“Brexit” and the Euro


As was to be expected, the EU Summit delivered an ambiguous communique covering the apparently consensual desire to find a solution for avoiding “Brexit”. If the good faith of the parties is hardly in doubt, no serious path seems in sight leading to a bridging of the gap between the British demands that are susceptible a) to weaken some of the fundamental principles enshrined in the treaties (freedom of movement of people together with related rights and primacy of Community over national legislation) and b) to grant non EMU Members rights that would limit those of participants.


In addition, the lines of fracture between Member States are different when addressing one or the other of these areas of contention which complicates reaching an agreement and also undermines David Cameron’s negotiating stance of “divide (and bluff) to reign”.


In an effort to lessen the controversy surrounding peaceful cohabitation between the EMU and non-Members, it might prove advantageous to remove this question from the perimeter of the direct negotiations with the UK and treat this important subject within the IMF, integrating it into the broader framework of the stability of international financial markets.


Building on the recent decision to include the Yuan in the composition of the SDR and aware that a currency war would endanger the world’s fragile economy, it would be appropriate to convene a meeting of Governments and Central Bank Governors representing the currencies included in the basket (USD, €, YEN, £ and YUAN) to agree on a set of rules aiming at prohibiting discriminatory practices that would harm the collective or individual interests of participants or of the market in general.


In such a framework, the UK could find the protection it seeks without bestowing on it, within the EU, specific rights that would limit unilaterally (and unacceptably) the necessary freedom of action of the Eurozone’s economic and monetary authorities.


This uncoupling of monetary questions from the broader search of a compromise allowing the UK to remain a member of the EU would greatly facilitate the negotiations. Indeed, it is hard to envisage that a give and take compromise, involving any attribute whatsoever of monetary sovereignty of either the Euro or Sterling is a realistic possibility.


At a time where the further integration of the Eurozone has become an absolute necessity to ensure the survival of the single currency, the acceptance by the UK of such an approach would demonstrate that it is not seeking to protect indirectly purely national interests (the City), in particular, in the event that other Members having joined the Eurozone (as they are obliged to under the treaty), that the double majority voting system currently in force would become obsolete.


By increasing the chances of avoiding Brexit, the UK is contributing in its own interests, to the consolidation of the €. Indeed, its implosion would, on par with the reinstatement of internal borders mentioned by President Juncker, lead to the disintegration of the Union and thus void any need for a post Brexit deal with the EU.

The damage inflicted both on the economies of the continent and Britain, as well as its worldwide effects, on a scale equal if not greater than the crisis of the 1930’s, would have profound geopolitical consequences from which Europe as a whole would take years to overcome.


Brussels, 18th December 2015



Paul N. Goldschmidt

Director, European Commission (ret.); Member of the Steering Committee of the Thomas More Institute.




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