfall it wants without admonishment from the European Commission and other EU ministers. It would also be free from the Commission's monitoring and advice on future actions.


Finance
Financial services firms based in Britain, from banks to clearing houses and funds, could lose their money-spinning EU "passports", which allows them to sell services across the 28-nation bloc with low costs and a single set of rules.
The passporting system has contributed to making London one of the world's most important financial centres.
Some American, Japanese and other non-European banks that have European headquarters in London have said they would consider moving parts of their business inside the European Union, in the event of a Brexit.


Trade
The rest of the EU has a trade surplus in goods of about 100 billion euros ($110 billion) with Britain, while Britain exports some 20 billion euros in services than it imports, principally due to financial services.
Brexit campaigners say it would be in the EU's interest to agree a free trade deal with Britain even if it leaves the bloc.
But there tends to be more of a focus on goods than services in free trade deals. Switzerland, where financial services are a larger share of GDP than in Britain, has no general access to EU financial service markets and runs a financial services trade deficit with the bloc.


Competition
British companies acquiring EU peers would still need approval from the UK competition watchdog and the European Commission, resulting in more legal costs and the risk that each delivers a different ruling.
Britain will have a free hand to aid ailing companies or industries without fear of EU action but it will also not be able to oppose subsidies granted by EU governments to their own national champions.


Energy
Leaving the EU could make UK energy infrastructure investment costlier and delay new projects at a time when the country needs to plug a looming electricity supply gap.
The uncertainty after Brexit could make energy investors demand higher returns for the risk of less favourable conditions. Oil and gas majors BP and Shell are among energy companies who warned about the potential downside.


Climate
Britain is the second-largest emitter of greenhouse gases in Europe and its utilities are among the largest buyers of carbon permits in the EU Emission Trading System (ETS).
Although most analysts believe Britain will remain in the cap-and-trade scheme, the vote is viewed as bearish for the market as Britain would no longer be able to drive tough reforms to drive up the price.
Brexit would also disrupt the bloc's plans to share out the burden of its Paris climate change pledge.
The environmentally minded also worry that EU climate targets would be less ambitious without British leadership to balance against more reluctant member states such as coal-dependent Poland.


Aviation
A Brexit could call into question EU agreements on open airspace that have granted the region's airlines unlimited access to the skies of fellow member states, benefiting both UK and EU airlines.
It would also affect transatlantic routes because of the EU-US Open Skies agreement, which gives British airlines unlimited flying rights to the United States.


Foreign policy
Along with France, Britain is the leading foreign policy power in the European Union, boasting a large military and close ties with the United States.
After a Brexit, Washington has made clear it will be less interested in London as an ally because of a perceived loss of influence.
Britain would no longer be bound by joint EU positions, for instance on economic sanctions against Russia.
Britain would remain a member of NATO.


Justice and home affairs
Britain has multiple exemptions from justice and home affairs policies, notably not being part of bloc's Schengen zone of free travel.
It is not clear what restrictions Britain might place on foreign arrivals. The EU has vowed to respond in kind.
Britain currently recognises other EU members' arrest warrants, exchanges police information, including personal data, and is a member of the bloc's police agency Europol.
Its future involvement, including access to EU databases, could diminish, meaning less cooperation on policing and fighting crime.

Factbox: How Brexit would affect economy, trade, foreign policy
via Reuters.

 

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From trade to migration: how Brexit may hit the EU economy.

The European Union's chief concerns over Britain's vote to leave the group are political but losing its second-largest economy will have a huge economic impact as well.
Below are some of the main economic risks and benefits for the EU's remaining 27 members.

Budget/Economy
Other members will have to fill in at least some of the shortfall from a lack of its contributions.
Britain's total contribution to the EU budget for 2016 has been set at 19.4 billion euros ($21.4 billion), including its rebate and customs duties. It receives about 7 billion euros, mainly agricultural and regional subsidies, leaving a gap to fill of just over 5 percent of the total EU budget.
Germany, the EU's largest member, would inevitably have to provide the most extra cash. Germany's Ifo institute estimates that would be 2.5 billion euros.
UniCredit says there would be manageable negatives for the euro zone, with a trade impact, a financial flight to safety and uncertainty possibly leading to tighter financial conditions and postponed investment. It would revise down its 2017 forecast for GDP to 0.5-1.0 percent from the current 1.6 percent.


TRADE
The rest of the European Union has a trade surplus of around 100 billion euros in goods withBritain, while Britain exports some 20 billion euros more in services than it imports, the same gap as for financial services.
Many economists forecast Brexit would at least temporarily reduce UK growth, uncertainty hitting domestic demand and weakening the pound, with a resultant impact on EU goods exports toBritain, which make up some 2.6 percent of rest-EU GDP in 2014.
A UK "demand shock", linked also to a possible reintroduction of import tariffs, of 10 percent could lead to a reduction of rest-EU GDP by 0.26 percent.
Brexit campaigners say the EU would want to agree a free trade deal with Britain even if the country left the bloc.
However, Oliver Schulz, an economist at Citi, reasons that could play more into the hands of the EU given there tends to be more focus in trade deals on goods than on services, and financial services in particular.
Switzerland, where financial services are a larger share of GDP than in Britain, has no general access to EU financial service markets and runs a financial services trade deficit with the bloc.
The EU's main service export to Britain, tourism, is unlikely to be affected.


Investment
The United Kingdom is consistently the largest recipient of foreign direct investment in the European Union, according to UNCTAD data, with an average of some $56 billion per year in the 2010-2014 period. EU partners supply just under half of this.
Some 72 percent of investors in an EY study in 2015 cited access to the European single market as important to the UK's attractiveness to FDI.
There is a risk some FDI would be diverted to other EU countries if Britain lost access to the EU single market.


Migration
One of the main arguments for Brexit campaigners is to limit migration of workers from other EU countries, even though both Norway and Switzerland have had to accept free movement of people in return for access to EU internal markets.
If Britain did cap immigration, it could have a negative impact on eastern European countries, from which some 1.2 million workers were in Britain in late 2015.
The impact could be most acute in the countries with the most citizens in Britain - Poland (853,000 in 2014), Romania (175,000) and Lithuania (155,000)
By contrast, other affluent western European countries, such as Germany, could as a result see higher inflows of EU migrants. This might be beneficial economically, if politically difficult.
Ireland, Benelux hit hardest?
Research by the Bertelsmann Foundation sought to break down the impact by country and determined that the impact of a "soft exit" could be worse in Ireland than in Britain, based on their degree of trade dependence on Britain.
The Benelux countries and Sweden would take the next biggest hits, while the impact on Germany would be very limited given that its auto and other manufacturing sectors have many other markets.
The Belgian region of Flanders will suffer a 2.5 percent decline in GDP, according to its premier Geert Bourgeois, who believes his region would be hit hardest after Ireland.


Dynamic effects
The Bertelsmann study also looks into "dynamic effects", such as a potential loss of productivity because a decreased openness to trade reduces international competition and lowers the incentive to improve competitiveness.
With dynamic effects, the long-term impact on German GDP would range between 0.3 and 2 percent below the value if Britain remained in the European Union. ($1 = 0.9078 euros)

From trade to migration: how Brexit may hit the EU economy