Brexit Would Cause “Contagion” Across Europe
By Will Martin
With the official date for the UK’s referendum about whether or not leave the European Union now set, the debate has been steadily gaining more and more attention in recent weeks. Everyone from politicians to actors to sportspeople has been giving their opinion on whether the UK should remain or leave, and big banks have been no exception to that.
American giant Morgan Stanley has become the latest to weigh in with its opinion, and its not just focusing on what will happen to Britain, but also the wider impacts across Europe.
In a note sent on Monday evening, Morgan Stanley analysts led by Elga Bartsch took an in-depth look at what a Brexit—Britain leaving the EU—would mean for the rest of Europe. The 43-page note is loaded with great charts and data about a potential Brexit. The news, Morgan Stanley says, wouldn’t be good.
As part of the “What Brexit Would Mean For Europe” note, Morgan Stanley identifies four big areas where the impact of Britain leaving the EU would spill over to the rest of Europe.
Here’s what MS has to say (emphasis ours):
In the event of a Brexit, its implications would reach well beyond the UK to the rest of Europe. Some countries look more exposed than others, but the overall impact would be negative for growth, negative for the euro, and negative for European equity markets.
In other words, areas of “contagion” which would be a big hit for the economic and political situation across Europe.
Let’s take a look at each one of these areas of impact from the section of the note named “Brexit Channels of Contagion.”
First up, uncertainty. This is what Morgan Stanley has to say (again, emphasis ours):
Brexit would open a lengthy period of uncertainty. The initial equity market reaction would be negative, currency markets volatile, and investment may take a hit.
Next, trade. Morgan Stanley again:
The trading relationship the UK has with the rest of the EU will not be as beneficial, as ‘free’, as it is at present. This, and the lengthy period of uncertainty around the exit negotiation will have taken its toll on UK growth and dampened demand for eurozone goods.
Third, the issue of migration, which has been one of the hottest topics across the continent in the past few years. Here’s another comment from MS:
Near-term the biggest risk is probably that post-Brexit migration control policies in the UK help boost the anti-immigration cause throughout the rest of Europe especially where some countries are struggling to accommodate a sharp increase in refugees. That will be especially the case to the extent that UK migration restrictions are seen as increasing the inflows elsewhere and because new UK policies may resonate in the policy debate elsewhere.
The final issue, Morgan Stanley says, is that of politics. Here’s the bank:
Should the UK leave the EU, the fact that someone managed to change the status quo could potentially galvanise the protest parties, which may step up their demands. This can play out through national independence claims and anti-EU or eurozone movements.
All of this sounds pretty dreadful. Trade will suffer, markets will be racked by uncertainty, political protest parties will gain traction, and the migration crisis could get even worse.
However, you probably don’t need to worry too much about this happening though. Morgan Stanley currently predicts there’s just a 35% chance that Britain will vote for Brexit, and even if the UK does vote to leave on June 23, there are some upsides, the bank says.
Here’s Morgan Stanley one last time:
Some exports that would have come from the UK, portfolio inflows and FDI destined for the UK, could be re-routed to the rest of Europe and the relocation of some financial-services business could boost eurozone economies. But the latter effect, in particular, seems likely to work relatively slowly. Longer term, less migration to the UK may give European, especially some CEEMEA economies, a population boost, but this effect is likely to be very modest, at least at first.
 2016 年 3 月 7 日。
 = British exit (from the EU).
 = Central and Eastern Europe, Middle East and Africa.