The euro had its debut as a currency on Jan. 1, 1999, initially rolling out for 11 member states.
From the very beginning, there was skepticism the euro would survive. Some still wonder if fallout from the next global recession will break it apart. Whereas European monetary union weathered a Greek debt crisis, it may not survive one with a far larger member (like Italy or France).
The interesting question now, though — and one few people saw coming — is whether the United Kingdom will survive. It is possible the euro will still be around in five years — but the U.K. will not.
The short version of the story is that Scotland and Northern Ireland do not want to leave the European Union (EU) via Brexit; thanks to a stunning conservative election victory on December 12th, Brexit is now bound to happen; and Boris Johnson, the U.K. prime minister with the strongest Tory majority since Margaret Thatcher in 1987, is on a head-on collision course with Nicola Sturgeon, the anti-Brexit PM of Scotland.
The United Kingdom, informally known as “the U.K.” and more formally known as “The United Kingdom of Great Britain and Northern Ireland,” is composed of four separate countries: England, Scotland, Wales, and Northern Ireland.
The U.K. was created 312 years ago, on May 1st, 1707, by acts of parliament in England and Scotland. A break-up of the U.K. would thus be a rollback of three-plus centuries of history.
In 2014, Scotland held a referendum on whether or not to leave the U.K. and become independent again, similar to the Republic of Ireland (which is a sovereign state separate from Northern Ireland and the U.K.).
The 2014 Scotland referendum was a nail-biter. Scottish voters ultimately decided to stay in the U.K. by a margin too close for comfort, 55 percent to 45 percent.
The 2014 referendum result was supposed to hold for “a generation” or more, suggesting the Scottish independence question would be put to bed for at least twenty years.
But Nicola Sturgeon, Scotland’s prime minister, believes that Brexit is a violation of Scotland’s sovereign rights as a country because the Scots had no real say in the Brexit process (and didn’t want Brexit to go through in the first place).
It helps Sturgeon’s case that her party, the Scottish National Party, saw a strong surge of support in the December 12th elections. It further helps that Scotland and Northern Ireland both voted strongly against Brexit.
Boris Johnson, now the U.K.’s strongest conservative PM since Maggie Thatcher, is determined to “Get Brexit Done,” a phrase which underpinned the entire December election campaign. He is also determined to hold the U.K. together.
Nicola Sturgeon has already formally requested the right to a new referendum. While she is not yet setting the time or date for a new independence vote, she wants Scottish authority to do so at will in the future.
The response from Johnson and the Tories basically comes down to: “No, you had your chance in 2014.”
Johnson and the Tories will try to block a new Scottish referendum at all costs, out of logical fear the Scots will vote “aye” this time — thus ending the U.K.
Sturgeon insists that even if Johnson flat-out denies her request for referendum powers — which he almost certainly will — the fight is just beginning.
We started by noting the survival questions swirling around the euro as a multi-member currency: There are credible arguments that the euro would not survive an Italian or French debt crisis triggered by the next global recession.
The parallel for U.K. breakup risk is a new political crisis unleashed by that same recession, a U.K. economic downturn due to Brexit trade negotiations turned sour, or a combination of both.
If the U.K. economy stays relatively healthy, and the thorny details of Brexit are pulled off without too much chaos or stress, then Boris Johnson can probably fend off Sturgeon and the pro-independence Scottish movement (not to mention the pro-independence Northern Ireland movement).
But if things get ugly enough in the next few years — economically, politically and otherwise — Johnson is likely to face a Scotland independence surge (Scoxit?) too fierce to be stopped. And that, in turn, could mean three-plus centuries of U.K. history coming to an end.
If we had to assign a probability to Scottish independence — with Northern Ireland likely to follow, both of them joining the EU and possibly Wales too — we’d say there is a 50-50 chance (essentially coinflip) that the U.K. no longer exists by 2025.
TradeSmith Research Team
