After Brexit, Here’s What’s Next for Europe
Will the U.K. and the EU be able to become friends with benefits?
“No man is an island,” the English poet and Anglican cleric John Donne wrote in 1624, presaging the Brexit vote by almost four centuries. “If a clod be washed away by the sea, Europe is the less.”
Europe is indeed the less today. A wave of populist anger is washing away from Europe not just one clump of dirt but the entire U.K., population 64 million, the second-biggest economy in the European Union. “I felt as though I was at a friend’s funeral,” Vaira Vike-Freiberga, the former president of Latvia, said in an interview after the June 23 vote for Britain to leave the EU. “This is no longer the European Union that we joined.”
Her anguish is understandable. The EU isn’t just a marriage of economic convenience. It’s a bulwark against the nationalism, militarism, and plain hatred that caused two world wars. Before the vote, European Council President Donald Tusk, a former Polish prime minister, told the German newspaper Bild, “As a historian I fear that Brexit could in fact be the start of the process of destruction of not only the EU but also of Western political civilization.”
The job now is to move past the pain and make sure that Tusk’s stark warning doesn’t come true. Brexit is chaotic at the moment because the prime minister announced his resignation and financial markets swooned. Eventually, though, the British will grope their way to a new relationship with the EU, probably more friends with benefits than matrimony. It won’t be as lucrative or liberating for the U.K. as the Leave campaigners promised, but it could well work out better than the Remain camp warned. The bigger challenge is keeping the EU itself from cracking up.
In the lead-up to the referendum, “each side made claims that could not be sustained,” says Mervyn King, former governor of the Bank of England and author of a new book, The End of Alchemy: Money, Banking, and the Future of the Global Economy. It’s time, he says, to “have teams of people working behind the scenes so the new prime minister can move forward.”
The work of another Anglican cleric, John Venn, points the way toward a new modus vivendi for Britain and Europe. There is no unitary continent. Instead, Europe is already a complex of associations and unions, a vast Venn diagram of overlapping circles of authority. Countries choose the spot in the overlap that gives them as much togetherness as they desire while sacrificing as much autonomy as they can bear.
Even before Brexit is formalized, the U.K. is outside a lot of Europe’s circles of authority. By choice, it’s not 1 of the 19 countries using the euro currency. It’s also not part of the 26-nation Schengen Area, which prohibits border controls between members. It’s inside the EU’s Customs Union, a free-trade zone that negotiates tariffs with nonmembers. The Brits will want to keep that arrangement with the EU even after leaving.
In other words, Britain’s choice is not all or nothing. For the U.K. to leave the EU is less jarring than for Texas to secede from the U.S.
What the Eurocrats call differential integration is a strength of the system, not a weakness, says Frank Schimmelfennig, a professor of European politics at ETH Zürich. Allowing different countries to have different relationships recognizes national differences and preserves democracy. It’s a safety valve for populist pressure.
Elites make a mistake if they ignore or disparage angry rally cries to “take our country back,” which is as powerful in the U.K. as it is in the U.S. Indeed, the support for Brexit revealed just how far voters will go when they feel oppressed and decide that their leaders aren’t standing up for them. Britain’s economy has been fairly healthy by the region’s standards, and British prime ministers have managed to carve out several exemptions from EU rules.
So imagine how much more frustrated voters must be in countries with weaker economies that must follow all the rules, including the full constraint of the euro currency. It’s no wonder that Marine Le Pen, president of France’s rightist National Front party, has taken to calling herself Madame Frexit. “France has possibly 1,000 more reasons to want to leave the EU than the English,” she said before the referendum.
For decades, the prescription for problems in Europe has been simply more Europe. The 1957 Treaty of Rome committed signatories to “lay the foundations of an ever closer union among the peoples of Europe.” Jean Monnet, the French economist who was an EU founder, wrote in his memoirs that “Europe will be forged in crises, and will be the sum of the solutions adopted for those crises.”
Monnet’s philosophy encouraged overreach. Europe’s leaders pushed further and faster than their citizens were willing to go. They engendered a backlash. All of the major European nations have growing anti-EU parties. On the right, the inflaming issues are immigration, bailouts, and red tape. On the left, it’s austerity imposed by foreign masters. Both sides complain of a “democratic deficit” in the EU.
As the recriminations over Brexit show, the well-intended effort to bring the nations of Europe closer together is instead threatening to drive them apart. The best example of that is the euro, the one EU institution for which there’s no safety valve, no outer circle of authority to escape to. The Brits were smart enough not to join the single currency.
The euro differs from immigration as a problem for EU unity in one key respect. Uncontrolled immigration from outside Europe is universally recognized as an urgent problem, whereas the euro continues to be seen by elites as something worth preserving. In reality, the euro acts the way the gold standard once did: as a monetary straitjacket. It’s too strong for Greece, making Greek goods and services too costly and preventing the country from getting its economy back on track. It’s too weak for Germany, underpricing Germany’s output and leading the country to pile up huge trade surpluses that sap growth and jobs from its trading partners. The EU has no provision for a country to drop the euro. Yet there’s little appetite for creating the financial institutions that would be required to make the euro a success, such as centralized taxing and spending authority. “Europe is in a quandary,” says Sebastian Mallaby, a senior fellow at the Council on Foreign Relations in New York. “You can’t go back, but you can’t go forward.”
In theory, the best choice for Europe would be to forge ahead to full fiscal union, essentially creating a United States of Europe, argues Joseph Stiglitz, the Nobel laureate economist at Columbia, in his forthcoming book, The Euro: How a Common Currency Threatens the Future of Europe. But because “there is more than a small probability that it will not be done,” he proposes various ways that Europe could escape from halfway-in, halfway-out purgatory. He sketches a way that Greece could in fact depart from the euro zone: simply break the link, so Greek euros become cheaper than regular euros. That would help trade by making Greece’s exports cheaper and imports costlier. The key would be persuading creditors to accept repayment in Greek euros. (Not simple, Stiglitz concedes.) Or, he says, Germany could leave the euro zone. Or the euro could be split into a northern and a southern currency.
The future of Europe lies in a “variable geometry” of diplomatic relations that satisfies those who want more integration as well as those who want less, argues Philippe Schmitter, a political scientist retired from the European University Institute in Florence. To use John Venn’s diagrammatic language, Europe and the British Isles will no longer be in the same circle. Still, they ought to be able to find a space where their vital interests overlap. No man is an island, and in the era of globalization, no island is an island, either.
Listen to this next: Peter Coy, author of “After Brexit, Here’s What’s Next for Europe”