Little chance of a second EU referendum; Brexit-induced volatility largely over: Lord Meghnad Desai

In a chat with ET Now, Lord Meghnad Desai, Senior Economist, shares his views on Brexit. Excerpts:

ET Now: Any likelihood of a second referendum?
Lord Meghnad Desai: There will not be a second EU referendum. This one has been about 10 years in discussion. We cannot have another one just because some people feel they have lost.

You cannot say we will go on having referendums till we have one that is not for exit. This is the referendum; the people have spoken. And we now have to implement the decision that people have made to exit from the EU.

ET Now: While EU wants negotiations to happen quickly, the UK is biding its time. Is that a sensible way to go?
Lord Meghnad Desai: I think so. In a sense, the government was not prepared for an 'out' verdict. It had made no contingency plans for that.

It is our right to initiate Article 50 negotiations. Nobody can compel us on that. There is no need for us to hurry, because this is a most important constitutional decision.

To my mind, the process is going to take two years at least, if not longer. We have not only to negotiate withdrawal from the EU, but also the shape of our future relationship with the EU.

I think we will open the Article 50 negotiations in January 2017.

ET Now: Not any time in the next six months?
Lord Meghnad Desai: No. By early September there will be a new leader, but it will really depend on whether or not at that stage the conference wants to ratify the vote.

At that stage, Cameron can go to the Queen and tell her to call in the new leader, after which the latter can be sworn in. But these things take time.

ET Now: The markets too must have realised that it will be a long-drawn-out process. That is evident from the reactions. Your take?
Lord Meghnad Desai: The markets typically overreacted, as they normally do to choppy news. That's what happened last Friday. But that reaction is now done. The pound is already coming up. The FTSE is down by one and a quarter per cent, but that too is nothing out of the ordinary.

Look, the fundamentals have not changed. The fundamentals of the UK economy are the same on Monday as they were on Thursday. Nothing has changed except expectations.

People take probability into estimate and that is why things sometimes swing wildly. That does not mean people are right. I think both the government and the people will take time to figure out what kind of change this Brexit means.