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We need a firewall to reduce Brexit risks

By Fu Jing (China Daily Europe) Updated: 2016-07-10 14:32

Upcoming meetings are a chance for EU leaders to build confidence among the bloc's partners, particularly in Asia

Beijing and Brussels will soon hold their annual summit, which will be an occasion for European Union leaders to discuss the breathtaking Brexit drama with China.

There will also be an opportunity for the EU to outline the situation to Western partners at a NATO gathering in Warsaw over the weekend.

In addition, leaders from Asia may put EU representatives and departing British Prime Minister David Cameron through the mill at the Asia-Europe Meeting in Ulaanbaatar, Mongolia, on July 15 and 16.

The uncertainties and risks stemming from Britain's shock vote to leave the EU on June 23, and the evolving consequences, are likely to be added to the agenda when the G20 meets in Hangzhou, eastern China, in early September, too.

Yet all these economic and political summits will be held before Cameron's successor takes office. He has said it will be up to the next prime minister to officially notify the EU of Britain's intention to end its membership and to evoke Article 50 of the Lisbon Treaty.

Thus, the curtain has just begun to be raised on this drama. If the events of the past few weeks in British politics and global markets are anything to go by, it's certain that more risks, uncertainties and pessimism will arise. If the situation is not managed well, and confidence-building messages are not delivered in a timely fashion, the consequences of this "black swan" event will be even more unpredictable.

It is imperative the consequences of Brexit are fully discussed at these meetings. It's also essential that efforts are stepped up to share information, build confidence and prevent risks, as the repercussions of a prolonged Britain-EU divorce are sure to be felt around the world if a firewall is not in place. Thefore, Brexit should be high on the G20 agenda.

When the global financial crisis began to unfold in 2008, the leaders of advanced and emerging economies sat down and ushered in the G20, which proved successful in addressing the crisis and coordinating the global response.

Brexit runs counter to the trends of globalization and regionalization, and G20 leaders will once again need to show vision and take concerted action to address the risks and uncertainties it will cause. Simply put, in a tight-knit global village, each county's troubles affect others to some degree.

When the EU's debt crisis erupted during the global financial meltdown, some predicted the bloc's economy would face a lost decade. That looks even more likely if Britain's exit is prolonged and messy.

In such a situation, one can see the EU struggling to hold on to its members and failing to gain the support of other countries, which would exacerbate the crisis. That scenario would lead to the EU losing its attraction for other strategic partners, creating a dangerous downward spiral.

So it's extremely important the EU leaders use the upcoming platforms to comprehensively discuss the situation with partners and build a pragmatic consensus on the way forward.

Importantly, although the markets have been stormy, the world's central banks have said they are coordinating their stances and actions. This is a welcome start, but more concerted action will be needed to ensure the fallout from Brexit is contained.

The author is deputy chief of China Daily European Bureau. Contact the writer at fujing@chinadaily.com.cn

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