Should Britain exit the EU?

By Nikhil Rao

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As the Euro crisis exacerbates, many doomsday scenarios loom. For example, experts posited that Greece might be kicked out of the monetary union, and dubbed it ‘Grexit.’ The situation worsened sufficiently enough for commentators to think about an oxymoronically-named ‘Fixit,’ a situation in which Finland would leave the European Union in order to minimize the negative impact of the area’s slowly failing fiscal situation.

But one situation that has largely failed to attract any serious attention is the one in which the United Kingdom opts to completely sever ties with the European Union (EU), a ‘Brixit’ of sorts.

For quite a while now British politicians have mulled over the idea of holding a plebiscite on Britain’s status within Europe – an ‘In/Out Referendum,’ if you will. In their eyes as well as those of many of the populace, the European Project, while magisterial in its own right will end up dangerous in more ways than one.

At its core, the EU is a quasi-federal system; one where the European Parliament hopes to legislate for the entire population of the 27 member-states. Not only do citizens fear that such a top-down approach, while probably well-intentioned, will fail to address their concerns, but they are also worried about being bogged down by European regulation.

For example, as well known Member of European Parliament (MEP) Daniel Hannan has written on many instances, the EU’s post-financial crisis regulation is woefully ineffective, overwhelming and, worst of all, not applicable to all countries. When politicians sitting in Brussels, one of the centers of the EU, contrive to save markets, their lack of knowledge and the countries’ lack of similarity give birth to thousand-page documents that bog down some economies within the EU.

On another note, countries feel that, as the EU’s political and economic issues are legion, it may be prudent to exit the EU prior to being dragged into some sort of malevolent debacle. One can look at the EU’s forecasted growth for 2013 of 1 percent (Spring 2012 forecast). With the IMF recently revising down their outlook for global growth, it seems logical that things for Europe do not look rosy, to say the least.

However, in a bid to stem the flow of fear and uncertainty, Mario Draghi, president of the European Central Bank (ECB), seeks to “do whatever it takes” to save the Euro. He aims to assuage debt-holders’ doubts about the solvency and ability to pay of many countries while he, along with Germany Chancellor Angela Merkel, has whispered about a fiscal union of sorts in Europe. Such a move would allow the ECB to issue ‘Euro Bonds’ and all member-states would be collectively responsible .

One of the massive stumbling blocks with regard to this proposition as well as the enlargement of related EU bureaucracy is that taxpayers and governments are unwilling to have to pay for the profligacy of other countries.

Thus, one digresses away from an economic argument only to find oneself confronted by the massive specter of an argument from principle – is it the taxpayers’ obligation, nay, is it the taxpayers’ responsibility to subsidize the profligacy and fiscal indiscipline of other nations? Think about that.

Now some countries in the Euro Area – member states of the EU that are part of the monetary union, i.e., they utilize the Euro as currency – toy with the idea of exit as the ECB’s mandate over currency bogs them down; they do not have the power to enact their own monetary policy as the United States does.

True, countries do retain their own central banks (for example, Germany’s Deutsche Bundesbank) but they do the bidding of the ECB. Should a country leave the monetary union, it could fiddle with its own currency with hopes of alleviating its economic woes.

This isn’t the case of the U.K.

Britain retains its currency, the pound sterling, and the Bank of England has been enacting monetary policies that are similar to those of the U.S.’ Federal Reserve and the ECB.

What then, is the problem?

The problem has already been outlined: suffocating federalism, growth issues and bureaucracy. Meanwhile, opponents to a ‘Brixit’ have argued that Britain faces prohibitive costs with respect to trade if it were to unceremoniously leave the EU.

Just yesterday, David Cameron, prime minister of the U.K., spoke at the Conservative Party Conference. It turns out that many people are wrong – the U.K.’s exports to the EU have dropped by 27 percent, while exports to Brazil, China and Russia have increased by 25, 40 and 80 percents, respectively.

As it stands, the question on whether or not Britain should leave the EU has never been more relevant.

In spite of this argument, it should be noted that the European Union is a wonderful project. It might not have been well-thought out economically but in terms of cultural and political integration across a vast continent, it certainly is something to aspire to.

However, when circumstances push integration to such a level as is currently happening, evaluation is paramount. This column is obviously not intended to inveigh against the idea of the EU, but it verily seeks to espouse the need for the evaluation of some of its aspects.

Nikhil Rao is a Collegian columnist. He can be reached at [email protected]