Bracing for a Brexit

With the chance of Brexit looming, international financial markets are fluctuating sharply. The index of Tokyo Stock Exchange has tumbled below 15,000 and the Chinese yuan neared its lowest level since 2011. London Stock Exchange saw a whopping 160 trillion won worth of shares vanish in just four days. As global hot money chases risk-free assets, the Japanese yen skyrocketed and interest rates of government bonds in Germany, Switzerland and the United States fell below zero. The fluctuations originate with the fear for the UK’s departure from the European Union, as suggested by a poll for The Times which gave Brexit a seven-point lead. We can hardly rule out a possibility of a global tsunami hitting the international financial market.

Market jitters primarily stem from huge economic repercussions of Brexit. If it happens, the eurozone could exacerbate the global recession and trigger a political and social unrest in Europe.

Europe has been proud of a single community renowned for its cultural homogeneity and socio-political similarities. Division and isolationist moves always caused a massive cost. The continent could be unified with the historic launch of the common currency euro in 1999 as a result of the 1991 Maastricht Treaty.

But it was unstable cohabitation from the beginning as Britain decided not to join the eurozone even when it became an EU member. Brexit is an offshoot of the union’s inability to overcome inherent economic gaps between member nations. Those who support Brexit have been complaining about the unfair system which forces the UK to offer aid to comparatively poor member nations as a result of the forced integration of economies with different size and strength. They don’t want to see the hefty benefits — enjoyed by as many as 2.2 million immigrants from their poorer peers in the areas of housing, education and medical service — anymore.

As those in support of a Brexit increasingly make strong voices, the results of the Times’ survey ahead of the June 23 referendum in the UK shows Brexit supporters will likely win. If Brexit becomes a reality, the EU based on the membership of 28 countries will suffer schisms. The UK’s isolationist move will surely wreak havoc on the economies of Ireland, Belgium and Netherlands — which heavily rely on Britain for their export — and affect Korea in a far-reaching shockwave across the globe.

Such a scenario is fatal to our economy vulnerable to outside shocks. We could face another economic emergency as we witnessed in the 1997 foreign exchange crisis and the 2008 global economic meltdown. The government and corporate sector must thoroughly prepare for the dismal ramifications of Brexit.

JoongAng Ilbo, Jun. 16, Page 30