When you think of the biggest victims of the European debt crisis, the feckless four—Greece, Portugal, Ireland, Spain—quickly come to mind. The list now also includes recession-stricken Italy and zero-growth France. You might be labelled daft if you put Britain on the victims’ list, but it is there, guv, that Her Majesty’s green and pleasant and increasingly irrelevant land belongs.
Britain has not been bailed out, nor is a bailout probable (that happened back in 1976, when inflation was running at more than 20 per cent and the International Monetary Fund rode to the rescue). Its sovereign bond yields are among the lowest in the industrialized world. Yes, its national debt is rising relentlessly, its budget deficit as a percentage of GDP is twice as large as Italy’s and it just crawled out of a double-dip recession that could well turn into a hat trick. But those are not the big problems.
The biggie is self-imposed isolation from continental Europe, aided and abetted by right-wing Conservatives’ mocking hatred for the apparently failing Great European Project. Britain’s steady drift away could damage its already deindustrialized economy. It risks evolving into little more than a playground for foreign-born millionaires and billionaires who amuse themselves by buying soccer teams and Louboutin shoes for their mistresses.
Britain has always had strained relations with Europe. After the Second World War, it felt no compelling urge to, in effect, merge its economy with its former enemies. It was just as cool to countries it helped to liberate, among them France, Belgium and the Netherlands. Continental European countries certainly had the urge to merge, if only to prevent themselves from slaughtering one another again.
Britain did join the predecessor to the now-27-country European Union in 1973, but not without great wailing and gnashing of teeth. Two years later, Labour Prime Minister Harold Wilson, facing an anti-Europe revolt from a third of his cabinet, used a referendum to confirm Britain’s ongoing membership. Maggie Thatcher, then Opposition leader, voted in favour but would become one of the EU’s biggest critics once in power.
Since then, Britain’s co-operation with the mob on the other side of the channel has been halting, at best. Conservative party bickering about the Maastricht Treaty, which formally created the EU in 1993 and led the way to the launch of the euro, cost Thatcher and her successor, John Major, their jobs.
Tony Blair’s New Labour government toned down the euro skepticism, but mistrust came roaring back in 2010 under David Cameron’s Tories. Last December, as the 27-country EU tried to fend off collapse, Cameron vetoed a German-inspired compact designed to impose strict budget discipline on governments that break debt and deficit rules. Britain is now fighting planned increases in the EU’s seven-year, trillion-euro budget and wants no part of the euro zone’s plan for a banking union.
Cameron claims that he remains committed to the EU, for fear of losing access to the world’s biggest market. But he may be forced into a membership referendum by the Conservative right as the debt crisis eats euro zone weaklings alive. In October, Finland’s Europe minister Alexander Stubb told Reuters that “It’s almost as if the boat is pulling away and one of our best friends is somehow saying ‘bye-bye.’ ”
Britain’s long goodbye to Europe is fine if the country is en route to a better destination. But is it? Britain on its own might float like a stalled aircraft carrier in the eastern Atlantic. Its “special relationship” with the United States has conferred upon it only minor economic benefits and has plunged it into two go-nowhere wars so far this century. The country has also let its industrial might melt away. In a speech in London in 2011, Fiat-Chrysler boss Sergio Marchionne said that Britain’s deliberate decision to end large-scale engineering and manufacturing so it could concentrate on clean, high-paying services like banking was a fundamental error. “The equilibrium of the entire [British] economic system was undermined,” he said.
British banks are now shedding jobs at an alarming rate, and huge institutions, such as Royal Bank of Scotland, remain under government control. Factories are still closing. In October, Ford announced the demise of two car plants. Manganese Bronze, the maker of the London black cab, ran into the ditch in the same month.
Britain may not leave the EU altogether. But even if it just continues to paddle away, it will have little or no say as the EU and the euro zone forge ahead, directed by Berlin.
Blame Cameron, who is sacrificing long-term economic strategy for short-term political gain: the appeasement of his euro-skeptic wing. Britain may fancy itself the Switzerland of the North, with nukes. There is an equal risk that it will evolve into a vulgar little economy that uses the lure of low or no taxes to attract foreign wealth, a chilly Cayman Islands.