Euroskeptic Brits Face Tough Euro-Zone Choice

Europeans have never quite understood Britain’s reluctance to fully commit to closer ties but the reasons lie in a long history of independence. Britain is heading for an extremely tough choice which could affect the future prosperity of the country.

If Euro-Zone leaders manage to halt the rotten contagion spreading through its peripheral members, the monetary union will become a much tighter United States of Europe with common fiscal policies and, with its size, the power to take on the world’s largest trading blocs. Within such a structure, Britain could not only flourish but also become a healthy counter balance to the dominant Germans, influencing the direction and evolution of the economic union.

However, the recent EU referendum debate in the UK parliament highlights the hysteric euro-skepticism, which is fairly representative of feelings towards Europe across the country and indicates the low probability of a British referendum ever supporting membership of the Euro Zone. But, Britain’s approach to Europe has always been different to the countries on the mainland.

For hundreds of years, Britain looked away from Europe to the rest of the world to expand its influence, trade and wealth. The Spanish Armada in 1588 marked the beginning of a long period of expansion where Britain was no longer intimidated by Europe’s stronger powers. Instead of looking to Europe, Britain found greater success around the world. It was the British Navy sailing the seven seas, rather than the army that built the Empire. Europeans were left to battle it out among themselves with Britain reluctantly dragged in on occasion, most famously in 1914 and 1939, usually at great cost. The First and Second World Wars greatly accelerated the demise of British economic power, leaving the country almost bankrupt in 1945.

Now, I’m sure Europeans are tired of hearing about the British Empire but it is the last 500 years that have forged British opinion towards Europe not just the last 50. Unlike the US which perhaps is seen in Britain as a younger brother that has matured into a more powerful version of itself, taking over as the world’s greatest superpower, Europeans are perhaps seen as Britain’s competitive peer group. In 1967, French President Charles de Gaulle vetoed Britain’s membership to the Common Market and in 1992, Britain was forced into an humiliating exit from the European Exchange Rate Mechanism.

Many Brits have a greater affinity to the US than to Europe and it is not just a common language but also the shared values of bringing law and justice to the rest of the world, labour flexibility, modern pop culture etc. Economic thought is also more aligned to the US as can be seen by the way the Bank of England and Fed are implementing similar policies rather than being completely disciplined by inflation targeting.

Although the proportion of US citizens who can trace their ancestors back to Britain has dwindled, young Britons are still taught about the early settlers in the 17th century and the later War of Independence. Nothing could be more British than a war triggered by tea!

The alternative to greater integration with Europe in a world, where the sheer size of China, India and Brazil will make Britain even less significant, is, therefore, to move closer to the US. The US makes up 14% of UK trade and although this seems small relative to more than 40% of UK trade with the Euro Zone, it is Britain’s second largest trading partner after the EZ. A free trade agreement with the US, possibly by joining NAFTA, would be beneficial to both countries and it would not only help to drive the competitiveness of British business but it could also help to forge a new era of financial market regulation and security between the world’s two largest financial centres, New York and London.

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This entry was posted in Economics, Euro Zone, Fed, France, Germany, London, New York, US and tagged , , , , , , . Bookmark the permalink.

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