Brussels Will Now Have to Keep Damages to a Minimum for the EU-27
Comment
The vast majority of MPs in the UK Parliament has rejected the Brexit deal agreed between Theresa May and the European Union. Professor Friedrich Heinemann, head of the “Corporate Taxation and Public Finance” Research Department at the ZEW – Leibniz Centre for European Economic Research, offers his view on the Brexit vote.
“The Brexit drama demonstrates just how much economic harm can be done when emotions run high in a national vote. The British voters, whose decision back in June 2016 was largely driven by emotions and the wish to teach the EU a lesson, will now have to suffer a substantial loss in wealth. After yesterday’s vote in the House of Commons at the very latest, Brussels will have to start preparing itself for a no-deal Brexit so as to limit the damages for the remaining 27 EU Member States. In this respect, there are three short-term tasks that have so far received only little attention.
Firstly, countries like Ireland, and also the Netherlands and Belgium are likely to face a negative economic shock if the trade with the UK suddenly collapses. Depending on the severity of the shock, concentrated stimulus packages such as the one passed in 2009 could become an important tool.
Secondly, the United Kingdom’s contributions to the EU budget could end as early as April. Interim financing arrangements need to be put in place quickly in order to prevent EU programmes from taking any damage.
Thirdly, small and medium-sized enterprises in particular are in need of comprehensive advice given the great number of yet unknown legal and technical implications for their business. While large companies have been preparing for a no-deal scenario for a long time, many SMEs who have supply contracts in the UK depend on external expertise. It is now up to the EU and its Member States as well as the various chambers of commerce and business associations to take remedial action.“