Biggest Brexit fear is really end of European Union as we know it

There will always be an England, but what's not clear is whether there will always be a European Union.

If the U.K. votes this month to exit the European Union, the world's worst fear is that it could lead to the demise of the 28-nation economic bloc itself. And that could bring an end to the single euro currency — leaving the continent and much of the world beyond in chaos.

The so-called Brexit vote June 23 has been hanging over markets for months, and the consensus view is that U.K. citizens will ultimately listen to their government and choose to remain in the European Union. But an undercurrent of fear is beginning to show up across financial markets, as recent polls show a shift toward a majority favoring an exit from Europe.

The Sun newspaper Monday evening threw its substantial weight behind the leave cause, telling readers the future looks bleaker if the U.K. stays in and worse for immigration, jobs wages and "our way of life."

For the U.K., the exit would mean leaving the 28-nation EU, and untangling a host of complex trade and other deals that tie the country to the European bloc. Those agreements were not easy to make, and they would be exceedingly difficult to redesign or renegotiate. The hot button issue for British voters has been the EU policy on immigration, with waves of refugees entering Europe from the Middle East.

"The issue is if the U.K. leaves, it will be the first country to leave, and that would seem to lower the barrier of exit for other countries. Many people are afraid if the U.K. leaves, it will trigger a U.K. political and economic crisis. The government is campaigning to stay. It's like a vote of no confidence in the government if they vote to leave," said Marc Chandler, chief currency strategist at Brown Brothers Harriman. "People are worried if the U.K. were to leave, it would trigger an EMU (European monetary union) crisis."

European Council President Donald Tusk became the latest official to voice those concerns. In an interview with German newspaper Bild, Tusk said a Brexit vote to leave would be a boost for anti-European interests who would be "drinking champagne."

"As a historian, I fear that Brexit could be the beginning of the destruction of not only the EU but also of western political civilization in its entirety," he said in the interview. Tusk said the long term consequences are difficult to see but that every nation in the EU would be hurt economically, particularly the U.K.

Polls have been extremely close and have been fluctuating. The latest Financial Times poll of polls Monday evening showed 45 percent would like to leave and 43 percent want to remain. The poll of polls been at a dead heat earlier in the day, but had favored exiting over the weekend.

The latest ICM poll Monday showed an increase by those that want to leave. Another poll, the ORB in The Telegraph, showed 49 percent want to leave, and 48 percent would prefer to remain remain, while a third poll in The Times YouGov poll had 46 percent voting to leave with just 39 percent for remaining.

Immigration is also an issue for other nations in the European Union, and recent terror attacks by Middle Easterners or people of Middle Eastern descent have made it an even a bigger issue.

"The worry in the market is that the U.K. is just the tip of the iceberg. Who would be the big winners? Russia and the nationalist forces, especially in France," Chandler.

A recent survey of Europeans by Pew Research showed that just 51 percent have a favorable view toward the European Union, while 70 percent see a UK exit as negative. But when it comes to sovereign powers, 42 percent said some powers should be returned from Brussels to individual national governments.

According to Pew, the biggest issue in every country was Brussels's handling of the refugee issue. Of the Greek citizens surveyed, 94 percent disapproved of how the EU handled the situation, as did 77 percent of Italians. The EU's handling of economic issues was another point of contention, with two-thirds of respondents in France, Spain and Italy all disapproving.

Leaving the EU would create a period of uncertainty while the U.K. negotiates a separation agreement involving trade and a host of other issues. Britain could have reduced access to the European market, and there could be uncertainty surrounding its trade relationship with not just the EU, but other nations.

"London is the financial capital of the world. Unknown is how much an ability there will be for London to be the conduit of all financial transactions in the world. Brexit really punches above its weight. It's not just Europe, not just the U.K. but the whole global financial system," said Boris Schlossberg, managing director with BK Asset Management.

While many experts see an initial period of uncertainty in the event of a pro-exit vote, they predict that the U.K. would stabilize in the longer term. However, it's possible that it would not stabilize — or that a Brexit would lead to a wider exodus of countries from the European Union. That fear has resulted in recent flight-to-safety trades in world financial markets.

"The ultimate crash scenario is England pulls out and everybody looks around and says: 'They managed to survive. Why do we need this?' and then they all decide to pull the strings apart and that creates a lot of volatility," said Schlossberg.

If the UK does leave, there is concern that the Scottish could vote to split form the UK, another fissure for the British economy.

The UK's exit is thorny, but more problematic would be if some of the 19 countries within the European Union that are linked to the euro currency were to leave. Then, there could be an unraveling of the premise for the single currency that was established in 1999. That has been part of what is driving investors to both sell euros and buy gold and safe haven currencies, such the Swiss franc.

Schlossberg said the fact that Brexit worries are beginning to spill over into financial markets may be a positive.

"If more financial assets melt down ahead of time, the more it will scare the people into staying," he said. "The worst-case scenario is that everything's complacent, and people can vote for it."