Let us look at the implications of a Eurexit, the exit of an existing EU member country from the EU, in terms of what it means for the EU.
At present, the most likely candidates of a Eurexit are Britain (Brexit), Finland (Fixit) or one of the Southern European countries. At the other end of the scale, a Eurexit of Germany has often been mooted as a possibility as well. This is based on the premise that Germany would finally lose patience with the deadweight of a disintegrating & discredited EU/Eurozone and decide to cut loose from it.
At the outset, I must be honest and state clearly what my support for a Eurexit really means and, in order to best explain this, let us take a Brexit as an example.
- Obviously, I do have positive point of view regarding the future prosperity of the United Kingdom (Britain). I hope that the Britons have carefully weighed up all of the pros and cons of such an important decision and have debated the matter sufficiently to understand the possible consequences of such a move.
- The “Leave EU” protagonists have produced sufficient evidence to convince me that if the UK were to leave the EU, this would be a good and positive thing…..for the UK.
- My real interest in this matter deals rather with the EU. Ideally, I am looking for a win-win outcome, but in accordance with what I wish to happen to the EU.
- And regarding the EU, a win for me would be if a Brexit would cause some tectonic shift in the plates of the EU/Euro institutions & make-up.
It is widely acknowledged that the inertia of the EU structure is proving to be very resistant to all attempts, whether intentional or unintentional, to change the system in ways that would make it a “better” union for the citizens of Europe.
The only remaining alternative is to hope that an event that creates a “shock” to the system, like a Brexit, would be the catalyst to initiate such a change. However, I am not yet convinced whether a Eurexit would actually have such an effect.
Let us consider the affects to the EU if a Eurexit should occur. There are three scenarios.
- Nothing affects the EU and it remains much as it is now. No worse, but no better either. This is the worst outcome (for me and like-minded people). However, in terms of the consequences of any disruption, it would have the least short-term negative effect.
- The effects of a Eurexit are sufficient to precipitate the ultimate breakup of the union. This is the best outcome (for me and like-minded people). However, in terms of the consequences of any disruption, it would have the most short-term negative effect.
- The effects of a Eurexit are sufficient to motivate those in power that changes have to be to be made to make the EU function better to provide the prosperity required by its citizens. It is more likely that the changes would be small in comparison to the Union as a whole. This is the 50/50 outcome. The outcome and effects of this are too difficult to accurately quantify in advance.
I do not have all of the knowledge and expertise to be able to provide detailed technical analyses. Therefore, in order to provide these where required, I will rely external resources, of which there are plenty available on the internet.
My task will be to put everything together in a reasonable sort of summary that the average Jill or Joe in-the-street can understand.
For some EU countries, a Eurexit would probably have a different effect, for both the country concerned and for the EU. Due the pressure of space, I will gloss over this fact for the moment. I believe that, for starters, it is more important to just get a basic grasp of the subject in question.
Looking at all of the analyses and predictions of the possible Eurexit of Greece last year, could be a start, but I think that there must be some qualifications. Prior to the “Greek Spring” last year, it seemed that not much thought had been given to how such a Eurexit would occur nor what the consequences might be, both to Greece or to the EU. In addition, the debate seemed to revolve around Greece only leaving the common currency, since being in the EU was generally felt to be a good thing. Of course, in reality, this might have not been possible since many experts feel that an exit from the EMU, de facto, also means an exit from the EU. For obvious reasons, there was no motivation for the EU institutions to clarify this matter properly. However, what not a lot of people realise is what had happened about 3 years previously.
In November 2011, the Wolfson Economics Prize competition was launched. The aim of the competition was to ask economists around the world to produce a workable solution to the following question:
“If member states leave the Economic and Monetary Union, what is the best way for the economic process to be managed to provide the soundest foundation for the future growth and prosperity of the current membership?”
Applicants were asked to explore in detail the issues that an exit from EMU would raise including:
- Whether and how to re-denominate sovereign debt, private savings, and domestic mortgages in the departing nations.
- Whether and how international contracts denominated in euros might be altered, if one party to the contract is based in a member state which leaves the EMU.
- The effects on the stability of the banking system.
- The link between exit from the EMU and sovereign debt restructuring.
- How to manage the macroeconomic effects of exit, including devaluation, inflation, confidence, and effects on debts.
- Different timetables and approaches to transition (e.g. “surprise” re-denomination versus signaled transitions).
- How best to manage the legal and institutional implications.
- A consideration of evidence from relevant historical examples (e.g. the end of various currency pegs and previous monetary unions).
The competition was open to everybody and the initial deadline for submissions was January 31st, 2012. Policy Exchange, the think tank which managed the award process, sifted through more than 400 entries received and provided an anonymous shortlist of ten to the judging panel. At every stage of the process, the judges were able to ask to review any of the submissions.
On 3rd April 2012, a shortlist of five finalists was unveiled at a press conference hosted in London. Each of the finalists was asked to answer a list of questions put to them by the judging panel and resubmit their entries by the 29th May 2012. On 5th July 2012, a prize of £250,000 was awarded to the winner, Roger Bootle, an economist, and his team from Capital Economics (Full Report here or Summary here). The four other finalists were awarded £10,000 each.
I have a number of comments regarding this very important event:
- This was a very credible attempt to address a very important question, which was starting to be raised among economists who were sensing that this option might have to be invoked by some “struggling” Eurozone countries, post 2008.
- The results of the competition were very interesting. Far from indicating that such a step would be disastrous for either the exiting country or the Eurozone, the winner and the four other finalists produced analyses that indicated that the process had benefits and was manageable. Furthermore, the winning entry, at 189 pages long, was very detailed and investigated all aspects of the question in great depth.
- Obviously, the EU would not want these facts to be too widely known and they were not. By the time a Grexit was being mentioned during the Greek economic crisis in 2015, Roger Bootle’s proposals had faded from view. The consequences of a Grexit were then being described in catastrophic terms to dissuade the Greeks (and any other Euro countries) from believing that this was a viable option.
- So the practicalities of undertaking such an event were well understood, from an economics point of view. What would then be required would be the political will to actually do it (or prevent it, as the case may be).
As it transpired, during 2015, numerous Grexit plans were put forward by experts and amateurs alike. Although I have not made a detailed comparison, I doubt that I would be far wrong to say that most of the “new” plans probably resembled Bootle’s plan in many respects. Then there were also some”in between” plans, more like a semi-Grexit than a full exit from the Eurozone.
Finally, when the Troika had the Greeks in the jaws of a vice, we got to hear that the German Finance Minister had been making plans for a Troika initiated Grexit. Obviously, the effects of any potential fall-out of such an event must have been studied by the Troika economists and suitable contingency plans made. So, far from seeing a Grexit as a calamity, the Troika were prepared to accept a Grexit as a solution, albeit on their terms.
As things turned out, the waters were never tested. All ideas of Grexits and semi-Grexits were shelved.
Since February 2015, however, some important changes have taken place in the EU:
- The negotiating process leading up to Greece accepting the third bailout was an eye-opener for many people, experts and laymen/women alike. The feelings towards the EU in general turned negative.
- The entire Greek affair also turned the spotlight on the functioning of the EU and its institutions as a whole and the scorecard was not impressive, to say the least.
- The plutocratic/technocratic nature of the functioning of the EU came to the fore, although this feature has always existed, inherently, in the EU structure. The last European Parliamentary elections nearly exposed this glaring short-coming, but the bureaucrats managed to paper over the cracks and the EU citizens didn’t really notice. However, the way the EU handled the Greek crisis, raised the awareness that, in reality, there is a deficiency of democracy in the EU system. Suddenly alarm bells started ringing all over the place and the activists all climbed onto the bandwagon. “Democratise Europe” became the new rallying cry.
- And then, just as (bad) luck would have it, 2016 became the year when the British Prime Minister, David Cameron, decided to keep his promise to the UK electorate that they would have a chance to decide whether the UK should stay in or leave the EU. The anti-EU pressure was again on the rise. I do not intend to discuss the details of the stay/leave debate here, since I have already touched on some of the issues in another blog article recently. The part that I am dealing with here is whether a British Eurexit will cause the EU to implode or disintegrate and would such an effect be entirely, partly or not at all.
- Well respected experts in their field now acknowledge that the EU/Eurozone just cannot go on any longer like this. Lord Mervyn King, who spent a decade dealing with the worst financial crisis in history as the head of the Bank of England, has recently stated that the weakest Eurozone members face little choice but to return to their national currencies as “the only way to plot a route back to economic growth and full employment”. “The long-term benefits outweigh the short-term costs,” he writes in his book that has just been published, The End of Alchemy. The former central bank governor added that popular disillusionment with EU economic policies are likely to lead to disintegration of the single currency rather than a move towards “completing” the monetary union.
Observation No.1: We must look closely at what happened since June 2015, when David Cameron formally announced that the British government would seek to obtain better terms for the UK within the EU. In many ways, the outcome of the negotiation of a new EU deal for the UK has mirrored the Greek experience 12 months ago and probably for the same or similar reasons. The most important being that the EU elites do not want to set any precedents that shows them to be going “soft” on EU policy. As it is, the UK already enjoys exclusions that other EU countries do not have.
A few months ago, I presented a possible negotiating strategy that could or was used to try to sway things in Britain’s favour.
The top dogs in the Conservative Party have read the writing on the wall and have finally been forced to admit that the EU, at least in its current form, is not necessarily the best thing for the UK.
The Tory leader also turned his fire on bureaucratic over-reach in the EU, which he said was driven by “the desire for harmonisation and homogenisation – on tax, on regulation, on so many aspects of public and private life”.
“It is the last gasp of an outdated ideology, a philosophy that has no place in our new world of freedom, a world which demands that we fight this bureaucratic over-reach and lead Europe into the hope and potential of a new, post-bureaucratic age.”
(BBC report on a speech given by David Cameron in Prague, Czech Republic – Nov 2007)
Also, not being (total) fools, they saw what happened with Greece’s EU negotiations. You must be prepared to go into the battle with your biggest guns or not start the war in the first place. Therefore, in order to achieve their objectives they decided to use a radical strategy:
Warn of the likelihood of a Brexit, indicate the willingness to do it (ie. carry out the wishes of the people) and then present reasons how it could be avoided!
Of course, using this strategy was always going to be a bit of a gamble, since it would give the supporters of a Brexit a bit of a head start. Nevertheless, in order to get some serious negotiating power on his side, Cameron might have been hoping that the real threat of a Brexit would certainly make those EU bureaucrats sharpen their pencils regarding Britain’s demands. Or would they? What if the EU experts have no fear of a Brexit. What if the EU’s position was that “we will give Cameron some tid-bits to take home to his voters to show that the EU is not totally heartless, but if, in the end they wish to leave, then they must go.”
“….the British often test our patience and good will with their continuous demands. They are demanding. They push hard. They insist. They just don’t let go. Many of my colleagues say behind closed doors: Don’t stop a rolling stone. If the Brits want to leave, let them leave.”
(Martin Schulz, president of the European Parliament – speech given at the London School of Economic in Feb 2016)
This sort of response might indicate that the experts of the EU believe that scenario 1 is the most likely outcome of a British Eurexit, ie. their best outcome, but our worst. And maybe this is the case. Here are details of the new deal with the EU that the Britons have been promised – “Cameron Watch – Is that it?” and some more detailed analysis here – “Cameron Watch – A Piece of Paper“.
The obvious conclusion can only be that the EU is not frightened of a British Eurexit!
Observation No.2: Quite a number of organisations, politicians, economists, econo-politicians, academics, business leaders and leaders of major companies who support a “UK stay in the EU” have been making a point of mis-representing the truth regarding the likely Brexit process and its consequences, both to the UK and to the EU. This strategy is a mirror image of the way that the “invasion of Iraq to destroy weapons of mass destruction to ensure peace in the world” was sold to the unsuspecting and uninformed public. And we all known what a load of nonsense that was.
Here is an important example of this. Prompted by a statement by a UK government minister in parliament, in 2011, that EU member states traded twice as much with each other as they would do in the absence of the Single Market, Michael Burrage set out to test the veracity of that assertion. This is his report – “The Myth and Paradox of the Single Market“:
How the trade benefits of EU membership have been mis-sold (Jan 2016)
“For many, the economic benefits accruing from the UK’s membership of the EU are supposed to be self-evident and unquestionable – access to the European Single Market is of enormous benefit to British exporters and a major attraction for global investors looking to expand into the region. Or so the argument goes. But where is the evidence for this? What do the trade and investment figures actually tell us?
This timely study looks behind the claims that are frequently made in support of being a member of the EU and finds a very different reality. Examining the research used by not only ministers but big business and many other pro-EU lobbyists to support their stance, Burrage finds that there is no empirical basis for the supposed advantages that the Single Market confers on the British economy. It is a devastating conclusion that should fundamentally shift the terms of the debate surrounding Britain’s relationship with the EU.”
Both the experts and amateurs that support a Eurexit of Britain and who analyse and explain what they believe the effects of such an action could be, are not fortune tellers. They cannot guarantee that things will turn out as they say, but I do not find that they are being devious to support their argument.
On the other hand, the “UK stay in the EU” brigade, who are mis-representing the truth to support their campaign, are not being honest with the public and are afraid. They are so afraid that the majority of the ill-informed public might realise, if given the proper facts, that it would probably be best for the UK to leave the EU. The “Leave” vote would then win by a landslide. The only possible way to counter this likelihood is to use the “Iraq War” strategy. Once the Referendum is over, it will make no difference to point out the dishonesty and expose the lies. Then it will be too late.
This disturbing phenomenon is a sign of desperation and it does not bode well for the presentation of honest facts. Here is what Sam Hooper thinks about “Project Fear”:
“…..The uncomfortable truth for the pro-EU crowd and the Remain campaign is this: the more you learn about the European Union, its history, the way it came about and its ultimate direction of travel, the more likely you are to oppose it and want Britain to leave. When ignorance prevails and people believe that the EU is nothing more than a friendly club of countries trading and co-operating with one another to Save the Earth, the europhiles win. But when the drip-drip of facts and evidence begins to permeate the debate, people start questioning those pro-EU shibboleths and opposing our continued participation in this mid-century supra-national experiment.
Furthermore, it is those who think primarily with their wallets, as consumers first and foremost, who are most likely to be susceptible to the Remain campaign’s Project Fear and scaremongering tactics about the hysterically hyped “costs” of leaving the European Union, while those who think as engaged citizens and global stakeholders who are most likely to question the European project.
Charles Moore is quite right: there is indeed an army of swivel-eyed ideologues in this EU referendum debate. And though they would hate to admit it, it is those on the Remain side who are most likely to be impermeable to facts, and who are least likely to have ever held a different view on the EU and been on an intellectual journey to arrive at their present position.
And as a rule of thumb, it is generally wisest to listen to those who can show evidence of having thought deeply about an issue and been persuaded by the steady accumulation of evidence to revise their thinking, rather than those who were born with their deeply-ingrained love of the European Union pre-programmed in their brains.”
And here is a further illustration that the “twisting of the facts” tactic has got so bad that not even the UK Prime Minister can be trusted to give honest answers. Fortunately, Paul Reynolds is keeping a close eye on “Dodgy Dave” and his “ducking and diving” antics and he is not letting Cameron off the hook so easily, unlike our mainstream media who seem to have got amnesia, dementia and writers block, all simultaneously.
“…….Released against a background of “Project Fear” and some dodgy campaigning tactics from Cameron’s government, you will be surprised and amazed to learn that the Government dossier concludes “no existing model outside the EU comes close to providing the same balance of advantages and influence“. Let’s have a closer look and see if that claim stands up……”
In summary, Peter North echoes exactly what I have being trying to say, only better!
“For reasons outlined on this blog, I do not believe Brexit will come at a heavy price. Both the EU and the UK have too much to lose by doing this any other way than carefully and amicably. The EU doesn’t want uncertainty, and to an extent nor do we. The EU isn’t interested in creating an economic catastrophe. A recession for us is a recession for them. We could survive one. The Euro, possibly, could not.
…..Those behind the campaign to remain are merely counting on public fear, ignorance and political narcissism to carry them through. And the shrillness and the forcefulness of their insistence tells us that they are scared. Not in a sense that the smell imminent defeat. It’s just the very idea of democracy, power in the hands of the people, really is anathema to them. If we had democracy we might vote to do something they didn’t like and that would never do.
…..It is the Remain campaign that really smacks it home to me. We have a prime minister who doesn’t shrink from telling one of the biggest political lies of the century and an establishment able and willing to use every tool at its disposal – no matter how low. Much of the inherent establishment advantage is one purchased with out own money over decades. The founding fathers always knew this day would come when their project was threatened by the need for change.
…..Should we instead choose another path, we can show real leadership in reviving multilateralism and cooperation. We can lead Europe out from under the dead hand of supranationalism – to finally put the politics of first half of the last century into the proper context. We can design a world more befitting the internet age. And if that comes at a price, then it is a price I am willing to pay. We have gone as far as we can with the post-war settlement. It really is time for change, lest we pay a price none of us wants to pay.”
This intensity of this dis-information campaign might indicate that the “UK stay in the EU” experts want us to believe that scenario 2 is the most likely outcome of a British Eurexit, ie. their worst outcome, but our best. However, in reality, it may be the case that scenario 1 or 3 are more likely. Not good for the “EU Disintegrate” lobby.
Observation No.3: Other experts believe that a Eurexit, and specifically a Brexit, will be catastrophic for the EU. Here is the view of Yanis Varoufakis:
“…..Brexit will make the EU’s fragmentation faster and surer, begetting a post-modern 1930s from which the UK will not escape even if out of the EU
As an outside observer of the developing Brexit debate, I am often struck by a false assumption made by both sides of the Brexit debate: the assumption that the EU is an ‘exogenous given’.
Both sides of the debate argue as if the EU is ‘constant’, ‘out there’, on the Channel’s other side, and that its solidity and constancy is independent of what British voters choose on 23rd June.
Both sides of the debate couch their claims on the basis of whether this ‘exogenous’ EU is something the British public should or should not want the UK to be part of.
Neither side seems aware of (or willing to allude to) the fact that the EU is disintegrating as we speak. That, under the weight of its own hubris, the EU is falling apart, with new divisions, new economic divergence, and new centrifugal forces tearing the Union apart. Indeed, neither side acknowledges the obvious fact that a vote to LEAVE the EU will speed up the EU’s disintegration. And neither side offers any analysis of what such disintegration will mean for Britain.
My view is that Brexit will, inexorably, cause ruptures in the EU that will lead to the Union’s effective dismantling. Will this serve the purposes of Brexit’s supporters? Will Britain be better of after the EU collapses? I do not believe it will. While undoubtedly many EU critics will get some satisfaction watching the EU’s unloved institutions collapse, they (along with the rest of us) will soon be consumed by the frightful vortex of the EU’s sinking vessel.
To begin with, a new fault line will develop along the river Rhine and across the Alps, separating:
(i) a new Deutsch Mark zone (that will include Germany, the Netherlands, part of Belgium, Austria, Poland, the Czech Republic, Slovakia, the Baltics and Finland) mired in deep deflation – as a result of the fast appreciating new Deutsch Mark
(ii) a stagflationary Latin (dis-) Union (spanning France, Spain, Portugal and Italy) where currency(ies) devalue precipitously, spearheading runaway inflation with high unemployment.
Simultaneously, a second fault line will divide Eastern from Western Europe, with ultra-nationalism, toxic social conservatism and a beggar-thy-neighbour migration & economic policy mind-set taking hold in the East and making its way West-ward (boosting the chance of politicians like Marine Le Pen).
From an economic point of view, these developments will deprive Britain of a large share of its export markets, push the City of London into a deleveraging mode not seen since 2008 and, worse still, reinforce the already negative global developments in the US and the emerging markets (as the EU represents the world’s largest economic bloc) that will impose nasty secondary effects upon the UK.
From a political point of view, these same developments will create a European hinterland inimical to the values that British democrats cherish and hostile to a democratic Britain.
In summary, British voters should not err into thinking that their 23rd June decision will leave the EU more or less ‘constant’. Their vote to LEAVE will devastate the ‘environment’ within which a newly ‘emancipated’ UK must work and live.
Although the reasons to support why this might happen, are not clearly stated, this sort of response indicates that some experts believe that scenario 2 is the most likely outcome of a British Eurexit, ie. their worst outcome, but our best. Given that Yanis has just started his project to Democratise Europe and reform the EU, I guess that he is willing to sacrifice the UK as a sort of a band-aid for the EU, if the EU is indeed in collapse as he describes. Keeping the EU on life-support may just give him enough time to accomplish his goals. Sorry, Britain, you are going to be sacrificed for the greater good!
Observation No.4: This is less an observation of mine than a question/statement regarding the current situation:
“You see but you do not observe”, says Sherlock Holmes to Dr Watson. This point could be leveled at the EU referendum Remain camp. The EU institutions are cracking. For myriad reasons, national governments are reasserting themselves for good or for ill.
A quick tour of current EU member states paints the picture of a fracturing polity: the Finns are questioning the euro; the French are testing the Stability and Growth Pact in addition to the free movement of peoples; since August 2002, when Chancellor Schroeder refused to join the US over Iraq, Germany has got used to saying Nein, most recently to France’s de facto proposal for a transfer union; France equally says Non to embedding a balanced budget regime in EU law; Portugal is in a constitutional crisis, and the government in Madrid faces a serious secessionist movement in Catalonia. The list goes on.
On a macro level, the Eurozone has not grown much at all since 2008. Levels of unemployment remain stubbornly high, leading to extensive youth emigration from distressed countries such as Spain, Greece and southern Italy, compounding the long-term problem of sluggish southern Mediterranean growth, and enriching the countries to which they move such as the US, Germany, and Britain. As stagnation drifts on, radical voices are becoming ever more audible – most recently seen in Marine Le Pen’s first place in the French regional elections last weekend – and the prospect of remaining chained to the EU appears riskier each day.
Given the severity of developments on the continent lately, the Prime Minister’s modest and inconsequential demands have, to say the least, been overtaken by events. The result is that we will be asked to vote to remain in an EU whose future shape we currently do not know, other than it will entail less power for the UK. We are asked to subscribe to a service and sign a contract that can be forever amended by the provider without our knowledge and against our interest. Worst still, our supposed victories can easily be ignored or overridden. With plans for further integration and loss of control outlined in the EU’s plan for the next decade, there is no, and can be no, EU status quo.
As the date of the referendum approaches, the Remain side is retreating into assertions and wishful thinking. During one of my last debates at a car manufacturing conference, the crisis sweeping the continent of Europe was initially ignored. It was only when I mentioned it that it became a topic.
Remain advocates brush aside the EU’s deep-seated ailments with the simple throwaway line: “Of course, the EU is not perfect but on balance…”
Observation No.5: Finally, as my summary and conclusion, I can do little better than to repeat here what Tony Edwards, believes will happen (or not happen):
There is an assumption made by many British Eurosceptics that the EU is a body in permanent decline – the first major shock would derail it altogether. But of course , that is a train of thought that has been spectacularly wrong before.
Back when the Euro was conceived, most of us foretold that it would be a disaster, and it of course has been exactly that. However, the EU is still there, and the Euro shows no signs of going away any time soon. It is driven forward by political will, in the belief that when there is enough integration its internal pressures will fade. The project itself is so important to those who hold the reins that they are willing to ride out the misery it has caused for millions of people across the Eurozone. That has even been true at a national level, where belief in the project, or at least fear of leaving it, has held it together with surprisingly little domestic pressure to do otherwise.
Then when the EU constitution failed to get past French and Dutch voters, it was swept under the carpet – not least of all by French and Dutch politicians. The constitution was re-written and then eventually passed with little opposition as the Lisbon Treaty, which as everybody knows was almost entirely the same in effect but written as to make it unintelligible to the average citizen.
Then there is the migrant crisis, this one has proven more difficult for the EU to sweep under the carpet, but while there may have been a temporary derogation from Schengen by some countries, none of them have entirely walked away from the principle. Equally, none of these countries has the serious likelihood of leaving the EU, and none has a planned referendum as the UK does.
So what would be the effect of the UK leaving the EU on the remaining states?
Well, it’s hard to actually see any. There is no chance that we would ever leave the single market under a Tory or Labour government, leaving the EU is not the same thing as leaving the Single Market. Apart from the added hassle of having to make a Customs declaration when importing into the EU, absolutely nothing would change. Product conformity would remain a domestic issue, with a single set of product rules across the EEA (and we would have access hopefully via renewed EFTA membership).
Visa free travel would remain, and there would be no repatriation of EU citizens from Britain, and no British Citizens would be removed from residence in EU nations.
Co-operation on science, defence, crime and terrorism would remain unchanged. There is no suggestion that we would somehow refuse to co-operate with our EU counterparts.
The EU would press forward to it’s next treaty, in the way presently outlined in the “Fundamental Law” document, which has been available for a long time for anyone to see the direction of travel. The current plan of course is for the ‘British model’ is simply the second tier of EU membership that is proposed in the document, with Britain the natural leader of that group due to its economic size and international links. So this would add a new dimension to EU politics, with a new leader emerging for that second group – the Non EZ countries. With Britain absent from that second tier, a new leader would emerge. This would probably be Poland, which would relish the opportunity to be the true leader of an ‘eastern EU’ bloc – leader of the previous Soviet states still outside the Euro. This would give the second tier EU a very different character than if it were British led, but would not halt progress towards total integration.
As for the Eurozone, it will face less interference with its own integration. To fully integrate, it needs to pass the next treaty, which would require unanimity. At that point, Britain could prove a thorn in the side of the EZ countries – but it is unlikely that any of the other non EZ countries will be as difficult to deal with. This is mainly due to the protections a British government would seek for the City of London and the financial sector.
So are there any dangers for the EU in Brexit?
There are, but they are not existential. Britain is a net contributor to EU funds. Removing a contributor at a time when many of the net recipients are not growing or in some economic decline (for example Greece), will place some strains on the remaining net contributors. It would not be popular in Germany of course if the burden fell heavily on them. But actually, it wouldn’t be of a magnitude that couldn’t be withstood.
EFTA would be more powerful, because its economic size will have increased (bearing in mind that for Flexciteers, the initial aim is to rejoin EFTA). It would therefore make it much more difficult for the EU to attempt to remove the EEA agreement, rolling the single market into the EU treaty in an attempt to pull in the EFTA nations (bar Switzerland). But leaving the EFTA/EU twin pillar structure in place would not harm the EU, though it might hinder its expansionist aims.
There is the danger that Britain outside the EU would surge ahead, reducing energy costs, reviving localised environmental policy, renewing democracy, increasing its trade links with the outside world. It might encourage others to leave the EU, and give a signal that the EU is yesterday’s answer to 20th century issues. Now of course, many of us in Britain believe those things to be true, and hope for those outcomes. But in the mainland of the EU, public desire for integration is still fairly strong in the leading nations. The migrant crisis has shaken belief in open borders, and Schengen has been relived in some places. But that does not automatically mean that there has been a fundamental shift in the desire to develop the EU per se, and the crisis will end at some point.
So, there is no real reason to think that the EU project would be substantially harmed by Brexit, which begs the question, why is Der Spiegel reporting that the colleagues will bend over backwards to keep us? I believe its simply a matter of mindset. No country has ever left the EU (Greenland left the EC which was a different prospect), and article 50 is supposed to prevent it (because it certainly would have been easier to leave under previous international conventions). So its a matter of conceptual attitudes, an unrealistic fear of ever seeing the project go into reverse.
So rest assured, Brexit won’t harm Britain, and it won’t harm the EU.
Britain, and the British attitude, was never compatible with European Political integration. Removing this incompatibility should have a positive effect for both us and the EU, where we can then co-operate on an equal footing rather than forcing both entities into an impossible strait jacket of ever closer union.
There is nothing to fear but fear itself.”