The Real Damage – A summary of reactions

IIEA6th April 20166min
Reaction to David Cameron’s EU reform deal has been mixed, but a consensus is growing that Brexit will introduce major uncertainty in the fields of trade and investment, in particular if it proves difficult to conclude a new relationship between the UK and EU.

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Less than three months before the June 23 Brexit referendum, domestic politics is concentrating on whether remaining in or leaving the EU is right for Britain.  For the rest of the world, a bigger question is what impact a British exit would have on the EU.  Precise calculations are impossible, but Brexit would probably harm the EU economy.  The real damage, though, would be political.

                        Tony Barber, Europe Editor, Financial Times[i]

 

Reaction to David Cameron’s EU reform deal has been mixed, but a consensus is growing that Brexit will introduce major uncertainty in the fields of trade and investment, in particular if it proves difficult to conclude a new relationship between the UK and EU. This might be the case if the outcome of the referendum were to lead to the arrival of a more anti-EU Conservative administration which might find little sympathy in continental governments and political parties.

The political fall-out of Brexit would emerge in a number of ways, in the context of a Union dealing with the Eurozone’s growth and unemployment travails, the continuing refugee crisis and unhappy relations with Russia.

The UK – seen as the driving force behind the creation of the Single Market in the 1990s – has always been a strong voice for liberal economic policies and for the extension of the market in the services and digital sectors.  Its departure could lead to a change of emphasis and, possibly, to difficulties in the EU-US trade talks.

Brexit, Barber argues, would reinforce the leading role of Germany at a time when France was deeply concerned with terrorism and right-wing populism. This would not be welcomed in Berlin which has regarded the UK, despite its ‘half-in’ attitudes to EU affairs, as a political balancing factor.

Above all, Brexit, according to Barber, would be evidence that “for the first time in the post-1945 era, that EU integration can go into reverse as well as forward.” This could encourage populist, anti-EU movements to demand renegotiation of their country’s terms of membership. In France, more than 50% of voters are reported as wanting a referendum, reminding observers of the 2005 vote on the proposed Constitutional Treaty. Brexit could equally encourage separatist feelings in Scotland and Catalonia and would create difficulties for the on-going peace and reconciliation process in Ireland.

There are, of course, some voices arguing that Brexit would be positive for the remaining member states since the UK has at times been considered an obstructive player in Europe. The former French Prime Minister, Michel Rocard, has called for Britain to depart “before you destroy everything”.

Tony Barber’s arguments in the Financial Times are paralleled by views expressed in more than one EU capital about the implications of the concessions to David Cameron.

Former Italian Premier and Commission President, Romano Prodi[ii], has commented that the real consequence of the summit is an enshrined multi-speed Europe. Agreeing with Prodi, Le Monde expressed the view that the divisions and lack of solidarity in Europe have “never seemed so deep.” Meanwhile Madrid’s El Pais wrote that the EU had “paid a high and unjustifiable price to secure the continued membership of a wayward partner.”

The Italian Finance Minister, Pier Carlo Padoan[iii], has advanced the view that Brexit would be a demonstration for other difficult partners that an anti-European programme can bear results: “It would be a message sent to many anti-European parties all across Europe and to some anti-European governments.”  He also argued that concerns about any domino effect might make an agreement with a post-Brexit UK very difficult to negotiate, requiring, as it does, not only new tariffs but new rules.

The technicalities of implementing Brexit are giving rise to serious concerns on both sides.  The former Taoiseach, John Bruton, has worried “not just about the technicalities but about the destructive forces that this could unleash, not just in the UK but across the continent.  It is the potential undoing of 70 years of statesmanship.”  The Finnish Finance Minister, Alexander Stubb, meanwhile, feels that “it will take a long time, a lot of instability, market mayhem, legal interpretation, a lot of court cases.”

Andrew Duff, in a Policy Network paper[iv], makes the significant claim that the Cameron deal leaves the European Union “left with its first concrete instance of political disintegration entrenched at a constitutional level.”  The agreement to exempt the UK from the treaty commitment to ‘ever closer union among the peoples of Europe’, according to Duff, means the end of an implied common goal.

The central implication of a UK vote to ‘remain’ would be that the Cameron deal – the formal Decision of the European Council of 18 December 2015 – would enter into force.  Andrew Duff states that the Decision will become legally binding if and when the UK voters decide to stay in the European Union and after the adoption of appropriate primary or secondary EU legislation. He argues that the decision is designed to change the terms of an EU treaty that the UK itself agreed to, and one which has not been the subject of any major disputes in the six years since its entry into force. Agreement to this arrangement may be seen as the EU and the UK together blundering into something whose long term consequences cannot be foreseen.

Duff concedes that there is an ‘optimistic’ interpretation of the implications of Brexit, put forward by federalists who see British relegation to second-class membership opening the way for much deeper integration of the core group within the Eurozone. Tony Barber picks up that opinion by advancing the argument that Brexit might inspire “Eurozone governments with courage to make a big leap towards closer financial, fiscal, economic and political union.” He then identifies a hitch in the theory, insofar “that it is by no means clear that Eurozone governments and public opinion have the appetite for such bold steps. There also remains the awkward question of which countries to include and which to exclude from deeper integration.”

 

 

 

 


[i] Tony Barber.  ‘A British breakaway would hurt its European partners.’  Financial Times, 1April 2016/ (www.next.ft.com)

[ii] Financial Times.  Fear raised over damage to EU project from UK concessions.  Financial Times, 21 February 2016.    (www.next.ft.com)

[iii] Patrick Wintour and Rajeev Syal. Brexit would damage EU and UK ‘politically and economically’.  The Guardian, 6 March 2016.   (www.theguardian.com)

[iv] Andrew Duff.  Britain’s special status in Europe.  Policy Network Paper, March 2016.  (www.policy-network.net)