EU Referendum - It's a Matter of Timing

As a macroeconomist I foresee a continuation of the economic downturn and perhaps even destruction of the eurozone over the coming years.

There has been a lot of talk in the media over the last week about the EU and the possibility of a referendum on the existing agreement the UK has with the European Union. I think the discussion started because of prime minister David Cameron's recent comments, in which he suggested a renegotiation of the existing relationship, although some euro sceptic groups have pushed for an 'all in' - 'all out' referendum instead. Either way the topic of Britain and the EU has been brought to the frontline of Westminster's political debate again.

Ed Miliband has subsequently stated he would not support a referendum on Europe and claimed David Cameron was, "sleepwalking us towards the exit door." Personally, I don't think David Cameron has any intention of putting forward any kind of referendum. I think that the recent increase in support for the United Kingdom Independence Party has led him to project a more anti European stance to slow the trend away from his party. I believe all of the media attention is merely an effort to maintain his political position, which is starting to slide.

If the prime minister was planning to push for a referendum on the EU in any shape or form it would be more likely to succeed, even if it was only a suggestion for his is own political agenda in the short term, if he put it forward later. Due to the weakening economic situation in the eurozone the strength of any argument away from the EU will be greatly increased as time passes. As a macroeconomist I foresee a continuation of the economic downturn and perhaps even destruction of the eurozone over the coming years.

Most of the attention on the eurozone economic crisis has been put on the PIIGS members states. However the research I have performed suggests the eurozone is in greater trouble than merely the 'known' sovereign crisis countries. There are a large number of former Soviet eastern block nations with staggering public sector debts, which will likely enter sovereign debt crisis in the next few years. Even the economically successful states such as Germany and France are likely to encounter economic difficulties due to weakening domestic output and a greater dependency on state support, partly caused by the aging demographic.

This indicates that not only is the sovereign debt crisis region likely to grow in the near future, but the ability of the wealthier nations in the monetary union to support the weaker members will decrease. As this deterioration takes place the political standing of the UK in any kind of referendum on the EU will become more tenable. In fact, if Ed Miliband was genuinely aiming for a continuation of the UK's relationship with the EU it would be advisable for him to support a referendum of some kind in the near future, rather than later, as it would be more favourable towards his agenda.

If you are interested in reading the data and analysis which led me to these conclusions on the future of the eurozone, you can purchase a copy of my book on the euro crisis here. In addition to the analysis I put forward a critique of the current economic model and infrastructure with some possible solutions in the latter part of the book.


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