Europe fears Brexit because it would unleash forces that could prove impossible to control

Jeremy Browne
European Debt Crisis Grows
Rip British financial services out of the EU and it leaves a large hole (Source: Getty)

In Britain, we inevitably focus most on how our departure from the EU would affect the UK. What the other countries in the EU mainly worry about, however, is how it would affect Europe. They are standing back, nervous that any intervention could be open to misinterpretation and be counter-productive, but they watch our referendum with trepidation.

The consensus is that it would be damaging if Britain walked out; but different countries have different reasons for coming to that conclusion.

There are those that most admire and agree with Britain. As a rough guide, the further north and east the country, the more supportive they are of British positions: the Scandinavians, the Baltic States, the Irish, the Dutch and many of the former Eastern Bloc countries.

Read more: Why Ireland only sees risks from Britain leaving the EU

They generally share Britain’s long-standing preference for a less centralised, more free market EU and want to see more wealth-creating policy initiatives. They instinctively step back from the idea of a “United States of Europe”, preferring to be one of the “States of a United Europe”. Britain is the big kid in their gang; the country with the bulk to best promote their interests effectively.

There is another group of countries with another reason to be wary of Britain leaving. These are less like-minded with Britain – sometimes even ideologically unsympathetic – but value our interventions aimed at preventing the EU from being shaped by Germany (either alone or in combination with France) and then presented as a fait accompli to the other member states.

Where all these countries agree, though, is that our departure could unleash unpredictable and possibly uncontainable political consequences.

It would also be delusional for other European countries to believe the economic status of the EU would not be severely damaged by Britain leaving. There are some covetous glances at the jobs in the City of London, especially from Paris, but most informed opinion understands the bigger risks for Europe.

Read more: Twelve reasons Britain is better off remaining a member of the EU

Some of the jobs lost in the City would resurface in other European cities, but others would go to New York or Asia, or disappear altogether. The net effect would be a weakened Europe, left with multiple mid-scale financial centres, but with a diminished global-scale hub. That would be symptomatic of a wider problem for a continent that does medium better than it does big.

The stated ambition of the EU Commission is a more competitive, job-creating Europe. There are plenty of problems, though: inadequate capital flows to support business expansion, deficient physical and communications infrastructure, insufficient private saving and pension provision. Added to that we can include slow growth, a rapidly ageing population, combined with chronic public debt and high unemployment in many countries. There is no major EU economic problem to which the solution is the loss of Europe’s only world-class financial centre.

What, after all, are Europe’s indisputable global economic attributes? German engineering, specialist manufacturing, some creative industries – and British financial services. Rip the last out of the EU and it leaves a large hole.

Read more: Brexit could spark an EU renaissance if elites recognise their failings

The dynamic of negotiating our departure will be very complicated. There is only one thing more damaging to the EU than Britain leaving – apart from Germany or France leaving – and that is Britain leaving and succeeding.

That may not happen – our country will be disadvantaged by diminished access to the Single Market, particularly in financial services – but it raises an existential threat to the EU.

The referendum matters to Britain, but it matters to the rest of Europe too. And, to complete the circle, what matters to the rest of Europe matters to Britain, whether we are in the EU or not.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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