Throughout the eurozone debt crisis, investors have fretted about the destabilizing effect of "Grexit" -- the possible departure of Greece from the eurozone. Now there's another worry: "Brixit" -– the fear that Britain may pull out of the wider European Union. Brixit fears have been heightened by a summit on the European Union budget, which started today in Brussels.
First, a word of explanation about the EU budget. The member states stump up the cash and the money is spent on things such as farm subsidies and building roads and bridges in some of the poorer countries. It also pays for the EU bureaucrats in Brussels. Those bureaucrats have called for a 6 percent increase in the budget, but Britain has flatly rejected that call and has demanded that in a time of austerity –- when national governments are cutting back –- EU spending should be frozen.
British Prime Minister David Cameron is threatening to veto the increase, a move which he says will be popular: "I feel I've got the people of Europe on my side in arguing that we should stop endlessly picking their pockets and spending more and more money through the EU budget."
Cameron's move has infuriated his fellow EU leaders and if he carries out his threat to block the budget he could find himself -- once again –- isolated in Brussels. All this is fuelling the impression that Britain is headed toward withdrawing from the European Union. Almut Moller of the German Council on Foreign Relations says there's a growing sense in Germany that a British exit, Brixit, is looming.
"People think that the U.K. may be close to leaving the European Union," Moller says. "It is out there and it is not something that goes down with a shock."
There is an exit route for Britain. Prime Minister Cameron has toyed with the idea of a referendum on Britain's continuing EU membership and opinion polls suggest that if that referendum were carried out now, a majority of Brits would vote to leave.
That prospect has big business in Britain worried. Roger Carr, head of the Confederation of British Industries, told his annual conference this week: "Europe, however challenged, remains home for half our exports. The cold business logic of a European partnership –- out of self-interest –- must prevail."
And it may well be in America's self interest, too, that Britain -- the U.S.'s closest European ally and main European business base -- stays inside the European Union.