Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19
The IPO Market Is Nowhere Near a Bubble - 9th Oct 19
US Stock Markets Trade Sideways – Waiting on News/Guidance  - 9th Oct 19
Amazon Selling Fake Hard Drives - 4tb WD Blue - How to Check Your Drive is Genuine  - 9th Oct 19
Whatever Happened to Philippines Debt Slavery?  - 9th Oct 19
Gold in the Negative Real Interest Rates Environment - 9th Oct 19
The Later United States Empire - 9th Oct 19
Gold It’s All About Real Interest Rates Not the US Dollar - 8th Oct 19
A Trump Impeachment Would Cause The Stock Market To Rally - 8th Oct 19
The Benefits of Applying for Online Loans - 8th Oct 19
Is There Life Left In Cannabis - 8th Oct 19
Yield Curve Inversion Current State - 7th Oct 19
Silver Is Cheap – And Getting Cheaper - 7th Oct 19
Stock Market Back to Neutral - 7th Oct 19
Free Market Capitalism: Laughably Predictable - 7th Oct 19
Four Fundamental Reasons to Buy Gold and Silver - 7th Oct 19
Gold and Silver Taking a Breather - 7th Oct 19
Check Engine Warning Light ECU Dealer Diagnostic Cost - Land Rover Discovery Sport - 6th Oct 19
Natural Gas Reloads For Another Price Rally - 6th Oct 19
Understanding and Purchasing different types of Plastic Building Materials Online - 6th Oct 19
Craig Hemke: Ignore the Elliott Wave “Buffoons” Calling for a Gold Crash - 6th Oct 19
Stock Market 6 Month Trend Forecast Conclusion - Video - 6th Oct 19
The True Causes Behind the Yield Curve Inversion and Gold - 5th Oct 19
Strategies on how to be a Successful CFD Trader - 5th Oct 19
Gold Stocks Correction Underway - 5th Oct 19
Climate Change When the Levee Breaks - 5th Oct 19
Federal Reserve Bank ‘Guarantees’ Dow Will Not Sink Below 26k - 5th Oct 19
The Russell and Transportation Tell A Completely Different Stock Market Story - 4th Oct 19
Confidence Drives the Economy and Trump’s Trade War Is Killing It - 4th Oct 19
ADL Predicts Crude Oil Prices Will Fall Below $40 - 4th Oct 19
Investing Money? Why You Need a Reputable Accountant - 4th Oct 19
Stumbling Manufacturing and Rising Gold – Now or Later? - 4th Oct 19
Silver Eyes Fourth Quarter Rebound - 4th Oct 19
Gold Price Forecast to Exceed $10,000/Ounce - 3rd Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

UK Election Result Strikes Another Blow Against EU

Politics / European Union May 17, 2015 - 07:55 AM GMT



Ryan W. McMaken writes: With the victory of the Conservatives in last week’s British election, the future of both the European Union and the United Kingdom looks more doubtful. Newly re-elected Conservative Prime Minister David Cameron, in order to please anti-EU constituents who were essential to his re-election, promised a referendum on EU membership by 2017, although it could come sooner than that.

At the same time, the promised referendum is again inflaming secessionist sentiment among Scottish nationalists and separatists who wish to remain a part of the EU.

Naturally, it would be highly simplistic to point to the EU issue as the only major issue behind the Conservative victory. As Louis Rouanet points out here, the British economy in recent years has performed relatively well — with an emphasis on the word “relatively” — and has done so by eschewing the French model of tax hikes and increased interventionism. Whether deserved or not, Cameron was probably able to convince more than a few voters that he deserved some credit for this.

A Gain for Euroskepticism

Nevertheless, the election was a good sign for the euroskeptics, even in the face of the United Kingdom Independence Party (UKIP)’s inability to deliver much in the way of electoral success to its members. CNBC explains:

Yes, [UKIP] got one MP — but 3.5 million people (in a country of around 62.5 million) voted for the anti-EU party. If there is a low turnout for the EU referendum, and you add the number of people who voted UKIP to those who voted for other parties but aren’t keen on the EU, there might be a real risk of exit.

So, the Cons were able to peel a lot of people out of the UKIP camp, but there remains a real core of anti-EU voters out there whom Cameron (who is a Europhile) can’t simply ignore in the face of his razor-thin victory.

Cameron’s promised referendum has caused the term “Brexit” — with obvious allusions to the possible Greek exit or “Grexit” — to enter the international lexicon. But of course a British exit would be a totally different matter than a Greek exit. For one, Greece is part of the eurozone, while Britain is not, but more importantly, Greece is a net receiver of EU welfare while Britain is a net payer.

In other words, Britain, like Germany and France, are the larger productive economies in the EU that pay the EU’s bills, give it economic influence, and produce the wealth that gets spread around to the less-productive countries like Greece and Ireland.

It’s not difficult to see why some Brits might tire of paying Portugal’s bills when Britain has plenty of economic challenges of its own.

Scotland Looks to the EU and Secession

Of course, I use the term “Brits” loosely. “The English” would be a more accurate term in this case since the Scots, knowing how their bread is buttered, continue to look to secession and the EU as a possible escape plan if the Conservatives deliver at all on their promises to slash government spending or withdraw from the EU.

This would make perfect sense for the Scots, of course, since the EU might indeed offer more generous welfare benefits than the Tories in England. Scotland only has to look next door to Ireland — which benefited mightily from EU largesse during the 1990s — to see how a small relatively poor country can do quite well as an EU receiver state. The Irish state still brags about being a net receiver of EU funds.

Thus, we find that if the British manage to leave the EU, the Scots would be likely to seek secession soon after. Rather than living largely off the forced generosity of taxpayers in England, though, the burden would be passed over to German and French taxpayers, among other northern Europeans.

The biggest loser in this whole reshuffling would be members of the Labour Party in England, who would still be subject to the edicts of London, but who — without reliable left-wing Scottish votes on their side — would be relegated to a political party with little hope of gaining a majority in Parliament in the near term.

(This analysis of course ignores all the non-financial repercussions of a more Conservative British state such as the decline of civil liberties, a strengthened surveillance state, and possibly a more belligerent foreign policy.)

Meanwhile, Back on the Continent

At the other end of the equation, the balance of power in the EU would shift dramatically as well. With the departure of the UK, the productive economic base — the “net tax payer states” of the EU, such as Germany — would be depleted even more, and the balance of power would shift even more to the more numerous net tax receiver states. Would this accelerate a German exit in a scenario similar to that imagined by Patrick Barron? Possibly, although it’s hard to predict how long the Europeans can keep using Nazi war guilt to keep the gravy train flowing out of Germany to the rest of Europe.

In addition to promising an EU referendum, Cameron has said that he will seek to renegotiate the terms of the UK’s relationship with the EU. With recent floods of refugees and migrants to Europe, the pressure on Cameron for successful renegotiation has increased. EU politicians have proposed spreading out migrants in a resettlement plan across numerous European countries. Naturally, British nationalists aren’t fond of that idea, since new migrants would place additional pressure on the British welfare state. But even if no migrants ended up in the UK at all, the British would end up at least partially funding resettlement through their EU taxes. A partial answer to it all can be had by simply leaving the EU.

As a final note, it might be worth remembering that back in America, the land of the free, the net tax payer states face few legal options if they grow weary of funding welfare programs and government projects in other states. If Colorado and Texas and Minnesota tire of being made to throw money at Mississippi, South Carolina, and Vermont, it’s just too bad for them. In Europe, wanting to break off from the centralized political structure is often called “skepticism.” In America, it’s usually called “treason.”

Ryan W. McMaken is the editor of Mises Daily and The Free MarketSend him mail. See Ryan McMaken's article archives.

You can subscribe to future articles by Ryan McMaken via this RSS feed.

© 2015 Copyright Ryan McMaken - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules