Wednesday, 22 June 2016

This Brexit vote isn't just about the UK. It's about the whole future of Europe.

The literal meaning of the word ‘insular’ refers to back to the idea of an island. It’s perhaps hardly surprising, therefore, that the UK’s referendum campaign on membership of the EU has been insular in the broader, metaphorical sense too.

Everything is about us.

We’ll be more democratic and more sovereign and free from the shackles of bureaucracy if we leave. We’ll be stronger and less isolated and richer if we stay.

The truth is that, whatever your personal viewpoint, the UK’s decision on Thursday 23rd has ramifications way beyond our borders.

If the unthinkable happens and we vote to break away from a tariff-free market of 500 million people, what happens next in continental Europe?

The first pressure will almost certainly be on the Eurozone. Italy’s maverick Five Star Movement – which just won key mayoral contests in Rome and Turin – has already called for a vote on whether Italy should leave the single currency. Despite a period of relative calm, the underlying issues surrounding the Eurozone’s so-called ‘periphery’ have not been resolved. Greece is still an obvious flashpoint.

If the worst did come to the worst, the Greeks represent about 2% of the Eurozone economy and a Grexit could be shaken off. But the currency could not withstand the seismic shock of a default in a bigger country such as Spain. And if the political mood is to follow the UK and if voters in Milan and Rome and Naples demand a return to the Lira, there will be no hiding place. The game will be up and the edifice will be in danger of crashing down.

The reaction of more ignorant Brexiters to this scenario might well be ‘so what?’

They not only want to extricate the UK from the EU, but quite openly hope for the institution’s demise.

But such a view betrays a woeful misunderstanding of our interconnectedness. The collapse of one of the world’s leading reserve currencies would almost certainly trigger a global depression. At that point, the warnings about the financial consequences of Brexit would seem to have been hopelessly understated. Because Brexit might a domino, set off with the lightest of touches, but cascading across stock market floors around the world.

And as the currency broke up, the chances of the EU itself collapsing would become very real.

When the people of Europe retreat behind national borders, mutual suspicion and the risk of conflict will grow. Meanwhile, there will be smiles on the faces of the political leaderships in Moscow and Beijing.  When dealing with any European country individually – at the level of trade and economics, or in the realm of politics and defence – these big powers, which have so little respect for democracy, would undoubtedly hold the upper hand.

It’s a prospect that is truly horrifying. 

Could it be that Project Fear hasn’t actually been frightening enough?

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