Hintergrundgrafik

insight

>> Stuttgart 16.06.2016

“My home is my castle” if there is one saying that captures the British spirit I guess this is the one.

A federal Europe has always been a thorn in the British mind set. If you listen closely to the leave EU campaign only small part of this is economically based argumentation.  Nigel Farage head of the United Kingdom Independence Party, similar to Germany’s AfD when it was originally founded, gladly points towards the EEA model and in his usual jolly self speaks of the fact that if Norway with its small population can sell 75% of its products into Europe than Britain with its 65 million can do far more. His main argumentation from an economical point of view basically comes down to the fact that Britain outside of the EU has a far better standing point to renegotiate trading deals than within the union, quote “Those countries have their own deals to maintain the type of trading relationship they want.”

In the remain base, David Cameron and more moderate tory politicians are warning of catastrophic economic implications should the country’s electorate choose to say “Non” to Europe, and it is on this basis that the Brexit campaign led by the former mayor of London. Boris Johnson and Nigel Farage argue vividly that the remain campaign are doing nothing else but scare mongering and remind the electorate that Switzerland and Norway are not in the EU either and are profiting from their position.

The money spent on being a part of the EU could be better spent on the failing NHS or education and Britain could even increase its profitability by negotiating better deals with countries outside of the EU.

There is no doubt that the argumentation from Farage and Johnson sounds reasonable and attractive. Getting away from the red tape of Brussels and being better off for it.  Listening to Farage you would feel that with the special agreements that Britain already has with the EU and its power compared to a Norway or Switzerland, i.e. could England be a military and economic might in Europe without worrying about what the European Technocrats think and say?  Will a membership in the EEA really save us so much money as Boris Johnson would like one to believe or is the Brexit campaign mistaken and unwittingly creating an illusion of being better off?

First of all we have to ask the question whether it is possible to measure England to Norway or Switzerland. Norway has been a member of the EEA since 1994 and rejecting a direct membership of the EU twice , nevertheless it pays EUR 850m a year, which is about the same as the benefits of what Britain receives yearly from the EU for diverse projects. If we spread this among head of capita, it is around the same percentage of what Britain pays yearly into the EU now. So could a membership of the EEA be as costly as the EU?

And what about the argumentation about avoiding EU regulations, in an article published in May’s edition of Spiegel, Norway must adhere to countless EU guidelines, like the free movement of workers, without having a voice in EU institutions. Were the UK to leave the EU and join the EEA, the country would continue paying and continue accepting guidelines from Brussels -- but it would no longer have the opportunity to be part of the negotiations that shape the European market.

Dennis Snower, head of the Institute of World economy in Kiel and having lived and worked for many years in the UK, speaking to the Spiegel says “The British would lose their influence in the EU but would still have to follow all the rules” and describes the “economic irrationality of the Brexit advocates” as “frightening”

And what about the Swiss British comparison?

 Switzerland is not even a member of the EEA, but has gained its role in Europe through a number of co-operations and negotiations of bi-lateral agreements over the last 25 years, from which Switzerland benefits especially in its retail and engineering sectors. However, when it comes to a crucial sector of the Swiss economy, respectfully financial services there are no existing agreements. 

With London’s city (banking and insurances) forming the backbone of the British economy this could become increasingly troublesome.   It is unlikely should Britain turn its back on Europe that bilateral agreements being agreed on short term will be possible. The City is the gateway to Europe right now and appreciates a high level of attractiveness for investors worldwide.  America, Russia and countries on the Asian continent have already warned that a complete U turn of England could result in London’s attractiveness on the financial markets to decrease rapidly and more decision making going on in Brussels, Strasbourg or Frankfurt. This will have negative effects not only on the British banking sector, but the European economy as a whole.

Switzerland has managed to achieve its status over 25 years, therefore it is highly unlikely that Britain will achieve the same status as Switzerland in such a short space of time. Naturally the correct outcome of a Brexit are difficult to judge beforehand, however it is obvious that a clear win by leaving the EU whether joining the EEA or negotiating bi lateral agreements, the economic advantage is certainly not visible.

Andrew Lawrence

With help of Spiegel Online<<