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Apres Brexit, what comes next?

Last Friday Britain cut its ties with the EU. Now Europe faces a battle to make new realities work and prove the 'doomsters' wrong

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A LEAP IN THE DARK: British subjects fly the flag in London on Friday

A LEAP IN THE DARK: British subjects fly the flag in London on Friday

AFP via Getty Images

A LEAP IN THE DARK: British subjects fly the flag in London on Friday

When Britain voted to leave the EU in June 2016, it felt to many observers that the bloc's economic and political foundations were crumbling before their eyes.

Europe's second-largest economy and the EU's dominant financial centre decided to quit just as the 2015 immigration crisis provided fresh impetus to populist politicians the length and breadth of the continent. When Trump won the White House the following November, the first question the new US president asked Donald Tusk, the European Council president, when he called to congratulate him on his victory was: "How is Brexit going - and who is next in line to leave?"

It wasn't just newly elected populist presidents who thought they could foresee the end of Europe as a coherent political entity; renowned Bulgarian political scientist, Ivan Krastev, wrote a bestseller on the subject gloomily entitled After Europe.

But four years later, the EU has built a powerful counter-narrative to that story of imminent decline, arguing that Brexit has proved that their political construct is a great deal more durable than the "doomsters", to borrow a phrase, had predicted.

As it turned out, Emmanuel Macron, not Marine Le Pen was elected to the French presidency in 2017 and as the UK found itself dithering and divided over what Brexit really meant, it was the other 27 EU states that successfully circled the wagons in the first phase of negotiations.

At same time, dirty deals with Turkey and Libya halted the flow of migrants into Europe, and after some grudging internal fudges in Brussels the lid was put back on the migrant crisis. Europe's east-west culture war, which had threatened to boil over, returned to a simmer.

At the same time, despite a manufacturing recession in Germany and continued anaemic growth, the eurozone plodded on, its own internal contradictions unresolved and its banking union incomplete but nowhere near the existential crisis Eurosceptics have long predicted.

But as Europe contemplates a new future without the UK in its ranks, the more thoughtful among its thinkers know that the real story is a great deal more complicated than this simplistic "renaissance" narrative would suggest.

That Brexit will have an abiding impact on the future shape of Europe is something that even the most ardent supporters of a supranational Europe accept - even if, at times, the EU's institutions, its Parliament and Commission, are in denial.

Andrew Duff, the president of the Spinelli Group, which lobbies for a more federal Europe, says that Brexit represents the biggest shift in European power politics since the fall of the Berlin Wall in 1989.

"The EU has not yet, in my view, understood the full consequences of becoming smaller, poorer and therefore weaker," he says, accusing Donald Tusk of indulging in "wishful thinking about overturning Brexit" while failing to reflect on the changes the UK's departure portended.

The most fundamental shift, says Christian Odendahl of the Centre for Europe Reform in Berlin, is the change in the big-power dynamic of Europe which over the past 40 years has seen Germany, France and the UK all working off each other. It is arguably this ever-moving political trinity at the heart of Europe that has kept Europe from turning in on itself, driving the evolution of the EU's single market and the expansion of the bloc to include eastern EU states in the early 2000s.

That trinity will now be replaced by a Franco-German duopoly that unsettles other EU member states. As EU diplomats in Brussels now joke: "What are we going to do, now that the British have disappeared and left us alone with the French?"

"Germany's role is shifting as a result of Brexit," says Mr Odendahl, noting that after Brexit "an important counterweight to France, and a close ally of the central and eastern EU countries, is now missing."

The result of this loss can already be seen in Germany's deliberately tepid response to Macron's grand plans for Europe, Odendahl argues, with European defence plans and eurozone reforms all slowly strangled by a sceptical Berlin.

"Germany needs to play the moderator more than in the past, and will not be able to formulate bold visions for Europe any time soon," he adds, as instinctive German resistance to a multi-speed, multi-tier Europe deepens "to keep everyone on board".

And so Europe's grand plans for democratic renewal, led by Macron's ideas for an EU security council, defence co-operation and a green New Deal, will all ultimately be constrained by the new political limits at the heart of the EU.

Ursula von der Leyen, the EU Commission president, has set in train a two-year conference to look at new ideas, the European Parliament wants "agoras" (Greek for "marketplace") of 200-300 citizens to drive the process, and yet already the Commission is soft-pedalling any talk of EU "treaty change" that would be needed for fundamental reforms.

In practice, says Guntram Wolff, director of the Bruegel think tank, post-Brexit EU will probably mean a greater drift towards centralising forces in the EU and, at the margin, a more protectionist economic outlook.

As a result, he argues, non-euro countries will come under greater pressure to join the euro, since the UK's departure means the club of non-eurozone states will now represent just 15pc of EU GDP. Sweden and Denmark are already scoping the costs of joining.

"The EU institutions will drive convergence, which is a mistake in my view. Already the Eurogroup was where difficult decisions were made, and those outside will doubly feel in a 'second ring' - like it or not," said Wolff.

With the bloc's hawkish competition commissioner, Margrethe Vestager, at the helm, the EU will not become protectionist overnight, Wolff says, but over a decade-long horizon, the risk is that the protectionist instincts of the German and French economies will start to assert themselves.

"We will feel that the UK is no longer in these debates about industrial and competition policy. There will be pressure to become more 'protectionist' and the UK's absence will make a difference at the margin," he said.

Much will depend on whether the EU can move past its current obsession with "winning" a narrow negotiation and grasp the bigger political picture, adds Andrew Duff of the Spinelli Group, who says that the importance of "getting Brexit right is huge" for the EU.

"Two things need to happen: the EU side has got to change gear and learn to treat the UK as an important third country," he adds, "And the UK needs to move from ideology to pragmatism over the course of the next months. The June summit will be critical."

But if the raw politics of divorce can somehow be put to one side - and the early omens are not encouraging - then strategic experts, like Malcolm Chalmers at the Royal United Services Institute, the defence and security think tank, are confident that the UK will continue to contribute to the EU's shared foreign policy goals.

The recent decision by the UK to accept Chinese 5G technology from Huawei - in the face of repeated objections from Washington - alongside Britain's decision to stand with Europe on major global issues such as climate change, China trade policy and rebooting the Iran nuclear deal, all point to a future basis for consensus.

The 'E3' group of countries (France, Britain and Germany) which most recently has helped coordinate a response to the Iran situation, could provide a way to keep the UK and France and Germany in the same room as each other on major issues.

"Ironically, the Trump administration - being so far outside consensus on all these issues - has pushed us together," says Chalmers.

Whether these shared strategic interests are sufficiently strong to overcome the fallout from the inevitable trade spats and the UK being shut out of key parts of the EU's defence industrial policy (such as its sixth generation fighter plane programme or Galileo satellite system) remains to be seen.

Already UK sources believe Westminster would not now join Galileo - the EU's alternative to the US GPS system - even if it were offered the chance. This despite the UK helping to develop large amounts of the project's high-end technology in pre-Brexit days.

In short, while the EU's centre looks certain to hold - driven in part by what Andrius Tursa, an analyst at the Teneo think tank, identifies as the rebalancing forces of higher wages in the east helping to reverse the talent drain of the past decade - Europe will not be immune from the uncertainties Brexit brings.

It seems there are two visions for that future: one darker version that sees the EU turn inwards to protect itself; the other, assuming that Brexit Britain prospers as a nimble neighbour with shared strategic goals, is to embrace a more open global identity.

For Krastev, the Bulgarian political scientist behind After Europe, the fact that the EU did not implode after 2016 spells only limited relief. The bloc remains in a defensive crouch, beset by populist demagogues, fragmenting electorates, ageing demographics and an ever-shrinking share of the world economy.

As he wrote this year in an epilogue to After Europe: "You could say that Europe has transformed itself from a missionary, who wants to shape the world in its own image, into a monastery focused on protecting the very exceptional nature of its political project."

But there is a more optimistic vision, espoused by the likes of Jean Pisani-Ferry, the French political economist, who served as director of the Macron presidential campaign in 2017, and believes that a successful Brexit Britain would ultimately be to the benefit of the EU.

"The bet is far from won, both on the British side and that of the Union. The most probable remains that Brexit is only a station on the Way of the Cross of European decline," he wrote recently. "But let's not stop dreaming: since we are condemned to cohabit from now on, it might as well be productively.

"Having an intelligent partner and competitor is the best thing that can happen to us."

┬ęTelegraph

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