“You have to wonder about the future of the European Union itself … this is an imperfect union and the survivability of it is, I think, a serious question,” Stephen Roach, a senior fellow at Yale University, told CNBC’s Sri Jegarajah on Friday.
Even before Brexit came about, the EU faced multiple challenges over the last decade, said Roach, who’s a former chairman of Morgan Stanley Asia. Those challenges include a sovereign debt crisis in Greece and a standoff with Italian leaders over the country’s spending plans.
And with the U.K. — one of the largest European economies — planning to leave the bloc, it remains to be seen whether the EU has the ability to withstand more pressure coming from member states while still reeling from the shocks of the global financial crisis, said Roach.
The EU agreed to postpone the U.K.’s exit from the bloc to May 22 if May can convince the British parliament to accept the existing deal. If May fails to convince parliament, Britain would face a disorderly exit from the EU on April 12.
“The idea that one-size-fits-all has been rejected repeatedly over the last 10 years,” he said.
“In the early days there was some convergence of economic cycles, but then the asymmetric shocks in (2008 and 2009) have continued to ripple through the landscape and really challenge the idea that this is a cohesive economic zone that can be guided by one central bank,” he added.
Roach is not the only one who has questioned what the future holds for the EU. Billionaire investor George Soros said last month that the future of the EU was “highly uncertain” and could experience the same fate as the Soviet Union, which collapsed in 1991.
Even though the circumstances surrounding Brexit are still uncertain and pose a major risk within Europe, Roach said the event itself wouldn’t be enough to derail the global economy.
What Brexit does accomplish, however, is to add to the “toxic cocktail” that threatens to hit growth, the economist said.
“The downward growth pressure is in China, the weakness in Japan, the deceleration in the United States. In conjunction with uncertainties and potential shock coming out of Brexit, it’s certainly a potentially toxic cocktail for the global economy,” Roach said.