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Brexit & Consequences

Brexit: Consequences And Significance

Brexit Consequences: For UK, EU, and U.S.

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In the past decade, Europe has been hit by important problematic events that have challenged European Union (EU) institutions and its legal framework in a new way, unimagined before. The 2007–2008 financial crises (followed by the sovereign debt and Euro crises) and the more recent refugee crisis have confronted the EU with its limitations in important framework aspects, such as its economic-monetary and external affairs pillars. The EU was challenged to show its economic capacity and political availability to cope with shocks of a different nature, but the response given was not out of shortcomings and insufficiencies. These crises have made clear that the Economic and Monetary Union’s (EMU) construction was not as solid as one might have thought, and this was so first and foremost because it was not founded on truthful political integration. On the other hand, these recent and severe crises have confronted Europe (and not only the EU) with its economic and social fragilities in a globalized world and also with its progressive political and geo-strategic weakening, at least when compared with other developed or developing regional blocks. Consequently, Europe as a space capable of economic progress and social development and cohesion is now at stake.

The Brexit decision, in the 23 June 2016 referendum, can hence be seen as a consequence of all these fundamental contradictions and insufficiencies, and it has raised more questions than answers about what will be (and should be) the future of the European integration project. The process now seems irreversible: Theresa May, Prime Minister of the United Kingdom (UK), on 29 March 2017, formally triggered Article 50 of the Treaty on European Union (TEU). Previously, in February 2017, the UK had stated, in the document entitled ‘The United Kingdom’s exit from and new partnership with the European Union’, the departing terms of exit that should be at the centre of the negotiation process with the European institutions. The more recent signals, either resulting from current UK political circumstances or relative to the on-going negotiation between UK leaders and the representatives of the EU, have already made clear that the nature of Brexit (‘hard’ or ‘soft’) is for now imprecise and that the process will be long and difficult. As for the EU, it has certainly perceived the danger of disintegration that Brexit could/can imply, also acknowledging the need to engage in profound and urgent reform measures, regarding both its economic and monetary arm and its political and geo-strategic role. In fact Brexit, along with other disruptive changes in the international panorama—such as the unprecedented driving forces pushing the EU’s relationship with the new United States (USA) administration-can be seen as an opportunity to substantially and effectively reform the EU.

As an important illustration of this movement, recall the launching, in March 2017, by European Commission President Junker, of the ‘White Paper on the Future of Europe’, where five possible scenarios for reform of the remaining EU27 have been brought up for discussion, all involving-as mentioned there-pros and cons: (i) ‘Carrying on scenario’, involving a positive agenda of reinforcement of the status quo, both on economic and political grounds, in particular, the EU27 managing to positively shape the global agenda in a number of fields such as climate change, financial stability and sustainable development; (ii) ‘Nothing but the single market’, which in fact means a step backwards in the process of integration, since the EU would now basically have as its main driver the internal market, while at the same time, this could imply an increase in internal disagreements on the approach to international trade; migration and some foreign policy issues would increasingly be left to bilateral cooperation and humanitarian and development aid dealt with on national grounds; the EU as a whole would cease being represented in a number of international fora as it would fail to agree on a common position on issues of relevance to global partners such as climate change, fighting tax evasion, harnessing globalization and promoting international trade; (iii) ‘Those who want more do more’, in fact, the approach of a ‘two-speed Europe’, a scenario where the EU27 proceeds as today, but where certain Member States wish to go further together in specific policy areas such as defense, internal security, taxation and social issues; (iv) ‘Doing less more efficiently’, where the EU27 would focus on specific areas and notably step up its work in fields such as innovation (including further cooperation on space, high-tech clusters and the completion of regional energy hubs), trade, security, migration, the management of borders and defense; (v) ‘Doing much more together’, which indeed means a step ahead in the integration process, in fact, cooperation between all Member States would go further than ever before in all domains and decisions would be agreed faster at the European level and more rapidly enforced; furthermore, the euro area would be strengthened (e.g. much greater coordination on fiscal, social and taxation matters, as well as European supervision of financial services).

Bearing all this in mind, the present volume intends to identify the short- to medium-term economic, financial and social consequences of Brexit, but also to discuss—in a longer-term and broader perspective- what will be its consequences on the design of the EU and the path of integration that can be followed from now on.

The crucial challenge is to address the major areas that can be affected by Brexit, bearing in mind—to avoid dispersion and to guarantee analytic cohesion— the fundamental legal framework of the EU, and particularly the European Treaties’ basic, foundational principles of free movement (of goods, capital, services and people). For this reason, two major types of Brexit effects can be disentangled: firstly, general effects on the European integration process, in which the authors will investigate in which way Brexit can work as a factor of integration or, on the contrary, a factor of disintegration for the EU (‘more or less Europe’), without ignoring constitutional and contractual implications that might arise and which will certainly be at the centre of the political discussion during the exit negotiation process; secondly, sectorial effects that, on the other hand, can be separated into two dimensions (bearing in mind the aforementioned basic principles of free movement): the first dimension is to assess the effects of Brexit considering the free movement of goods and people, and here the discussion will embrace problematic aspects such as trade, (im)migration, social rights and social security; the second dimension considers the free movement of capital and will highlight the effects on the financial markets, not only for the UK-as usually mentioned-but for the whole EU.

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