No deal on Brexit: towards a new existential crisis for the European Union?

Home"TO THE ONE"No deal on Brexit: towards a new existential crisis for the European Union?
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FIGAROVOX / ANALYSIS - Steve Ohana analyzes the consequences of the resignations of Boris Johnson and David Davis. He sees pointing the prospect of the "No deal" for the United Kingdom and questions the responsibility of the European Union.

Steve Ohana is a professor of finance at ESCP Europe.

The resignation of David Davis (Minister for Brexit) and Boris Johnson (Foreign Minister), two big pro-Brexit figures of the Theresa May government, could deprive the British Prime Minister of a parliamentary majority for his exit plan of the European Union. Remember that the objective of this plan is to keep the United Kingdom as a member of the European Customs Union only for industry and agriculture, while regaining control of intra-European migratory movements. This plan seems to resolve a number of inherent contradictions in Brexit at first glance. It protects the integrity of supply chains on both sides of the Channel. It largely solves the thorny problem of the border between Northern Ireland (member of the United Kingdom) and the Republic of Ireland (member of the EU). It gives the United Kingdom a degree of commercial and legislative autonomy in at least the services sector, which accounts for 80% of its GDP, which is the only one in the United Kingdom to secure trade surpluses and to experience positive growth since the 2008 crisis. Finally, it responds to the demand of a large part of the British pro-Brexit electorate to control migration flows from the rest of Europe.

However, this plan is itself fraught with frustrations and contradictions, both for the "Leavers" and the "Remainers". And its biggest fault is that the Union has already announced, through the voice of the European officials in charge of the negotiations with the United Kingdom, that it considers it unacceptable. The reason is simple: the Single Market is based on the principle of four indissociable freedoms (products, services, capital, people). There can be no "à la carte Europe" that allows single market participants to "peck" at the menu of these four freedoms. This so-called inflexibility of principles in fact hides a strategic and political choice. The European Union has already proved capable of compromising on the principle of the four freedoms, for example in the context of its partnership with Switzerland, which offers Switzerland access to the European Single Market at the same time as certain control of intra-European migratory flows.

But the question of divorce with the United Kingdom is far more politically hot than the Swiss question - which in the process took many years to negotiate ...

Two options are available in the UK: the "Canadian Option" or the "Norwegian Option".

Indeed, unlike Switzerland, which has never been part of the EU, the United Kingdom has been a member since 1973. Any concession granted to a country leaving the EU on the principle of the four freedoms would, to use the words of our President of the Republic, a "victory conceded to populism", in the existential struggle that Macron intends to wage against the return of "nationalist" demons in Europe. Macron is joined in this inflexible position by Angela Merkel, as well as by the entire Brussels establishment. The purpose of this strategy is to lead the UK to choose between one of two options: on the one hand, the "Canadian" option, where the UK would no longer be a member of the Single Market, but bound to the EU by a free trade agreement modeled on CETA; on the other hand, the "Norwegian" option, where the United Kingdom, without being a full EU member, would continue to be an integral part of the Single Market (via integration with the European Economic Area or with European Free Trade Association), and would be subject not only to the principle of the four freedoms, but also to all European regulations on the single market, without being able to participate in their elaboration.

Neither of these two options can obtain a majority in British opinion, or even in Westminster.

The Canadian option creates the risk of a hard border between Northern Ireland and the rest of the UK (which is unacceptable to most British citizens, including the Irish Unionist Party DUP, which Theresa May has a narrow majority in Parliament). Moreover, it does not respond to the wish of supporters of the Remain or a "soft Brexit" (very represented in the Labor Party as in the Tories) to maintain as close links as possible with the EU. As for the "Norwegian" option, it is unacceptable for the Brexiters of the Tory Party, who are very keen on reclaiming British migratory sovereignty and legislative autonomy from the Commission and the European Court of Justice. Only an intermediate option between the Canadian and the Norwegian, on the model of the partnership with Switzerland, is likely to win majority support across the Channel. And that's precisely the essence of Theresa May's plan, presented last weekend. Brussels, rejecting the plan in advance, has directly provoked the current political crisis across the Channel: both Davis and Johnson explain in their letter of resignation, that the strategy of Theresa May, given the future concessions that the Kingdom United will be led to do to the EU in the upcoming negotiations, can only lead to a solution to the Norwegian, totally unacceptable to them.

The case of the United Kingdom will not be able to settle on the mode of the Greek crisis of 2015, where the European leaders succeeded in making Alexis Tsipras capitulate on all his promises of campaign.

It is quite legitimate and understandable that the European Union is defending its interests, foremost among which are the integrity of the Single Market and the political struggle against the "national-populist" currents that threaten it in all countries, and who are already in charge in Central Europe, Austria, Italy, and even in the ruling coalition in Germany.

But the equation is actually much more complicated for the EU than it seems at first glance. The case of the United Kingdom will not be able to settle on the mode of the Greek crisis of 2015, where the European leaders succeeded in making Alexis Tsipras capitulate on all his promises of campaign, after understanding that it had not no "plan B". Indeed, if the EU continues to offer only unacceptable "solutions" to the UK for the majority of Britons, there will be a great temptation for the UK to choose the No Deal option or the "Brexit dirty" (exit from the EU without a transition agreement on 29 March 2019, the end of the two-year period following the triggering of Article 50). Although this scenario is very uncertain for the United Kingdom, it also has a number of advantages over the Canadian and Norwegian options: no cash to pay (it is recalled that the EU requires payment £ 39 billion as a prerequisite for any transition agreement with the United Kingdom), reclaiming full trade, legislative and migration sovereignty, preserving the integrity of the United Kingdom ... And unlike Greece's exit from the eurozone in 2015, which would have had primarily symbolic consequences for the EU, a non-negotiated exit from the United Kingdom would this time have very serious consequences for all European citizens, both sides of the Channel: sudden stop of trade flows between the United Kingdom and the continent, delays, accidents, monster queues at the points of passage of goods and people, weakening of the sectors Continental exporters (the EU exported 320 billion pounds of goods and services to the United Kingdom in 2016, registering a trade surplus of 80 billion pounds with the UK, more than 30% of which is due to Germany ...), brutal bankruptcies of small and medium-sized companies involved in trade with Great Britain, indeterminate status of European nationals in the United Kingdom, challenging strategic military partnerships, particularly with France, as well as Safe partnerships in the fight against terrorism ...

The same German-Austro-Italian Conservative "axis" about Brexit is to be found in the migratory subject.

It is no coincidence that Theresa May has put preparations in the "No Deal" scenario in a good place in her plan: she understood that this scenario worries in Europe, and that its only evocation could be enough to sow doubt and division among Europeans. The security consequences of a lack of agreement have, moreover, sufficiently preoccupied the German Interior Minister Seehofer, so that just a few days after his armistice with Angela Merkel on the migratory issue, he writes a letter to the European Commission for ask him to soften his position on the Brexit issue. In fact, Seehofer had found another way to weaken the German Chancellor, echoing the concern of the German automotive sector, which would not recover from the combination of a tariff war on car exports to United States and a "dirty Brexit" with the United Kingdom (a fatal combination that would make him lose his two biggest export markets in one fell swoop). The new "sovereignist" government in Italy is also calling for a softening of the European position with regard to the United Kingdom, "to prevent Theresa May from leaving the negotiating table". As for the Austrian Prime Minister, who holds the rotating EU presidency until the end of 2018, he wants the United Kingdom to be allowed more time in case negotiations fail. We thus see the same conservative German-Austro-Italian "axis" about Brexit as the migratory subject. This is hardly surprising considering that the main disagreement between the United Kingdom and the EU is precisely on the issue of migratory sovereignty ...

The European Union has hitherto taken refuge behind legal arguments in its negotiations with the United Kingdom, hoping in this way to force the United Kingdom to espouse its position. On the contrary, Brexit bargaining is treated across the Channel as an eminently political subject, with opinion and parties torn apart on existential questions about the United Kingdom's place in Europe and the world. In the "wet chicken game" that is engaged, the advantage is to the party that seems the most determined and the most inflexible in its position, the other party having no other choice but capitulation for avoid the crash. This is why so far concessions have had to be made by the British side, sowing division and even the beginning of a political crisis across the Channel. But, if the British side succeeds in giving substance to the scenario ofNo Deal", The Brexit file will be less and less likely to be treated by the European leaders in a technical and legal way, given the serious economic, political and security stakesBrexit dirty"Covers for European citizens. And, as the migration crisis and the transatlantic crisis have amply illustrated, the European Union, as a techno-legal order, is fundamentally incapable of resolving political crises, which are ultimately the responsibility of the states. Faced with the prospect of a non-negotiated Brexit, national interests will reaffirm in the face of the position held so far by Macron, Merkel and the Brussels technostructure, and these interests will clash violently in what will become a new existential crisis for the EU. The editorial advises you:

Steve Ohana - Professor of Finance at ESCP Europe.

Source: © No deal on Brexit: towards a new existential crisis for the European Union?

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