Brexit | Europe’s 21st Century Renaissance?

Brexit | Europe’s 21st Century Renaissance?

As unstoppable continental plates move millimetre by millimetre in different directions, pressure builds. Where there is a degree of fluidity this pressure can be released slowly across a multitude of small movements, but this is not the norm. More commonly, the continents become locked in a titanic struggle. With each decade that passes the pressure increases locking the plates ever more immovably together. Until one day something gives.

The shock that follows and the forces that are unleashed are terrifying, but as the ground shakes the foundations are laid for a new age of stability, opportunity and prosperity.

With the seismic shock of the British vote to leave the European Union still reverberating around the globe, it is easy to forget that this decision has been a long time in the making.

For more than half a century the European project and its institutions have been moving unstoppably towards an ideal of a European superstate. Born in the aftermath of two World Wars this noble idea was intended to bind the people of Europe together and deliver peace and prosperity. Initially this proved highly successful but slowly over the decades the European political class has pushed relentlessly against a second unstoppable force – the will of the European people.

On Thursday 23rd June 2016 the pressure of these opposing forces finally gave way and the British people voted to leave the European Union.

To be clear this is not simply a British issue. It is true that the British have been most vocal and forceful in their opposition to ever closer integration, and to the great frustration of Europhiles in Brussels. It is also true that the political arguments, on both sides, degenerated into little more than rabble rousing and threats, stirring up ugly and at times disgraceful prejudice and fear. However, the underlying issue is much more fundamental. The European Union has not been listening to the people of Europe, and over many decades.

The fundamental premise of democracy is that parliament and governments represent the will of the people they are elected to serve. The test of any democracy is simple; Government and State are always the servant of the people, never their master. This truth has been long overlooked in Brussels, absorbed in the grand plan. Not only have they not been listening to the people, they have actively sought to overrule, overturn or manipulate the will of the people.

Never more clearly was this demonstrated than with the Lisbon Treaty. Rejected outright in its former guise as the European Constitution by the peoples of France and the Netherlands, what was the response of the European Commission? Change the name and push ahead regardless. The rationale in the European Commission was simple, noble ends justify any means.

The discord would not exist if the EU was delivering the prosperity it promises, but nothing could be further from the truth. By any measure the Euro experiment has proved an unmitigated disaster. The economic reasons why are well understood and I remember studying them at University over a quarter of a century ago. In reality the European Union has been a relentless drag on global growth for the past 20 years and the Eurozone has hardly grown at all in the last decade. Seven years on and Europe has done little to address the financial and banking crisis that has paralysed the continent.

While the European elite have talked of grand plans, ordinary people have suffered desperately. Many southern countries have experienced economic destruction on a massive scale driving unemployment to over 20%. In Britain it has been the younger voters who have been most vocal in wanting to remain in the EU, but this stands in complete contrast to much of Europe where youth unemployment has reached staggering proportions of up to 50%. These are levels that have almost always led to revolutions in previous eras, and yet the EU has done little to address these problems. Astonishingly, for some this weakness has been seen as an opportunity to push for complete unification.

It cannot be said that Britain did not try to change the direction of the European Union from within. On the contrary, so much was the frustration at Britain’s seemingly obstructive stance over many years that champagne corks popped in many quarters across Europe when the vote to leave became clear. That sense of release will also be felt in the UK over the coming months. No longer must we battle constantly with our friends and neighbours to get our point of view across. There comes a time when two opposing views must go their separate ways for the good of both, no matter how deep the bond between the parties or how difficult the separation.

That time was reached on the 23rd June 2016. In the immediate aftermath there is shock, distress and almost bereavement. But as the tremors die down there will be a tremendous release of positive energy both in the UK and in Europe. Decades of tension will be replaced by a sense that at last we can move forward, not as one European nation but as good neighbours and close friends.

For the UK, there will undoubtedly be substantial challenges in the short term, but I believe these obstacles can be readily overcome. Over the longer term the UK has a tremendous and unique opportunity to be at the centre of the global free market economy, driving prosperity across national borders and political constructs.

The European Union arguably faces even greater short term challenges, but again I believe this moment will be precipitous and profoundly positive. Europe must now confront an unavoidable decision. Push ahead for complete unification, or listen to its people. Even in the heart of the European Commission there is a realisation that there can only be one answer. Once understood, the great institutions of Europe can be properly harnessed and peace and prosperity will be well within reach.

Country in focus | Germany

Country in focus | Germany

Global Equities Q2 2016

Global Equities Q2 2016