The European consequences of Brexit

European policymakers might now reshape the EU architecture. They could stop seeing integration as a one-way street and give back to member states some competences. A column by Charles Wyplosz.

Charles Wyplosz
«Stepping back runs against the very idea of European integration.»

So the British voters have decided to leave the European Union. The new government will have to negotiate a new relationship with the continent and this will not be easy. At the same time, the EU will have to decide how it sees its own future, and that will not be any easier.

The withdrawal of the UK has profound implications for the EU. Britain always was a special member of the club. For many Europeans, it should not have been admitted in the first place so what is happening now is simply the correction of an error and the Union can carry on with its business. They are deeply mistaken. The UK had a view of the Europe that it wanted, and this view is shared in many ways by the Nordic countries and several Eastern European countries, and by Switzerland too. It wanted to be part of the world’s largest market (one day it will be China) but it did not share the dream of continuing economic and political integration. It is attached to limiting governing interventions, letting market forces as unfettered as possible. Where governments must intervene deeply, for example in matters of income distribution, welfare policies or labor and financial markets, the UK has always claimed that these should remain national competences. As the other countries were deepening integration, the UK asked for exemptions, which were sometimes granted, sometimes not. In the end, the distance grew too large.

But which distance are we talking about? Between who and who? There never was a unified view of where Europe should go. Disagreements exist among countries but also within countries, and this is not new. What is new is the rise of Euroskepticism, a phenomenon that is visible in virtually every member country. It is not Europe per se that is under siege, but what it does for ordinary people. In fact, it not only Europe that is increasingly seen as favoring the elites, but more generally globalization. The less well educated have the feeling that they are at the losing end of the game and that their governments are no longer able to protect them. They are not wrong.

Not everyone can benefit of integration

Deeper economic and financial integration implies that the wheels of fortune favor the better educated and that many aspects of everyday life are being shaped elsewhere, by the markets and by international agreements that bind national governments. This is not new either. But the result of several years of miserable growth – or outright recession – mean that the benefits of integration cannot accrue to every one. The lower half has been suffering and it is now angry, especially when it sees the huge and rising salaries of the happy few at the top of the scale. The perceived loss of control over the situation is naturally, even if unfairly, associated with Brussels».

This is why the EU cannot just wave good-bye to the UK. Brexit is a precedent that a growing number of Europeans find appealing. It matters little that this view is not entirely correct, if only because their governments and the elected European Parliament must approve European decisions. For decades, there was much discussion about the democratic deficit. The answers have been technocratic, raising the profile of the European Parliament, whose visibility remains very limited, creating new jobs at the top (the President of the Council and a permanent chair of the Eurogroup of Finance Ministers) and considerable communication effort by the Commission. More of the same will not do, the EU must ask some hard questions and draw the conclusions.

The really hard, but inevitable question is whether the transfers of competences from member states to the EU have not gone too far. This is where the vision of where Europe should go matters a lot. This question has never been settled. Instead, it was decided to just keep moving. This is a reasonable strategy, a sort of touch and go approach that proceeds toward deeper integration whenever opportunities arise. For decades, those who did not want an ever-deeper union were a small minority, and integration could proceed. It is now plausible that they are not a minority anymore.

Better break some taboos than break the EU altogether 

These considerations suggest an intriguing evolution. Concerned with the evolution of their public opinions – and their own elections – European policymakers would reshape the EU architecture. They would stop seeing integration as a one-way street and give back to member states some competences. This could include the freedom of movement of people, which played a major role in the British referendum campaign. Member states could be allowed to limit migration or restrict access to welfare programs. They could also task national governments with imposing constitutional obligations regarding fiscal discipline instead of threatening them with politically explosive sanctions (as is now under consideration for Spain and Portugal).

Many petty rules that are seen as intrusions into national affairs (the Brexit supporters liked to mention the size and curvature of bananas) could be abandoned. There are so many day-to-day irritants that are of minor practical importance that the list can become huge. Each of them may be justified but the fact that they are seen as imposed by Brussels, even though they were explicitly agreed by all governments, is creating unnecessary hostility to the bigger picture of EU achievements. There could even be a moratorium on new integrative steps, a position already adopted by the Juncker Commission.

In brief, European policymakers would deal with the democratic deficit by listening to the citizens, not by adding new layers of bureaucracies. They would use the reverse gear to avoid more Brexits. Stepping back, however, runs against the very idea of European integration. But so does the notion that member countries can leave. This is why Brexit is so important. The British voters have broken a first taboo. It may be time for governments to break a few more taboos to preserve the EU.