FT Alphaville " Towards a Brixit Just when you had had enough of Grexits, Greuros and Drachmageddons, here's another irritating term to add to the eurozone crisis lexicon: Brixit. Yes, the genius fusion of the words Britain and exit to describe another gloomy scenario. The word was coined by The Economist's Bagehot column this week (although apparently it is also the name of a Swedish shop that sells Lego) to describe an event that it argues no British political party wants but is nevertheless likely to happen. The story of the euro crisis, surely? Bagehot writes: The chances of Britain leaving the EU in the next few years are higher than they have ever been. A Brixit looms for several reasons. For one thing, the British never fell in love with Europe, instead weighing costs against economic benefits. Right now the EU is seen as a basket case (though British finances are hardly in great shape). For another, if euro-zone members overcome their differences and integrate much more deeply, they would arguably be leaving Britain, especially if their integration fragments the single market that is the bedrock of British membership. Mr Cameron and his chancellor of the exchequer, George Osborne, may talk of the euro's "remorseless logic" compelling richer members to stand behind the weak. But there are paths of European integration down which no government led by Mr Cameron (or for that matter Mr Miliband) could follow. At the top of the Conservative and Labour parties, economic debate is dominated by those who saw the euro as a disaster and think they are being proved right. The public agrees, though their certainty has less to do with economics than misanthropy: the British do not like southern Europeans enough to offer them a subsidy union, and have never believed that other rich northerners, deep down, felt differently. Many eurosceptic MPs want to use the crisis as a form of blackmail to extract more favourable terms of EU membership, namely force Brussels to return various powers back to London. At the core is a call for a referendum on EU membership. The precise form this would take is unclear at the moment. It could be used as a mandate to renegotiate a new membership deal, or as an endorsement of an already-renegotiated deal. But, the worry is that if voters rejected the new deal, the pressure would be on for a second "in or out" referendum. The biggest risk there is that voters use the opportunity to vent frustration with the EU, rather than just answer the actual question asked. It may force a UK exit, which would be something of a disaster especially as most MPs, members of the public and businesses don't want to leave the EU, they'd just like a looser relationship with it; keeping the single-market membership but losing the pesky environmental and employment regulations and the hefty budget contributions. It should be noted that a law was passed last year to force a referendum to be called if there is any further transfer of power from London to Brussels, but many MPs are arguing that further eurozone integration changes Britain's relationship with Europe so much that a referendum should be called even without a further technical transfer of powers. The problem is that Germany is in no mood to entertain these threats. Angela Merkel is fed up of every EU member moaning about something. She has bigger things to worry about. And the UK is not even part of the euro currency, making it somewhat dispensable if it wants to start throwing its toys out of the pram. Germany - seen by Mr Cameron as the dominant force in a fast-changing Europe - has clearly signalled that Chancellor Angela Merkel will not be blackmailed into British opt-outs or special treatment. Germany accepts that in the event of treaty changes to create new euro-zone institutions, Mr Cameron would need concessions to get such changes endorsed by Parliament. Perhaps certain narrow powers could return to the national level for all EU members, Britain has been told. But push too hard and euro-zone integration will be pursued outside EU structures. But politics at Westminster have a dynamic of their own, largely unconnected to what's going on at the broader European level. It could easily lead to an unfavourable and unintended outcome, says Bagehot, as the political parties jostle for support ahead of the next election: Yet within Parliament and Whitehall, a startling number of senior figures think that one of the big parties will pledge an EU referendum before the next general election, forcing the others to follow. Labour, it is said, might call a referendum to split the Tory Party. The Conservatives might call one to shore up their core vote. Both might be bounced by rising support for the United Kingdom Independence Party, which favours withdrawal. None of the party leaders want to leave the EU, but it could happen. All have much to lose from an EU referendum, yet such a vote is starting to feel almost inevitable. How this ends is unknowable, and only partly in Britain's hands. It seems that the prospect of Britain inadvertently leaving the EU is something that has got bank chiefs worried due to its impact on the City. Well, at least one that we definitely know of: Standard Chartered's Peter Sands. And how do we know this? Because he walked out of a meeting on the eurozone crisis at Downing Street on Monday with his notes in a clear plastic folder on show to the waiting photographers. (Why does no one use a briefcase any more we ask?! Still, at least he didn't have briefings on national security out on display, like Bob Quick, Britain's former most senior counter-terrorism officer, who's career-ending error forced a raid on suspected terrorists to be brought forward.) But, back to Sands. At a meeting to discuss the eurozone crisis, the boss of Britain's emerging markets bank raised concerns that growing political hostility to the EU could eventually lead Britain to the exit. Standard Chartered declined to comment on the issue, but one person close to Mr Sands confirmed that the prospect of Britain withdrawing from the EU was identified as one of the key risks in Mr Sands" briefing document, the person said. Its hard not to take Sands" points as a clear warning to David Cameron and George Osborne to abandon the idea of a referendum and find other ways of pursuing Britain's interests in the EU. We expect more lobbying by the banks on this point (and the plans for a banking union) in the coming months. Perhaps, just perhaps, Britain's bankers will stop the seemingly-unstoppable push for a referendum in Westminster. Related links: A Brixit looms - The Economist Cameron warned on risks of EU exit - FT This entry was posted by Masa Serdarevic on Wednesday, June 27th, 2012 at 8:45 and is filed under Capital markets. Tagged with britain, Brixit, eu, EU referendum.