European Unity in Face of Brexit

European Unity in Face of Brexit

posted in: Policy Analysis | 4

“The views represented in this opinion piece do not necessarily represent those of the Willy Brandt School of Public Policy”

 

The European Union (EU) may never forget the shock it received on June 23, 2016, the day of Brexit — Britain’s exit from the EU — referendum. Threatening the very existence of the EU, the bloc’s second-largest economy voted in favor of leaving it — 51.89% votes for ‘Yes’ and 48.11% votes for ‘No.’ Then media reports suggest that most of the politicians in the United Kingdom (UK), including the strong Brexit supporters, and the other EU member states did not anticipate such a result. Opinion polls, which were already under scrutiny after their wrong projections for 2015 elections in the United Kingdom (UK), also were not able to gauge this strong undercurrent support against the UK’s presence in the EU. That showed the complacency of intellectuals, technocrats, and politicians, among others, who believed in a liberal consensus, i.e., the promotion of free market-led globalization, liberal values, favorable immigration policies, etc, and the referendum was perceived as the vote against this consensus. These people, who were instrumental in the formation of the EU, believed to have hardly imagined such a threat to the union since the fall of the Berlin Wall. So, what are the major trends and reasons behind Brexit? Are those reasons valid across the EU that have the potential to cause further damage to the bloc’s unity in the future?
Reasons behind the Brexit

The attitude by the Britain public, especially senior citizens who are believed to have been more inclined towards Brexit, could be traced back to 2008 Global Financial Crisis that hit European nations badly. Not that there was no such sentiment before, but it is assumed to have gained momentum after the crisis. The UK was hit hard as its capital, London, is considered one of the big global financial hubs. Soon after, this was followed by Eurozone debt crisis that started in 2009 and peaked in 2012, worsening the economic stability across Europe. As a result, rising unemployment, wage stagnation, deflation was felt across Europe.  According to the European Commission data, unemployment in the UK had risen from 5% in November 2007 to 8.4% in October 2011, and for the whole EU, it had risen from 6.8% in April 2008 to 10.9% in April 20131. To maintain the budget stability, David Cameroon’s government responded with fiscal austerity. That led to a reduction of social security net, which was already in decline. “The updating of working age benefits by substantially less than inflation since 2010 and cuts made in tax credits has resulted in falling living standards. That was the first time that the real level of the safety net had fallen since Unemployment Assistance began in 1934. The Child Poverty Action Group recently estimated that the failure to uprate child benefit by inflation since 2010/11 has meant it has lost over 15 percent of its value over this parliament compared to its worth had it been uprated using RPI… The failure to update the child element of tax credits over the course of this parliament has resulted in reducing the real value by 8.5 percent. As a result, a family with one child will have lost £628 in the last five years, and a two-child family doubles this (£1256). This is one of the main reasons why the Equality and Human Rights Commission found that the combined effects of taxes and social security changes since 2010 had reduced the income of couples with children in the bottom income decile by 13%,” said Jonathan Bradshaw, Emeritus Professor of Social Policy at University of York, in his 2015 article for discoversociety.org2. In the UK, the current generation of workers receives only the fraction of the pension benefits their parents got3. Falling pension benefits coupled with falling living standards resulted in economic insecurity among British people. Pro-Brexit politicians like Nigel Farage — former chief of UK Independence Party — and Boris Johnson, Conservative Party leader, as well as the current Secretary of State for Foreign and Commonwealth Affairs, have long criticized the EU. They have argued that the loss of economic sovereignty to the EU, associated with the increasing European Commission-led executive decisions made it tough for the UK to make its own economic decisions for the benefit of the people. They further said if the UK comes out of the EU, the government will be able to take decisions freely and might sign trade agreements with various nations on their terms, indicating that they were not against free trade per se but the idea of the economic union.

Apart from economic vulnerability, pro-Brexiteers increased their rhetoric against immigration. They argued that because of the free mobility the people from other EU member states were getting the jobs that British people deserved. The rhetoric turned into a fear mongering when number of refugees and asylum seekers started rising substantially in the EU — of which the UK shared comparatively less burden compared to other large nations like Germany and France — during the Arab Spring and later, after the rise of Islamic State of Iraq and Syria (ISIS) and conflicts in West Asia. Refugees, mainly Muslims, were accused of Islamic radicalism. The British people were made to believe that these people will enter the UK easily due to free mobility within the EU and will be a threat to their security. Multiple terror attacks in various EU nations gave further fillip to this narrative. The pro-Brexit campaign also believed that the induction of large Muslim population would lead to multiculturalism, thus, in turn diluting the Christian ethos of the nation. That is also one of the primary reasons why London, which is diversified enough, didn’t vote in favor of Brexit and the large parts of hinterland voted otherwise.

 

Repercussions across the EU

All the reasons to which the British people were vulnerable, also applied to the people of other nations. Few months after Brexit, Donald Trump became the president of the United States of America. Though he is not related to the EU, his victory mattered symbolically for the momentum of anti-globalization and anti-immigration narrative across the West, especially the EU. The rise in popularity was seen for right-wing parties like Alternative für Deutschland (AfD) in Germany and Marine Le Pen-led National Front (NF) in France. Apart from these narratives, nationalism was an additional component in these parties’ rhetoric. Many pro-EU leaders believe that these narratives were also partly built by Russia to serve personal strategic interests through its media organizations such as Russia Today and Sputnik. However, the momentum in anti-EU narrative started to dwindle since early 2017. In 2017 Dutch elections in March, Mark Rutte-led pro-EU party, People’s Party for Freedom and Democracy, became the largest party and the anti-EU party, Party for Freedom, came a distant second. A few weeks later, Emmanuel Macron-led pro-EU party, La République En Marche!, won decisively against NF in French presidential elections. Another few months later, in September, Angela Merkel-led Christian Democratic Union (CDU) became the largest party in German national elections, and the AfD came a distant third. Economic recovery across the EU also believed to have helped pro-EU parties. According to IMF, Euro area’s real gross domestic product (GDP) is estimated to have grown by 2.4% in 2017 as against 1.8% in 2016 and for the emerging and developing Europe; it is estimated to have grown from 3.2% in 2016 to 5.2% in 20174. IMF adds that economic outlook remains bright for Europe in 2018.

 

Future Risks to the EU

Although the pro-EU parties have fought back in 2017, the risks against its unity remain. Economically and politically. Wage stagnation remains a significant concern. Debt of countries like Greece, Italy, Cyprus, Portugal, is still high. In April 2018’s policy outlook, European Central Bank (ECB) President Mario Draghi maintained the status quo concerning the asset purchase programme introduced during the eurozone’s debt crisis without informing the future course of action.5 On May 29, Euro hit an almost 7-month low against the dollar on the back of political developments in Spain and Italy.

Catalonia separation movement in Spain remains a large risk for the stability of the union. The recent successful no-confidence motion ousting Prime Minister Mariano Rajoy on the back of corruption scandal is adding more to the Spanish political instability. The Catalonian separatist faction is trying to make its movement strong by adding more non-corrupt leaders to its fold. Northern league-led coalition and Five Star Movement — another populist party in Italy — put their bid to form the government unsuccessfully after weeks of deadlock, because of which Italy faced the prospects of another national election. But, both the parties managed to instate a consensus candidate, Giuseppe Conte, as the new prime minister. Other EU nations, non-EU nations, markets, among others, will be keenly observing the developments in Italy as some fear that the nation might go the Brexit way. That is being touted as the most unstable period for Italy in recent decades. Meanwhile in Germany, as the CDU and Socialist Democratic Party has formed the government again together, the principal opposition space — important position for any new party — has been occupied by AfD as a significant boost to the party. Everyone has to keenly observe how this would pan out in the future for Germany as things unfold. The anti-immigration narrative remains very strong in eastern European nations like Poland, Czech Republic, Hungary. On January 28, 2018, pro-Russian leader Milos Zeman won the consecutive second term as the president of Czech Republic, further strengthening his anti-immigration stand. Recently, Viktor Orban, a right-wing nationalistic politician who is against immigration and is pro-Russia, has won his third term as a prime minister in Hungary. On the other hand, the ongoing Brexit negotiations may also decide the future course of the EU. Many EU leaders want to give a hard Brexit to Britain to make those nations that might want to exit the union in future think twice. However, there remains few leaders like Leo Varadkar, Irish Prime Minister, who wants soft Brexit in ‘Norway plus’ model, closer than that of current Norway-EU relations, i.e. something more than European Economic Area that has no precedence7. However, the border arrangement between Ireland and Northern Ireland remains a contentious issue in the negotiation. Therefore, these negotiations will be crucial for future political messaging in the EU.

 

Will the Brexit happen?

It has been over 20 months since the Brexit referendum, and still, a glimmer of hope remains for those who want the UK to remain a part of the EU. According to Guardian/ICM survey held a few months ago, Britons favor the second referendum by a 16-point margin as concerns mount over ongoing negotiations with the EU8. That is also partly fuelled by the campaign of some pro-EU leaders. If it happens, which many believe is highly unlikely, this could become a booster shot to the EU’s strength.

 

Conclusion

The Brexit referendum will remain a dark chapter in the EU history. There were various economic and political reasons behind Brexit. Those reasons also threatened the position of other EU member states. However, anti-EU momentum mellowed down after the emergence of leaders like Mark Rutte and Emmanuel Macron. Partly, due to economic recovery. Nonetheless, issues such as Catalonia secession movement, political instability in Italy, anti-immigration rhetoric in eastern Europe, still prevalent populist narratives and underlying economic weakness remain as potential risks to the EU. Brexit negotiations may also be crucial for political stance-taking. Despite all these events and hard politics, pro-EU camp does not seem to lose its hope to revert the Brexit.

 

Notes:

  1. http://ec.europa.eu/eurostat/en/web/lfs/statisticsillustrated
  2. https://discoversociety.org/2015/01/03/theerosionoftheuksafetynet/
  3. http://www.businessinsider.de/definedbenefitpensiontransferwealthfromworkerstocompanies20168?r=UK&IR=T
  4. http://www.imf.org/en/Publications/WEO/Issues/2018/01/11/worldeconomicoutlookupdatejanuary2018
  5. https://www.bloomberg.com/news/articles/2018-04-25/draghi-s-faith-in-euro-economy-tested-as-growth-doubts-emerge
  6. https://www.reuters.com/article/usbritaineuireland/irishpmsayswantsnorwayplusbrexitdealwithukidUSKBN1FE12K?il=0
  7. https://www.theguardian.com/politics/2018/jan/26/britonsfavoursecondreferendumbrexiticmpoll

 

Follow Aditya Laxman Jakki:

Aditya Laxman Jakki is an MPP candidate at the Willy Brandt School of Public Policy, specializing in International Political Economy and International Relations. Prior to this, he was a journalist at Business Standard Private Limited in New Delhi, India. He completed Post-Graduate Diploma in Journalism from Indian Institute of Mass Communications, New Delhi. Before that, he gained B.Tech in Electrical and Electronics Engineering from the Jawaharlal Nehru Technological University Hyderabad, India.

4 Responses

  1. Abhilash

    Nice Aditya , finally u r on the right track

  2. Eric Mushimiyimana

    Hi Aditya!
    Good job here, the article has increased my undertsanding on Brexit causes and future effects within the Eurozone. What do you think the EU member states should do to avoid any future event like this as you anticipate some countries that may take the Brexit way?

  3. Eric Mushimiyimana

    Hi Aditya!
    Good job here, the article has increased my understanding on Brexit causes and future effects within the Eurozone. What do you think the EU member states should do to avoid any future event like this as you anticipate some countries that may take the Brexit way?

  4. Krishnamurthi Avadhanula

    Aditya,

    Excellent.. Keep it up. The way you look into the scenario and the way you analyse are commendable.