Brexit escalation raises alarm for ailing European economy

Published on: 

Europe's Brexit drama is hurtling toward a new climax at the wrong time for the region's economy, threatening to sow chaos for businesses just as a large part of the continent is sliding toward recession.

British Prime Minister Boris Johnson's move to suspend Parliament for weeks ahead of the October 31 Brexit deadline means lawmakers will have little time to pass laws to keep the country from crashing out of the European Union without a deal. A disorderly divorce is a worst-case scenario that both sides have been trying to avoid since the Brexit vote three years ago - and many experts now see it as a likely outcome.

Economists describe a nightmarish setting for companies: new tariffs overnight on trade between Britain and the other 27 EU countries, border checks for people and commerce, the sudden loss of business licenses, and countless other regulatory problems.

This all would play out at a time when the European economy is already taking a mighty hit from uncertainty over the US-China trade war, with powerhouse Germany halfway into recession.

"Germany could have taken the UK's departure from the EU in its stride a couple years ago but it will be hit quite badly if a no-deal Brexit occurs in two months' time," says Andrew Kenningham, chief European economist at Capital Economics in London.

Where Germany goes, so does Europe. The EU's largest economy contracted in the second quarter and is expected by many analysts to shrink again in the third, putting it in what is technically defined as a recession.

Daily Pioneer
dailypioneer.com