Scotland Referendum to Be Followed by UK Vote—Likely to Shake the Euro

09/19/2014 5:40 pm EST


Jim Jubak

Founder and Editor,

If the euro market was rattled by the Scottish independence vote, then, as MoneyShow's Jim Jubak points out, it's really going to get shaken up by the 2017 referendum for UK membership in the European Union.

One referendum down, one to go.

And if global currency markets-and especially the euro market--found the Scottish independence vote worrisome, the prospect of a 2017 referendum in the United Kingdom on continued membership in the European Union will be terrifying.

Scots voters lined up against independence with "No" winning 55% to a 45% share of the vote for 'Yes." That 10-point margin was far wider than polls had been predicting in the last few weeks. On the news, London's FTSE 100 index put in a second positive day with stocks climbing to heights not seen since the 1999 peak for the index.

But while the margin was wider than expected, it was still far narrower than the 20 percentage point lead that "No" had at the start of the campaign. At the moment, polls give "stay in the European Union" a lead in any vote, but the margin is smaller than the "No" position had in Scotland at the start of the campaign.

And it's the ability of the "Yes" campaign to tap into an emotional message to pick up ground that has the 2017 referendum-that Conservative Party Prime Minister David Cameron has promised the anti-EU wing of his own party-setting off early alarm bells. The economic argument for UK membership in the European Union may be strong, as the Financial Times concluded in today's paper, but, the newspaper continued, the emotional argument goes strongly in the other direction.

One parallel between the Scottish independence referendum and the proposed European Union vote-the Financial Times pointed out-is the presence of a tireless leader for the opposition. Alex Salmond, leader of the Scottish National Party, crafted a potent "Yes" campaign around a call for self-rule and the distrust of a remote government and hostile bureaucracy in London. In Nigel Farage, leader of the UK Independence Party, the anti-EU forces have an equivalent figure who understands, like Salmon, how to play fears of a loss of UK freedom and independence to the European Parliament and the bureaucrats of Brussels.

If Cameron were smart-and if he had room to maneuver-he'd call off the referendum. But his government is unpopular with the electorate, in general, and faces the prospect of a revolt from the anti-EU wing of its own Conservative Party.  Cameron's government faces elections as early as 2015.

If you're into doodles, draw a frowny face on the euro once the relief passes that the markets dodged a bullet in the Scottish vote.
As if the currency didn't have enough problems.

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