Jeffrey Ball: Being a country outside the EU is politically and economically uncomfortable

Brewin Dolphin's Jeffrey Ball says there is still much work to do but the final destination is still a fully integrated United States of Europe

EEC building Brussels Belgium
EEC building Brussels Belgium

On a warm day in September 1946, the great and the good of the University of Zurich gathered in its auditorium and turned their attention to a bowtie wearing gentleman who had risen to speak.

Despite the fatigue of a heavy travel schedule, Winston Churchill spoke energetically of his vision of how to maintain peace after seven years of war. An idea of “some kind of United States of Europe.”

The European Union and full integration across the region is still relatively young as an economic concept. Formed in the shadow of World War II, the primary desire was to protect against another war, coupled with the burgeoning notion that bigger is better and a united Europe would allow them to compete more effectively on the global stage in the face of a rising challenge from Asia.

A founding father of the concept of the United States of Europe (USE), Churchill was rarely seen without his bowtie.

No one knows why he was so keen on them. One theory is it was a tribute to his father, who he had a difficult relationship with.

The Greeks have their own ‘difficult relationship’ at the moment. Threatening a ‘Grexit’ by leaving the union, Greece’s ruling party, Syriza continue to rock the boat and demand an end to the imposed austerity measures.

The radicalism that got them elected in January has lessened now as Europe continues to deny their demands like a firm parent slowly losing patience with a tempestuous toddler. With no progress being made, the Greek people too are losing enthusiasm for the Syriza party’s policies and the move by Prime Minister Alexis Tsipras to requisition an estimated €1-2bn from local government coffers to attempt to stave off a default has understandably not gone down well either.

The yields of a country’s government bonds are an easy measure of the market’s concern for its fiscal health, so the fact the Greek’s yields have started to fall back to 15% after spiking at around 20% for five year bonds is telling. This is compared to the UK equivalent, which yields about 1.4%.

Despite this, Greece remains in the minority and it is still seen to be better to be in the EU than not. From the original six countries there are now 28 and as it continues to grow; being a country outside the EU is increasingly politically and economically uncomfortable.

If European integration is so good, why then is Greece waiting at the door with its coat on? It could be argued that the aim of full integration has been filed under ‘in progress’ for too long and the time it is taking to reach the cherished land is leading to a loss of faith in the idea.

If the US has been a noble steed galloping over the horizon of economic recovery then Europe has been a camel lumbering behind like a horse designed by committee. The US started quantitative easing in 2008, a few months after the Lehman Brothers collapse, Europe announced its own quantitative easing this January. US unemployment has fallen to 5.5%, the European Union’s is 9.8%.

Until there is a full integration of both the economic and political fronts and a streamlining of the burdensome bureaucracy, there will always be potential issues.

When the Treaty of Rome was signed in 1957, the purpose was to enhance economic prosperity.

It was not until 1992 that we first saw mention of political elements, when the Maastricht Treaty was put together to prepare for the beginning of the Euro currency, which brought its own issues.

There is still much work to do but the final destination is still a fully integrated United States of Europe. Remember it was a bloody, war torn path before the USA emerged in 1776, so it would be wrong to think the path to the USE would be easy.

But there is still a long way to go before the European flag stops resembling a patchwork quilt.

Jeffrey Ball, Assistant director, Brewin Dolphin


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