Over six weeks have passed since David Cameron confirmed the date of the UK’s historic referendum on European Union membership. And it’s now less than twelve weeks until 23rd June.
As a card-carrying economics nerd and news junkie, I follow the increasingly febrile debate on British EU membership very closely. Doing so involves countless conversations with politicians, business leaders and strategists about the referendum – and the aftermath of a potential Brexit vote.
While political insiders obsessively trade the pros and cons of the EU, though, most voters currently feel, if anything, frustrated and confused by a discussion long on arguments and insults but short on facts. So, here’s a column making a series of points about the upcoming referendum which, while vital to understanding what’s happening in my view, are rarely stressed in print.
Firstly, no-one knows what will happen. The opinion polls are clearly very close. While some surveys suggest Remain is ahead and others tip Leave, almost all polls put less than 5 percentage points between the two camps – with around a third of voters undecided. That’s why the debate is already so vicious, as it could easily go either way. And unlike a general election, decided in a few dozen marginal constituencies, every vote is of equal significance in a referendum. And every vote could count.
The second point is that while much public debate on EU membership uses remote economic concepts such as trade rules and customs unions, voters will be swung far more by what actually happens in Europe over the next 12 weeks.
Politicians and pundits swap predictions about the EU being good or bad for jobs and house prices, but such arguments are largely lost on voters – not because they don’t care about such matters (they care very much) but because the rhetorical exchanges cancel each other out. The public anyway (rightly) concludes that most economic predictions (whoever makes them) are self-serving.
Europe’s migrant crisis, in contrast, is tangible and in front of our faces. As refugees and economic migrants have streamed into Europe from North Africa and the Middle East, millions of British voters have become alarmed. Record UK annual net immigration – 323,000 on the latest figures, over three times David Cameron’s 2011 “no ifs not buts pledge” – has already been met with record levels of immigration-related public concern. And if, in the run-up to 23rd June, our television screens show more pictures of families desperately crossing the Mediterranean, and bursting out of squalid camps, that will encourage millions of wavering UK voters to leave the EU.
Immigration will play a pivotal role in the referendum, then, especially if June brings calm weather to the Med, encouraging more migrant crossings. It’s naïve to think it won’t. The linking of Europe’s open borders to terrorist atrocities in Paris and Brussels, rightly or wrongly, has also brought the EU’s “free movement of people” into sharp focus, and not just in the UK. Several member states, inundated with migrants and trying to suppress public outrage, have temporarily suspended the Schengen open-border agreement, among the EU’s most cherished principles.
Then there’s the single currency. We’re often told the eurozone crisis, which brought turmoil to global markets during the summers of 2011 and 2012, is over. That’s not true. The euro remains an economic powder keg. In the absence of a significant deepening of political union, including the pooling of a sizeable share of government spending across member states, it will ultimately break-up. This notion, a heresy when some of us ventured it as the euro was launched in the late 1990s, is now widely accepted.
Could there be another eurozone crisis this summer? If there were, the resulting financial turmoil and endless “emergency EU summitry” could easily influence UK voters. Another bout of euro-induced financial contagion would associate the EU with economic incompetence in voters’ minds, while reminding them once more of the grotesque extent to which the reach of “the European project” over-extends its grasp.
If the eurozone crisis is solved, why has the European Central Bank just jacked-up its program of quantitative easing, already over a year old, from €60bn to €80bn a month? Why are several of the region’s sovereign bond markets propped up by printed money and the endless promise of yet more printed money – aka ECB Supremo Mario Draghi’s “whatever it takes” pledge? Any kind of continental bond-market meltdown between now and the UK’s EU vote would be a disaster for the European project. I see few reasons some traders won’t want to test that resolve over the coming months.
Back in 1975, the UK economy was “the sick man of Europe”. That helps explain why voters strongly backed our continued European Community membership – by a factor of two-to-one. This time it’s different. Although Britain has economic problems, we’re growing faster and creating far more jobs than our EU counterparts.
The euro zone economy, meanwhile, is “flying on one engine” and “fighting for altitude” according to a report last week from Standard and Poor’s. The ratings agency points to the impact on the euro of recent hints America’s Federal Reserve won’t be raising rates anytime soon, causing the dollar to fall and making Eurozone exports less competitive. On top of that, a new official EU survey puts economic confidence across the region at a 13-month low – and that was based on research conducted before the latest terrorist atrocities.
Despite the relative strength of the UK economy, we simply don’t know what happens if Leave prevails. That’s because, having voted for Brexit, the UK then enters an “Article 50 negotiation” – named after the relevant EU Treaty clause. During these discussions, which could last up to two years, all existing laws and agreements between the UK and EU would still apply. So nothing would immediately change if we vote Leave – putting paid to some of the more disingenuous scare stories telling of post-referendum chaos.
The Remain camp insists, though, that the UK would be in a weak position during an Article 50 negotiation. “Why should France or Germany do us any favours if we’ve opted to leave?” is the common refrain. To me, this argument makes no sense. On the latest figures, we buy £60bn a year more in goods and services from EU nations than we sell them, adding to our large trade deficit. Powerful French and German carmakers, along with Italian furniture manufacturers, would exert considerable political muscle to ensure free trade continues between the EU and a non-EU UK.
Consider, also, that if the UK choses Brexit, voters in other EU nations – not least Finland, Sweden and Holland – could easily demand their own membership referenda. Such votes could take place during the UK’s Article 50 discussion. My strong suspicion is that the EU would cave in to all manner of UK demands, in a bid to convince Britain to vote again to stay in and preventing the broader EU project, as discontent spreads, from unraveling completely. Which brings us to another hot topic that barely gets any airplay – there could be two referenda.
The government doesn’t want this idea gaining traction – as that would remove the fear factor of voting Leave. But I genuinely believe, as do many other close observers, that if we do vote to quit, the subsequent Article 50 negotiation will be so significant the UK will end up voting again on whether or not to accept it.
I believe in a EU but not this EU – so am voting leave. But I also hope a Brexit vote sends shockwaves across Europe, finally sparking meaningful EU reform.
Follow Liam on Twitter @liamhalligan