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The decision by UK voters to leave the European Union (EU) reflects a rising discontent in the west with established political institutions, which should take heed and reform themselves, a top banking official in the UAE has said.
“Throughout the world anti-establishment movements have been building for some time,” says Gary Dugan, the Chief Investment Officer at Emirates NBD’s Wealth Management arm. “From the rise of Donald Trump in the US to the Five Star movement in Italy - who now run the city of Rome – the evidence of such sentiment is growing. The political elite of the western economies has either failed to make the case for their efforts to solve the world’s problems, but perhaps more likely they have failed to deliver to a large percentage of their population.”
He continues: “Part of the problem is that the world’s institutions were built for reasons that are less relevant today. Although many in Europe will deny it, the EU was at least partly created to ensure that a cohesive Europe diluted down the power of Germany, such that a third world war could be avoided. Supranational institutions such as the United Nations (UN) do not reflect the new world order. It remains headquartered in New York, whereas the centre of the global economy, according to Professor Danny Quah at the London School of Economics, is centred in the Middle East.
“People have become less confident in their national institutions. Central bank policy around the world was founded on dampening inflation pressures, but they now struggle to get their heads around how to create inflation (taken to be successful reflation).”
To many in the UK, the EU promoted regulation and control, protecting self-interest and never really freeing-up the means of production that could accelerate economic growth and improve employment prospects, he says.
The lack of proper coordinated and cohesive EU foreign policy around the Middle East has meant that refugees from the Syrian crisis poured across European borders, only exacerbating the xenophobia in the EU - and particularly in the UK and Germany, he points out, adding that the EU is already closing ranks, encouraging the UK to ‘Brexit’ – as it is known – as quickly as possible.
Meanwhile, anti-establishment political movements across Europe feel empowered by the UK vote.
“In Italy, elections the previous weekend saw the anti-establishment Five Star Movement Party win key mayoral races in Italy’s capital Rome, and Turin. Spain returns to the polling booths on Sunday in a further general election, after the vote in December 2015 failed to deliver a stable government. The Podemos movement, an anti-austerity party, looks to be on track to leap into second place.
In France, National Front leader Marine Le Pen has promised voters their own referendum on EU membership. She is widely expected to reach the final round of the French Presidential election in April 2017.
“Meanwhile, the Danish People’s Party says Denmark should now follow Britain’s lead and hold a referendum. The Netherlands is also showing signs of being less committed to the EU in recent months. In Sweden, the Democratic Party has demanded a referendum on EU membership.
In Austria, the Freedom Party, a far-right anti-establishment party, just failed to win the Presidential election. The fact is that close to 50 per cent of the electorate voted for right wing candidate, Mr Hofer.”
How the EU handles the challenge laid down by the UK voters will be crucial in determining whether it survives. Should it belligerently press on, ignoring the criticisms of its lack of accountability and slow reform, it will surely fail, he says.
“The UK vote to leave the EU should hopefully act as a catalyst for reform and change. It should be a wake-up call to the political elite to change their engagement with the masses. If lessons are not learnt, protest votes to follow could have far more damaging consequences for the global economy and political stability in the West,” he concludes.
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