The banks, not Brexit, will destroy the European Union

5 Oct 2016

 

Since the 2008 Great Recession, the words 'banking crisis' have emerged as a common theme in global politics. They will begin to do so again as the banks, not Brexit, will destroy the EU.

 

Our economy is due to grow by 1.8% according to accountancy powerhouse PricewaterhouseCoopers. The increase adds an estimated £5 billion to the value of goods and services produced here. The number of jobs in Britain has increased by four per cent since August.

 

Theresa May made clear at this year’s Conservative Party Conference two days ago that she will deliver a 'hard' Brexit. What this means is that Britain will quit the Single Market in a bid to end the free movement of workers. This is a bold decision by a prime minister who supported the Remain campaign during the EU Referendum. It also shows that the EU has a lot to lose from trading with Britain and vice versa. It is in neither party's best interests to make this divorce excruciatingly painful. The superbloc buys £61 billion worth of British goods and London is the financial centre of Europe. Is punishing us fundamentally worth economic turmoil?

 

The EU is vulnerable. Ireland is furious at the European Commission's decision to destroy its generous tax rates. Hungarian Prime Minister Viktor Orban has declared victory in a recent referendum that rejected refugee quotas. Yet it won't be Brexit, EIRE or Hungary that will destroy the European dream. Instead, those 'evil bankers' will do just that. 

 

There was considerable truth behind Vote Leave's argument that the Antartica is the only continent growing less than Europe. Since 2009, the latter has been plagued by years of economic decay due to numerous crises in Mediterranean countries. Greece almost quit last year. If it collapses, Germany and Italy will be the guilty culprits though.

 

Deutsche Bank, Germany's largest bank, is witnessing the beginning of a financial crisis on a precedent of the one in 2008. US regulators are fining the bank $14 billion. Last year, the company laid off 35,000 employees and announced a $7 billion loss. The burdensome stress tests imposed on banks after the Great Recession showed that the banking giant failed in every respect. If this bank falls, how many others will follow?

 

If Germany can avoid financial meltdown, who is to say that Italy won't? They have promised the European Commission that they will sell Banca Marche, Banca Etruria, CariFe and CariChieti, but they may have to resort to nationalising these failed banks. Italy is buckling under the weight of £270 billion in bad loans. Matteo Renzi, the Prime Minister of Italy, will be forced to resign in December if he loses his referendum on proposed reforms to deal with the problem. The term 'Quitaly' will start to roll off our tongues and Brexit will no longer be the new kid in town if this happens.

 

For all those Remoaners worried about Britain's economic future outside the EU, look to our continent. Who would you rather trade with? Prosperous countries like Australia? Or a dying European economy that will consist of 19% of the world's GDP by 2020? Our booming economy and the emerging threat to stability from across the continent demonstrates Stronger In's arguments were pure fallacy.

 

With the EU in such a vulnerable position and the Government planning a full Brexit, are they essentially going to destroy their economic ties with a country they so badly depend on at the moment? Brexit won't destroy the European project; the banks will soon enough. As Bill Clinton once said: 'it's the economy, stupid.'

 

Read more articles by this commentator, or follow @matthewjsnape

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