Posted at June 23, 2015, by Raleigh Addington, Comments Off on “Would it actually matter if Britain left the EU?” Eurozone expert Wolfgang Münchau analyses the economics of Brexit
Wolfgang Münchau is considered one of the world’s foremost experts on the Eurozone. Writing for Prospect Magazine, he argues that whilst there is a case for Britain remaining a member of the European Union, it has little to do with economics.
Wolfgang counters the common economic arguments for staying in, and demonstrates that relying on insecure arguments serves nobody. For example, whilst “The single market has a certain ‘motherhood and apple pie’ quality—it is very hard to be against it”, it is not known how much is the single market really worth. Wolfgang points out that EU-wide productivity has been in decline since the official start date of the single market in 1992, and as such “the single market is not visible in the macro statistics.”
He concedes that leaving would present risks, but none compelling enough to make the case for a vote to stay in. “No matter what happens,” Wolfgang contends, “Britain’s future relationship with the EU is going to be one of semi-detachment.”
Click here to read a summary of his key arguments.
Firstly, David believes that the British economy has all of the vitality of a “fatigued and aging tortoise.”He feels that the government has frightening people and businesses into lower spending, which lead to lower demand and therefore the risk of a “lost decade” in the Japanese mould.
Secondly David draws attention to the concept of a “balance sheet recession” where companies and households have increased their savings by more than the government has borrowed. This implies that the government is somewhat premature in its fiscal consolidation: the UK is not Greece. The UK has much stronger fundamentals than the Greek economy.
David joins Paul Krugman and Larry Summers in arguing against the “voodoo economics” of deficit reduction. He states that it is simply impossible for a government to nurture and support the private sector while halving the deficit: they are mutually exclusive goals. Only time will tell if he is correct.
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