|
On February 20th, UK Prime Minister David Cameron announced that the
'in/out EU referendum' he had promised in the campaign for the last
parliamentary vote would finally take place on June 23rd. The outcome of the
long-promised vote could have a tremendous impact not merely on the future of
Mr. Cameron and his coalition but on the economic future of Great Britain and
much of the world, including the European Union (EU) and the United States.
It's arguable that the referendum will be the most significant vote the world
will see between now and the U.S. presidential ballots in November.
Of course, Mr. Cameron is desperately trying to convince Britons to cast
their votes in favor of the UK remaining 'in' the European Union. In order to
pacify the deeply held mistrust of the European Union that is harbored by
many in Great Britain, Cameron recently returned from negotiations in
Brussels with a list of "concessions" from the EU which he claimed
would secure a special status for the UK within the EU. Ominously for
Cameron, French President Francois Hollande expressed doubt that the
concessions would even be included in any binding treaty. Already the fault
lines have sharpened and the political maneuvering has begun. But as with the
current climate in the U.S., sentiment does not boil down to a simple
left/right spectrum.
A true understanding of the EU demands recognition of the basic rationale for
its formation. In the late 1940s, European leaders, including Konrad Adenauer
of West Germany and Jean Monnet of France, dreamed of a European superstate
powerful enough to negotiate on equal terms with the U.S. and the Soviet
Union. The resulting surrender of sovereignty by the once-proud European
empire ruling nations was not to be achieved easily. Allegedly, Jean Monnet
wrote to a friend in April 1952, "Europe's nations should be guided
towards the superstate without their people understanding what is happening.
This can be accomplished by successive steps, each disguised as having an
economic purpose, but which will eventually and irreversibly lead to
federation." (The End of the Nation States of Europe, Philip Jones
9/12/09, rense.com)
Regardless of whether Monnet actually penned those words, the move towards
'ever closer political union' has been pursued rigidly, relentlessly and
ruthlessly by the Euro elite exactly as those words suggested. The path was
lubricated by huge amounts of targeted funding and activism by the European
Central Bank, which showered monetary largesse on those member nations facing
financial strain. Although these wealth redistribution policies had become
increasingly unpopular among the creditor nations of Europe's northern tier,
they were not enough to derail the drive for further unionization. It was not
until the recent wave of mass immigration from Muslim countries that the
average European citizen began to realize just how much sovereignty their
political leaders had yielded to the EU. Just this week, Angela Merkel's
Christian Democrat party, which has long championed greater EU integration,
took a major drubbing in local German elections as a result of her fanatical
support of open borders for Middle Eastern refugees. The big winners were far
right parties that oppose open borders and are pushing for the return of
greater national sovereignty.
However, these rumblings have yet to make a significant impact on policy.With
the unique exception of Greenland, a Danish territory, the EU has allowed no
national exits or even material retreats from its relentless drive towards
ever closer political union. With this in mind, and in light of President
Hollande's comments, many Britons have come to doubt that Cameron's promised
"special status" will be all that special.
According to yesterday's Financial Times poll tracker, 45 percent of British
voters favored staying 'in' the EU, with 40 percent against and 15 percent
uncertain. The result is far from certain, leaving it open to political
persuasion, including massive advertising.
Perhaps the biggest political development of recent weeks has been the
defection of Boris Johnson, the charismatic and popular conservative mayor of
London to the "out" camp. By breaking with the leader of his own
party, Johnson has threatened to fragment the Conservatives (much as Donald
Trump is doing with the Republican Party). But, as with Trump, there may be
more than purely ideological motivations behind Johnson's gambit.
Even if victorious, Cameron could be seen by almost half the British people,
and in particular among conservative elements, as having sold short his
country's interests. Sensing this, he may have to resign soon after the June
23rd vote and try to hand the Premiership to his old friend, and Chancellor
of the Exchequer, George Osborne. The succession plan may have been the push
that Johnson needed to finally join the 'out' campaign. His outstanding
oratorical skills, combined with those of UK Independence Party's Nigel
Farage, could prove to be a major factor in convincing a major portion of the
undecided vote.
The "out" crowd will likely need all the help it can get. The
pro-EU forces are expected to deploy massive advertising expenditures to
allege that British trade and economic vitality will plummet with an exit
from the Eurozone. Even President Obama, who remains a popular political
figure in Britain, intends a trip to the UK in April for the expressed
purpose of galvanizing support for an "in" vote, according to a
report yesterday in The Independent on Sunday. In response to that, Boris
Johnson has excoriated Obama for meddling in internal British affairs and for
supporting a surrender of sovereignty that would be wholly unpalatable to
Americans.
Great Britain, a late entrant, has long been the 'odd-man-out' among EU
member-nations. Its language, culture, its common law legal system and its
financial capital markets are aligned closely to those of the United States.
Even as a cultural 'misfit', the UK's membership is of great economic and
political importance to the EU. According to 2014 figures from the IMF,
Britain has the second largest European economy. Paying the second largest
net contribution to the running costs (2013 figures from Highcharts.com), the
UK is a key element in the EU's continued viability. Those who have been
attempting to spread economic fear through dire warnings on lost trade have
failed to mention that the EU has enjoyed a trade surplus with Britain, which
rose to over $6 billion per month in 2014 (Office for National Statistics).
Politically, Great Britain has an independent nuclear deterrent and a
permanent seat on the UN's Security Council. In both of these critical areas,
the UK has operated for over seven decades in uniquely close collaboration
with the United States. Envious and covetous of this quiet but most powerful
'special relationship', the EU may want it severed.
The implications of a revolutionary 'out' vote by British voters should not
be underestimated. It may influence even the U.S. election. Clearly, a BREXIT
would represent a precedent for other nations, such as Greece, Portugal and
even Italy, which already may wish covertly to leave the Germanic strictures
of the Eurozone.
Any major threat to the euro, the world's second fiat currency, could impact
an international monetary order built on an unprecedented mountain of
credit-based debt. The uncertainty of the political future of the EU combined
with the costly effects of deeply negative rates in European banks could
increase interest in alternative stores of value.
June 23rd may prove to be a day of destiny for the United Kingdom, if not the
world at large.
Read Original Here
John Browne is a Senior Economic Consultant to Euro Pacific Capital.
Opinions expressed are those of the writer, and may or may not reflect those
held by Euro Pacific Capital, or its CEO, Peter Schiff.
Subscribe
to Euro Pacific's Weekly Digest: Receive all
commentaries by Peter Schiff, John Browne, and other Euro Pacific
commentators delivered to your inbox every Monday!
Order a copy of Peter Schiff's updated illustrated
economic parable he co-wrote with his brother Andrew, How
an Economy Grows and Why It Crashes - Collector's Edition, and save yourself 32%!
|
|
|