The European Union: Brexit Updates

Updates on the Brexit from The European Union author Jonathan Olsen

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The June 2016 Brexit vote, in which the citizens of the UK voted to leave the European Union, will have a profound and evolving influence on the EU for the foreseeable future. To help instructors address this complex issue with their students, Jonathan Olsen, author of The European Union, will be posting periodic updates here about the Brexit’s implications. Each post will be available to read here, and will also be downloadable as a PDF.

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The EU in Late 2016: Aftershocks from Brexit

By Jonathan Olsen | December 15, 2016 | Download PDF

THE EU IN LATE 2016: AFTERSHOCKS FROM BREXIT

In the first supplement to The European Union: Politics and Policies I discussed some potential ripple effects from Brexit. While some of these have turned out to be less worrisome (e.g., an immediate new vote for Scottish independence), others have become much more consequential. This second update will discuss:

  • the current state of Brexit
  • the effect of Brexit on populist movements throughout the European Union
  • what the defeat of Italy’s constitutional referendum and the resignation of Prime Minister Matteo Renzi may portend for the EU

What kind of Brexit? Positions harden

In the six months that have followed the Brexit vote, political debate in the UK has centered on the particulars of how Brexit will be accomplished. Prime Minister Theresa May announced in October that she planned to invoke Article 50—the legal mechanism for leaving the EU—by the end of March 2017 at the latest. But in early November 2016 this timetable was thrown into doubt as the UK’s High Court ruled that the government could not decide Brexit strategy alone and that its substantive details must receive parliamentary approval. Since May had previously argued that involving Parliament on the substantive details of Brexit strategy would hamper her government’s flexibility in negotiations, she has appealed the High Court’s ruling. Of course, it remains highly unlikely that lawmakers in Britain would reverse Brexit; however, both anti-Brexiter and pro-Brexiter lawmakers could shape its outcome considerably. While this jockeying has continued in London, EU leaders have hardened the union’s position, rejecting any attempt by Britain to cherry pick among the four principles of free movement—goods, people, capital, and services. Still, there remains speculation that some British ministers and EU officials remain open to a “grey” Brexit, i.e. negotiating separate complex deals on immigration and limited sector access to the bloc’s trade zone.

Anti-establishment populism gets a boost

Whatever ultimate form it takes, Brexit—and the election of Donald Trump in the US—tapped into a potent mixture of nativism, anti-elitism, and hostility to globalization. It has therefore been grist for the mill for populist parties in Europe, with Marine Le Pen’s National Front in France, Geert Wilder’s Party for Freedom in the Netherlands, and Beppo Grillo’s Five Star Movement in Italy all applauding the vote. All three have vowed that, should they come to power (elections are scheduled in 2017 in both the Netherlands and France), they too would hold referendums on membership in the EU. After the failed constitutional referendum in Italy in early December (see below), elections may also be held there in 2017, with the Five Star Movement having a strong tailwind. Right-wing populism has even gained a foothold in Germany, where Frauke Petry’s Alternative for Germany has had a stunning series of electoral wins in regional contests. It’s predicted to gain entry to the national parliament after elections in September 2017—the first such right-wing party to win seats in the Bundestag since the founding of the Federal Republic.

Italian vote shakes the EU

That same populism largely explains the decisive rejection of a proposed constitutional amendment which led to the resignation of Prime Minister Matteo Renzi. While the referendum was ostensibly about reducing the power of the Italian Senate (and therefore giving the Prime Minister more power), economic reforms were intricately tied up with the proposal. Yet this was really a referendum on Renzi, who was viewed as a defender of the political and economic establishment and of the EU. The likely result of the vote and the paralysis of economic reform efforts is a deepening debt crisis (Italian debt stands at 132 percent of GDP), especially dangerous for its fragile and deeply indebted banking sector. Not surprisingly, in the wake of the vote the interest rate on Italian bonds (and Italy’s borrowing costs) rose in an ominous echo of Spain’s debt and banking crisis of 2012. As the fourth-largest economy in the eurozone, further economic instability—and an EU-hostile government—in Italy could spell disaster for the union.

After the Brexit

By Jonathan Olsen | September 15, 2016 | Download PDF

AFTER THE BREXIT

On June 23, 2016, voters in the UK opted to leave the European Union, the so-called “Brexit.” But the drama is far from over, and key questions remain unanswered. What are some of the salient issues and debates that continue to be front and center in the UK and in the rest of the EU as we move into the fall? This short supplement, first in an ongoing series of updates to The European Union: Politics and Policies, will outline three of these:

  • the debate over the formal process for leaving the EU
  • the main points of contention between the UK and the EU
  • the wider potential effects of Brexit on other EU member states.

Timing is everything

The first issue that will need to be settled concerns the actual process of leaving the European Union. The legal path to withdrawing from the EU is outlined in article 50 of the Treaty on European Union. That article requires a member state to notify the European Council of its intent to leave and then provides a two-year period in which to negotiate and conclude an agreement between the two parties (the member state and the EU, represented by the Council). During the two-year negotiation period, EU laws still apply to the UK and reciprocal obligations remain, although the UK will not be allowed to participate in EU discussions or be represented in EU institutions. Not surprisingly, the two sides are at odds over the timing of this process. While the EU has urged Theresa May, the new Prime Minister of the UK, to set that timetable without delay, May (conscious that the clock will start after invoking article 50) has stated that her government will not be rushed into negotiations until it gets clarity and initial agreement on several important issues. Moreover, whatever final agreement is reached will have to be ratified by EU leaders on a qualified majority vote, a majority in the EP, and by national parliaments of the member states.

Some thorny issues

Clarity and agreement will be difficult to come by. The most substantive of the issues tied up with Brexit is a bedrock EU principle—that of the free movement of labor. Hostility to immigration was a key driver of the vote on Brexit and Theresa May has said that freedom of movement from the EU cannot continue in the same way. However, most EU states (among them Germany, Portugal, and the Czech Republic) are insisting that the price of the UK’s access to the single market is its abiding by this principle, much like other states with similar access to the EU do (Norway, for example). Finding some kind of compromise solution may satisfy neither Brexiters nor the other members of the EU. Another complaint championed by Brexiters during the campaign was that the UK was sending some 350 million pounds to Brussels; its accompanying vow was to eliminate all such payments. But several countries in the EU (many from Eastern Europe, but Greece as well) are insisting that the UK continue to contribute to help support the EU in return for access to the single market. Finally, different member states have various concerns on specific issues concerning the Brexit that will need to be addressed. For example, Ireland wants to maintain an open border with Northern Ireland, France and Denmark want reciprocal access for their fishing industries, and Spain is pressing for joint sovereignty over Gibraltar.

Ripple effects from Brexit?

The potential effects of Brexit are wide and profound. Belgium and Spain worry about the effect of Brexit on their own populist, separatist movements, especially should Brexit prompt a new vote for Scottish independence. Italy has serious concerns about the effects of Brexit on its own economic health, as high unemployment, anemic growth, and shaky banks are threatening to undermine it, one of the largest and most important economies in the eurozone. Meanwhile, other countries (e.g., Sweden) are worried both about losing a key pro-business ally in the UK and about ideas recently floated in Westminster to lower corporate tax rates, a move that could complicate considerably a quick and frictionless departure of the UK and a harmonious post-Brexit trade relationship. Given all of this, the process of the UK’s withdrawal from the EU and the details of the final agreement reached may well be crucial to averting yet another series of crises in the EU.

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