UK Effectively Leaves EU

The UK has finally, unofficially left the EU. The departure began when it would not agree to modifications to restructure the region’s financial mechanism enforcement. Provisions in the plan would have affected London’s banks. The UK plan is final in that it will not put money into a 150 billion euro plan by the International Monetary Fund to create a rescue fund through bilateral loans from EU nation central banks.

The UK was not alone in its decision. Major powers, including the U.S., China and Japan, also declined. Their politicians cannot convince voters that Europe should be bailed out before their own economies are. In a world of austerity, contributions to the salvation of other nations is out of the question.

The UK might have made a token contribution to the new IMF mechanism. That would have been a sign that it has not completely given up on its place in the union. Such a move would have signaled that it wants to be part of the common financial structure that ties the EU nations together. But it gave the future of the IMF program no more than lip service. According to Bloomberg, “The U.K. has always been willing to consider further resources for the IMF, but for its global role and as part of a global agreement,” the Treasury said in an emailed statement.

It would be shattering if the UK announced it would pull out of the EU. The future of the alliance is already at risk because of sovereign debt problems and fear of contagion. A UK decision to leave would cause panic in capital markets. The smart money, though, already knows the UK is gone.

Douglas A. McIntyre