Geographically the UK is very obviously an island with all the benefits that brings, although not quite as comprehensively as is often imagined. However in many other senses such as economically, militarily and politically the UK is anything but.
The UK occupies a remarkably unique position in global affairs. It is the only state which is a member of the G8, G20, the EU, NATO, the Commonwealth, the Council of Europe and a permanent member of the UN Security Council. In addition the UK is a nuclear power and, despite current difficulties, has one of the largest economies in the world. We may no longer be an imperial power, but “punching above our weight” sometimes seems to be an understatement.
Thus it is clear that a country the size and importance of the UK leaving the EU is going to have very significant political and economic ramifications which will reverberate around the world. Greenland leaving the then EEC in 1985 is one thing, the UK leaving the EU now is an entirely different matter altogether. Just the effects on the EU alone would be profound, not least in reversing partly the political momentum for ever closer union and thus showing a different path for other member states. Other countries such as Ireland and Denmark may follow us out. We would be creating a precedent.
So while some arguments ensure over legal details such as whether “the Commission can do what they like in the two year process under Article 50” – it can’t as I noted here, here and here – there are significant consequences that transcend the dry legalities of leaving.
One thing stock markets dislike intensely is uncertainty which is why market sensitive data is often released over a weekend when they are closed; thus any unilateral exit by the UK especially with no plan and no warning would clearly send the FTSE, the Dow Jones, the Nikkei et al smashing through the floor on a plummet trajectory. Tearing up international agreements on an ad hoc basis is likely to lead to stock market crashes and history tells us where stock markets crashes end up.
We’ve had plenty of evidence on the sensitivities of the market during the Eurozone crisis, for example when, to the complete surprise of virtually everybody, including his own parliamentarians, Greek prime minister George Papandreou called a referendum to approve a EU bailout deal in November 2011:
Global stock markets dropped sharply as investors sold off shares after Greece’s shock decision to hold a referendum on its eurozone bail-out package thratened to intensify the region’s debt crisis.
London’s FTSE 100 index of leading shares dropped more that 2pc, with markets in Germany falling, France, Spain and Italy sliding between 2.7pc and 4pc.
And not just the stock markets, the bond markets have also played an important part of the eurozone crisis. More so as bond markets generally have large power over countries again typified by the fate of Eurozone countries such as Spain, Italy and Portugal.
So we come to Chancellor George Osborne whose entire strategy is effectively betting on being able to borrow on the bond markets at rock bottom rates. Osborne’s recovery plan is based on the hope that rates will stay pinned to the floor, and given that we’re borrowing £3,000 a second he (and we) can’t afford for borrowing costs to overshoot, which they most certainty will do in the event of uncertainty regarding sudden exit from the EU. Escalating borrowing rates as a result are very likely to make Greece’s situation look like a picnic in comparison..
And not just the bond market, there’s also the sterling and the forex market, any movement on EU membership by the UK will have dramatic impact on the value of GBP, with economic consequences for us all.
So to leave without an orderly exit in place, in times of a fragile world economy, will have adverse economic consequences also for other countries to the ultimate and obvious detriment of our own. Any immediate destabilisation of EU membership by any member state would impact on the Eurozone undoubtedly dramatically ensuring it enters yet another crisis furthering affecting the UK economy.
Thus we have an international duty, in our own self interest if nothing else, to make sure our exit has to be as smooth and as structured as possible, and that can only be achieved by showing the international community we honour international agreements and are willing to follow due process. Undoubtedly an extensive period of foreshadowing our intentions beforehand is likely to be necessary to allow politicians across the world, the economy and the markets to price the change in.
Purely taking an English stance by seeking comfort in quotes from the Magna Carta and other Constitutional Acts which apparently bind their Parliamentary successors and hoping for the best without consideration of the UK’s position in the world simply will not wash…