Jeremy Corbyn has chosen the smart route on Europe. The new leader of the United Kingdom’s opposition Labour party pledged on Sept. 17 to stay in the European Union. For investors fearful of an increasingly powerful “Out” campaign, and previously unsure where Corbyn stood, it’s good news.
Given his left-wing sympathies, Corbyn could easily have come out against the EU. Brussels bureaucracy can be high-handed, undemocratic and can seem more about smoother-functioning markets than workers’ rights. The Labour leader could have slyly made his support contingent on Prime Minister David Cameron securing safeguards for British jobs from EU leaders. This would have been a valid threat, given Cameron wants to make the UK labour market more flexible.
Instead, Corbyn has said he will stay in the EU come what may, and repeal unseemly legislation if needed should Labour win the general election in 2020. It should leave the far-right UK Independence Party as the only party of any size to favour an EU exit, and calm investor fears. Insofar as it suggests Corbyn is not quite the irresponsible firebrand some see him as, it should help his appeal.
With the good comes bad. Even as Corbyn laid out his EU policy in an article for the Financial Times, he also vowed to press for a tax on financial transactions. This may seem like a smart way to raise cash for governments, hit banks and dampen high-frequency trading. But lower volumes would actually increase volatility, and hurt ordinary consumers and their pensions when banks pass along the higher cost of trading bonds and shares. It could stymie the euro zone economy’s attempts to get growing again.
Investors may not like Corbyn’s financial meddling, and in any case he remains unlikely to be able to put it into practice. But his support for Europe makes a British exit that bit less likely.