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Brexit: An Unsettling Time Ahead

28 June 2016

With the 'Brexit' referendum now behind us, the next step is the invocation of Article 50 of the Treaty of the European Union. However, it will not be a straightforward path towards the uncoupling of the UK from the EU. 

Supporters of the Leave campaign and the UK government suddenly find themselves in a position where they have no plan on how to handle Brexit now that it has happened. The UK government may have also miscalculated by viewing the EU in a purely pragmatic, economy-centric way, ignoring the emotional attachment some Member States have towards the European project. As a result, many political figures are calling for a swift start of negotiations between the EU and the UK to minimise the uncertainty. This sentiment was shared particularly clearly by six participants, all founding members of what is today the EU, of the extraordinary meeting of foreign ministers in Berlin following the referendum.

Buying more time

The push to start the Article 50 process as soon as possible implies the unwillingness to maintain a state of limbo for a prolonged period of time. However, some political figures, Angela Merkel being among them, want some time to pass before the procedure starts. This is likely because of the wish to avoid negotiations based on animosity and the desire by some members to ‘teach the UK a lesson’. It is also true that despite what happened many still see UK as an important partner and want to maintain a working relationship.

The negotiations are unlikely to start right away despite the protests by some Member States to begin the process as soon as possible. Partly this can be explained by the lack of a clear plan from the Leave side that could be applied now that UK has made its decision to leave the Union. This is exemplified by the lack of public reassurance about what will happen next, which markets have picked up immediately, leading to high market. David Cameron has also made it clear upon his resignation that it is the new Prime Minister who will start the negotiations, and who should be elected before the October’s Conservative Party Conference. With the summer recess of the UK and EU Parliament only a few weeks away, the decision to delay trigging Article 50 may indeed be a pivotal move. It would be fair to expect that this protracted waiting period would allow the tensions to die down. However it also means months of uncertainty for everyone involved.

What to expect from the EU institutions?

Heads of States and Governments coming together at today’s European Council and Parliament meetings will seek to introduce calm and clarity. The discussions are likely to lead to planning of how to approach the current situations and possibly some expected deadlines for action to avoid looking complacent towards UK. More importantly, however, it is likely to indicate the general mood of both the EU institutions and national governments towards the UK, and might be an indicator of how easy it will be for it to get a good deal post-Brexit.

A delay for the benefit of Eurosceptics

Whatever the positions of heads of states and governments at this week’s European Summit may be, many will argue that the UK’s decision should not be allowed to be delayed too much. Some Eurosceptics have been up in arms to lead their countries towards a referendum, such as Austria’s far right politician Norbert Hofer. The main message coming from many key EU political figures, such as Guy Verhofstadt, is one that acknowledges the dangers of further disintegration and calls for a new vision for the EU. Whatever that vision may be, a common narrative will be crucial for maintaining cohesion, which will continue to push heads of states to take action. However this might not be the only tool employed to maintain unity in Europe and keep potential dissenters in line.

No more concessions

An idea to use the process of renegotiation of deals as a way to ‘punish’ the UK was floated more than once. No special treatment will be given to the UK: more than once UK received exceptions and special terms to overcome disagreements in opinions. The list of concessions include not being part of the Euro area or the Schengen zone, and  a custom level of participation in the field of police and judicial cooperation in criminal matters. In this case some suggest that as a way to demonstrate the price of an exit, the UK should get a sub-par deal. However, the likelihood of this occurring is likely to remain low. While many of the EU Member States will view the UK with scorn for its decision, retaliating will not only damage the EU’s image within the Union but also give Brexit supporters legitimacy.

Expectations and reality

The coming weeks are likely to have a limited number of major statements published as countries meet to discuss the situation and establish a workable plan. Once the negotiations do begin, the UK is unlikely to be in a position to drive a hard bargain as its economy is still feeling the after-effects of the Brexit decision. Partly due to the high price of acting with the goal of punishing the UK, and partly due to emotional upheaval slowly receding, the usual pragmatism among EU actors will begin to dominate again.

The negotiations will be fairly unpredictable as it is already clear that the UK expects to get identical access terms to Single Market that it currently enjoys – an ambition that some EU members are likely to oppose. Access to the Single Market will require compliance with EU regulations which was, according to the Leave campaigners, what pushed the country towards leaving the EU in the first place.

The most important events at this point are the extraordinary meetings of the Council and the Parliament over the 28-29 June, and subsequent statements and comments that will be made as a result. They are like to reflect both the current and future tone of the negotiations.

 

Image courtesy of muffinn

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Darius Mikulenas, Transport Policy Executive
Darius Mikulenas
Transport Policy Executive

Darius Mikulenas leads on the Transport, Security and Defence portfolio for the DeHavilland EU team. Darius has experience working with an industry association representing the Waste-to-Energy sector in Brussels.