Neither the UK nor the European economy are in great health, so it is in the interest of both to achieve a good Brexit. And Britain has some key advantages.
Yes, the UK is massively in debt – levels are valued at over 1 trillion Euros. But UK debt is denominated in sterling, meaning that the UK can (in theory) print the money to pay its own debts.
The EU also has four states with debts of over 1 trillion Euros: Germany, France, Italy and Spain. In addition to these, 21 members have debts that exceed the Maastricht rule of 60% of GDP. As populations age and left-wing policies encroach, the EU’s debt levels are only likely to rise.
Infamously, Greece has debts over 177% of GDP. Italy’s are over 130%, Portugal’s over 125%, and Spanish debts are almost 100% of GDP. France has debts at 96% of GDP, and the EU average is around 85% of Europe’s GDP. For comparison, the UK’s debt is just under 90% of GDP.
The key difference is the Euro. The EU is bound by it: Greece has been unable to get itself out of debt because of it, and has suffered recession, mass unemployment and economic crisis. Italy, Spain and France are in the same boat: their debts will require either submission to a compromise plan that hurts German growth and handcuffs Southern European spending, or permitting the ECB to engage in mass QE, running the risk of unleashing hyperinflation and destroying the EU market. The UK’s advantage is control over our own currency – a vitally important asset, giving the UK more room for manoeuvre than the EU!
In terms of debt ownership, major EU governments have massive stakes in the UK. However, this is due to London’s financial services industry, and the UK has high-value assets backing the debt. The fact though remains that if France and Germany want repayment, a good Brexit is in their interests.
The UK also has substantial ownership of EU members’ debt, owning around 140 billion Euros of German debt, nearly 230 billion Euros of French debt, and 74 billion of Spanish debt. And with the prospects of a Trump-inspired UK-US trade deal, along with improved Anglo-sphere relations with Australia, as well as other countries, the UK is in a good place to resurrect historic connections and global links, revitalising the UK economy.
Meanwhile, fortress Europe must deal with its ageing populations and the pressure of mass immigration, internal migration and economic inflexibility, as well as a top-down Treaty-based legal structure that cannot adapt to changing circumstances.
There is also the question of who owns the debt. Around 52% of French debt, 48% of German debt, and 45% of Spanish debt is owned by non-residents. All of the big-4 European economies have larger short-term debts than the UK. This leaves these states more vulnerable to outside pressures and creditor demands, further weakening their democracies.
Eastern Europe has lower debt levels, but has the problem of larger amounts being in foreign currencies. A strong Euro will help them, but the EU’s Charter of Fundamental Rights opens Eastern Europe to the same dangers that are sinking the West, of exponential increases in medical costs from such things as gender reassignment surgery at the same time as populations shrink and productivity falls. This will only add to debt levels.
The UK is thus in a strong position, controlling our debt and able to manage things in the interest of Britain without needing to endure fudged compromises.