Theoretically, the Tory victory in May gave rebellious Conservatives what they’d be seeking so passionately for over 20 years: a referendum on the UK’s membership of the EU. Most pundits expect this to be held in late 2016 or early 2017. But is it possible that it won’t be held at all? If things remain as they are, it would be suicide for Cameron to renege on it. However, I’d like to put forward a scenario in which I think it could happen.
Economists and international observers are becoming increasingly worried about the prospect of another crash. It is no longer the preserve of websites such as Zerohedge to openly state fears about markets. As we’ve seen over the past few weeks, the turmoil in Greece caused stocks and the Euro to fall sharply, with not only Greek banks being shut but also some in Southern Italy for fear of contagion. Even if the Greece crisis is resolved, it is only a matter of time before the innate problems with the Euro flare up again in Spain or, even worse, in Italy. Meanwhile, London is floating on a completely unsustainable property bubble funded largely by foreign capital, which is guaranteed to burst some point soon and could easily destabilise the UK’s economy in the process.
However, all of this pales in comparison to fears over China. Since early June, Chinese stocks have fallen by 29%. Everyone knows the country is financed by colossal debt and the remnants of a command economy, and their stocks are overvalued, but as long as confidence held China was still a boom market. Not anymore it would seem. Once again, this is not the talk of doom-mongers, but ‘respected’ institutions everywhere.
Based on the above scenarios, and the fact that in a boom-and-bust economy crashes tend to come every decade or so anyway, it seems very likely that we could see a serious crash and subsequent recession in the next few years. Would Cameron risk introducing further uncertainty to markets by letting Europe’s second largest economy hold an in/out referendum on the EU? I doubt it. A referendum was never in his instinct and it would give him a chance to face down the ‘lunatic wing’ of his party to put country first. Granted, his party may commit regicide in the process, but the pressure on Cameron to postpone a referendum would be immense. So don’t imagine that this referendum is cast in stone just yet …