Brexit and its impact on the Eurpean Union/Where do we go now?

September 29, 2016

From the FEDEMAC Sept. 2016 Newsletter:

Since the outcome of the Brexit vote that took place on the 23rd June, much speculation on the future of the European Union has been made. The biggest question being a general one “What now?” Indeed, what would happen with the UK? It is clear that despite what the pro Brexit advocated, the separation will be a slow one. How will this be done? Well that is still to be answered. Teresa May, the UK’s recently appointed Prime Minister has clearly stated that article 50 will not be invoqued in 2016. Much needs to be prepared before entering the official negotiations. What the pro Brexit never explained to its voters is that exiting the EU means also forgoing any international agreements that it has with the EU but also with organisations and 3rd countries from all over the world. Thus negotiations will be needed on all fronts.

What has happened in Europe since the vote?

The Brexit has created an avalanche of problems to the European Union. The outcome has clearly shown the disparities between the Union and its citizens, not only in the UK but across the continent. Many other countries have made statements rethinking the future of the EU, especially in regards to its federalism and the sovereignty of Member States.

By the end of summer clear geographical “clans” were formed, starting with the Benelux countries and northern ones “the North sea Union”, to France, Portugal, Spain, Italy, Greece, Malta “the Southern EU countries”, and finally the “viseguard group” formed by Poland, the Czech Republic, Slovakia and Hungary. The latter believes that the EU should be a conduit for political, economic and security cooperation but should not infringe on the sovereignty of national governments. They supported David Cameron’s call to the repatriate more powers from the European Union to allow national parliaments more authority to veto EU decisions.

The potential formalisation of such groups within the EU could risk of being the demise of the European Union.

On the 16th September, an informal EU Summit took place in Bratislava, where Member States discussed the future of the EU without the UK. The leaders focused on developing “roadmap” for the months ahead that would allow them to present the public with a clear set of achievements, showing that Europe remained united. According to their joint statement, they are “determined to make a success of the EU at 27” members. However, the Brexit negotiations remained somehow out of the Summit.

President Donald Tusk stated: “It was a sad moment for Europe when the British people decided to leave, and so it required an honest diagnosis. Today we had a frank discussion about the root causes of the current political situation in Europe. The fact that millions of Europeans feel insecure is real. People are concerned about, what they see, as lack of control, and express fears over migration, terrorism and last but not least, about their economic and social future.”

The UK just opened a major pandora’s box that will become more difficult to contain with time. Populistic and xenophobic parties have jumped on the opportunity to use people’s disillusionment with the EU to promote their agenda.

However, Van Rompuy ex-President of the European Union stated that “Brexit should not be viewed as a European phenomenon but a specific incident largely influenced by national circumstances for which Europe was the scapegoat”.

Most people, even those ingrained in the machinery that is the European Union would agree that the EU needs major reforms if it is to have a future. But all Eurosceptic should try to remember a Europe with borders, a Europe with 28 different legislations, one with no single market and therefore with many barriers to businesses.

The recent legislation imposed by France and Germany on the minimum wage on the road transport, created much bureaucracy, added costs and disrupted business. This was the impact of only two countries introducing one legislation each. What would be the impact on our industry if these were to multiply?

Brexit Timeline

The British citizens made it clear on the 23rd June that it will be leaving the EU. The “when” part remains unclear. The United Kingdom has yet to formally start the process.

Speaking in parliament, the Prime Minister Teresa May refused to show her hand, saying “I know many people are keen to see rapid progress and to understand what Post-Brexit Britain will look like. We are getting on with that vital work but we must also think through the issues in a sober and considered way”, she said. “We will not take decisions until we are ready, we will not reveal our hand prematurely and we will not provide a running commentary on every twist and turn of the negotiations”.

Any agreement between the UK and the European Union may consist of amending the EU Treaties. If so, it will have to ratified by National Parliaments. If the UK does not find a balanced deal that suits all parties, it may face a veto by some countries. Changes to the Constitutional Treaty must be done by unanimity. Consequences may be an even longer timeline for the UK’s Brexit.