Brexit hardball: the European Union will treat Britain like Greece
Brussels: I arrived in Brussels as the Daily Telegraph‘s correspondent in early June 2015. A fortnight later, Alexis Tsipras snubbed Brussels, and called a referendum on the third bailout that was designed to save the eurozone from collapse.
Merkel: ‘Brexit’ is a watershed moment for Europe
German Chancellor says Britain’s decision to exit the European Union is a watershed moment, but warns against hasty reactions.
The terms he was later given – €50 billion ($74.2 billion) of assets sold and a de facto control of economic policy surrendered – were so harsh they were later denounced as a “coup”.
It taught me two things: that in the cause of its salvation the European Union can be profoundly flexible and exceptionally brutal, and that events can swiftly take a momentum that is hard to control.
European Commission president Jean-Claude Juncker with Greek Prime Minister Alexis Tsipras last week. The Greeks also told the EU “no”, only to reluctantly accept its terms later. Photo: AP
Nothing of that experience gives me hope for the years that now await our country.
Britain is almost certainly out the European Union
As far as Brussels is concerned, Britain has left.
At home on Friday morning, Britons were dumbstruck, agog at the result, or chuffed at having taught Brussels a lesson.
European Parliament president Martin Schultz, Mr Juncker and (far right) European Council president Donald Tusk meet in Brussels on the morning after the Brexit vote. Photo: AP
We now see street protests to overturn the result, internet petitions, suggestions that the British or Scottish Parliament could revoke it or somehow make it go away. Westminster is occupied by Labour coups and Tory successions. Few seem to believe we are going.
In Brussels, they have been ready to say goodbye for a long time. Britain had been halfway out the door for 40 years. British Prime Minister David Cameron had announced this referendum in January 2013. He had won an election on the back of it, and many expected him to lose it. He, and they, repeated many times that it was final and binding. Patience is exhausted.
A man dressed as Boris Johnson takes part in a tomato fight at Britain’s Glastonbury Festival over the weekend. Photo: Getty Images
On Friday there was grave sadness, but no panic. The timetable for the talks was announced days before the vote. Martin Schulz, the president of the European Parliament, spoke at dawn; Donald Tusk, the president of the European Council, delivered a statement at 7.40am London time. The founding members’ foreign ministers met on Saturday; sherpas for the 27 remaining states will meet today to sketch out the months ahead.
Leaders have demanded Article 50 is activated immediately, to create certainty. Realistically, Mr Cameron has until Christmas.
European Parliament president Martin Schultz was an early bird in reacting to the Brexit vote. Photo: AP
Scotland is ready to quit, and diplomats are quite open to welcoming them into the EU club.
The treaties say that all Britain’s rights and obligations must remain for two years once Article 50 is activated. But Lord Hill, Britain’s European commissioner, quit yesterday, and Downing Street said it had no plans to replace him, and European Commission president Jean-Claude Juncker told UK Independence Party members of the European Parliament to pack their bags.
‘Please Stay’: a message in front of the British representation to the EU office in Brussels on Friday. Photo: AP
Is the legal order fragmenting? What other clauses in the treaties – which protect British expats on the continent, among other things – will now be ignored without consequence?
So the Brexit locomotive has left the station. Can it be halted?
Britain will find few easy routes in its dealings with the European Union in the coming years. Photo: AP
The European Council has offered a narrow window, saying that Britain has not left until Article 50 is activated formally by Britain’s prime minister, “if it is indeed the intention of the British government.”
Mr Cameron has left it to his successor to activate it. Mrs Merkel is in no hurry. Senior EU sources say they can wait until Christmas, but prevarication would trash Britain’s creditworthiness.
A man uses a multi-currency ATM in downtown Madrid. The Brexit vote has plunged the continent into economic uncertainty. Photo: AP
There are two problems. Firstly, to not activate Article 50 would be a rejection of democracy on a scale that could only be described as a coup, and would poison British public life for generations.
Secondly, a wave of movements demanding referendums on the terms of membership, given a huge boost by Mr Cameron, is tearing across Europe – in France, Denmark, the Netherlands, Slovakia, Italy, Hungary. Marine Le Pen could well run rampant in French elections in the northern spring.
Happier times: British Prime Minister David Cameron flanked by Mr Tusk (left) and Mr Juncker in Latvia last year. Mr Cameron’s behaviour has left Mr Juncker angry and bitter. Photo: AP
Leaders anticipated that Boris Johnson would pursue a ‘vote leave for a better deal’ strategy, and ruled it out from February, precisely to prevent this scenario.
Mr Juncker said on Friday: “The repercussions of the British referendum could quickly put a stop to such crass rabble-rousing, as it should soon become clear that the UK was better off inside the EU.” Britain simply has to go, on bad terms, pour encourager les autres.
Jo Leinen, centre, a German member of the European Parliament, holds an EU flag outside the parliament in Brussels on Friday. Photo: AP
Britain has very few friends
In European eyes, Mr Cameron has had a remarkably generous lot: already out of the euro, ever closer union, justice and home affairs obligations and the Schengen agreement, he was offered an enhanced deal that confirmed the perks of membership with scant obligations.
Yet he attacked Brussels for years for domestic advantage. Mr Cameron campaigned hard against Mr Juncker’s appointment. Stories about Mr Juncker’s alleged drinking and the war record of his father, a conscript in the Wehrmacht, emerged. Yet Mr Juncker offered an olive branch by giving Jonathan Hill the financial services portfolio Mr Cameron craved, in order to preserve the City of London’s position. He is profoundly angry.
In his brutal negotiation,Mr Tsipras had a number of cards to play. There was the “solidarity” that EU states are obliged to show each other, the pity and guilt at the plight of the Greek people who had been punished through no fault of their own, and the €83 billion of German taxpayer cash in Greek banks that risked going up in smoke. Their referendum had been hasty, the question unclear, Mr Juncker said; Greeks made plain they wanted to remain Europeans.
No such goodwill exists for Britain, now an ex-member. Boris Johnson, the possible next prime minister, caused genuine and grave offence by likening the European project to the ambitions of Hitler. His declarations that Brexit will trigger events that unravel the entire project is, in effect, a declaration of war that must be met.
Recall how inflexible European leaders were during Mr Cameron’s attempted renegotiation, when he put a gun to their heads and threatened to leave unless they submitted to his demands. He has fired that gun in the air, and locked himself out the room. Britain’s only leverage is how much damage a messy Brexit would inflict on European economies.
Time is not on our side
Once Article 50 is activated, events will move frighteningly fast. It took Mr Cameron seven full months to secure his meagre renegotiation. He will have just two years to get an exit deal covering every facet of British life, and a trade deal that will do the least harm to the fragile, debt-laden economy.
The government is in disarray, the Labour party in meltdown, and the imminent exit of Scotland means it will be unclear with who or what, exactly, the EU is negotiating with. The French foreign minister yesterday implored Mr Cameron to find a successor to take charge.
A ban issued from Downing Street on Brexit preparations – lest it boost the Leave campaign – meant Britain’s most senior officials were permitted to “think” about a Brexit, but not allowed to write anything down.
Several take their guide from Flexcit, a book by blogger Richard North that advocates a Norway-style deal as a halfway house under a “soft” exit. The crucial weeks ahead of polling day were spent in purdah, tending the garden.
Britain has next to no trade negotiators, and will need hundreds, to replicate the market access it currently has with 50 states around the world .
But the EU is ready. Talks in Mr Juncker’s in-house think tank began months ago. Foreign ministries have been preparing position papers. Lawyers are busy: Brussels has had 70 years of practice in writing treaties, signing trade talks, fixing accessions and bailouts, making and breaking nations.
We don’t get to be Norway
The Leavers’ best hope – a Norway deal that means European Economic Area status, retained rights for the City of London and immigration – is almost certainly off the table.
Britain has made it clear it doesn’t want free movement – and so any deal on those grounds would be so impossibly fragile as to be a waste of time. Frankfurt and Paris would certainly like our banks. Mr Juncker is determined to undo Britain’s attempt to create a multi-currency union, meaning clearing houses that trade in euros and generate billions for Britain will have to be domiciled in the eurozone.
Leaders have made clear, before and after the vote, that Britain is not getting access to the single market.
“Out is out,” German Finance Minister Wolfgang Schaeuble said some weeks ago.
“There will certainly be no cherry-picking,” confirmed Mr Juncker, saying it will be a “clean” divorce.
More likely is a Canadian-style trade deal, that will set tariffs on imports and exports. That may be fine for German manufacturers. But Britain’s service economy will be cut up like an old car. British graduates are about to learn what it’s like to use an Australian-style points system.
We do not control this process
Article 50 is designed so that it leaves any state that activates it is a supplicant.
The remaining EU states will negotiate between themselves and deal with Britain as one, just as they would for Albania or Turkey.
If a deal covering trade arrangements isn’t struck once the two-year period expires, Britain is simply released from the EU treaties and left on crippling World Trade Organisation terms – something the UK Treasury terms a “severe shock scenario” and which it envisages would likely result in a cut in GDP of six per cent and increase unemployment by 800,000, not including the risks presented by emergency spending cuts, or the “tipping points” presented by the crystallisation of financial stability risks.
It means the government will effectively be forced to take any fait accompli presented at the last minute, or face ruin.
Even then, any further trade deal will require ratification by EU parliaments, meaning Belgian MPs, amongst others, can veto it.
The Leave campaign is fond of a quote attributed to Churchill: “Each time we have to choose between Europe and the open sea, we shall always choose the open sea.”
Oh, hear us when we cry to Thee, For those in peril on the sea.