Brexit – the chaos that will be felt around the world

Jun 26, 2016 News

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By John Lloyd

(Reuters – Commentary) Britain, and its Conservative prime minister, seemed a sweet pairing when David Cameron first went to Downing Street. The coalition government Cameron headed for that five-year term, to 2015, worked relatively well: the economy turned round more rapidly than others in Europe; unemployment, high for the young in some parts, was overall lower than the European Union average.
Last year, when Cameron won an absolute majority, when the Labour Party picked a far leftist as leader and the Liberal Democrats, tainted in the eyes of their voters by coalescing with Conservatives, all but disappeared, it seemed that Cameron was something of a political genius.
Then – crash, bang, wallop. What a chaos! Britain has voted to come out of the European Union, Cameron is going in the next two or three months, and presumably one of the leading Brexit campaigners – former London Mayor Boris Johnson, the most obvious choice – will be elected in his place.
So first, the little local difficulties. The turmoil within the ruling Conservatives, as those who voted “Remain” to stay in the European Union face up to domination by a Brexiteer, will be matched by the Labour Party. Its leader, Jeremy Corbyn, made a half-hearted, conflicted case for Remain. He was passionately against membership in his decades as a far-left member of Parliament; and many, probably most, Labour voters chose Brexit. Already, members of Parliament are calling for Corbyn to go.  
Scotland, which as a region voted by 2:1 to remain in Britain during its own referendum last year, may have another vote on independence. This one may go through.
At the same time, the Republicans in Northern Ireland, which also voted (less convincingly) to Remain have called for a referendum on Irish unity, and may get it.
“May” is the operative word here. The economies of both these regions are not so healthy that they can lightly leave a supportive England. London and the southeast region generate the surplus they help to spend. But they will rumble away and make government harder, even if they don’t seek to leave.
The next prime minister is likely to trigger Article 50 of the EU’s Lisbon Treaty, which starts a two-year decoupling process. Vast changes must be made to legislation – and to borders. What happens to the millions of continental Europeans who have made their home and work in the UK? (Will my Italian wife need a visa? she wonders). There’s much else, but the issues arising from these will fill this year’s remaining months.
Then for the world. The pound plunged by more than 10 percent overnight against the dollar, to £1.32.  Negotiations with the remaining 27 states of the European Union on trade cannot be easy: favourable deals would give the impression that other exiteers can cease membership with no pain. Bond spreads in the EU, having closed up over the past year, will widen again. Britain’s likely shrinking economy will hurt the rest of Europe and tariff barriers are likely.
The world economy, which the pre-referendum Brexiteers airily said would be the UK’s oyster once free from the constrictions of the Union, is not in robust shape. China’s growth is comparatively low; the United States grew at a mere 0.5 percent in the first quarter of this year, its weakest level for two years. Russia is under sanctions and broke. India looks better. But every country and corporation is beating a path to New Delhi. Competition will be as fierce as its summer heat.
The largest threat, which now faces the European Union as it schedules fraught meetings this weekend and next week, is: Can it contain the damage?
Marine Le Pen, leader of the anti-EU, far-right Front National in France, has called for a referendum there. She told a gathering of far-rightists in Vienna last week that “France has possibly a thousand more reasons to want to leave the EU than the English.” A new poll showed that LePen is the most popular politician in France. It is just possible (though still unlikely) that she could win next year’s presidential election.
The rightists met in Austria’s capital because Austria’s far-right Freedom Party, whose presidential candidate almost won the country’s presidency last month, is strong – as is the Netherlands’ increasingly popular Party for Freedom, whose leader, Geert Wilders, also called for a referendum, for the Dutch. The far-right Swedish Democrats lead the polls in Sweden; and the formerly  Communist members of the EU – Poland, Czech Republic, Slovakia- warn that the UK’s example could be followed by others, unless the Union changes radically, halts immigration and stops calling for closer integration.
In Italy last week, the euroskeptic Five Star movement won the mayoralties of several big cities, including Rome.
Can the EU save itself?
Its leaders are divided. Donald Tusk, the president of the European Council – which brings together all the EU heads of state – has tweeted “we must take a long hard look” at the Union’s future. But the president of the Commission, the former prime minister of Luxembourg Jean Claude Juncker, said the EU “would not change its nature.” Like other committed Europeans, Juncker sees the solution for most problems to be “more Europe.” Today, more and more Europeans want less – to the point, perhaps, in following the British down the path of none.
The continent stands on the cusp of two unravelings. One is the United Kingdom itself, whose more than three centuries’ union between Scotland and England is now at risk. The other is the EU, most of whose members – Germany, the dominant state, is one exception; Spain the other among larger states – are restive, with parties, once fringe, now digging deeper into the dissatisfactions of the electorate and, like Britain’s UK Independence Party, proclaiming seemingly plausible solutions.
Yet the EU hasn’t lasted, in some form, for more than 60 years without developing considerable bureaucratic cunning. It has, with both Denmark and Ireland (twice) tampered with unwelcome criteria and persuaded these small states to vote again and reverse referendums rejecting the Lisbon and Nice treaties.
Britain is a far bigger state and much larger problem. But in the privacy of their Brussels offices, the leaders of the Union will now be brainstorming on whether or not they can offer an even looser arrangement to the UK than it has already – and get it to vote the right way the next time (if there is one.)
Today, it’s a forlorn hope, but if the captains of Brexit begin to regret their victory as economic turbulence becomes frightening, and the Union sees the break-out spreading, it could begin to recommend itself. Either way, the old continent is in new crisis.
(John Lloyd co-founded the Reuters Institute for the Study of Journalism at the University of Oxford, where he is Senior Research Fellow. He is also a contributing editor at FT and the founder of FT Magazine.)

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