The European Union’s economic woes which have dominated its last 6 years of existence have dominated the minds of the world’s senior economists during the last few months, beginning with a widespread understanding that Greece may leave the European Union, leaving behind a debt which is equivalent to one third of the European Central Bank’s capitalization.
This very real possibility, along with other failing economies in the Eurozone which have been subject to bailout after bailout, has resulted in some drastic measures by certain central banks, the most notorious being that of Switzerland, which removed the 1.20 peg on the EURCHF pair in January, sending markets into unprecedented volatility, and effectively changing the entire approach to risk management for international FX firms.
Just a few months on, it has been revealed that Britain may leave the European Union, a matter on which LeapRate has highlighted the possibility in some detailed reports over recent times.
Although Britain retained its sovereign currency when it joined the European Union, there has been much dissent from senior industry leaders in the UK, as well as taxpayers, as the European Union is a costly white elephant with no real benefit to the British economy as London’s financial center and Britain’s workforce continue to prop up , whilst laws are made in Brussels over which British businesses have no say.
The recent election of a Conservative government, led by David Cameron heralded a potential turnaround, and has gone some way to restoring the faith in the recovery of the British economy. The prospect of a Labour Party victory had caused some of the largest FX dealers in the world, including ICAP plc (LON:IAP) and HSBC Holdings plc (LON:HSBA), to consider relocation from the UK, as an anti-business policy would be the final straw for a nation which has battled economic woes since the financial crisis of 2008 and 2009.
Should we stay or should we go? Bank of England staff leaked a memo to the Guardian newspaper.
The Bank of England has actually revealed that it has a top secret taskforce looking into a potential British exit from the European Union, or ‘Brexit’, after bungling staff accidentally emailing the highly confidential details to a newspaper.
The top secret email detailing the project, codenamed Project Bookend, was mistakenly forwarded to a Guardian editor on Thursday by the Bank’s Head of Press.
According to the Guardian, the email states questions from other parties, effectively referring to the press, about “whether this was a project to look at the referendum”, should be given the answer “that there is a lot going on in the next couple of months – pointing to some of the specific European economic issues (eg: Greece) that would be of concern to the Bank”’.
The election earlier this year of the in Greece was a clear indication that there would be little effort made to generate domestic wealth within Greece and pay off its ever-increasing debts, causing European economists to foresee a catastrophe ahead.
The Bank of England’s taskforce is to be made up of four senior staff, led by Sir Jon Cunliffe, who as deputy director for financial stability has responsibility for monitoring the risk of another market crash.
They will be charged with looking into the implications of a ‘Brexit’ on the economy should an in-out referendum, due to be held in 2017, come out in favour of leaving the European Union. Meanwhile, British Prime Minister David Cameron is currently touring Europe, attempting to secure a deal on reform from other leaders.
At the end of last week, despite intending to keep this particular project quiet to everybody including Bank of England staff, the Bank of England was forced to admit that it was committing resources to this, and that it is only to be expected that it would investigate the possibilities of a ‘Brexit.’
In a report by the Daily Mail, a Bank of England spokesman stated “It should come as no surprise that the Bank of England is undertaking such work about a stated government policy.”
“There are a range of economic and financial issues that arise in the context of the renegotiation and national referendum. It is one of the Bank’s responsibilities to assess those that relate to its objectives” concluded the spokesman.
Labour Party senior official Chris Leslie has raised a question as to why the Bank of England was determined to keep its investigation into a possible ‘Brexit’ secret, and demanded to know what incumbent Chancellor of the Exchequer George Osborne knew about this project.
The fervently pro-Europe Labour Party had, during its long time in power, rejected numerous calls for a referendum on European Union membership and had thrown billions of pounds down the black hole, only to find that it has been squandered and no economic progress has been made. This was a very sizable source of discontent among British voters, and contributed greatly toward a Conservative victory at the polls.
Mr. Leslie explained his viewpoint on BBC Radio 4’s Today program: “It’s a very momentous decision that the country is facing, it’s incredibly important for our place in the world and we have got to have the full information and analysis so that the British people can reach an informed decision.”
“I don’t think it’s unreasonable to have an assessment of the consequences for jobs, trade and living standards, but why on earth so much secrecy and concealment? I can’t really see why there should be so many hidden agendas here, I think we have got to have an open and transparent and frank debate, not facts hidden from public view” concluded Mr. Leslie.
The Bank of England defended its decision, in light of having been placed under such scrutiny. “It is not sensible to talk about this work publicly, in advance” the spokesman said.
“But as with work done prior to the Scottish referendum, we will disclose the details of such work at the appropriate time. While it is unfortunate that this information has entered the public domain in this way, the Bank will maintain this approach” he concluded.