‘Brexit’ not as cut-and-dried as Osborne suggests

Is it conceivable that Britain will leave the EU? While “Brexit” is now a universally recognised acronym, no British politician of chancellor George Osborne’s seniority has previously threatened so explicitly to pull out.

‘Brexit’ not as cut-and-dried as Osborne suggests

Osborne’s rhetoric may sound strident, but actually it suggests the opposite conclusion when British politics and European economics are taken into account.

British PM David Cameron leads a fractious coalition between his mostly “euro-sceptical” Conservatives and “Europhile” Liberal Democrats. The coalition faces a general election in May 2015 and the biggest threat to its survival comes from a haemorrhage of right-wing votes to the UK Independence Party, an upstart populist movement whose main objective is to get Britain out of the EU.

UKIP gets only 10% support in most opinion polls but it could easily draw away sufficient Conservative support to swing seats to Labour. Moreover, UKIP’s anti-EU zealotry appeals to many Tory politicians.

While a majority of Britons say they would vote to leave the EU, polls show that most people do not seem to care much about Europe. In monthly surveys conducted by Ipsos-MORI for The Economist, only 7% cite relations with Europe as an issue affecting Britain.

Cameron thought that he could silence his own party’s dissenters by promising that, if re-elected, he would conduct a “fundamental renegotiation” of Britain’s relationship with the EU and hold a referendum in 2017, when he could campaign for continued EU membership because Britain’s main concerns were met. Unfortunately for him, EU leaders retorted that no changes to the European treaties would be possible by 2017, or, indeed, at any other time. As a result, the Conservative Party’s internecine battle over Europe quickly resumed.

Osborne’s speech on Wednesday was a serious attempt to restore credibility to Cameron’s EU policy by explaining why renegotiation of the European treaties will be inevitable, not just for sake of Britain but for the EU as a whole.

By shifting the main emphasis of Britain’s proposed renegotiation from emotive issues, such as immigration and agriculture, to more important technical issues connected mostly with financial markets, Osborne has laid out an agenda for negotiation that is both realistic and likely to be acceptable.

This is where British politics meets European economics. EU leaders who insist that the European treaties are set in stone must also believe that the euro crisis has been permanently resolved, and that Europe’s prosperity and stability are assured.

It is understood that the single currency can only survive in the long-term if there are major changes in the political, budgetary and financial governance of the eurozone. These reforms will, over time, involve large transfers of sovereignty from the national governments in the eurozone to the federal level. If such reforms do not happen, the eurozone will have to be broken up. In either eventuality, major changes will be inevitable in the EU treaties. And even if these changes take years to implement fully, negotiations about them will have to start soon. Either way, Britain will be involved in these negotiations, and the upshot will be significantly altered EU treaties, on which British voters could quite reasonably cast a referendum judgment.

The British voters’ judgment will almost certainly be positive. The technical issues that need to be resolved between Britain and the rest of Europe are infinitely less complex and troublesome than the profound differences over national sovereignty that have to be settled between Germany and Italy or France. If new structures can be designed to keep the eurozone together, it will be trivial to bolt on a few concessions to keep Britain in the EU.

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