Don’t Brixit if it Ain’t Broken

When the European Union was awarded the Nobel Peace Prize, most Europeans were most pleasantly surprised. After all, with the debt crisis spurring civil disturbances in Eurozone nations forced into exceptionally severe austerity programs in exchange for bailout funds, tensions in the continent were smoldering and exploding. Angela Merkel’s call for more centralized economic controls – at the expense of local control – didn’t seem to sit well with so many EU members. Growth in an increasing number of Eurozone countries was sliding from nil to negative, and the best the EU could do with Greece is find ways to delay an economic judgment day when the world would have to come to inevitable terms with Greece’s ultimate inability to achieve the required economic debt/GDP ratio or remotely be able to pay back its massive debt. In short, the mood in the zone is and remains bleak.

But not all of the 27 EU members are Eurozone constituents; the big player unwilling to give up its own currency being the United Kingdom. And even though such holding back has created additional tensions with the rest of Europe, notwithstanding that its unwillingness to join the euro crowd has given England a back seat in EU policy-making, if there is a direction to be taken, the tea leaves suggest England wants to pull back even more.

In 1990, then Prime Minister Margaret Thatcher warned her Parliament that adopting the euro as the pan-European currency, presenting an unpopular view that Germany’s obsession with inflation would combine with the obvious disparities with poorer EU nations (the euro, she said, would “devastate their inefficient economies”), was nothing more than a waiting disaster for the continent. England retained the Pound Sterling. Maggie Thatcher’s 1990 rhetoric is mighty popular these days in the UK.

If there were to be an unraveling of the EU, most pundits have focused on the Eurozone and most particularly on Greece, the weakest member state currently struggling to stay afloat. If Greece were forced out of the zone, perhaps the hemorrhaging could be held at that battle line; perhaps the other weaker PIIGS (in addition to Greece, Portugal, Ireland, Italy and Spain) would find a way to remain and survive. But the back room conversations were always about how long it would take before someone hit the jettison button on Greece, facing a reality that many believe is inevitable. Other skeptics still could not fathom how a combination of weak and strong economies could ever be properly regulated under a single currency.

The UK has been eyeing all of the goings-on on the mainland with trepidation. Thatcher’s admonitions were seemingly coming to pass, and Germany’s obsession with inflation-protecting austerity was rapidly becoming the only tool that the Eurozone was remotely able to implement. When the Peace Prize was announced, most European leaders were beaming… and said so. British Prime Minister David Cameron was strangely silent on the subject. “Before [the prize was announced], the British government said it wanted to exercise an opt out of an estimated 133 areas of European Union police and judicial cooperation to which it had once agreed.

“And Mr. Cameron supported a plan for a new budget for countries that use the euro (which Britain does not), something that would place his nation firmly in Europe’s outer tier. The prime minister has been hinting that he could hold a referendum on Britain’s relations with the union, and one newspaper reported recently that a senior cabinet minister wants Britain to threaten openly to leave the 27-nation bloc. There was no official denial of the report. 

“All of which has fueled concerns that Britain is laying plans for what political and financial pundits have dubbed ‘Brixit,’ a variant on ‘Grexit’ — the shorthand for Greece’s much predicted if currently forestalled departure from the euro zone… Mr. Cameron insists that he is trying to keep Britain in the European Union. He argues gamely that popular consent to membership can be regained only by refocusing the relationship on Europe’s single economic and free trade market — which accounts for half of Britain’s foreign trade and investment, according to the government — and loosening other ties…

“Previous British governments argued that if they did not like something, they had a chance of changing or stopping it only if they sat at all tables with their European partners… Mr. Cameron seeks a new arrangement that abandons any pretense of being at the heart of the European Union. He does not, for instance, want to stop the euro zone integrating without Britain. Indeed, he recognizes that this is necessary to save the euro... But can a more remote relationship work?” New York Times, October 27^th. The Eurozone and the euro are definitely broken, but can they really be fixed… and if they can be fixed, is the painful repair worth it? And if the zone is broken, who can claim that the entire European Union is not equally flawed and listing to port?

I’m Peter Dekom, and the fact that Europe’s struggles have a substantial impact on our own economic future makes these headlines impossible to ignore.