Brexit would strike at the heart of EU’s legitimacy

In the three years since British prime minister David Cameron announced his plan to hold a referendum on Britain's European Union membership in January 2013, the prospect of a British exit from the EU has been foremost in the minds of policymakers in Brussels.

British scepticism about the EU is nothing new. Its position as a reluctant member of the union, which it chose to join in 1973, has become a defining feature of the relationship, stretching back to its first referendum on membership in 1975.

The predominant response in Brussels following Cameron’s January speech was one of dismissal; the view that if Britain wants to leave, then let it, was held by many. However, frustration shifted to pragmatism as the referendum date approached and the general election of last May marked a defining point in the EU’s attitude. The possibility of a referendum moved from being a party pledge to a political reality following the Conservative Party’s decisive victory.

The prospect of one of the EU's largest members possibly becoming the first to leave it presents an existential problem for the union. Europe has lurched from one crisis to another in recent years, grappling with the euro zone debt crisis and with the unprecedented number of refugees seeking protection on the continent. In parallel, the European project has been losing support across member states, a trend expressed politically through the rise of Eurosceptic parties in countries as diverse as France, Denmark, Hungary and the Netherlands. A Brexit would strike at the heart of the EU's legitimacy and cohesion at a difficult time for it, and could set a dangerous precedent for other countries.

It was unsurprising then that, in February, despite all the tough talk, ultimately Britain’s 27 EU partners stepped up to the plate, providing Cameron with a deal he could sell to his people to try to keep the UK in the club.

Despite accusations from Eurosceptics in London that the deal secured was insufficient and derisory, the EU basically went as far as it could.

Once full-blown treaty change was off the table, there were always going to be limits as to what could be done. While Cameron has been criticised for overpromising on what he could deliver, officials confirm he had been assured by German chancellor Angela Merkel during the height of the euro zone crisis in late 2012 that treaty change was inevitable as the EU sought to bed in new economic governance arrangements. The plan was that Britain could piggyback on the reopening of the EU treaties with its own demands. Once those plans for treaty amendment changed, however, Britain was left with little option but to secure the alterations through compromise.

Speedy accord

The settlement presented to Britain in February was the fruit of more than six months of intensive work at official level in Brussels. Two teams of EU officials led the negotiations – a special

European Commission

taskforce on Britain, and the team around

European Council

president

Donald Tusk

, who was responsible for securing the support of all EU member states.

In the world of EU politics, where decision-making moves at a glacial rate, the speed with which Tusk secured the backing of Britain’s 27 EU counterparts was impressive. Pressure from Merkel to sort out the British question in order to focus on the refugee crisis also moved things along – indeed her support for Cameron was an important reason why the negotiations did not drag on longer.

In terms of the detail of the settlement, the draft managed to address Britain’s four “baskets” of issues: economic governance; competitiveness; sovereignty; and social benefits and free movement.

The fact that the final text stopped short of some of Cameron’s initial pledges to the British public, such as a complete ban on migrants’ access to in-work benefits, may have been viewed as a defeat for him by Eurosceptics. Others in Brussels marvelled at how east European countries who stood to lose most from changes to free movement rights agreed to the changes.

Emergency brake

The predominant view in Brussels now is that the Brexit discussion has moved to Britain ahead of June’s vote. Nonetheless there are still significant elements of the deal to be worked out.

First, questions remain over the role of the European Parliament. Because the "emergency brake" on in-work benefits involves changes to secondary legislation, these changes must be approved by the parliament. Martin Schulz, president of the parliament, has indicated that, while the institution is supportive of the plan, there are no guarantees.

Second is the argument that a second referendum is possible. The fact that the final settlement does not exclude the possibility of a second referendum has led many to suspect that Brussels was leaving the possibility open. The idea has been pushed by some prominent Eurosceptics, such as Michael Howard, but EU officials have been quick to shoot it down, stressing that the agreement is the final offer. Belgian prime minister Charles Michel has taken a leadership role in this, insisting there will be "no second chances".

The idea that a No vote would “shake EU leaders out of their complacency”, in the words of Lord Howard, and force Brussels to offer a better deal, is implausible at best. The widespread view is that the EU has gone as far as it legally can.

The example of the Irish referendum on the Lisbon Treaty, when the electorate was asked to vote again after an initial rejection, is dissimilar. Unlike the British renegotiation, the Lisbon Treaty involved changes to primary legislation, which needs unanimous approval from all member states. The first Irish vote halted the entire EU system and a solution had to be found. In the event of a British exit, the EU could continue to function.

While the deal offered to Britain in February was viewed as a necessary compromise by many, in the event of a No vote the EU would lose any incentive to offer Britain a better deal. The fear that other countries might call for “special status” would be one reason why it would not be in Europe’s interest to offer Britain further changes.

Switzerland’s case offers a good comparison. Two years ago, voters there backed the introduction of immigration quotas in a referendum. The outcome immediately had an impact on its relations with the EU, of which it is not a member, but with which it has a long-standing set of bilateral agreements. The commission warned that any curb to EU migrants would trigger changes to these agreements governing EU-Swiss relations, including its participation in science and research funding and the Erasmus university exchange programme.

Two years on, the negotiations between Bern and Brussels have reached stalemate and Switzerland is scrambling to find a compromise.

Despite reassuring words in Switzerland that the EU would offer up a method to keep its arrangements, the commission has taken a tough line. While Switzerland is an important trading partner, accounting for some 8 per cent of EU exports, the union accounts for 65 per cent of Swiss foreign trade. Brussels holds the upper hand, and has privately warned Switzerland it will not get an agreement before the British referendum, amid fears that it could be seen to show a willingness to provide special treatment.

While Britain, as a global economic and foreign policy power, occupies a different position from Switzerland in relation to the EU, the principle is the same. While the EU will want to negotiate trade deals with Britain, the bloc of 27 member states will retain the upper hand with its collective economic clout.

Example of Norway

Similarly, the comparison of the British situation with non-EU member

Norway

holds little weight. Unlike Britain, which would be negotiating as an ex-member of the EU club, Norway negotiated its EU relationship from outside the EU. Even so, many in the Nordic country believe its unique relationship with the union is unsatisfactory. While it has been a member of the European Economic Area (EEA) since 1992, it rejected EU membership in referendums in 1972 and 1994.

Norway pays hundreds of millions of euro to be part of the internal market and is still subject to thousands of laws based on EU directives. To many, Norway contributes to the costs of EU co-operation without having a seat around the EU negotiating table which would allow it to shape EU laws.

What is certain is that, should Britain vote to leave the EU on June 23rd, article 50 of the Lisbon Treaty, which sets out the rules for countries wishing to leave the union, would be invoked, and the British “settlement” agreed in February would immediately become void. While the official estimate is that the process of renegotiating a British exit would take two years, it is likely to take much longer, particularly if new trade agreements have to be drafted. The impact of that process alone could have catastrophic effects on the British economy.

Apart from the legal conundrums and challenges thrown up by the British referendum, the imminent vote on EU membership for Britain raises profound questions for the EU. Many of the changes demanded by Britain are logical – countries across the continent agree on the need to reduce red tape and increase competitiveness – but the Juncker commission had already committed to streamlining EU legislation.

The demand for Britain's exclusion from the principle of ever-closer union was also accommodated in the final deal, despite opposition from Belgium and France. But the predominance of the debate about "sovereignty" in the British referendum campaign raises other questions. As member of the United Nations, Nato and the G7, Britain already shares its sovereignty to some extent – the EU is simply another collective group that is the reality of a more multilateral and globalised world. Further, Britain already has a semi-detached relationship with the union. It is not a member of the euro, or of the Schengen free-travel area, and it has opt-outs from most justice and home affairs legislation.

Should the referendum pass, Britain’s position in a second-tier Europe would be further entrenched. To that extent, many people in the rest of the EU are asking whether, if the new British settlement is not enough for Britain, it might be time for it to leave. For the other 27 members of what is supposed to be a community of equals, the EU has gone as far as it can go.