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ABSTRACT

By the end of the year 2006, the European countries had faced huge financial crisis leading to the situation of panic, even when there was a large expansion of the economies throughout the nation. There was a prevailing condition of financial distress among the nations. Large mortgages were demanded out of the banks for trading in the hedge fund derivatives. The capitalization rate had lowered down. The real time economy has affected the global financial crisis in many of the Central and Eastern European Countries, by affecting the borrowing conditions for the firms and the household and also declining the global economy in terms of the domestic investments and the demand supply ratio.

INTRODUCTION

The European Union comprising of 28 member states is the economic and political union of these countries.  The EU has of late also managed to develop an integral single market with the help of standardized law system applying in all the member states. The union was established when the Maastricht Treaty came into force in the year 1993. In the year 2016, on June 23, British citizens had opted to leave the union. The European Government was comprised of several units, such as a parliament, courts of law, a central bank, an executive council and a bureaucracy for implementing the laws and regulations. There were European regulations of the mediocre level which were never enforced to begin with and large shocks were given to the system in the manner of banking crisis and the other underlying differences of debt services and the competitive policies.

Q 1. How did the panic of 2008 affect the sectional divisions within the European Union (EU)?

Ans:  In the year 2007, the financial crisis had begun. Before the crisis had begun, there was a lengthy period of the ever-growing rapid growth and the development of the real estate bubbles. The United States then, had faced huge monetary losses. The European Union had to face financial distress condition during this financial crisis. Many of the banks were drastically undercapitalized and were holding insufficient liquidity factor within the countries. These crises were largely caused due to the de-regulation in the financial industry. Primarily, the banks were allowed to indulge in the hedge funds trading with the derivatives. There was also a demand from the bank of more mortgages for supporting the profitable sale of these derivatives. All these had formed the prior causes of the financial analysis leading to the diversified recession. Sectional divisions had been largely affected in the financial panic caused. Deficits in the budgeting decisions had arisen, interest rates on the Swiss credits had been reduced. The condition had led the Hungarians to borrow francs for their personal usage. The GDP ratio had largely declined. Monetary financing was carried by then Government at the time of the currency exchange. Exchange rates during this crisis were made constant and hence sense of competition was lost. The export-import trade activities had largely deteriorated as the trade is primarily based on the exchange rate which was constantly fixed at a higher price thereby resulting in business losses. With the severed downfall in the business, unemployment was highly acknowledged, as a direct loss on the lifestyle of commoners. ("Eurozone Debt Crisis", 2019)

Q 2. What prompted Prime Minister Cameron to promote a referendum on leaving the EU?

Ans: The former Prime Minister, David Cameron, in the year 2016 had demanded for the agenda why the United Kingdom should exit from the European Union. Cameron had served as the Prime Minister from the year 2010 to 2016. The agenda of whether Britain must leave from the European Economic Community had arisen in the year 1975. ("The Euro Crisis and the Future of European Integration | OpenMind", 2019)The community was preceding to the formation of the European Union. The Conservative Party leader, had embraced this demand of re-examining the British relationship with the European Union.  He had primarily committed all the common British people to follow a negotiation process over the membership status of the UK, being a part of the Union. Certain challenges were thrown by him:

- There were severe fundamental challenges in Europe against the common issues faced in the Eurozone.

- European Competitiveness was lacking which degrade the healthy trade relations

- A lacuna exists between European Union and British citizens, thereby creating a lack of democratic accountability. 

Apart, he had also laid down principles for the betterment of the EU, the competitions amongst the nations, large number of nations and cultures were incorporated. He was urged to see UK free from the binding decisions of the European Union.  Cameron had largely emphasized on reducing the influence of the European Court of Human Rights over the British Law Enforcement. (Stewart, Mason & Syal, 2019)

Despite the continuous movements of seeing free Britain, the above challenges between the EU and Britain were finally over in the year 2016, after which Cameron had decided to carry out a poll amongst the common British citizens, whether he should carry on in the EU or exit. (Landler, 2019)

Q 3. Why were Britons receptive to leaving the EU? Why did the “Remain” party believe that the UK should stay?

Ans:  The outcome of the Britain exiting the European Union Referendum of 2016 had proved to be a victory for the “Leave” from the EU. The votes percentage which had favored for exit was 51.9%.  The major decision why the Brexit, that is Britain + Exit was a success, was the Euro disaster. Britain, since the beginning were never much adaptive to the EU control, which made it even more receptive towards leaving the EU. There were many other reasons of the Britain being receptive, but the biggest was Euro. Initially, the banks were assumed also to react towards the recessions by enlarging the money supply in the country for the promotion of the economic activity., but it did not happen due to financial crisis, in which the banks were badly affected. Also, what formed the cause was that the European Union had liberal rules for this internal migration and the EU’s cumbersome economic regulations. The unelected EU bureaucrats of Brussels had been given the ultimate powers of ruling and there was less room for the national decision making. Bilateral free trade agreements could be facilitated. The European Union was also too undemocratic and unaccountable to the public. (Martin & Bowman, 2019)

The “Remain” party was of the opinion that the UK should stay in the EU as the British parliament was attacked and paralyzed in a way by the commoners and divided the country. After the referendum, the value of the British pound had degraded resulting in a cause of major concern of the future British economy. British equity markets were well affected by the Brexit. Britain was viewed as a strong world leader, but with once leaving the EU, the country might lose that special place. The remaining party was of the opinion that the free trade might be avoided from reducing by investing in the British economy and thereby support the living standards of the citizens. ("https://time.com", 2019)

CONCLUSION

Considering the United Kingdom’s exit, the British will no longer be considered as the nationals of the member state and will therefore also lose on the benefits associated with the European citizenship. The Brexit had both advantages and disadvantages which the common Britain had to face. Global financial crisis has formed the crux of the degradation of the bilateral free trade amongst the countries. The union had started facing the Euro crisis which was the segregation of the irresponsible behavior and poor fiscal policy followed by the other countries.