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What’s the EU going to do?

It’s telling that almost all the British public debate since Friday’s announcement of the result of the EU referendum has been about British politics: who’s succeeding David Cameron? What’s happening to Jeremy Corbyn? Or Scotland?

Almost nothing has been discussed about how this decision will play out with the rest of the European Union.

At one level, this reflects the speedy resignation of Cameron, which would appear to make him now head of a caretaker administration, able to claim that constitutionally he is unable to make any decisions beyond the mundane, including notifying the EU of the UK’s intention to withdraw and invoke Article 50 proceedings.

With the European Council seeming to accept that it has to receive a formal notification to start Article 50 – either a letter or a minuted statement at a summit – there does not appear to be any politically-viable means of forcing the UK to start that process without their express consent.

However, this does expose a basic tension for other EU leaders. On the one hand, they don’t want the UK to leave, for a wide variety of reasons. On the other, if the UK is going, they would like it to be dealt with as quickly as possible. With all the other problems that the EU is facing, a drawn-out Brexit process is most unwelcome.

With talk in London now of an October notification, to be made by a new Tory leader, the key imperative for the EU27 is to make the most of the time to plan, since they control Article 50 once it begins.

This planning will take in two basic elements: the how and the what of the process.

The how is simply a function of never having to have done this before. While the Greenland exit in 1985 offers the nearest model of proceedings, the EU has moved far beyond its then competences and there is no parallel framework of the Danish government involvement on non-exit matters. In short, this is a white page exercise.

Such procedural questions – who speaks for the EU27? How are positions coordinated? How are decisions reached? – overlap to some extent with the content aspect, the what.
In essence, there are two models the EU can work from.

The first starts from the UK as a member state and takes things away. Most obviously, that means voting rights and representation in institutions, but after that, the UK could be offered everything it has now.

The attraction of this is that the UK is obviously already compliant with EU requirements, as a current member state, so there’s no transition into compliance. A framework agreement could be put together quite easily, whereby the EU27 and the UK agree a process for the latter to notify the former of its intention to withdraw from a given area of policy, with the EU27 then indicating any knock-on effects (legal, financial, etc.) and some relatively simple approval process. If financing kept pace with such an arrangement, then that needn’t be an issue: more complex would be linking different legal elements together.

The big problem with this model is that is clearly clashes with the likely British intention to limit free movement of workers, which is a fundament of the internal market: would it make any sense to use this maximalist model without the core of the activity?

This leads then to the second model, which starts from a position of no relationship at all and adds elements in. This addresses the free movement issue more easily and also allows each member state to decide quite what it’ll bar to the UK.

This approach is also more future-proofed, as it rests on the structure that would apply if there was no agreement after two years, at which point the UK could leave, with no residual rights beyond those present elsewhere in other international agreements.

However, this minimalist strategy has the problem that it would increase the economic costs of Brexit to all involved, since more barriers would emerge. This would take much longer to negotiate and a framework arrangement of the kind outlined above would probably not be possible. Also, if the EU27 did hold out any hope of the UK rejoining in the future, this would make that harder.

Moreover, there are some challenges of the EU27, whatever approach is taken.

Firstly, member states have very different positions on Brexit and what price to impose. To take the most obvious example, Ireland has a very strong economic, political and security imperative to keep the UK very close. Countries that would gain from limiting British access to markets – those with financial centres or car manufacturing, for example – might be much less amenable.

Secondly, member states will be conducting this entire process with at least one eye very firmly on their domestic audiences. There is considerable pressure in countries such as France, the Netherlands and Denmark for similar votes to the British one, so these governments have no incentive to offer the UK a deal that looks even close to being ‘better’ than their current terms of membership. The politics run completely against the economics here.

Finally, the EU27 will have to think to the future on this process. Now that exit is established as possible, there is going to be the possibility that it happens again, not least for the reasons just mentioned. Thus governments might consider what might work in their favour, should their country’s time come. This will be particularly the case for Eurozone members, which face a degree of complexity that will make Brexit look like a walk in the proverbial park.

With meetings of the original founding members and of the EU27 permanent representatives over the weekend, and a European Council this week, expect heated debate across Europe, even as the UK continues to work out its own way forward.

 



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