Brexit to affect Italy?

Results after Brexit will create a domino effect that will surely affect several European countries, already eager to follow British steps. What will then happen into the Bel Paese? Will there be immediate consequences for Italian citizens? Here or leaving under the Union Jack? Let's try to make it clear, providing a deep analysis with pros and cos.

Stock Exchange on a critical point

The first, immediate result was the collapse of the Stock Exchange, where Milan lost in a day a 12.48%, the worst result ever in its history, which was also the worst result among all EU Stock Exchanges. To better explain the magnitude of the loss, it should useful to remember that the lowest recorded value so far had amounted to a 8.24% on October 6, 2008, in the midst of the crisis that followed the collapse of Lehman Brothers. Not even the attack on the Twin Towers in New York City on September 11, 2001, had brought such a massive decline, bringing the index to only a 7,57%. (reaching a 6,62% three days later). Since 2008 the Italian Stock Exchange, at different times, recorded in several occasions more than a 6% rebates, but never had reached a double-digit decline. The spread has shot up to a 180 points, and then finally lowered to a 160 index.

Industry experts had still assumed a downward even in case of REMAIN, but certainly not at these levels. Economy Minister Pier Carlo Padoan tries to minimize the fears, arguing that the reflexes to Italy will only be minimal. As a result, the concern is high, especially for banks that own British securities portfolio. The stock market remains very cautious, awaiting further developments. It is worth mentioning that, despite the collapse of the British currency, London is the market that has less suffered from loss, " because in any case, for a few months anything will change from a practical point of view " said a manager.

Global effects on economy

What will change from now on for the economy of Italy? Wine, football, houses, everything is to be reanalyzed.

Prosecco, a so-beloved wine in Great Britain, which even ousted the French cousin’s champagne, because of the collapse of the pound, but also with the risk of increased excise taxes, will become more expensive. It stays at the center of a real boom in constant acceleration: in the first four months of 2016, sales across the Channel rose by 38%; a bottle of Prosecco out of five in recent months has been consumed in a wine bar on British soil. A toast Italian-style, from now on, will cost a bit more. In general, it will be the food industry to suffer, with a bit less of Grana Padano on English tables, and less Worcester sauce in Italian refrigerators. Much of this will depend on the outcome of coming trade negotiations, that could last two years or more. It is indeed estimated a loss of about 450 million euro, corresponding to a 14% of sales.

Another sector of Made in Italy that will definitely be affected is fashion, with an estimated decrease of 200 million, corresponding to a 9% of sales.

The two major low-cost companies, Ryan Air and Easy Jet will sensibly differ. Prices are likely to soar, while planned investments in British airports could decrease. Ryan Air has already made clear, as well as the rival Easy Jet, possible increase in rates.

On the opposite side, also the holidays of the English citizens on the Continent, and especially in Italy, a country that has always been popular with Her Majesty's subjects, would cost more. An estimated increase of about 330 Euros for a family of four people, including currency devaluation, higher costs for transport and other charges, is estimated. To find out if this factor will impact on the holidays this year, just wait shortly. The peak season in Italy begins in July.

Travels to the United Kingdom will not change. Italian tourists will continue to enter Britain without a visa, and it will only be enough to produce an identity card or passport. Unless the British will want to impose a visa for entry, but this measure will act as a boomerang, because at that point it will equally be required for them to visit the EU countries. The Italian Interior Ministry has announced that nothing will change for the next two years. It must be said that England, even before, was not a part of the Schengen area, in which citizens can travel without documents.

Another sore point is the one linked to scholarization, since now attending an English university will be even more expensive than the current nine thousand pounds required, going up to a maximum of thirty thousand euro. It will also be more complicated for students who intend to access the Erasmus programs, but they will eventually be able to fall back on Ireland.

From the health point of view there will be a not-so-positive impact. Italian citizens who traveled to Britain have so far been paid, or redeemed, by the national health system. Same thing went for British citizens entering the hospitals of our country. With Brexit Italy leaves the 2011 Directive which reaffirmed free movement of patients in the European Union. Going to Britain will from now on be like traveling to the US, where healthcare will be singularly paid by the patient, with the possibility to access a temporary insurance for the duration of stay on British soil.

In general, even a sport like football will have repercussions on the immediate future. Among the more than one hundred players who play in the English league, our Mario Balotelli, may end up with the status of immigrant.

Not least, the art market is in fibrillation. The uncertainty of the stock markets and the pound will highly weigh on the future appointments of major British auction houses. Now London is second only to New York, but tomorrow? For sure England will not benefit of European funds for museums and cultural institutions, and many co-productions with Italy, from opera to theater, may not be affordable.

Turning point for the Italian branches of foreign banks. As Guido Rosa, president of Aibe (Italian Association of Foreign Banks) explains, both English and non-European banks, who used London as a base to operate in Europe, until now considered European, due to the EU passport, will now be henceforth considered outside Europe. No longer will they, therefore, enjoy Community banks facilities on freedom of bank branches openings, as well as the capital base.

Conclusion

Following the earthquake caused by Brexit in the UK, question is whether Italy will also follow the same example of other countries such as France and Holland, to name a few, pawing to get out. At the moment, due to the already delicate internal political situation, (partly as a result of the recent elections that have overturned the country's political structure, giving de facto victory in as many as 17 municipalities to the emerging Movimento 5 Stelle party, including the capital, with the election of Virginia Raggi), an exit does not seem to be of primary importance. The government remains committed to the fight between the majority and opposition, undermined by the huge problems facing the country, for which an output prediction does not seem to be the order of the day. The government still follows with great attention what is happening across the Channel, and the effects that this decision will lead to British population. Other considerations, certainly not marginal, concern the voters. Should it come to a IT-exit possibility, for sure there wouldn’t be as a high turnout as shown in the United Kingdom, for it would never reach the proportion of 72.2% gained across the Channel. Italy has always been penalized by low turnout at polling stations. Matteo Salvini (Northern League) has always been very hostile to the overwhelming power of Europe on national issues, strongly hoping for more freedom in home decisions. His party will soon want to hold a referendum. By now, however, the Bel Paese will strongly remain linked to its roots.

Sources: La Repubblica – Corriere della Sera – Libero, 25 giugno 2016

Article authored by Sonia Russo, info@srusso.it