Archive for July, 2015


One of the unforeseen consequences of the sovereign debt crisis has been the proliferation of English portmanteau words. “Greece” plus “exit” has given us “Grexit”; more recently, and less successfully, there was an attempt to promulgate “Greferendum”. But as the odds of a Grexit recede again – for the moment – the prospect of “Brexit” seems to be drawing closer. It was predictable that the Greek experience might play a part in this, but as with the spawning of some rather inelegant language, nobody seems to have seen it coming.

For people in Britain, our membership of the European Union is supposed to be a boring issue. It regularly comes 94th in the rankings of things which opinion pollsters find we care about. Some years ago the Prime Minister famously instructed members of his party to stop even talking about it. Two or so decades back the middlebrow tabloids would print stories of the impertinent substitution of kilograms for Fahrenheit, and so on, but all that blew over long ago. We may not feel European but we have got very used to belonging to the Union and that, until very recently, seemed to be that.

Then a little over a year ago a ragtag rabble of a political party called UKIP won the expensive exercise in window-dressing known as a European Election. Front and centre of their campaign was the topic of immigration policy. Rather than no. 94 down the list of people’s concerns this subject has been no. 1 for most of the last ten and more years. Despite some absurd protestations to the contrary there is a very material effect here from EU policy on freedom of movement – and crucially, the right to reside anywhere in the Union – and our own parliament has no control over this policy whatsoever. UKIP itself was painted as the most racist political party anywhere since the US Democrats. Its supporters were authoritatively presented as poor, ill-educated, “left behind” working class knuckle-draggers incapable of adapting to the progressive glories of the modern world. The party polled 27%, winning the election hands down.

One of the consequences of UKIP’s success was the Conservative party’s commitment to an in / out referendum on Britain’s membership of the EU. After Mr Cameron’s surprise election victory he was lumbered with actually having to deliver this, and given the tiny size of his majority in parliament has already been unsuccessful in his early attempts to stitch it up. Still, opinion polling has almost always favoured the “in” side. This is not surprising when one considers that EU membership is an issue which for the last twenty years has only exercised the country’s political right, and a minority of it at that.

Enter the Greeks.

Readers of this blog will know that the attitude of the Greek government to negotiations with its creditors has been childish and dangerous. Readers of the news will know too that despite a referendum in which the Greek people voted not to accept their creditors’ terms of a month ago, the Greek parliament has just voted to accept terms more stringent – including a large majority of the ruling far-left Syriza coalition.

This has widened ancient cracks in the support for EU membership on Britain’s own left. Only a month ago it was down to Ms Kate Hoey MP, no longer a high-profile figure, to remind us in the words of the New Statesman that “it was once Labour that was the Eurosceptic party of British politics”. Since the Greek experience, however, support for EU withdrawal in the Labour movement is growing. Like Syriza there are many in this country who believe that balancing the nation’s books is an unacceptably “austere” approach to fiscal policy and they are dismayed that the Greek government has given in to reality so easily. Leftist media commentator Owen Jones gave an excellent account of this position in the Guardian this week:

At first, only a few dipped their toes in the water; then others, hesitantly, followed their lead, all the time looking at each other for reassurance. As austerity-ravaged Greece was placed under what Yanis Varoufakis terms a “postmodern occupation”, its sovereignty overturned and compelled to implement more of the policies that have achieved nothing but economic ruin, Britain’s left is turning against the European Union, and fast.

“Everything good about the EU is in retreat; everything bad is on the rampage,” writes George Monbiot, explaining his about-turn. “All my life I’ve been pro-Europe,” says Caitlin Moran, “but seeing how Germany is treating Greece, I am finding it increasingly distasteful.” Nick Cohen believes the EU is being portrayed “with some truth, as a cruel, fanatical and stupid institution”. “How can the left support what is being done?” asks Suzanne Moore. “The European ‘Union’. Not in my name.” There are senior Labour figures in Westminster and Holyrood privately moving to an “out” position too.

“Its sovereignty overturned”. A few weeks ago it would have been unthinkable to find anyone significant on the left of politics in this country remotely concerned about a backward-looking hangup like that.

Most significantly of all, Mr Len McCluskey of the Unite mega-union – who has the Labour party in his pocket – told the Financial Times yesterday that if Mr Cameron succeeds in watering down the employment law component of the EU’s imperium his organisation may join the “out” campaign:

“My union is a pro-Europe union [but] if Cameron was successful and watered down workers’ rights, I believe my union would need to seriously consider its position,” Mr McCluskey told the Financial Times.

Asked explicitly if the union could switch to the No camp, he said: “The whole question about what Cameron does to workers’ rights would require us to review fully our position, and that could be anything.”

We began by observing that this series of events was predictable. Succumbing to technocratic hegemony from Brussels in several key areas of one’s national life can appear sensible so long as Brussels makes decisions which are to one’s liking. While the Commission was whimsically busying itself with the destruction of coal-fired power stations and such like the Joneses and McCluskeys had nothing to say about it. But get in the way of double socialism before breakfast? Heaven forfend!

So the Greek fiasco has now whipped up secessionist sentiment on the left as well as the right of British politics. The odds of Brexit have therefore increased.

This is of huge political significance of course. The economic consequences will equally obviously be argued over with increasing volume as the date for the Breferendum approaches. There is little to be gained by getting into that argument now as the actual consequences would depend on the options available to the UK should the decision to leave the EU be taken. From an investment perspective, however, that increased likelihood of uncertainty itself could have an impact.

The Big Two ratings companies have both threatened the UK with downgrades should Brexit come to look more likely. International portfolio flows might well put downward pressure on sterling and on British assets. Confidence might be impacted and growth could suffer, which would jeopardize our already rather fragile debt arithmetic.

There are, in that immortal phrase, several “known unknowns” to consider. The Greek story has made UK withdrawal from the EU thinkable for the first time since the chaos of the Maastricht Treaty. As that referendum approaches times might just get very interesting indeed.

17/07/2015 at 3:02 pm

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