Brexit and the future of Europe: main risks

I’m sure the UK ahead of the referendum were able to negotiate the best possible conditions for EU membership, such as participation in the common market without commitment to enter the Eurozone, along with a number of exceptions from EU rules. However, it was not enough to prevent the vote from the British electorate for a withdrawal from the EU. Why?

The migration factor

The answer can be found in the results of public opinion polls for several months before the referendum. In Europe, the unfolding immigration crisis, and in Britain the debate on Brexit, and they both fed off each other. The agitators for secession were playing on the deterioration of the situation of refugees (whose symbol became the frightening images of thousands of refugees gathered in Calais desperate to get into the UK) to incite fears of “uncontrolled” immigration from other EU countries. Meanwhile, the European authorities have postponed important decisions on the refugees, seeking to avoid their negative impact on the outcome of the British referendum, which led only to the multiplication of scenes of chaos, such a situation in Calais.

The decision of German Chancellor Angela Merkel to open the wide doors to refugees was magnanimous gesture, but it was not well thought out, because it ignored the plans of the refugees themselves. The sudden influx of refugees broke the usual life of people in many EU countries.

In addition, the lack of adequate controls had caused the panic that gripped everyone — the local population; ensuring public safety; the refugees themselves. It also paved the way for the rapid rise of the xenophobic anti-European parties (e.g., Party UK independence, UKIP, who led the campaign for withdrawal from the EU), while national governments and European institutions seemed incapable of resolving this crisis.

The anti-European front

Now would frighten many catastrophic scenario became a reality, which makes the disintegration of the EU is virtually irreversible. Regardless of winning Britain at the end of exit from the EU in the short and medium term, the economy of the country and its people are waiting for serious tests. Immediately after the vote, the pound fell to its lowest in more than three decades of level. Global financial markets are likely to be confused the whole period of negotiations about a long and complex process of divorce in the UK and the EU. The consequences for the real economy will be comparable only with the financial crisis of 2007-2008.

This process, of course, threatens increased uncertainty and political risk, because at stake is always it was not just the real or imaginary benefits for Britain, and the very survival of the European project. Brexit will open the floodgates to other anti-European forces within the EU. Only just announced the results of the British referendum, as the French national front called for France’s withdrawal from the EU (“Rexit”), and the Dutch populist Geert Wilders called for the release of the Netherlands (“Nexo”).

Jeopardized the survival and the UK. From Scotland, where the vast majority voted to remain in the EU, we can expect another attempt to achieve independence, and some politicians of Northern Ireland, where voters also supported the continued membership of the EU, calling for the unification of this region with the Republic of Ireland.

The split in the EU

Another blow to the country could become the EU’s reaction. European leaders, seeking to deter other countries from the EU attempts to follow the British example probably will not offer the UK conditions (primarily concerning access to the common market of Europe), which would allay the painful process of withdrawal. The EU accounts for half of British trade turnover, so the impact on exporters can be deadly, even increasing their competitiveness the weakening of the pound. And since in the coming years, financial institutions will begin to translate its activities and personnel in the financial centres in the Eurozone, the city of London (and the London housing market will also suffer.

However, for Europe the consequences could be even worse. Differences between EU countries has reached a dangerous level, not only for refugees, but also because of the extreme tension in the relations between creditor countries and debtor countries within the Eurozone. Meanwhile, the feeble leadership of France and Germany is now fully focused on domestic issues. And in Italy the stock market fall by 10% immediately after the news from London, demonstrated the risk of a full-fledged banking crisis. Such a crisis may next year to bring to power a populist “five star Movement just won the mayoral election in Rome.

We need a restructuring

All of this only reduces the chances of reforms in the Eurozone, which should provide for the establishment of a genuine banking Union, a limited fiscal Union and a much stronger democratic control mechanisms. And time is not on the side of Europe: the external pressure from countries such as Turkey and Russia, who are all these differences in their own interests, only reinforces the European political strife.

That’s where we are today. All of Europe, including Britain, would suffer from the loss of the common market and the loss of common values, the EU was created. However, the EU is really falling apart, no longer meet the needs and aspirations of its citizens. It is moving toward chaotic disintegration, which resulted in the situation in Europe may be worse than could be, if the EU had never existed.

But we must not give up. Everyone recognizes that the EU is a design with flaws. After Brexit all of us who believe in values and principles, to support which the EU was created, must unite to save the European Union through its fundamental rebuilding. I am convinced that, as in the coming weeks and months will show various consequences of Brexit, we will begin to join more and more people.

Copyright: Project Syndicate, 2016

The authors ‘ point of view, articles which are published in the section “Opinions” may not coincide with ideas of editorial.