Brexit and the Failure to Reform

Abstract

Abstract This chapter explains why the 2016 decision of the UK to leave the European Union failed to produce substantial European financial reforms, because as a moderate crisis originating outside of the European financial system, it did not create the circumstances where reformers could frame reforms as essential. Brexit posed threats to European financial stability through a loss of access to London markets and a shock to already fragile banks. However, attempts by reformers to argue that these dangers made immediate implementation of European Capital Markets Union essential fell short. Brexit’s origins outside of finance meant that the deeper integration would not prevent further member state exits, and the moderate threat to integration from financial turmoil out of Brexit failed to motivate member states to compromise on harmonization of market rules or give up their individual ambitions to host the new hub of European financial market activity.