Stunning Blow to EU Scaremongers over Brexit

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French investment bank Natixis sides with rebellious islanders.

The UK will hold a referendum by the end of 2017 on whether or not to stay in the EU. No country has ever left the EU. The fact that the now second largest economy in the EU is threatening to do so because its people may want out has set off a bout of hot-and-heavy scaremongering.

Visions of doom and gloom are used to beat the rebellious islanders into voting the right way and submitting without further demur to the yoke of Brussels. Even the US has jumped on the scaremongering bandwagon. Everything must be done to hold the EU together, and some rebellious islanders aren’t going to muck it up. That’s the theme.

But wait a minute, said Natixis, the investment bank of France’s second largest megabank, Groupe BPCE, in a new report: a “Brexit,” it said, would be “a non-event.”

It then poured cold water over all the scaremongering.

The economic policies of the UK are already independent from those of the Eurozone, it said. “The situation would be very different” if a Eurozone country, like Greece, wanted to get out of the EU and “take advantage of the exit to devalue its exchange rate….”

But the UK already has its own monetary and exchange rate policies. It runs whatever budget deficits it wants to, unconstrained by EU rules, which limit deficits to 3% of GDP. The EU imposes draconian punishments on violators, such as gnashing its teeth in public, as it did when Germany was among the first to violate that rule.

The UK doesn’t worry about that circus. Its fiscal deficit exceeded 10% of GDP in 2010, and even now, it sits on a deficit of 4%. While Greece was going through the bailout extortion racket after the Financial Crisis, the UK was happily printing money and monetizing its deficit. Everyone’s doing it, even the ECB – though Eurozone countries that need it the most, like Greece, can’t benefit from it, while others like Germany and now Spain are awash in this money, and negative interest rates see to it that their governments get paid to borrow.

Britons see this absurdity and are scratching their heads.

There are other differences, according to Natixis: In the UK, the tax burden, at 34% of nominal GDP, is lower than in the Eurozone, at 40%, with some countries lower than the UK, and others higher, such as Denmark, France, and Belgium at just under 50%.

Welfare benefits as percent of nominal GDP in the UK are lower than in the Eurozone. But both have increased over the years, with the UK’s rising from 12.4% in 2002 to 13.8% now, and the Eurozone’s rising from 16.2% in 2002 to 17.2% now. Corporate income tax rates are low in the UK: its 20% rate compares to Germany’s 30.2%, France’s 34.4%, Spain 28%, and Italy’s 27.5%.

But these differences, however important they might be, Natixis says, “would be neither greater nor smaller after a UK exit from the EU.” So in these respects, a Brexit won’t change anything for the UK.

What about the threat that a Brexit would crush the UK’s exports of goods and services to the EU? Um, well – a Brexit would only have “muted impact.”

In terms of trade, if the UK leaves the EU, it has two options:

First option: it can join the European Free Trade Association (EFTA) and its four Member States: Iceland, Liechtenstein, Norway, and Switzerland. In that case, a Brexit might have no “significant” impact on trade. But the UK would have to subject itself to very EU regulations it’s trying to get out from under. So if the UK wants this, Natixis says, “it is difficult to see any reason to leave the EU” in the first place.

Second option: it does not join the EFTA. In that case, customs tariffs may be introduced between the UK and the EU. But they won’t have much impact either.

Turns out the UK has only a “small-scale industry.” Exports of goods from the UK to the EU have been declining, now at 6.5% of GDP. And the price elasticity is low: “For a customs tariff of 10% in both directions, the shortfall in exports would lead to a loss of 0.25 percentage point of GDP” in the UK, “which is very small.”

But the UK has “large-scale exports of services,” which has risen to 12% of GDP now. They’re centered on financial services, a sector that employs 3.5% of all workers. However, these services are highly specialized and would probably only be “very slightly affected.”

For the City of London, one of the most opaque financial centers of the world and a key to the UK economy, a Brexit may be a mixed bag of minor proportions.

Some financial services, such as investment banks or asset managers, might relocate some of their services to the EU. But others, such as hedge funds, would be attracted to the UK, as “one of the objectives of a ‘Brexit’ for the United Kingdom is to have less restrictive financial regulations than those applied in the Eurozone….”

A Brexit would only have “limited impacts” on the UK economy, Natixis concludes. “But there would obviously be a negative impact on the European Union’s economic and diplomatic weight.”

So all the scaremongering may be about the EU and not the UK. It isn’t about the economy, which would be fine on either side of the Channel, but about political power, about the EU’s “economic and diplomatic weight” in the world, and about the size and power of the bureaucracy in Brussels.

Those rebellious islanders in the UK who are threatening to muck up the dream of the Eurocrats are under intense pressure. And the name of the game is fear. Read… US Threatens UK over Brexit Vote

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  17 comments for “Stunning Blow to EU Scaremongers over Brexit

  1. November 19, 2015 at 2:44 am

    “Visions of doom and gloom are used to beat the rebellious islanders into voting the right way and submitting without further demur to the yoke of Brussels.”

    Nothing wrong with putting fear in the minds of sheep. It’s how we Americans have scaled Mount Everest. Fear, indifferent, and poverty are handed down from generation to generation just like courage, concerned and wealth. If 200 wildebeest turned their horns towards the lions instead of their butts, the outcome would be altogether different. No, the job of the sheep is to provide the wolves with wool and sing the sheep’s National Anthem, “Someone Should Do Something”.

    • Mark
      November 19, 2015 at 8:23 am

      Well said.

    • November 20, 2015 at 10:50 am

      US debt is about 140% or more to GDP ,,,,, The payment is
      6.2 Trillion each year . Oh fear monger,,,,,What the Hay !

      It,s Over for Anerica !

      • Bob Miller
        November 20, 2015 at 3:02 pm

        America, north and south, are land masses. So long as the Earth is human friendly, humans will live on these land masses. It really doesn’t make any difference what name they go by. If you’d like to watch the greatest video ever made on the subject (3 minutes or so) click here:

  2. CrazyCooter
    November 19, 2015 at 2:45 am

    Let’s keep this Euro discussion a bit on the short side, shall we?

    From WIKI (RE: Charlemagne)
    Charlemagne had an important role in determining the immediate economic future of Europe. Pursuing his father’s reforms, Charlemagne abolished the monetary system based on the gold sou, and he and the Anglo-Saxon King Offa of Mercia took up the system set in place by Pippin. There were strong pragmatic reasons for this abandonment of a gold standard, notably a shortage of gold itself.

    The gold shortage was a direct consequence of the conclusion of peace with Byzantium, which resulted in ceding Venice and Sicily to the East and losing their trade routes to Africa.


    The resulting standardisation economically ***harmonized and unified the complex array of currencies which had been in use at the commencement of his reign***, thus simplifying trade and commerce.

    Except, it didn’t really. And Byzantium, if I recall correctly, did quite all right for damn near a thousand years under christian rule and a gold standard.

    I’d sign up for that.

    This is also known as a monetary union doesn’t work (i.e. joint and severally liable with your broke disk brother in-law). Because crappy government leaders who high-roll on OPM aren’t really good for currencies (i.e. just like your broke disk brother in-law).

    Sorry if the redneck and history is overboard. :-D

    Gold doesn’t solve the problems. The problems (as I comment regularly) are PEOPLE. Greed, stupidity, etc. That is why we have CYCLES. The smart ones forget and the dumb ones are still dumb and the greedy ones have new suckers.

    Hope you at least laugh the the video/youtube; it is about the dumb ones. If that ain’t you, are you greedy or did you forget. :-D



    P.S. Corb Lund (the band that did the video) are Canadian and have a great show – see ’em live. I often feature them in my radio show and are deeply talented musicians.

  3. Nick Kelly
    November 19, 2015 at 8:56 am

    So let’s see- the UK has only ‘a small scale industry’ with exports to the EU declining. Well they sure as heck aren’t picking up to North America. The German owned Mini is made in the UK- I haven’t seen ‘Made in the UK’ EVER. Just a few remnants: “Made in England”
    Ah, but fintech, employing 3.5 % of all workers, concentrated of course in the opaque City.
    And all is well because they can happily run big deficits, knowing better than the Germans that printing money creates prosperity.

    This sounds like something that works until it doesn’t. Like if they were to stop buying houses from each other, or if the Chinese and Russians at the top of the chain stopped buying in London.

    The ability to run deficits falls apart if there is a run on the pound sterling, and the wheels have come off the pound more than once. ( It would be interesting to know what the UK government really thinks of the yuan’s pending admission to the IMF reserve currency club. I’ve talked to people on these sites who didn’t know that the pound was still a reserve currency. It has by far the smallest economy behind it)

    One of those times was around 1974, when, just thirty years after the end of WWII, the 15th million VW Beetle rolled off the line, displacing the production record of the Model T Ford. And wiping out along the way the perennially strike-bound British motor industry.
    In the run-up to their painful and humiliating approach to the IMF, the Brits tried to hit up (West) Germany for a loan.
    “Bloody krauts’ said the UK minister when he heard that although the Germans wouldn’t help support the pound, they would help France support the similarly stressed franc.

    (If the above sounds anti-Brit, I am one, a dual citizen of the UK and Canada. I just think that fintech replacing industry is a dubious strategy.
    I also think that a lot of the UK opposition to the EU is stronger in the rust- belt north and is serves as kind of proxy for the underlying discontent with the prosperous south which is both the heart of fintech and the real estate bubble.)

  4. Petunia
    November 19, 2015 at 10:52 am

    I follow the bitcoin and crypto currency space, and many of these companies are being nurtured in the channel islands, where there is little regulatory over site. With online gambling under pressure in the US, they too are looking to go to a friendly place. The ultimate aim seems to be to create a wild west of finance, coupled with a data collection point where over site is also absent. Leaving the EU allows all this to continue and flourish undetected.

    • Nick Kelly
      November 19, 2015 at 1:41 pm

      And employing how many?

      • Petunia
        November 19, 2015 at 4:33 pm

        The employment numbers in the islands may not be high, but the cash flow thru UK banks could be enormous, leading to employment there.

        • Nick Kelly
          November 19, 2015 at 6:44 pm

          You may be right about money flowing through UK banks.
          But I think the underlying probs for the UK go beyond finance, as good as might be for a small group.

    • Nick Kelly
      November 19, 2015 at 1:59 pm

      Jesus wept.

      And this channel island computer site will employ how many? And pay what taxes? The ones selected will not covered by UK law, that’s the attraction. As far as the economy of UK is concerned they might as well be on the moon.

      The City already is a wild west of finance. But with bigger fish.
      That’s why its opaque.
      Probably only the US-UK Special Relationship stops the US from turning its legal guns on London.

  5. Paulo
    November 19, 2015 at 12:02 pm

    I bought a new motorcycle this past summer. In a fit of enthusiasm I exchanged riding information with many Europeans, including several from England. I use my bike for fun on sunny days or when I need to do a sunny day shop in the nearest town. They use theirs to commute into London, 1.5 hours each way, rain or shine, snow or sleet, notwithstanding. Why? Despite having good financial employment they cannot afford to live in the city, nor can they afford to use the now privatized train service.

    My wife’s uncle has lived in Manchester his entire life. His children live in the north of England. The uncle is trying to hold on without getting mugged and killed before he passes on in old age. His children, (my wife’s cousins) all have adult kids living at home because thay cannot afford to move out.

    England, population of almost 64 million, imports most of its food. It is now very much a net energy importer with the demise of North Sea Oil (depletion). They have no manufacturing exports to think of, and no longer control foreign countries (colonies) to suck dry through their noble multi-nationals (HBC etc).

    Does anyone on this blog have a clue about how they plan to survive going forward? Banking? Arms exports? Tourism? James Bond films? Just curious.

    • Bob Miller
      November 19, 2015 at 12:17 pm

      Transatlantic Trade and Investment Partnership?

    • December 14, 2015 at 11:55 am

      Thank you Paulo for asking the right questions. It was about time!
      Andre Teissier-duCros.

  6. Dave Mac
    November 21, 2015 at 11:41 am

    The UK is getting very cosy with China, which currently dominates Asia and will eventually run the world.

    I’m not sure how America will cope when Clinton is elected in 2016.

  7. major
    November 21, 2015 at 10:12 pm

    Why are these other countries trying to pull Britain back in? Because the World Globalist agenda falls apart if one country succeeds in withdrawing from EU. It will show others they too can withdraw and the Globalist goal of one World government is set back decades.

  8. jon livesey
    December 16, 2015 at 1:51 pm

    I don’t have much to say on the supposed issue of the column, but I am really struck by the utter cluelessness about the UK in the comments.

    Guys, the very first sentence in the column points out that the UK is the second biggest economy in the EU, and it’s the second biggest exporter as well.

    Yet most of the comments seem to assume that it’s some poverty stricken little Island where we are all raised in orphanages.

    Please, get up to date, hey? The Internet is a wonderful source of information, and you can learn a lot. It’s not just a place to post totally uninformed comments.

Comments are closed.