MUNICH – On June 23, voters in the United Kingdom will decide whether their country will leave the European Union. They alone will cast ballots, but the political and economic impact of a vote to leave (“Brexit”) would be felt across the EU, if not the world.
For Germany, Europe’s largest economy, the consequences of Brexit could be grave. Public opinion in the country is divided on the issue. Some fear that the EU would become less liberal if the UK left. Others, resentful of the UK’s presumption that it should be allowed à la carte EU membership, are eager to see the British go. When it comes to the economic impact of Brexit, however, Germany has much to lose and almost nothing to gain.
To begin with, Brexit would change the way multinational companies make investment decisions. The UK could face an exodus of foreign firms, as companies seek to retain a presence in the EU. But there is no reason to believe they would necessarily move to Germany; many US multinationals, for example, would likely relocate to Ireland.
At the same time, the EU as a whole – and Germany in particular – would become less attractive to investors. The UK would be free to loosen regulations and lower taxes in order to attract investments for which a foothold in the EU is not necessary. This, too, could reduce investment in Germany.