The EU and Brexit: Sailing in uncharted waters

christianschweiger | 20 July 2016

The momentous decision to opt for exit from the European Union that was made by a slim majority of the British public on 23 June immediately will have long-lasting effects which will linger for years to come. The immediate result of the Brexit decision was profound domestic political and economic turmoil in the UK. This is likely to be followed by years of insecurity for both the UK and the rest of the EU as the new British government led by Theresa May prepares to enter into difficult exit negotiations.

The outcome of the referendum is not surprising for anyone who is familiar with the evolvement of the domestic political debate on EU membership in the UK. Overall the British public has never been at ease with their country’s membership of the European Economic Community (EEC) and later the European Union. The exception is Scotland, where membership of the EU continues to be considered as an opportunity to enhance the region’s autonomy. The UK joined the EEC in 1973 mainly for economic reasons. The British economy had slipped in and out of recession during the 1960s while growth rates in the six Common Market countries were comparatively strong. The UK had reluctantly applied to join twice in the 1960s and both times was vetoed by French president De Gaulle. De Gaulle was concerned that as a member the UK would try to fundamentally change the nature of the EC towards a loose free trade area. Moreover he was convinced that American influence in the EC would grow once Britain was on the inside. After De Gaulle’s departure the new French president Pompidou had shown a more pragmatic attitude towards British membership. This allowed the Conservative government under Edward Heath to take Britain into the EEC on 1 January 1973. Heath, an ardent pro-European, was convinced that the economic benefits of membership of the Common Market would outweigh the political costs of joining a Community that had been predominantly shaped by France and Germany and where the UK would immediately turn into a net budget contributor. Heath famously stated that the UK would be ‘part of Europe by geography, tradition, history an civilization’[i].

Initially it seemed as if the majority of the British public were beginning to warm to Heath’s view. At the first membership referendum held by the Labour government under Harold Wilson on 5 June 1975 67.5 per cent of voters opted to stay in the EEC. The referendum was the result of the deepening divisions within the Labour Party towards the EEC. The eurosceptic left wing of the party led by Tony Benn rejected EEC membership on the basis that the Community would be a capitalist club that was making it impossible to implement a socialist political agenda in the UK. In contrast the Conservatives remained the pro-European party with even the new Conservative opposition leader Margaret Thatcher campaigning strongly for staying inside the Common Market in the 1975 referendum campaign. This changed drastically after Thatcher had become prime minister in 1979. Once in office she realised that her priority for market liberalisation was at odds with the Franco-German desire to deepen the political integration of the Community. Thatcher therefore adopted an increasingly non-cooperative attitude and demanded clear red lines to safeguard the UK’s national sovereignty and limit the contributions to the Community budget. At the 1984 Community summit in Fountainebleue Thatcher negotiated a permanent budgetary rebate for the UK by stating that ‘I want my money back’. During her famous speech at the European College in Bruges on 20 September 1998 warned of the dangers of a European federal superstate: ‘We have not successfully rolled back the frontiers of the state in Britain, only to see them re-imposed at a European level with a European super-state exercising a new dominance from Brussels’[ii]. This eurosceptic rhetoric occurred against the background of Thatcher having previously signed up to the Single European Act (SEA). The SEA not included measures to accelerate market liberalisation in the EEC but also laid the foundation for deeper political integration by introducing qualified majority voting for economic and social affairs. Moreover the SEA paved the way for the creation of the European Union and a concrete timetable for the establishment of monetary union under the subsequent Maastricht Treaty.

Thatcher and her followers believed that the main purpose of the EEC should be to act as a free trade area which strengthens trade between the member states. Thatcher mainly blamed Germany for pushing towards the deepening of political integration. She was deeply suspicious of German European policy motives. In her political memoirs Thatcher characterised Germany as a ‘destabilising force’ which would waver between ‘aggression and self-doubt’[iii]. While she was still in office she allowed her Trade and Industry Secretary Nicholas Ridley to characterise the EEC as Germany’s means to subjugate Europe. Ridley equated the transfer of Britain’s national sovereignty to the Community with conceding it to Adolf Hitler[iv]. The tradition of Thatcherite predominantly English euroscepticism has consequently fed itself from the scaremongering about German hegemonial aspirations in the EU. This has been a prominent feature in the eurosceptic tabloid press, especially in papers like The Sun and the Daily Express, where engagement in the EU is persistently portrayed as ‘surrendering’ to foreign interests, most of all those of Germany and France. These sentiments also featured in the recent EU referendum campaign when prominent VoteLeave campaigner Boris Johnson, now Britain’s new foreign secretary, compared the EU with Nazi Germany. On 15 May this year Johnson emphasised in an interview with The Telegraph that it was his belief that the EU shared Nazi Germany’s desire to unify Europe under ‘one authority’, albeit with ‘different methods’[v].  Johnson’s comments reflect the deep-seated hostile perception of the EU and European integration amongst particularly the English public.

This is not only the result the failure of successive governments since Thatcher to make a positive case for British engagement in Europe. Apart from the brief period of constructive rhetoric on the EU during the first parliament of Tony Blair’s New Labour government (1997-2001), who aspired to turn the UK into a leading player in the EU but eventually gave up this ambition over his support for George W. Bush’s military invasion in Iraq, British governments allowed the eurosceptics in the Conservative Party, UKIP and in the media to set the tone of the debate. The fact that the EU has come under almost exclusive semi-hegemonial German leadership since the onset of the eurozone sovereign debt crisis has deepened this euroscepticism across England and now also in Wales. German chancellor Angela Merkel’s relentless drive towards deeper policy coordination in the eurozone and beyond has contributed towards pushing an already sceptical British public further towards the EU’s exit door. David Cameron’s renegotiation of the British membership terms and the subsequent referendum were a response to growing euroscepticism within his own party but also amongst the wider British public, which was illustrated by the electoral successes of the anti-EU United Kingdom Independence Party (UKIP).  Cameron chose to adopt a defensive position and to focus on the renegotiation of the membership conditions rather than to try to take a leading role in the EU. He therefore missed the opportunity to challenge Merkel’s dominant position and to promote an alternative reform agenda for the EU. If Cameron had exercised strategic leadership he would have most likely won over France, Poland and other countries in Southern and East-Central Europe, which are critical of the German agenda, as allies to promote institutional reform towards greater subsidiarity and enhanced democratic accountability. Cameron’s defensive strategy instead concentrated on negotiating a permanent British opt out from political integration in the EU. His intention was essentially to ensure that differentiated integration between the eurozone core and the outsiders could be maintained. Cameron argued that ‘far from unravelling the EU, this will in fact bind its members more closely because such flexible, willing cooperation is a much stronger glue than compulsion from the centre’[vi]. In the end Cameron, who lacked both the popular appeal and the intellectual ability to make a convincing pro-European case, was unable to convince a sceptical public in England and Wales to remain in the EU. Cameron had run a lacklustre referendum campaign during which he allowed his chancellor George Osborne to determine a predominantly defensive strategy. The Remain strategy hence concentrated on emphasising the potential negative economic effects of Brexit rather than to make a positive case for staying in. Meanwhile the Vote Leave camp was able to put issues such as migration, contributions to the EU budget and Turkish membership of the EU on the agenda. This ultimately led the majority of voters to the conclusion that staying in the EU would potentially be a greater financial and political risk than leaving.

The public decision in favour of Brexit pushes both the UK and the EU into uncharted waters. Never before has a member state invoked article 50 of the Lisbon Treaty under which a request to leave the EU can be formally submitted to the European Council. The decision is even more profound as the with the UK the third largest member state will exit the EU. This will fundamentally alter the EU’s internal power balance. Without the sustained engagement of the remaining larger countries France,  Poland, Italy and Spain the EU is likely to remain under German semi-hegemony for the foreseeable future, which could contribute to a further rise in euroscepticism. Brexit will also weaken the EU’s external economic and political influence. With the UK the EU loses a vibrant services economy and a net contributor to its budget. Moreover the UK is currently the only country alongside France that is able to make a substantial contribution towards the EU’s military capabilities. These facts should however not mislead Theresa May and her ministers into assuming that the UK can expect substantial concessions during the Brexit negotiations. Once the British government decides to invoke Article 50 the negotiations are expected to be concluded within a period of two years. During this period the UK will negotiate with the remaining 27 member states, which are formally represented by the European Commission, bilaterally as an outsider. In practice this means that ‘the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it’[vii]. The EU-27 governments, in cooperation with the Commission and the European Parliament, therefore have the final say over the conditions of the UK’s status after exit from EU. The British government can try to lobby individual governments for favourable conditions but it has no veto over the final deal and also no guarantee that its proposals will be supported.

The remaining EU-27 member states are unlikely to show much goodwill to the new British government led by Theresa May after a referendum campaign in which the Vote Leave applied xenophobic rhetoric and half-truths to win over the public. Although May declared herself to be in favour of the UK remaining in the EU it is well know that she is a moderate eurosceptic. As home secretary May initiated the UK’s gradual withdrawal from the EU’s justice and police cooperation and repeatedly expressed her concerns about the freedom of movement. At the 2015 Conservative Party annual conference May emphasised her belief that ‘the numbers coming from Europe are unsustainable and the rules have to change’[viii]. The new PM has decided to put the Brexit negotiations into the hands of eurosceptic right-wing Conservative David Davis, who will have to work with foreign minister Boris Johnson to secure a deal. EU leaders reacted with bewilderment to the appointment of Johnson and he was widely criticised for his ‘dishonest’ campaign promises on NHS spending and immigration control. Johnson’s comparison of the EU with Nazi Germany particularly angered France and Germany, which was illustrated by the hostile comments of the French and German foreign ministers on Johnson’s appointment[ix].

It is crystal clear that the Vote Leave campaign promises to completely pull the UK out of the EU regulatory domain and to replace the freedom of movement with an Australian style points-based system can only be realised if Britain leaves the Single European Market. This means that in practice Theresa May’s demands to end the freedom of movement comes at the price of having trade tariffs reinstalled between the UK and the EU. Currently none of the countries who are not members of the EU but have full access to the Single Market, has been able to negotiate an opt out from the freedom of movement (with the exception of tiny Lichtenstein). Even if France and Germany proposed to accept concessions on the freedom of movement for the UK after Brexit these proposals would most likely be vetoed by the countries in Central-Eastern Europe, especially Hungary, Poland, Slovakia, Latvia and Lithuania. As a considerable number of citizens from these countries currently reside in the UK their governments are adamant not to jeopardise the freedom of movement to prevent a substantial return migration wave which could hardly be absorbed by the fragile domestic labour markets and would also considerably burden their welfare states. The freedom of movement is consequently the issue upon which the future shape of relations between the UK and the EU will be determined. The Brexit negotiations will be further complicated by the likely demands of the Scottish government for a renewed referendum on the region’s post-Brexit status.

Until the British government formally invokes article 50 and puts concrete proposals for the UK’s post-Brexit status on the table the insecurity about the medium- to long-term consequences of the referendum outcome will remain. The immediate result has been unprecedented domestic political turmoil in the UK with deep internal infighting within the Conservative and the Labour Party. Although the potential future risks of Brexit for the UK and the EU are profound and real they can be avoided if the process is properly managed. This will demand that the May government is willing to compromise on freedom of movement and that the EU-27 governments act in the spirit of collective solidarity instead of negotiating individually with the UK. If the UK manages to maintain full access to the Single Market after Brexit it would help it to avoid profound adverse economic implications for the domestic economy and also for the wider Europe. The IMF has already warned that Brexit is likely to push the UK into recession and to severely undermine economic recovery in Europe and even globally[x].

Ultimately Brexit does not only pose risks but also offers an opportunity for the EU-27 governments to relaunch the European project by working towards implementing profound reforms of the EU’s institutions and decision-making processes with the aims of achieving greater policy efficiency and public legitimacy. Both the UK and the EU-27 governments will need steadfast stewardship to sail through the current tides of insecurity that Brexit has pushed them into to avoid  ending up shipwrecked. If the current leaders in London, Berlin, Paris, Warsaw, Rome and Madrid  are able to provide this stewardship at the end of the day is more than doubtful given their failure to reach a joint approach on resolving major challenges, such as the eurozone and the migration crisis, Ukraine, Syria and more recently Turkey. Brexit therefore remains a scary and unpredictable choice for everyone or, to quote David Cameron, ‘a leap in the dark’.