Walker's World: Brexit or Grexit

By MARTIN WALKER, UPI Editor Emeritus

BERGERAC, France, July 29 (UPI) -- For the past two years, Europe has been gripped by the prospect of Grexit, a forced withdrawal by an impoverished Greece from the euro currency. Maybe Europe was looking in the wrong direction. Brexit, a voluntary British withdrawal, now seems ever more likely.

"The prospect of Brexit, not Grexit, will be the dominant issue for Europe and it looks ever more likely," says Denis MacShane, former Europe minister in the Tony Blair government.


The prospect is alarming Britain's friends elsewhere in the world. Its closest ally, the United States, has already been pressing the British government to remain as the best guarantee of its future influence in Washington.

Now the Australians have joined in, following the Japanese who warned recently that its future investments were likely to depend on Britain's continued access to the European market.


"Australia recognizes the U.K.'s strength and resilience and looks forward to seeing it continue as a leading economy and effective power," said the letter from Australia's foreign ministry. "Strong effective membership of the EU contributes to this."

Britain played a key role in charting Europe's foreign policy, the letter went on, and the author (whose name wasn't released but widely understood to be Foreign Minister Bob Carr) added. "I hope to see this continue long into the future."

Last week the first results arrived of the balance sheet audit commissioned by Britain's coalition government of the benefits and costs of British membership. Run by the civil service, after widespread surveys of businesses and various industrial and pressure groups, the audit concluded on balance that Britain's EU membership was positive.

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Most euroskeptics, who form the majority of Conservative members of Parliament, have long argued that British pays in more than it gets out and that the rules are rigged to benefit French agriculture and German industry while Britain is hamstrung by regulations from Brussels.

This has always been an illogical argument. The EU rules and regulations don't seem to harm British industry. And more Europeans complain that the rebate on the net payment that Margaret Thatcher secured 30 years ago means that Britain is the favored one. Certainly the German and Dutch pay far more per head into Europe than the Brits.


The first wave of the government review was published last week, the first six of 32 separate assessments of different aspect of EU membership, from economic benefits to foreign policy and legal obligations, health policy to immigration and from the impact on investment and productivity to cultural links.

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The review made an effort to be balanced. On the one hand, special access to the European Union's single market (which was itself largely created at British urging) meant Britain's gross domestic product was "appreciably greater" than if Britain were excluded. On the other hand, it noted concerns over EU regulation and "constraints on policy-making."

The review didn't attempt to put a figure on net costs and benefits but it cited six other studies, only one of which found the costs to be higher, claiming that Europe had depressed Britain's gross domestic product by 3 percent. The other five studies all agreed that EU membership had boosted GDP, one claiming the extra benefit to be as high as 6.5 percent.

"Is that trade-off, between cost and benefit, between economics and politics, of overall benefit to the U.K.? It is not possible to give a simple, unambiguous, and universally accepted response," the review said. "But most observers, and indeed most of the evidence received for this report, answer positively."


British Prime Minister David Cameron, nervous of the euroskeptics in his own party, released the review with little fanfare on a day when Britain was obsessed with the imminent royal birth. Cameron has announced a nationwide in-or-out referendum after the next election, and said he would campaign to stay in the European Union, so long as some key reforms are enacted. The last opinion poll before the review was published, by YouGov, found 46 percent of respondents said they wanted to leave, 35 percent to remain, 16 percent undecided and 4 percent saying they wouldn't vote.

The review may change these figures and much will depend on the feel-good factor at the time of the referendum, scheduled for 2017.

The latest data from the Office for National Statistics suggest that unlike the rest of Europe, Britain is recovering from the recession, with growth up 1.4 percent on the previous year and for the first time in over three years all sectors of the economy -- agriculture, production, construction and services -- were enjoying simultaneous growth.

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But since the eurozone economy is drifting back into recession, it isn't easy to claim that Europe is fueling the British recovery. Indeed, the euroskeptics say this buttresses their view that Britain is better off outside the European Union.


Purely economic arguments tend to miss a key point, that the European project is less about economics and more about the creation of a new post-national European sovereignty. For Germans, whose experience of nationalism has long been a nightmare from which they seek to awake in a new Europe, this remains a potent issue. For deeply established nation states like Britain and France, the post-national ideal looks far more problematic.

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