Can Brexit turn into a Eurofail? What to expect from tomorrow’s vote resultsThe first article on Brexit can be read here.

 

In this second piece dedicated to Brexit, we will try to sketch what larger political consequences the referendum will bear for the European politics in case of both outcomes possible. Whatever the results, the EU will face a whole spectrum of new challenges after the vote, and will have to invent creative responces in order to avoid exacerbation of its chronical weaknesses.

Let’s start with the worst-case scenario: namely, if the Brits decide to turn back on Brussels. First of all, the withdrawal from the European Union in this case will in no way be automatic. The process delineated in the Article 50 of the Lisbon Treaty, takes about 2 years from the moment since the state that intends to leave, officially invokes this article. Throughout this time, the leaving member is supposed to conduct negotiations on the exit terms and redraft the parts of legislation related to the EU membership and all the binding rules stemming from it.

It is needless to say that this far there has not been a single case of a country leaving the EU, with a partial exception of Greenland, an overseas territory of Denmark that chose to leave the then European Community in 1985. However, Greenland hardly had any weight in the European affairs, and moreover, the Union was much less integrated than now. The withdrawal of a country as large and important as the UK, the 2nd economy in the Eurozone and the 5th one in the world, cannot but be painful for the both sides. If London decides to leave, then it will almost immediately turn into a giant “lame duck” within the EU for the whole 2 years of the negotiation process. The army of European bureaucrats with the British citizenship will have quite hard times in Brussels, supposed to work on the issues Britain would not be trusted to discuss any more. Indeed, selective and lacklustre approach London, never eager to concede its independence in domestic matters, takes in European affairs, has often been an irritant for the core members of the EU, most importantly France.

But what position London will most likely take? Most investigations warn that the e

xit from Europe will entail severe economic uncertainties until post-Brexit rules of the game are quite clear. Economists indicate to the various interdependencies between the UK and Europe, most crucially for London in the services sphere, whereby common market rules have made London the best place to run financial businesses in Europe. Some of them have already announced that they may consider switching to other places, such as Dublin, for example, if Britain leaves. A study conducted by Open Europe estimated long-term annual change in the British GDP compared to what it would have been as the EU member, between -0.8 and 0.6%, while it is emphasized that the positive effects may be secured only if London maximally preserves its status within the single European market and at the same time pursues wholesale liberalisation at home.

During the negotiation process Brussels will have to resolve a sophisticated political dilemma. As London will most likely prefer to retain the maximum level of integration with the European common market possible, it will probably try to draw up a relationship plan similar to the ones currently accepted by other non-EU countries in Western Europe- Norway, Switzerland, or Iceland. Though as economists demonstrate, this scenario will guarantee a relatively smooth “divorce” and makes a perfect sense in terms of rational choice decision-making, it bears a significant political risk for Brussels: it might issue a signal for other EU members that leaving the union without incurring almost any tangible losses is an option to consider. As Euroskeptic trends are currently stronger than ever in many European countries (France, Netherlands, Austria, Sweden, Czech Republic and now even Germany), such a move may trigger a dangerous wave of referenda capable of drowning the fragile European boat. Hence, the EU has enough incentive to go tough with Britain, trying to inflict real costs for the exit- the aforementioned adversarial feeling towards British isolationism may also exacerbate this mood. Many European bureaucrats and national governments alike may feel irritated if London leaves despite Brussels’ readiness to give further concessions ot the former’s special status within the EU. However, such a move would bear multiple risks too- while quite obvious one lies in further blows hit on the stagnant European economy struggling to reach meaningful growth rates, increased internal cohesion that can be aimed by tougher stance towards the UK is doubtful as those member states that have a stronger interest in preserving ties with Britain (mostly the countries fo Northern and Eastern Europe) may oppose these measures, so that the South-North cleavage within common Europe will polarize.

On the other side of the English Channel matters are set to be complicated as well. There is already a lot of talk by the Brexit campaigners that the UK is not going to leave just to end up as Norway- tied with Brussels-imposed obligations but devoid of its say over decision-making. In case of the exit the isolationist forces within the Tories, as well as UKIP and like-minded groups, will insist on the policies they believe to represent “real independence” from Europe. In fact, those social strata that are mostly interested in leaving Europe for good (small and, to an extent, medium business along with low-skilled workers) oppose those very regulations the government will probably prefer to abide in order to retain the advantages of the common market. Hence, the sides may end up self-destructively distancing from each other.

 

Nigel Farage, the leader of the United Kingdom Independence Party (UKIP)

 

Even if the parties manage to avoid the unruly variant of the exit process, the consequences will loom large for Europe. First of all, Britain is the ideological leader for the so-called “liberal camp” within the EU that also includes the Netherlands, Poland, Sweden, Baltic countries, while Germany remains somewhere close. These countries are known for their more business-friendly approaches than the Romanic member states, from France to Portugal. Without the UK, this camp will hardly retain its current ability to block policy projects, and Berlin is likely to shift back to a more dirigist approach. The hottest issue currently on the agenda is the proposed free trade deal with the US, vividly lobbied by Britain but facing serious opposition from the major continental powers that seek to significantly amend it to protect their key sectors. Brexit will dramatically decrease the chances of a successful agreement on the terms of treaty and thus may bring down the level of cooperation between Brussels and Washington, prompting the latter to denser ties with London instead. While state-heavy European economies have been long mired in systemic stagnation, Brexit might only deepen EU’s economic problems. Another challenge for Brussels will be Europe’s feeble military capabilities. As of now, the UK and France are the only two member states disposing of robust armed forces able to meet global security challenges. Without Britain, Paris will remain a virtual EU monopolist in this regard. Bearing in mind France’s dubious account of tackling terrorist threats at home, this will pose Brussels some tough questions. Russia’s aggressive policies have recently revealed Europe’s vulnerabilities, namely its lack of ability to assist its Eastern European partners on vital security issues as well as its own susceptibility to Russian methods of subtle information war and lobbying efforts. Britain’s consistent policy of deterring Russian “hybrid” penetration of the Western countries has been an asset for Europe; with London outside, dealing with the new Eastern wind will be much more difficult. Some countries with vested interests in cooperation with Russia will try to dismantle the sanctions regime- as the French Parliament has already attempted to do- further undermining the unity of the EU. Finally, Britain may boast a soft power influence far exceeding that of any other European country (that’s why the island is often metaphorically described as “punching above its weight” in global politics). The EU that has been predominantly reliant on non-violent, soft methods of increasing its influence will suffer a lot diplomatically should London leave its ranks.

This far, so many negative predictions for the Brexit scenario have been made that it might seem the opposite one would necessarily be much more benign. Though it seems to be safer, some tough challenges are bound to appear as well. The British government has attached staying in the EU with a number of substantial concessions- and Brussels is ready to satisfy most of them, endowing Westminster with more discretion in the matters of social benefits to migrant workers and promising not to impose binding commitments on Britain in case of member state bailouts, as it happened last year with regard to Greece. These autonomies, as well as some more minor ones, satisfy major pro-European government members such as Prime Minister Cameron and Chancellor of the Exchequer George Osborne, but will be treated with increasing suspicion in Europe. Britain’s unwillingness to contribute to the Greek cause caused a lot of discontent last year, and London is considered by many to blackmail Brussels into more and more сompromises. Other member states with strong Eurosceptic moods may also organize their own referenda and try to gain similar autonomies from Europe.

To sum up, whatever the outcomes of the Thursday’s vote are, they will once more reveal the sore points on the EU’s political body. Existing cleavage in policy vectors between London and some other centrifugal states and the core EU will not disappear; hence, unless similar-minded forces come to power in all the major countries (that is not very realistic) the Union will either have to admit these deficiencies sooner or later and revert to more pragmatic modes of integration, those prevalent before the Maastricht Treaty, or- if obstinacy prevails in Brussels- to continue suffering from weakening legitimacy and prestige, frondeur member states and decreasing role in global affairs.

 

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