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EU debate is only just warming up

Posted May 25, 2016

By David Worsfold

Many people in the City seem to think that the EU referendum debate has been won, and that the clash of debate and arguments over the next month will not alter the inevitable vote to remain in the European Union. That is because they judge the debate in narrow, largely economic, terms.

The terms of that debate are those of the conventional economic wisdom that dominates developed economies and, especially, financial markets. With almost every City heavyweight from the Governor of the Bank of England down spelling out the consequences of Brexit with alarming clarity, it is easy to see why it is possible to agree over a glass of wine in a comfortable City wine bar that the debate has been won. But there are wider debates going on and they are far from won.

Most obviously, there are the debates about immigration and sovereignty. If immigration bothers you and you can’t see it as an economic necessity, then the economic case for staying in the EU is hardly going to touch you. You cannot win those people over with economic arguments.

Similarly, you cannot win over those who worry about ceding more sovereignty to the European Union on purely economic grounds, although they are more likely to be open to arguments about the balance of good from being part of the EU than the anti-immigration lobby. This is also the group that is most likely to sway the vote on 23 June.

There is, however, another strand of argument emerging that could yet swing the vote in favour of Brexit and that is the progressive economic case for leaving the EU, set out with forceful clarity this week by Larry Elliott and Dan Atkinson in their book ‘Europe Isn’t Working’.

This, in Elliott’s own words, is a relentless attack on the Eurozone: “The eurozone is economically moribund, persists with policies that have demonstrably failed, is indifferent to democracy, is run by and for a small, self-perpetuating elite, and is slowing dying”.

For those already inclined to dismiss this contribution to the debate because the UK is not in the Eurozone, Elliott has a blunt response: “Britain is not in the euro, for which we should all be thankful. But let’s be clear: staying in the EU means hitching the wagon to a currency zone unable to go forwards or backwards, and which will continue to struggle as a result”.

What this strand of argument is about is trying to peel way from the Remain camp those on the progressive left who are lukewarm about the EU, are driven to support Remain because they are revolted by the right-wing, anti-immigrant rhetoric of its leading voices but who remain as suspicious of the EU and its intentions as Tony Benn was forty years ago. He argued that Europe was a businessman’s club, run by a small, unaccountable elite. Many on the left are still drawn to that argument, especially after the post-financial crisis years of austerity have seemed to them to have been more about restoring the banks to profitability than protecting ordinary working people.

There is an alternative response to this analysis of the state of the  European Union. That is reform from within, the case argued by former Greek finance minister Yanis Varoufakis and his newly launched Democracy in Europe Movement.

“The EU’s very existence depends on Britain staying in. Greece and Britain are facing the same three options. The first two are represented aptly by the two warring factions within the Tory party: deference to Brussels and exit. They are equally calamitous options. Both lead to the same dystopian future: a Europe fit only for those who flourish in times of a great Depression – the xenophobes, the ultra-nationalists, the enemies of democratic sovereignty. The third option is the only one worth going for: staying in the EU to form a cross-border alliance of democrats, which Europeans failed to manage in the 1930s, but which our generation must now attempt to prevent history repeating itself”, says Varoufakis.

He sets out a vision of European economic co-operation with a reformed and fully accountable EU that would be readily recognised by any good Keynesian.

Are these just political and economic debates that are going on far away from the desks and screens of those charged with managing the billions of pounds of assets held by UK insurers? On the contrary, these are part of the central debate about the future of Europe and its financial institutions, not least the Euro.

No-one dissents from the belief that Brexit will cause an economic shock. Even Brexit economists accept that, despite the reluctance of those politicians who are making the case for Brexit to admit so. The only questions are how long and how severe, and what lies beyond.

But what of the economic and financial implications of staying in? Little thought seems to have been given to these, but the sort of issues raised by Elliott, Atkinson and Varoufakis could find their way onto a reform agenda as EU leaders look at how to avoid a damaging, negative series of debates elsewhere in Europe about membership.

Thinking about the consequences of staying in is as important as thinking about the consequences of coming out.

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