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Death of Queen Elizabeth II Could Devalue Pound, Experts Say

The death of Queen Elizabeth II could be another factor in the devaluation of the pound sterling, the British currency, according to experts consulted by the CNN Brasil Business .

The monarch, who died this Thursday (8), at the age of 96, represented, in their opinion, great political and economic stability for the kingdom.

The professor of international relations at Fundação Armando Alvares Penteado (Faap) Vinícius Rodrigues Vieira explains thatwith the inflationary, energy and political crises involving, for example, Scotland and Northern Ireland – both with possibilities of long-term independence movements after Elizabeth’s death -, the pound sterling may suffer from a devaluation and the living costs may increase even further.

“In the case of Scotlandthey wanted to become independent, but keep it [Elizabeth] like monarch, thereforeis a sign that the British population is not necessarily royalist, it is “Elizabethan”. She’s been reigning for 70 years, so the idea of ​​a monarch is her. Someone with less prestige will have great difficulty winning over the population,” says Vieira.

On Wednesday (7), the pound fell to a 37-year low against the dollar. The coin dropped 0.5% to a low of $1.14, lower than in March 2020, when the Covid-19 pandemic began.

The possible impact on the British currency adds to the complex context of the energy crisis and rising cost of living.

In July, UK inflation hit a new 40-year record in July, surpassing the 10% mark for the first time since 1982. The result caused experts to revise inflation forecasts for the country.

According to an economist at US bank Citi, the UK consumer price index is expected to peak at 18% – nine times the Bank of England’s target – in early 2023.

The kingdom also suffers from pressure on energy costs as it is highly dependent on natural gas in its energy mix. The cost of the commodity has skyrocketed due to the war in Ukraine and the decrease in Russian exports to Europe.

In August, the regulator said UK energy bills will jump 80% to an average of $4,188 a year from October.

As early as Thursday, Prime Minister Liz Truss announced that the government will cap domestic energy prices for homes and businesses, aiming to provide relief from a cost-of-living crisis ahead of the European winter.

Kai Enno Lehmann, professor of International Relations at USP, says that the United Kingdom is already in a complicated economic situation and that, in his opinion, could get worse in the coming months due to the arrival of winter and the death of Queen Elizabeth, which could be another factor of insecurity for the local economy.

For Lehmann, the monarch represented stability and continuity, two important factors for an economy. “So, the transition that will take place now in relation to the Head of State seems to me to be one more element of uncertainty”, he said.

The professor mentions that the days of official mourning – when businesses and services do not work or function minimally – can minimally affect the results of the English GDP, but that, according to him, it should not be a “catastrophic” impact.

Vinícius Vieira also recalls that the new king, Charles III, has a less discreet personality than Elizabeth, so he may try to interfere in agendas such as the environmental issue.

“Charles is super fan of global warming issues. So he can interfere in a policy environmental more ambitiouswhich is clearly Liz truss doesn’t want to do it, even because of the high energy costs”, he explains.

However, both agree that Charles must play the role of unifier and peacemaker, as the country is already plunged into an economic crisis.

“Focusing on this aspect would be good for the economy, it is better not to get involved in political issues, but to be there to represent the continuity and stability of the state”, he says. Kai Enno Lehmann.

Source: CNN Brasil

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