The EU is taking back control
Agreement in the EU this week on a €750bn recovery fund should remind market participants of the UK’s newfound vulnerability.
It took EU leaders four days to strike a deal on a financial recovery plan for Covid-19.
But the actual substance of what they agreed has been the subject of more than a decade of heated debate.
For the first time, the EU is set to borrow big money in the capital markets.
The funds can only be used to tackle the impact of the coronavirus pandemic, but this is an important step towards some form of debt mutualisation.
Policy wonks were right to point out that an agreement might not have been possible if the UK were still a full member of the EU.
The country has traditionally found its allies in central and northern Europe, among the so-called “frugal” states that were pushing back on the terms of the recovery fund this week.
Now, though, the UK looks increasingly limp and lonely.
With no constructive trade talks with its closest neighbours, it is sleepwalking towards a damaging Brexit scenario at a time when its economy is in major need of a boost.
UK government borrowing is already forecast to hit 20% of GDP this year, with the chancellor expected to unveil new spending plans following the autumn budget.
There is also talk of the Bank of England considering negative interest rates for the first time in its history.
It is hard to look at Europe’s success this week and think the bloc is worse off without the UK.
As the value of the euro soars and the BTP-Bund spread narrows, it seems as though the remaining EU member states are taking back control.