Can someone please tell us what we're voting on?
The EU referendum is looming, but the terms of the vote remain frustratingly vague. The question is settled: "Should the United Kingdom remain a member of the European Union or leave the European Union?". That sounds simple enough, but no-one has articulated what "leave" actually means.
Sometime before the end of 2017, the British public will be asked to consider the following question:
It looks increasingly probable that the referendum will fall in 2016 (with June 23rd as the whispered date). In weighing up their options, the electorate will have to consider matters of political identity and national sovereignty alongside economic arguments. In the latter area, there exists a huge range of opinions on whether our membership of the EU is a net positive or net negative.
I've got no intention of weighing into that debate, but want to highlight the frustrating lack of clarity about what "leave" actually means. For good reasons (i.e. they are not Euro-obsessives), most people don't know the difference between the European Union (EU), the European Economic Area (EEA), the European Free Trade Agreement (EFTA) and the European Union Customs Union (EUCU).
However (unfortunately), this alphabet soup matters a lot for the terms of the referendum debate.
Leaving the EU, might mean "be like Norway"? If so, that implies EEA membership. Or it might mean "be like Switzerland" (i.e. EFTA membership). Or it might mean "be like the Channel Islands" (EUCU). We simply don't know.
The diagram above attempts to summarise what these options would imply: there are major differences in terms of the implications for the free movement of labour and for single market access in goods & services. Those things matter a lot for trying to work out the potential impact of a decision to leave the EU.
Financial markets intensely dislike this kind of uncertainty. Driven by "Brexit" concerns, the price of protecting against crashes in sterling has now risen to the highest level since the financial crisis.
The message from the currency markets is fairly simple: Can someone please tell us what we're voting on?