In a blog post titled "Economic Implications of Brexit," former U.S. Federal Reserve Chairperson Ben Bernanke said the biggest losers from the vote will be Great Britain. "Even more obvious now than before the vote is that the biggest losers, economically speaking, will be the British themselves," Bernanke said in his opening remarks.

It has become increasingly evident that the coming years will bring great uncertainty to the UK economy, which will see foreign investment fall. "Such fundamental uncertainty will depress business formation, capital investment, and hiring; indeed, it had begun to do so even before the vote," Bernanke said. Ernst & Young's latest annual Attractiveness Survey said only 36% of international companies felt the U.K.'s attractiveness for foreign direct investment will improve in the coming years, down from 54% last year.

Brexit Will Hurt Europe as a Whole

Bernanke said that outside of a few cities that may benefit from relocation of financial services, Europe as a whole would also be negatively affected. Populist movements across Europe see Brexit as a win, and calls for referendums in their own countries are growing, leading to the unrest.  "The biggest risks here are political, as has been widely noted: In particular, markets are already beginning to price in the risk that other countries or regions will press for greater autonomy from Brussels," Bernanke said. See also: (Greenspan says Brexit is Worse Than 1987.)

"A move toward exit by a member of the euro zone would be particularly destabilizing, as even the possibility that a country might leave the common currency could provoke bank runs and speculative attacks on the country’s sovereign debt and on other countries that might be thought to be next in line."

Italy and Spain Are Most at Risk

Peripheral Europe, where the political uncertainty is the highest, suffered heavy financial losses after the Brexit vote, even more than U.K. stocks. Both the Spanish IBEX and the FTSE MIB (the benchmark index for the Italian Borsa) fell 11% on the Friday after the vote. 

The fallout has rippled through international financial markets. Bernanke said that Japan will face the hardest battle as the Yen strengthens, making the Bank of Japan's fight against deflation tougher.

Bernanke reiterated U.S. Treasury Secretary Jack Lew's comment from yesterday that a full economic crisis is unlikely. "Although bank stock prices are taking hits, especially in the U.K. and Europe, a financial crisis seems quite unlikely at this point. Central banks are monitoring the funding and financial conditions of banks, and so far serious problems have not emerged," Bernanke said. (See also: Lew Says Brexit Won't Spark a New Financial Crisis)





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