by Frank Schnittger
Mon Jun 27th, 2016 at 12:33:10 AM EST
Not so long ago any article touting the EU as an example of clear leadership would have been heading for the spike anywhere except perhaps on The Onion or the Waterford Whisperer - see current lead on "thousands of British refugees make dangerous journey across the Irish Sea"...
However the Brexit campaign has all the trappings of a train wreck as far as the UK is concerned, and for once the EU is acting quickly, clearly, and with one voice. As Bernard has documented, EU leaders are pressing for a quick resolution. In effect, they are saying that there is only one process, Article 50, by which a member state may leave the EU, and all else is hot air and silly manoeuvring. Without the invocation of article 50, the Brexit referendum was an entirely internal UK affair of no legal consequence within the EU.
The EU is of course an interested observer of the political goings on in member states, and must do contingency planning, but no more than that. The UK could reverse its decision, either by a second referendum or election, or simply by Parliament deciding to ignore the referendum, and it will formally be an internal UK matter. That is why the EU has also rejected overtures from the SNP to begin discussions on Scotland remaining within the EU. It would be the diplomatic equivalent of opening discussions with Catalonia if done before Scotland formally becomes an independent and applicant state.
Of course, in the real world, lots of informal discussions take place in the background all the time. All sorts of understandings and informal agreements may be in the process of being reached. But if the UK thinks it can again game the system and reach some kind of enhanced renegotiated position by threatening to invoke Article 50, it is in for a rude awakening. EU leaders are not buying it any more. You are in or out. You decide.
In providing this clear response EU leaders are also providing a clear riposte to the Brexiteers' cant that the EU will only be falling over itself to provide favourable exit terms to the UK because of the UK's importance as an economy and a market in its own right. Some Brexiteers actually argued that the EU needs the UK more than the other way around.
The economic costs of the uncertainty created by the referendum are also overwhelmingly asymmetric in the EU's favour. Very few businesses invest in (say) Portugal in order to gain access to the UK market. It is nearly always the other way around. The Irish Government has already made it very clear that it is ready, willing and able to facilitate any new investment or re-location of UK businesses that require access to the EU market.
The UK gets c. €30 Billion in FDI p.a. to the Irish Republic's €5 Billion, so even if 10% of UK bound FDI decides to hedge its bets and head for the nearest English speaking centre with a proven track record and ready made infrastructure, then that will be a major boost for Ireland even if small in EU and UK terms.
The longer this uncertainty goes on, the more it will favour the EU. Thousands of business decisions made every day will cumulatively add up to a delay in investments in the UK, the diversion of some projects to other EU markets, and the occasional high profile re-location of existing business from the UK. I wouldn't worry too much about the immediate short term impact of this: it may be mildly recessionary, but it is the cumulative long term impact that will be extremely damaging to the UK, and it will only partially be off-set by the devaluation of the £.
The advantage of Article 50 from everyone's point of view is that it sets out a clear timescale for any negotiated exit, thus reducing long term uncertainty. Some businesses may be prepared to wait that long to see how things pan out before making major changes to current investment plans.
The disadvantage from the UK's point of view is that if no agreement is reached within that timescale it will be out without any kind of preferential treatment whatsoever. I could see little obvious progress being made for the first 21 months putting extreme pressure on negotiators as the deadline approaches. Brinkmanship is the name of the game in any difficult negotiation.
I could see Ireland being very concerned about the re-creation of border checkpoints and customs control at the North South border and other member states might also have their own red line issues, but the negotiations will be conducted on the basis of qualified majority voting on the Council. There is also no provision, under Article 50 for an application to leave the EU to be subsequently withdrawn. It is a one way ticket out of the EU with no guarantee of any kind of an amicable divorce settlement.
In the meantime, the political atmosphere in the UK could become very febrile as uncertainty wrecked havoc with consumer spending and investment decisions. The prospect of 2 million elderly expats returning would put more pressure on the NHS than immigrants ever did.
Another UK referendum or general election on the terms of exit seems a very likely outcome. The current Labour Party heave against Corbyn may in part be motivated by the fact that with Cameron gone, Osborne in hiding, and the Lib Dems largely irrelevant, there is no effective leadership left in place anywhere to represent the 48% of voters who voted Remain. It is the UKIP and Scottish nationalists who have clear and unambiguous positions easily understood by the electorate and with a democratic mandate. All else are in disarray.
The problem is that it is difficult to identify ANY Labour leader with significant name recognition, standing, or ability to articulate a clear policy position. Why hasn't Labour, as the main opposition party campaigning for Remain, articulated a clear set of reforms they would require if the UK were to remain in the EU? And if Labour is now going to "accept the verdict of the people", change its policy, and compete for the Leave vote, what differentiates it from UKIP and Tory euro-sceptics? Why would anyone wishing to leave the EU vote for Labour and not the real UKIP Leave candidate?
