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Better off out: German economist predicts bright future for UK but trouble ahead for EU
What is your opinion of the EU as it stands now? Originally the idea of forming the EU, they were trying to set up a community that would secure peace in Europe.
It was a liberal or even a libertarian idea to have free trade, a free flow of capital and people across borders and that was a very wise concept. But over time the EU was no longer pursuing the route of a free trade area but it became increasingly politicised, and the idea was to set up a centralised power structure in Brussels to transfer national sovereignty rights on to the supranational decision making structure. Over time the EU has become a very different animal.
Now the EU policy is about interventionism, they try to interfere in all sorts of economic and social fields to push through all kinds of political concepts and that's a very dangerous idea. So how do you think they'll treat a country, like Britain, that wants to leave? Sooner or later the free market system is going replaced by a system of coercion.
This is the problem of the EU and now Great Britain is trying to get out and of course the remaining European interest groups don't take kindly to this. You can expect them to do their best to give Britain a hard time to prevent the impression that an exit can be beneficial to a member state.
So I can imagine that Brussels tries to give Great Britain a hard time and that includes a protectionist restriction on free trade. There seems to be a prevailing mood in the EU, and especially Germany, that punishing Britain is the best way to save the all-important Single Market.
Is that wise? They won't only harm British interests, they will also harm the interest of people in the EU.
Because if you interfere and hamper free trade you reduce the material benefits that can be achieved, so it's a lose-lose strategy which is being pursued in Brussels at this juncture.
Germany has very much to lose once free trade is getting restricted vis-a-vis Great Britain. .
Do you fear that, if trade is restricted with Britain, it could signal the start of a more protectionist era for the EU? We would basically open Pandora's box.
Once you start putting restrictions in certain areas, interest groups will start turning up and demanding the same types of interventions in other fields. In the EU, which is highly politicised, [this will happen] sooner or later.
Germany is highly dependent on the demand in other countries, we keep exporting like hell, so German firms have customers in many countries around the world and without these markets economic growth and the employment situation in Germany cannot be sustained, so Germany has a vital interest that there is free trade. In corporate Germany, most CEOS are very aware that free trade is very important for the wellbeing of the economy. So what future do you predict for the EU? It's the wrong direction they are moving ahead along, there's not even a kind of plan discernible at the moment.
The right thing would be to start decentralising the process and giving back more sovereignty to the member states, but the opposite is happening and that's a big concern. The first signs are that the euro currency has failed and it's only in place because the ECB has dropped interest rates to zero.
Under normal conditions it would've collapsed already.
It can't compete - it's a dead end policy. People in Great Britain have realised that this [the EU] isn't a concept that will bring prosperity for the current and future generations, so they got out and I think others will follow.
It will take some time but the EU in its current form will fall. .
What does that mean for Germany? Will the Free Democratic Party entering Angela Merkel's coalition indicate any change in direction? It could certainly have a positive impact because they still have a faint idea of the benefits of having free trade, but I'm not sure at the moment we'd really get a major change.
The problem at the moment is the German economy is doing reasonably well. Economic growth isn't stellar but it's reasonable, so most Germans don't really feel the problems that have been building up in the EU and the costs that will come with pursuing the current policy approach in Europe.
It's an illusionary state at the moment. If you look at the Target 2 balances, Germany's balance is now 840 billion euros, or 25 per cent of German GDP.
It's money gone and it will show up in low profits from the Bundesbank and presumably higher taxes.
All these measures that have been implemented to drain German wealth to support ailing banks and prop up Europe…most people won't realise because it's so complex.
The zero interest rate policy, it does all sorts of bad investment and it pushes up real estate prices so people can no longer aggro to buy houses in Germany. It's basically impoverishing a great many people but it's difficult to understand for most people, they won't realise what the ECB does and what Mrs Merkel and Mr Schauble have agreed to in Brussels.
It's a vicious policy that's been implemented to hold up the European project. The consequences will be huge.
Finally, what do you think Britain should do to make the most of the Brexit opportunity? If Great Britain pursues a wise strategy, bringing taxes down, making attractive conditions for setting up businesses, welcoming talent from other countries, this is the way towards prosperity.
In the short term it might become ugly but in the long run it will be very beneficial for Britain and that's a big worry for Brussels. It's important for economists to stress the importance of getting out and the long term benefit it will have for the people of Great Britain, and to inform the general people in Europe that it would be a lose-lose situation if Brussels really tries to punish Great British people for having made this decision. The bottom line is basically free trade is great for all parties involved, it brings greater material prosperity of everyone involved.
At the same time for having free trade you don't need this Single Market and all the bureaucracy that comes with it. Professor Thorsten Polleit is Chief Economist at the precious metal dealer Degussa Goldhandel.
He is also a Partner of Polleit and Riechert Investment Management LLP and the President of the German Department of the Ludwig von Mises Institute.
He previously worked for ABN AMRO and Barclays Capital and is an Honorary Professor at the University of Bayreuth.
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