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Should I stay or should I go? Europhobia and the consequences of Brexit

Should I stay or should I go? Europhobia and the consequences of Brexit
Published 10 Mar 2016   Follow @TimHarcourt

You can't blame the Europeans. The original grand European project had the best of intentions. In the shadows of the bitter and bloody World War Two the leaders of France and Germany decided they never wanted to go to war again. The hope was that binding Europe together in an economic union would prevent any outbreak of future military conflict.

To begin with the plan was straightforward enough; a customs union reducing tariffs between a handful of states. A simple 'Economic Community' of sovereign states trading between themselves with minimal red tape. But it grew in size and ambition until it included 29 very different countries, a parliament, a central bank, a foreign policy for Europe as a whole, and even a common currency. We saw the consequences of the European overreach with the Greek Crisis (for more on this, see My Big Fat Greek Debt). Ageing factory workers in Hamburg and Dusseldorf could hardly be expected to pay the pension of a retired Greek public servant on the Greek Islands. As that crisis showed, it's hard to have monetary union without fiscal union.

Now the UK, a reluctant member of the European Union (whose membership were actually vetoed by Charles de Gaulle in the early days) is thinking of leaving the club. It's a club the UK may have never really liked being a member of. The 'Battle of Britain' for and against leaving will take place on 23 June and prominent people are taking sides, lining up behind UK Prime Minister David Cameron who wants to stay, and London Lord Mayor Boris Johnson, who wants to go.

What would be the consequences of leaving? The view of the 'go' camp is that there's unlikely to be adverse impact to the British economy if there is a democratic vote to leave the EU. This view holds the EU has distorted, rather than created, trade. It maintains the UK would do just fine with its major trading partners in and outside of Europe (with the latter including the US, Canada, Asia, Latin America, Australia and New Zealand), without the EU straitjacket of protection and subsidies. Leaving the EU would allow the UK to focus more on trade relations with successful economies away from Europe — like Australia for instance.

The usual examples given are successful economies like Norway and Switzerland (that have done well as trading partners of Europe while staying outside the EU), and the many who stayed outside of European Monetary Union (I bet there are a few economies that now wish they hadn't ditched their own currencies and signed up to the euro).

Furthermore, they 'go' advocates say, the UK could retain some of the good things the EU has brought — like progressive social and environmental standards — and continue to enjoy European culture, nice restaurants and holidays all the same. In short, they say, you don't have to be in the EU to be a 'good European'.
Those on the 'stay' side say leaving the EU would be harder that many think. Britain would then have to re-negotiate trade deals at a disadvantage and eventually fall behind the rest of Europe, as it did in the 1970s. Leaving would have an adverse effect on business confidence and inward foreign direct investment. And Scotland and Wales may push again for independence.

Economics aside, the 'stay' case says there is a big picture, geo-political angle to consider as well. UK support for the EU may be important in an uncertain world with fundamentalist Islam, Putin pushing for a neo-Cold War Eurasia bloc, tensions in the South China Sea. and other global problems. Regardless of the economic costs of staying in (and they may well be less than a disruptive exit), they say the world actually needs Britain to stay in the EU for international economic stability.

It's going to be an interesting and wild ride to the 23 June.

Photo courtesy of Flickr user Thijs ter Haar


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