TOP CITY ECONOMIST: ‘THE EUROZONE IS A COMPLETE DISASTER; BRITAIN MUST LEAVE THE EU’
Speaking to Money Week about his new book, The Trouble With Europe, which he says he wrote to get his thinking straight on Europe, Roger Bootle, founder of Capital Economics has said that a Brexit would be good for the UK economy.
“I think the eurozone is a complete disaster and I’m not a Johnny-come-lately on this subject I was saying it right from the beginning,” he said.
“The problem is really two-fold: firstly, you’ve got these countries on the southern periphery: Greece, of course, the most intense example, but also Italy, Spain and Portugal, which are uncompetitive.
“But the second aspect which is not fully appreciated, and it is, I think, at least as important, and that is the tendency for Germany and The Netherlands and some other countries, but mainly those two, to do too much saving. They run their policies too tightly.
“What the euro has done is it’s locked together these two groups of countries that behave fundamentally differently. In the old days the exchange rate acted as a flex, a hinge, enabling those two sorts of countries to work together. Without out it well you’ve got this ghastly stagnation.”
Bootle admitted that he has always been eurosceptic, but said that it was not until he sat down and started writing the book that he fully weighed up the costs and benefits of being in the EU. At the moment, he said, there “are so many studies of the issue that show actually the net balance of advantages and disadvantages is fairly small.”
But as the EU becomes more sclerotic thanks to the weight of regulation, Bootle said it woud become increasingly advantageous for Britain to leave the bloc and make its own way in the world.
“Probably in the long term [the economic costs are] not marginal. I think it could then be significant, because I see Europe going largely the wrong way: over-regulation, over-integration.
“I think the costs of that are going to grow over time; and similarly, Europe is fading in relative importance in the world. I think if Britain were outside the European Union it could take another direction. It could deregulate quite a lot, and, I think, bring quite a lot of advantages.
“So, I think it’s complex. Short-term: disruption, difficult. Medium-term, however long that is, I think the net balance is fairly marginal. Looking out longer-term, it could be substantially positive to be out.”
Responding to questions over whether an independent Britain would have to enact EU regulations anyway in order to maintain trade agreements with the EU, Bootle responded: “This is a tricky issue. I think one of the most important points in the case against staying in is that yes we have to have certain regulations in place if we’re trading with Europe but if we weren’t in the EU we’d only have to have those in place in those industries and businesses which were exporting to the EU.
“Of course, that’s a tiny minority in relation to the system as a whole. If you’re in the EU then you have to impose those regulations across the whole economy. So, little sandwich sellers in Dagenham have to comply with the regulations about working hours and all these other things, whereas if we weren’t in the EU that wouldn’t apply.”
Bootle’s comments come as the British Eurosceptic campaigns gear up for a referendum fight, following the Conservative’s victory in last week’s general election. Prior to the election Prime Minister David Cameron had vowed to hold an in-out referendum on the back of treaty renegotiations by 2017, although reports this week suggest that a vote could come as early as next year.
Rory Broomfield, director of the Better Off Out campaign for British independence said “Regardless of the recent General Election result in the UK, it is clear that the EU will still expand, with or without the United Kingdom. If the British public do get a chance to vote on whether they stay in or leave the EU, they need to recognise this.
“It should be noted that, despite all the scaremongering, the UK is the fifth largest economy in the world, with global connections and the ability to not just survive but thrive in the world outside the EU. The UK has everything that could allow it to act as an independent, globally oriented country.
“As a result, the UK should think again at tying itself to EU membership. We will be increasingly held back and undermined by the increases in the EU’s scope over the next few years and beyond. There is opportunity out there: we just need to decide whether we want to be part of it.”