EU withdrawal is losing its appeal

I have been a Eurosceptic for decades so it might seem strange, with an in-out referendum promised and anti-EU sentiment at an all time high, I am cooling on the idea of a UK exit.

Don't get me wrong, I have not suddenly learned to love Brussels.

Just last week, the British government was overruled on bankers' bonuses.  Regardless of what you think about our friends in the City, the effects of this move will overwhelmingly be felt in Britain and yet we have no right to say no.

The Eurozone shambles has reduced pro-European voices to a whisper and not just in Britain.  Any notions of being better off "at the heart of Europe" are now widely derided as those who warned about the single currency are  completely vindicated (Euro doubters are being proved doubly right).

Consequently the Europhiles have adopted fear tactics.  Fear of lost trade, jobs and inward investment.  Fear of declining influence and isolation. Fear of retribution from Brussels, Berlin and Paris.

I would liken the situation now to a spousal abuse victim finally plucking up courage to leave her husband.

Britain has been marginalised, overruled and bullied by the EU for a long time but only now, when the resolve to do something about it has hardened, do the doubts creep in...

She thinks: "What will I do for money?", We think: "who will we trade with?"

She worries: "What if he comes after me?". We fear regulatory retaliation.

She worries:"What will our friends say?".  Will Obama still take the PM's calls?

The temptation is to dismiss the Europhile fear-mongering and marginalise the downside of leaving the EU.  That would be a mistake because some of the issues are genuine and could easily turn a referendum in favour of remaining in the EU.

It is obviously true that leaving the EU will have downsides. Yes we will lose a measure of influence in the world and particularly in trade negotiations.  Of course our spurned partners (especially France) may try and put the knife in and, for example, stack the regulatory cards against the City of London.  Multinationals will certainly be worried about the security of access to the giant, albeit, shrinking market across the Channel.

None of this means that the UK should just lump it in the EU, like the victim who keeps giving their abuser another chance.  And that old reform-it-from-within line is starting to sound pretty lame.  The Eurozone countries have their own existential struggle going on and are not going to listen  to Britain however polite and obedient we are.

Besides some of the fears can be dealt with by securing guarantees in exit negotiations which could take years and in which we hold some cards, a big trade deficit prime among them.

However to make a case for withdrawal, EU opponents must do more than try and talk away the negatives. They must present a positive case for being a free and independent country once again.  How would we use that room for manoeuvre?

Theoretically the UK could reap massive economic and social advantage from being fully sovereign again: a more rational immigration policy, a massive reduction in red tape and converting saved budget contributions into tax cuts aimed at growth.

But there is a big difference between being offered an opportunity and taking it.  Given that the two main British parties are both firmly wedded to the high spending, high taxing, bank bashing, welfarist, interventionist consensus that currently prevails, EU withdrawal would be unlikely to usher in a new era of economic liberal radicalism.

And without hope of turning into the Hong Kong of Europe, why take the risk of leaving?

The best quote I ever read about withdrawal was from a Europhile who said "Britain has a competitiveness problem not a Europe problem".   Germany out-exports us handily under exactly the same regime of EU regulation.

Much as you might loathe the EU, without serious commitment to reform Britain is in deep trouble whether it leaves or not.


From our website:   Spanish non resident tax

Euro doubters are being proved doubly right

It seems absurd now but a decade or so the UK was very close to joining the Euro. Tony Blair’s Labour government, popular and trusted (yes, it was a long time ago), was pushing for it and only some stubborn resistance from Gordon Brown kept Britain out.

One of the key “pro” arguments was that interest rates would be lower. The pro camp was obviously hoping to sell the Euro with a bribe of lower mortgage rates. I remember thinking at the time that this was a hollow and short-sighted argument.

Lower interest rates are not a good thing necessarily. Interest rates need to be high enough to balance saving and spending. Set too low and the risk is of unsustainable booms and horrible busts.

The euro-sceptics pointed out that a single interest rate for Europe would be bound to leave some parts too high or too low rates with nasty consequences. Events have proved the doubters right of course but there is more to the story.

The arguments against joining were not wholly economic. Indeed the dangerous economic consequences of joining were a side issue for most opponents who feared the political logic more: the Euro was an irrevocable step towards a European superstate which rendered national governments almost powerless on the things that matter.

Pro-Euro campaigners either played down the loss of sovereignty as scare-mongering or argued that it would be a good trade off – slough off your little-Britain hang ups and reap the economic benefits, they said.

Now the Eurozone threatens implosion that position looks ridiculous: all 17 members face the prospect of ruin and disaster unless they join together in a fiscal union. Exactly what the Euro’s opponents predicted and the Euro-enthusiasts perhaps secretly hoped for.

What will this Eurozone superstate look like, if indeed it gets off the ground? Again you don’t need a crystal ball to see the shape of things to come. It will be hugely wasteful of public money, highly bureaucratic, damaging to business and most of all grossly undemocratic.

The citizens of the Eurozone must already feel like they are helpless onlookers watching their political elites flounder in the crisis that they themselves created. They can now look forward to permanent Euro hell as the price for preventing economic meltdown.

From our website: A guide to Spain's autonomo system

The Greek bail-out could send Spanish property crashing

Last week’s Eurozone bail-out involved some debt relief for Greece, more firepower for the EFSF (the bailout fund for other crisis countries) and a bank recapitalisation plan. Quite apart from the fact that most market observers think the plan is flawed and inadequate, the last bit that should have Spanish property owners worried.

In theory, topping up the capital buffers of the banks, particularly Spanish ones which are among Europe’s weakest, should be a positive development. The banks will be safer in the event of a new crisis and there should be less fear in the interbank market, a key feature of the original “credit crunch”.

There are two ways for a bank to boost its capital adequacy ratio: raising more capital or slimming down in size to make its existing capital look proportionally bigger.

Investors are rightly suspicious of banks so raising fresh capital by selling shares is not going to be easy. Higher capital ratios themselves imply lower profitability for the banks, making it harder for them to raise capital.

Perversely Government and EU officials are making it even harder for the banks to raise capital by demanding that they pay less in dividends and pull out of certain areas of business. The proposed financial transaction tax is also depressing bank share prices.

So banks are more likely to choose to go on a diet – desperately reduce in size to meet the new adequacy ratios without raising more capital. But how do banks reduce in size? There are a few ways, all of which are negative for growth and asset prices. They can sell non-core businesses like insurance or overseas subsidiaries. They can reduce the size of their loan portfolios by slashing the amounts they are willing to lend to households and businesses. They can also sell off other assets like the properties they have repossessed.

This is what Santander intends to do according to this article in the FT: Santander seeks to offload €3bn of Spanish property If all the Spanish lenders do the same then there will be a flood of new property on the market at knock-down prices. At the same banks will be trying to cut down on lending to businesses and homebuyers.

Throw in further austerity measures by the government and falling demand in most export markets and it’s hard to feel optimistic about the Spanish economy right now.

Related : 10 reasons why Spanish property prices will stay depressed

Now IS the time for a referendum on Europe

Over 100,000 signatures collected by volunteer groups and some brave Conservative MPs have forced a vote in Parliament over UK membership of the EU. All the main party leaders are forcing their MPs to vote against a referendum. Strange bed-fellows Cameron and Miliband are effectively saying the same thing: now’s not the time.

They are wrong. It’s the perfect time for the British people to be given a say on the EU. After all they have not been consulted for over 35 years. They have never had the chance to say whether they want to be part of what the EU has grown into since those seemingly innocuous origins of six countries in a Common Market.

Since then, with barely a nod to democratic process, the EU has grown into a 27 state behemoth that reaches into every legislative area, slaps down our courts and parliament, dictates who we can let in to the country and claims to speak for us in the world.

It also soaks up enormous sums of money, a net £12 billion of which comes from the UK taxpayer. As we wrestle with a massive fiscal deficit, now is most definitely the time to consider whether we can afford to pay this massive subsidy to our neighbours and debate what we get in return.

Many other economic issues are tied up with the EU from the burden of regulation on industry to the effects of unchecked immigration and the impact of EU schemes to undermine the City. Far from a referendum being a distraction in a time of economic crisis, it may be a pre-requisite of recovery. We should at least be able to debate the arguments rather than remain permanently shackled to the Euro project which has never looked so tarnished and dysfunctional.

Some argue that the sovereign debt crisis should be given priority at the moment and that a referendum is an irrelevance we could do without. On the contrary, the Euro crisis is the most compelling reason for a debate on continued membership. For one thing it has undermined one of the principal claims of the Euro-enthusiasts: that Europe does things better and we would be better off inside the club.

Also, however the crisis is resolved, it is sure to presage enormous changes in the way the euro area and EU are run. We deserve to be consulted before the UK government has to decide how to respond to the crucial choices that are bound to result.

Fundamentally the Euro crisis has exposed the dearth of democratic legitimacy in the rotten core of Europe. The political elites have pushed the project along hard and fast ignoring popular doubts and look what a mess has resulted. Just think of how the German electorate must think about their politicians’ promises about no bail outs and pooled debt.

With the sole exception of the Euro and one or two opt-outs, UK governments have gone along with the lot and have never put the issues to the people. Now is the time to remove that stain on our democratic heritage and have a referendum on this vital topic.

If you feel the same way you can make your voice heard (in a small way!) by signing the People's Pledge here.

On our website this week Spain is bringing back the wealth tax