[Click eStock] Brexit Realized, Impact... European Stock Market Volatility Likely to Increase

[Asia Economy Reporter Oh Ju-yeon] Following the United Kingdom's decision on the 31st of last month to withdraw from the European Union (EU), an analysis has emerged that volatility is inevitable during the transition (implementation) period set until December 31 of this year, during which both sides will negotiate their future relationship.

On the 4th, Daishin Securities stated that although Brexit (the UK's withdrawal from the European Union) has been implemented, the noise such as the weakening of cohesion within the EU has actually increased.

Researcher Moon Nam-jung said, "According to the withdrawal agreement, the UK will maintain a status equivalent to that of an EU member country (such as remaining in the EU Customs Union and Single Market), but until the end of this year, there will be a transition period during which negotiations on future bilateral relations including diplomacy, security, FTAs, fishing rights, and immigration issues will take place," adding, "The negotiation process between the two countries during the transition period is expected to be more difficult than the negotiations over the UK's withdrawal conditions that have been fraught with difficulties over the past three years."

He explained that the boomerang effect brought by the UK's EU withdrawal inevitably increases future uncertainty in two respects.

Researcher Moon said, "First, Brexit inevitably provides justification for Scotland, which is pursuing independence within the country, thereby increasing internal division. For the EU, the first member state to leave could encourage other countries (such as Switzerland) to exit, and with the UK, the second largest economy after Germany, leaving, the scale of the EU economic zone shrinks, inevitably lowering its status in global trade."

He also predicted that negotiations during the transition period until the end of this year could face difficulties.

Considering that the trade agreement the EU concluded with Canada took about seven years, it will be difficult to reach an agreement on the vast areas of future relations within the mere 11-month transition period. Even if a negotiation proposal is derived, approval from all 27 member states is required, and given the sharply intertwined interests among the countries, it is expected that reaching a negotiation proposal within this year will not be easy. Researcher Moon explained, "Accordingly, both countries may extend the transition period until the end of 2022 in case negotiations are not concluded, and the decision on whether to extend will be made by the end of June this year."

He added, "Depending on the situation, Brexit, which can turn into a negative factor, is expected to be a trigger for increased volatility in European stock markets throughout this year."

This content was produced with the assistance of AI translation services.