Could Brexit Be A Catastrophe That Never Happens?

There are some reasons to think so.
European Commission President Jean-Claude Juncker welcomes Nigel Farage, the leader of the United Kingdom Independence Party,
European Commission President Jean-Claude Juncker welcomes Nigel Farage, the leader of the United Kingdom Independence Party, prior to a plenary session at the European Parliament on the outcome of the Brexit" in Brussels, Belgium, on Tuesday.

What if the craziest thing about the Brexit is that it never happens?

In the wake of the U.K.’s historic, market-shaking vote, financial heavyweights, commenters and the stock market itself are sending a signal that maybe, possibly, there might be hope that Britain’s departure from the European Union will not happen. The vote, after all, wasn’t binding, and it will be up to the next British government to decide if the country formally withdraws from the E.U.

Then there’s the fact that the London FTSE 100 stock index has made back up the losses it incurred after the surprise “leave” vote. (The pound, however remains deeply depressed against the U.S. dollar.)

There are also finance industry executives who have come out to calm fears, perhaps in hope as much as belief. Larry Fink, the chairman and CEO of BlackRock, the world’s largest asset manager, told Bloomberg TV that he wasn’t sure the Brexit would happen. Uncertainty, he said, was the only thing he could be sure of. Pressed on what he thought would happen, Fink said there is “plenty of time to find a less harmful" alternative to leaving the E.U.

David Rubenstein, founder and co-CEO of private equity giant Carlyle, told Bloomberg TV that economic self-interest alone would keep British politicians from accepting the results of the 52-48 vote.

“When it becomes clear that the terms of the exit are so expensive,” he said, “I think the next prime minister of England [sic] will not invoke Article 50,” referring to the binding notice that a country wishes to leave the E.U. “I’m reasonably optimistic that, in the end, Britain will come to its sense, or the government leaders will come to their senses, and recognize that a Brexit is not in anybody’s interests.”

The Financial Times’ Gideon Rachman looks at another kind of self-interest -- the sheepish reaction of Boris Johnson, London’s former mayor and a prominent "leave" campaigner -- and is hopeful. Johnson, Rachman reasons, just wants to be prime minister. That door has been opened by the resignation of his club mate and fellow Tory David Cameron, who was on the "remain" side. Rachman writes that if Johnson becomes PM, he’ll be satisfied with a slight renegotiation of immigration terms and leave it at that.

But even that scenario, which looks like the best hope for "remain" supporters, would need a drawn-out set of negotiations over arcane matters to end in a very specific way.

And regardless of whether that outcome occurs, Fink says there are already indications of cash-hoarding and a slowing of the types of investments that drive economic growth. In other words, even if the Brexit doesn’t happen, it’s already done harm.



Brexit Wins