A “Yes” to Brexit Leads to the Demise of the EU and the Euro

I am torn regarding the Brexit vote.  I have to admit I am a Brit, but I am not able to vote as I have been living outside the country for 20 years.  But my history, my background, is English, UK, and European.  But I remain torn.  Even a few months ago I was in the pro-Europe camp since I felt that by being inside the EU we (the UK) could help improve the system, the experiment.  But I was conflicted as I also believe that the Euro is fatally flawed.  The economic imbalances across the Euro zone will only get resolved with full political and monetary union, and that is not on the cards.  Thus the recent Greek crisis is just the first of many.  So why be “inside” as the Titanic struggles?  

I than had breakfast in London a few weeks ago with a work colleague who had concluded that the Euro was going to fall, and as such, why should the UK stay “in” and get dragged down with it?  This breakfast changed my thinking and I was converted to the anti-Europe camp.  Thus for the last month or two I have felt like a politician having flipped-flopped my position.  Well I am now just wrapping up another week in London and my exposure to TV, radio, press and local feeling related to Brexit is brethtaking.  I have been glued to the news channels to suck up all the information I can.  It’s not good news.

It is clear that for many locals, rational evaluation of the data is not part of the analysis.  Worse, even if that is possible, data on both sides of the argument don’t align, and so neither camp can understand the other.  The U.K. is a net contributor to Europe yet if the UK leaves, certain groups will lose EU subsidies.  Why can’t those contributions, once destined for Europe, be rediretcted to UK interests?  It seems the the vote will likely come down to emotion and politics, and feelings pointed toward perceptions of immigration issues, not fact and economics.  As I sit here wiriting this blog, the chances of a “yes” vote for Brexit are very real. Even the risky pollsters suggest, from day to day, that it could go either way.

Interestingly I had dinner last night with some visiting Austrians . This was a dinner meeting after a long day at Summit.  The conversation was wide and general but for a few minutes I turned the discussion toward Brexit.  I wanted to hear their thoughts.  We did not talk about Brexit for lomg.  Almost nonchalantly, the Austrians said (and I am not paraphrasing much here), “Well, if the UK votes to leave, the EU and the Euro are dead of course,” and with that they moved the conversation on. There was no hesitation, there was no open debate. It seems such things have already been analyzed and are already well past, so now it’s just a matter of waiting for the decision (or the hangman). I found this most disturbing.

Once I got back to my hotel my mind was racing and I was having difficulty getting to sleep.  I had to write down what I was thinking, and what I was thinking concerned what could take place should Britain vote to leave the EU.  Here are some of those thoughts: here is a potential time line of events:

  • Since Britain was able to re-negotiate its relationshop with the EU as part of the preperation for the referendum, it won’t take long for other countries to seek to re-negotiate their position. Greece has tried to do this financially and failed. They will try again. Italy might very well do the same. Portugal is a possibility. By the way, did you know (seperately) that there are a number of (mostly) eastern european countries on the waiting-list to join the Euro – all (I think its 6 or so countries?) are on ‘hold’ right now as they don’t want to jump in (to what might be a sinking ship).
  • A renegotiation will be refused by Germany and/or France for the same reason that they will feel that it is giving in and appeasing the fringe and thus weakening the role of the EU.
  • A refusal to permit any more renegotiation will trigger a demand for a  referundum in those countries where relations with the EU are fraught: again Greece, Italy, possibly Spain, Portugal. Even Ireland, now growing very well and fully recovered after the crisis, may seek “out” since they are now being dragged down by the EU’s slow growth.
  • There won’t be one referendum – there will be several. The EU will begin to unravel and the Euro will fall.
  • Sometime before this, countries will have to put in place emergency plans to prepare for the reintroduction of national currencies, perhaps preceded by a desperate last-chance lock down of a single currency and political union by Germany and France (which has no practical chance of actually taking place). The mere hint that countries are considering plans for their own currency will precipitate a faster collapse of the Euro.
  • The ECB will be shut down. Interest rate policy will devolve to soverign states as currencies start to trade.

And this is ignoring all the political and social fall-out that comes about from a “yes” vote for Brexit.

Lastly I was confonted by another counter argument that should Britain vote “yes” to leave, then Scotland will quickly seek to leave the UK and join the EU.  I am not so sure that they will have time to complete such a desire.  Why w0uld Scotland seek to join what essentially is a club teetering on the edge of collapse?  It may not be apparent for three months or more, but surely a Brexit will precipice the collapse of the EU, or at least a long period of confusion and reordering of the EU experiment.

My week in the UK has certainly added more complexity to my thinking.  My heart says the UK should stay, my mind says the UK should leave.  Emotional ties and the hope of unity pushes me to want to remain in Europe; cold analysis of the incomplete political and monetary union tells me that the expriment cannot survive and being “inside” when it collapses will cost the UK more.  And it’s not like anyone wants the Euro to fail – it’s that the terms of reference have shifted from a free trade zone and common citizen-enablement policy towards political union and centralized (even unelected) control  (which was never a real possibility).  

I am nervous for what may happen.  I don’t think anyone knows.  Who would have believed that the UK, late to the EU table (thanks to France), might in fact be an early trigger for its possible demise?

 

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