Nearly 1 ½ years ago in January 2015, voters in Greece brought the radical leftist SYRIZA party to power on the promise to do away with austerity while keeping Greece inside the Eurozone.  More recently, last Thursday British voters decided to abandon the EU in order to close their borders to free movement of European nationals and stop paying into the EU budget while keeping access to the Single Market for goods and services.  So there is a common theme in the two cases; mainly the promise to get rid of unpopular EU policies (immigration in the UK, austerity in Greece) at minimal economic cost.

The promise to get rid of austerity (while the country was in an EU-IMF bailout) was what catapulted the radical leftists in Greece to power.  After five months of high stakes negotiations, it proved impossible to get a deal and the SYRIZA government turned to the people by calling for a referendum on the terms the EU and IMF were offering for a new bailout deal.  Even though the Greek referendum was a resounding rejection of the Troika’s terms, the SYRIZA government in the end refused to repudiate the memorandum and lead the country to a Eurozone exit with unknown consequences.  Despite this big U-turn, SYRIZA managed to get rid of its intra-party rebels and convincingly won the elections that were held in September.

Interestingly, there was strong support for SYRIZA’s stance against austerity from a number of non-mainstream left-leaning organizations and personalities around Europe and the world; similar to the support the “Leave” campaign has received from anti-immigration and anti-EU candidates such as Donald Trump in the United States, Front National’s Marine Le Pen in France and the Dutch Party of Freedom’s Geert Wilders.

Of course it is ludicrous to suggest that the two cases are the same; the UK is in a much stronger position than Greece is; it is a permanent member of the UN Security Council, the world’s fifth largest economy, a competitive economy which is well-integrated into the global economy and a major military and diplomatic power.  The broad principle is similar however; using popular votes to try to extricate one’s country from an international arrangement that is seen domestically as unfair and unpopular.  It is far too early to speculate what will happen in the case of the UK, but it’s possible that like SYRIZA in Greece, a new government in the UK might not be able to fully deliver on its campaign promises of getting rid of EU immigration and stop paying into the EU budget while keeping the economic impact small.

The question then becomes, will the new Conservative Eurosceptic government in the UK blink in order to reach a compromise deal with the EU or will it plunge into uncharted waters by transforming from full EU member to a third country with few relationships with the EU.  Whatever the case though – as in the case of Greece – investors will prefer to watch the whole affair from the sidelines and not get involved into a process that will mix economics, geopolitics, domestic politics, EU politics and regions with autonomous tendencies.  Volatility is also expected to be high during this period.