The elephant in the room. Everybody knew what Mark Carney meant when he paused halfway through his regular three-monthly update on the state of the economy: the implications of Brexit.
The governor of the Bank of England did not pull any punches. He warned of a potential run on the pound and of possible problems financing the UK’s whopping balance of payments deficit. He said the Bank expected growth to be materially lower and inflation to be notably higher. Voters trust the Bank of England. They sat up and took notice. The opinion polls started to move in favour of remain. When the history of the referendum campaign is written, Carney’s may be seen as the decisive intervention.
In truth, there was more than one elephant in the room. Carney was right when he said there was a risk that the upheaval caused by Brexit could tip an already weakening economy into recession. But as elephants in the room go, this was the smaller, Indian version. The equivalent of the bigger, African elephant was the shocking state of the eurozone after the failure of the single currency experiment. This went unremarked by Carney, although it is relevant to the debate about Europe.
Why? Because, although Britain is likely to stay in the EU, Brexit will remain a live issue unless the eurozone can sort itself out. That means either admitting that the euro has been a terrible mistake, or going the whole hog and integrating further, with a single banking system, a Europe-wide treasury, and a democratically elected finance minister with the power to raise money in Germany and spend it in Greece. This is not going to happen any time soon, and perhaps never. Countries that joined the eurozone gave up a considerable amount of economic power when they adopted the euro, but they retained the right to raise their own taxes and make their own spending decisions.
Britain is not in the euro, for which we should all be thankful. But let’s be clear: staying in the EU means hitching the wagon to a currency zone unable to go forwards or backwards, and which will continue to struggle as a result.