See EU later!

A look at the news - Nicolas Jutzet

June 24, 2016, will go down in history as the day the European project began to crumble. As the votes were tallied, a schism emerged: Scotland and Northern Ireland voted “IN,” while Wales and England chose the path of exile by casting a majority “OUT” vote. The people of the United Kingdom have spoken, and now risk splitting apart, each going their own way, alone. Some find this choice disastrous, irrational, or even dangerous; I would simply say that it is unprecedented and represents an exhilarating leap into the unknown.

By voting for Brexit, the United Kingdom has condemned itself to volatility and uncertainty. On the other side, the European Union—that cuckolded lover—is furious. It cries out for revenge, determined to prevent further exoduses, and promises to be ruthless during the negotiations. As he steps down, Cameron leaves his successor with a veritable quagmire. With Parliament’s support, the newly elected leader will have to invoke Article 50 of the Treaty of Lisbon to trigger the process of leaving the European Union, then wait, negotiate, and finally complete this long journey toward regained sovereignty.

Navigating a divorce successfully requires intelligence and pragmatism—which, unfortunately, are precisely what the current EU lacks. Disappointed, it is baring its teeth and risks rejecting what is, after all, economically obvious. We need to establish free trade agreements for goods, capital, people, and services, while allowing the United Kingdom to remain in control of its social policy (cutting social benefits will always be more effective than border controls). Cameron had, in fact, succeeded in negotiating along these lines and presented a “light” version of Europe in response to Brexit. The public deemed this compromise insufficient. It is difficult to accept semi-sovereignty.

The United Kingdom is the world’s fourth-largest destination for foreign direct investment (FDI), ranks fifth in terms of GDP, and has a substantial trade deficit (exports – imports = trade balance). It is, therefore, an economic giant. Its absence from the single market would be detrimental to everyone, but above all to the European Union! Indeed, the United Kingdom is a major consumer in the global market, and its withdrawal would in fact be a huge loss for all businesses in European countries.

Paradoxically, the British are in a position of strength. Pragmatism would suggest that bilateral agreements—similar in form to those concluded with Switzerland—should be signed (on better terms than our Bilateral Agreements I and II). Unlike us, Britain will have the courage to exert its influence in the negotiations by looking down on this European Union in decline. So the EU will either negotiate or die from its own obstinacy. If we compare the EU to a school classroom, it has just lost a brilliant student and is watching the dunce sitting in the back near the radiator (France) gain more power. This is nothing to celebrate.

The short-term impact will be severe, as any period of instability is a trial for the economy (as we can see in the stock markets, which are in complete disarray); but once this hurdle is overcome, the United Kingdom (or rather, what remains of it) will emerge stronger from this experience, freed from the European burden that has managed to turn a beautiful idea into a bureaucratic nightmare. Anyone who loves the idea of a peaceful Europe should rejoice at this Brexit; it must lead to better days. But first, a long journey through the wilderness awaits us.

Write to the author : nicolas.jutzet@leregardlibre.com

Photo credit: New Center