Conflict ahead, even if Britain stays in
Partner that has never felt at ease with Europe
by Niels Thygesen in Copenhagen
Wed 8 Jun 2016
If I were a citizen of the UK, I would not hesitate to vote Remain in the 23 June referendum. As an economist I cannot doubt that ‘Brexit’ would lead to a sizeable short- to medium-term loss. This would be magnified if the UK – for politically logical reasons – refused the least costly option of retaining access to the single market.
The main arguments for Brexit are political, stemming from a perception of lost sovereignty within a club where the UK has never felt at ease. Leave advocates have difficulties deciding whether their perception is due mainly to further European Union political ambitions (though currently dormant) which they do not share, or to (justifiable) frustrations over the way the EU tries, and often fails, to develop joint policies.
As to the former, the UK has already opted out of political union, confirmed and extended in Britain’s February deal. As to the latter, domestic opinion underestimates UK bureaucrats’ skill in defending national interests, as well as EU reforms started well before 2016 scaling back excessive regulations. Other member states often show similar critical perceptions; the UK is unique in finding enough support for them to gamble with the idea of leaving the EU altogether.
Brexit would pose economic challenges and political risks, notably of contagion elsewhere in Europe of anti-integrationist views. Negotiating exit terms would be a time-consuming distraction. No wonder a clear majority of EU public opinion hopes to avoid Brexit. However, the assumption that all is well if a majority of UK voters decides to stay is unwarranted.
Consider the less dramatic scenario after a narrow Remain victory – the most likely outcome. An unhappy large UK minority, probably a majority in the governing Conservative party, would demand to be better accommodated, becoming still more stridently critical of the EU. In seeking to ‘exercise leadership’ in working for a less cohesive post-referendum EU, Britain would have potential allies on some topics, notably with regard to the more nationalistic overtones on migration from some central European governments. Yet the UK would find it hard to leverage much support on monetary and economic matters among the heterogeneous group of countries yet to join the euro.
In sustaining demand and employment since 2008, the UK economy has performed better than continental Europe. This is mainly due to a weaker sterling and postponement of action to adjust Britain’s current account and public finance imbalances. These choices attract applause in the UK; elsewhere in Europe, sterling’s weakening is regarded as free-riding on the UK’s trading partners. The rest of Europe would show fresh disquiet if the currency falls further after the vote as Britain tries to cut its massive current account deficit.
Over four decades, senior Labour and Conservative policy-makers have made central contributions to EU integration in key areas: Roy Jenkins on economic policy, Arthur Cockfield on the single market, Leon Brittan on competition and trade policy, Chris Patten on foreign and security policy, Peter Mandelson on trade policy. In the 20 years to 2010, governments of both parties often stated they wanted to be at the heart of Europe – though they did little to sustain that image. But in the past six years the UK debate has moved from a critical to an outright hostile tone.
Brexit would be a worse outcome, but not by as wide a margin as many of us in the rest of the EU would like. A Yes to the EU is likely to reinforce a legacy that the UK’s partners cannot view with equanimity. Today’s main source of EU divergence may well stem from the entry in 1973 of a UK that never accepted deeper EU integration and rejected any consequential political moves to enact it.
Even if Britain votes to stay, there is still much room for conflict.
Niels Thygesen is Professor Emeritus of Economics at the University of Copenhagen and a Member of the OMFIF Advisory Board. This is No.85 in the series – the 100th article will appear on 23 June.
OMFIF’s series on the UK EU referendum presents a wide variety of perspectives from Britain and around the world ahead of the 23 June poll. We are assuring a balance between many different points of view, in line with OMFIF’s overall neutral stance on the issue.
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