The Old Europe is Dead, Long Live the New Europe

Two days before the big bang, four women and two men stepped onto the stage at London’s Wembley Arena. The BBC had invited them to a closing debate prior to the vote. Among the political adversaries on the stage were Boris Johnson and Labour Party politician Gisela Stuart, originally from Germany, who both fought on behalf of the Leave campaign. Representing the Remain camp were freshly elected London Mayor Sadiq Khan and Ruth Davidson, the leader of the Scottish conservatives.
It didn’t take long for it to become clear in Wembley just how deeply divided the country is. Boris Johnson called out, “If we vote Leave, we can take back control of our borders.” Khan countered: “You’re telling lies Boris, and you’re scaring people.”
The three Brexit supporters scored points largely on the issue of immigration. The Remain camp had warned of an economic crisis and foreign policy isolation. After 90 minutes, the two men and the four women left the stage, with no victor in the debate. But the frenetic applause given to the Brexiteers offered an indication of which side had the more passionate supporters.
The Black Thursday vote also bolsters opponents of the EU in other member states. In the Netherlands, around half of voters want a referendum. If one were to be held, current polls indicate a majority would vote to stay in the union, though their lead is slight. The situation is similar in Denmark. In Sweden, polls indicate that only 32 percent of voters would support remaining in the EU if a plebiscite were held there. Brexit has exposed the destructive forces currently at work on the continent. The focus is no longer on the question of what connects countries — it is on what is different about them. Even in Italy, one of the EU’s six founding states, almost half of those surveyed say they have a negative view of the EU.

Racist Overtones

Similar opinions could be expected in Eastern Europe — particularly in Hungary, the Czech Republic and Slovakia, three countries that recently hindered refugee policies with their joint opposition. But even the biggest skeptics there aren’t demanding that their countries leave the EU. Europe is too important for the east. This week, Hungarian Prime Minister Viktor Orbán took out a one-page ad in the Daily Mail for £32,000 in which he implored the British not to leave the EU.
In Eastern Europe, people now fear that they are losing an important partner in Britain, that an export market is disappearing and that the development will result in a marked increase in German dominance in the bloc. For Estonia, Latvia and Lithuania, London, in contrast to Berlin, had always advocated a tough stance against Moscow.
In France, meanwhile, the Brexit vote is likely to invoke pleasure for at least one woman: Marine Le Pen has stated repeatedly that Brussels is like an ulcer sucking France dry. It’s her view that there’s nothing to justify the EU’s continued existence and in the unlikely event she is elected as French president next May, her first act in office, as she recently stated, would be to “immediately go to the European institutions and demand the return of France’s sovereignty. I want control back over our currency and our borders.”
The British have shown a side in recent months that people wouldn’t have expected of a people generally considered to be cosmopolitan. It hasn’t made the country look any more welcoming, either. The debate over immigrants in particular took on ugly and sometimes racist overtones and British journalists used war metaphors in describing the battles between the different camps. The major task at hand for the government and the parties now is to reunite the divided country. Europe may have been the trigger, but it was not the cause of the critical self-questioning that just took place Britain. The country is fraying and is more divided than ever before: between the rich and the poor; between the Scottish, the Welsh, the Northern Irish and the English; between the middle and the upper classes.
Europe suddenly seemed responsible for everything that plagued the island. But beneath the surface, much bigger questions were stewing. Questions like what kind of country Britain actually wants to be. How the people there want to live, how many immigrants the country is willing to absorb and how open society wants to be. In that context, though, the British are hardly different from the Germans, the French, the Austrians or the Italians.

A New Beginning

What is unique is the conservative English elite’s obsession with Europe. The lies and malice flowing from the pages of the Daily Mail, the Sun and the Daily Express were so nasty they instilled fear even in some Brexit supporters. Tory politician Sayeeda Warsi, who was born in Pakistan, switched sides only days before the referendum and complained of a lie-, hatred- and xenophobia-filled debate. Indeed, the murder of Jo Cox, a member of parliament with the Labour Party who had championed refugees and the Remain campaign, underscored just how toxic the atmosphere has become in England.
Most EU opponents were blind to the possible consequences of Brexit. Scotland, for example, where the probability of a second referendum on independence has grown, as have the chances of its success. Or Northern Ireland, where peace could be threatened if the border to the Republic of Ireland in the south is sealed as an external EU frontier. On Friday, Nicola Sturgeon, head of the Scottish National Party and first minister of Scotland, said she believed a second referendum on independence from the UK was “highly likely” after Scots voted overwhelmingly to stay in the UK. She described the outcome as a “democratic outrage.”
There are many reasons to harbor doubts about Europe. The continent has been too rigid in recent years, too narcissistic, too comfortable. Some Brexiteers even posed justifiable questions. What if, for example, the EU has already fulfilled its primary function of securing peace and prosperity in Europe? What if the citizens of Europe no longer want deeper ties between their countries? Must “more Europe” really always be the only answer to everything?
The European Union now has the opportunity to reinvent itself. But it also needs to consider new, looser forms of memberships for countries like Britain or Turkey that want to conduct trade but either do not want or cannot be part of an ever closer community. Next week, EU leaders will meet in Brussels for their first post-Brexit summit. It has to be the start of a new beginning. That’s the only chance we have left.

Blind to Consequences

When Cameron was elected as leader of the Conservative Party in 2005, his party was deeply divided on the Europe question. On the one side were skeptics like Michael Gove, a long-time friend of Cameron’s, and on the other were pro-Europeans like Kenneth Clarke. Cameron wanted the Tories to open up and refocus their attentions on reality.
“While parents worried about childcare, getting the kids to school, balancing work and family life, we were banging on about Europe,” he said in a 2006 speech. It was a call for Tories to finally pull themselves together, though Cameron knew that most British didn’t care much about Europe. Since 1974, the pollsters from Ipsos Mori have regularly been asking British voters the same question: “What would you say is the most important issue facing Britain today?” Europe and the EU are usually to be found toward the bottom of the list. Even one month prior to Thursday’s referendum, less than one-third of respondents identified Europe as the most relevant issue facing the country.
Britain’s European policy is cyclical. There are phases of intense engagement followed by periods of great disappointment, frustration and withdrawal. The last committed European to reside in 10 Downing Street was Tony Blair, at least early on in his term. In 2002, he even proposed joining the euro, which in retrospect looks crazy to most of his fellow British. Blair pushed for the EU’s eastward expansion because he believed it would slow European integration, but the strategy wasn’t particularly successful. The EU treaties of Amsterdam, Nice and Lisbon led step-by-step in the direction of an ever closer union and Britain reluctantly followed. The more power that was sent to Brussels, the louder Tory resentment became. The anger felt by many Euroskeptics today is rooted in the feeling from those Blair years that they were gradually losing power and could do nothing about it.
When Cameron became prime minister in 2010, he was faced with the task of appeasing the Tories. He was considered a weak premier because he didn’t win a majority and was forced to enter into a coalition government with the Liberal Democrats. Prior to that, he had withdrawn Tory members of European Parliament from the center-right European People’s Party, much to the chagrin of Angela Merkel, whose Christian Democrats are part of the EPP. But that did little to calm the internal party hardliners, particularly since the right-wing populist UKIP party was poaching voters from the Tories in local elections. That led Cameron to make a daring wager: He promised that if he won re-election, he would initiate a new round of negotiations with Brussels on the relationship between Britain and the EU and would follow that up with a nationwide referendum.

‘Fundamental, Far-Reaching Change’

In January 2013, he promised “fundamental, far-reaching change” in his country’s relationship with the EU. In particular, he promised a significant reduction of the number of migrants coming to Britain from other EU member states.
Euroskeptics developed a plan to blackmail the prime minister and wrote up a list of maximalist demands that Cameron would never be able to meet, making an exit from the EU virtually unavoidable. One of those who thought long and hard about how best to put the government under pressure was a calm, reserved man with rimless glasses and all the charisma of a small-town bank teller.
Matthew Elliott is sitting in a café on the Thames River one week before the referendum and is in an excellent mood. A brightly lit Palace of Westminster is standing elegantly across the river. In 2013, Elliott founded Business for Britain, an initiative bringing together Euroskeptic business leaders. It was the first important step on the way to Brexit: The business leaders were to lend the anti-EU activists an aura of gravitas.
Elliott didn’t believe even then that Cameron’s “fundamental change” would ever arrive — he knew the EU too well for that. At the beginning of the 2000s, he had worked in Brussels as an advisor to a Tory member of European Parliament before later campaigning in Britain for lower state spending and against changes to the country’s election laws. More recently, he became head of the Vote Leave campaign. He speaks of the EU as though it were contaminated with radioactivity. “Do I think that Britain’s future is better outside of the EU? One-hundred percent.” The bloc, he argues, is over-regulated and the euro zone will implode sooner or later. He smiles.
Elliott was correct in his prediction that Cameron would receive concessions from Brussels, but that they would be too meager to help him much domestically. Indeed, it quickly became clear that the rest of Europe wasn’t too eager to bend over backwards for the British. German Chancellor Merkel personally made clear to Cameron that the right of EU citizens to choose where they want to live and work inside the union was not up for negotiation.
In response, Cameron significantly slimmed down his demands and by last December, he was only asking that in-work benefits for EU migrants could be suspended for four years. Furthermore, he asked that the preamble of the Treaty of Lisbon, which obligates all EU member states to pursue an “ever closer union,” not apply to his country. He also wanted to increase competitiveness and removed disadvantages for countries that were not part of the euro zone.

No Concessions

Finally came the long Brussels summit on the evening and morning of February 19th and 20th, at which Cameron was supposed to show himself to be a tough negotiator. Shortly before midnight, he announced, “Britain will be permanently out of ever closer union — never part of a European super state.” He also negotiated a “red card” that would have enabled national parliaments to block decisions made in Brussels. The response from London was prompt. “Call that a deal, Dave?” read the cover of the tabloid Daily Mail. The battle lines had been drawn.
Matthew Elliott believes that Brexit is just the beginning. “There will be a queue behind us,” he says. He argues numerous EU countries will demand the same conditions that Britain will inevitably get in its negotiations with Brussels. Denmark, Sweden, Ireland and many other countries are very likely to demand special rights, he said. That could be the end of the EU as a political project and, he says, Europe would finally be free. Elliott laughs again.
But the coming weeks are unlikely to be as harmonious as the Brexit movement imagines. The current stance of the government in Berlin following the referendum is to adopt a tough position against the British. “In is in. Out is out,” Finance Minister Wolfgang Schäuble told SPIEGEL in an interview published two weeks ago. There will be no concessions.
The British vote, though, also represents a defeat for Angela Merkel. Few others were as engaged as the German chancellor in their efforts to sway Britain to stay in the EU. Early on, the chancellor told Cameron she would not be able to accept any fundamental changes to the treaties but that she would do everything she could beneath that level to help him. Indeed, that is one reason for her deep disappointment when she received no support from Cameron for her refugee policies. Officials in the Chancellery are aware that a policy of open borders played into the hands of Brexit supporters. But those close to Merkel still had the feeling they had been left in the lurch by the British.
Speaking on Friday, Merkel said we have to recognize the decision of the majority of the British people with “deep regret” today. “There is no point in beating around the bush: Today is a watershed moment for Europe, it is watershed moment for the European unification process.”
Britain’s withdrawal is to be negotiated according to the provisions of the Treaty of Lisbon. But Merkel and Steinmeier have already agreed that they will not rush Britain to initiate the formal proceedings. First, the domestic political situation in Britain needs to be clarified. “We first have to have someone who has the legitimacy to lead Britain out of the EU,” said one member of Merkel’s cabinet. “We want to give London the time it needs to clarify things at home.”

A Deep Impact in Germany

Within Merkel’s center-right CDU, but also within the Chancellery itself, officials are already thinking about how the British can maintain a close relationship with the EU even after the Brexit vote. Government sources say it is in nobody’s interest to unnecessarily cut economic ties. Nevertheless, the source said, it is also clear that Britain will only be provided with access to the single market if it continues to provide the same rights to EU citizens. In other words, it can’t be part of the common market unless it accepts the freedom of movement — meaning the acceptance of immigrants from other EU countries — that comes along with it.
Brexit’s impact cuts deep into the German political landscape. Following the decision by the British, Horst Seehofer, the head of the Christian Social Union, the Bavarian sister party to Merkel’s Christian Democrats, now wants to implement referenda all across Germany. “Citizen participation is the core of modern politics,” Seehofer says. That applies to significant issues, like changes to the country’s constitution or to European policy, he says. Even the fact that the British have voted to leave does nothing to change that, he says. “You can’t say, we support plebiscites as long as they turn out the way we want,” he says. “If you lose, then either the policy wasn’t good or it wasn’t explained well enough.”
The coming months will be uncomfortable ones for the European economy. The emergency planning by the European Central Bank (ECB) and other central banks may make a speculation-triggered crash unlikely, but it cannot be ruled out entirely.
Far more severe could be the medium-term consequences for the financial industry. Since the creation of the single market, investors and financial institutions from around the world have been able to use London as a bridge to the EU. No country in the world exports as many financial services as Britain — and one-third of those go to the EU. As a consequence, a lot would be at stake if it lost access to the common market, the International Monetary Fund has warned. It’s very unlikely the ECB will continue to allow a significant portion of euro currency trading to take place in London. Currently that trading has a daily volume of €€750 billion.

Huge Job Losses in the Financial Sector

If euro trading moves, so will the traders — and the situation is similar for many other financial products. HSBC, Britain’s largest bank, is already considering moving parts of its business to Luxembourg. The American bank J. P. Morgan has also announced that as many as 4,000 jobs in Britain may be lost as a result of Brexit. Most of its US competitors view the situation similarly. Companies like Deutsche Bank are reviewing the possibility of moving entire departments to the continent. The consultancy PwC estimates that anywhere between 70,000 and 100,000 jobs could be lost in the financial sector as a result of Brexit. The phase of uncertainty will paralyze Europe economically. But what steps must now be taken? N

Der Spiegel, Nr. 26, 25.06.2016

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