Brexit will weaken Europe

By Raz Koroh

Germany’s finance minister, Wolfgang Schauble, in an interview with German weekly Der Spiegel, proudly declared that Britain’s potential exit (now or in the future) will have little impact on the rest of the European Union (EU).  He even warned the British people to live with the consequence of no longer having the benefit of trading freely with its European neighbors.  Schauble’s rhetoric evidently influenced the opinions of British leaders like Peter Mandelson who said that Britain “cannot leave the club and continue to use its facilities.”  On the opposite view, the EU needs Britain more than the other way round.  This is mainly due to its growing role in world politics.

In recent years, the EU has been keen to increase its influence around the world; it has helped to negotiate a landmark nuclear accord with Iran, and has worked closely with Washington and Moscow in an effort to revive stalled peace talks between Israel and the Palestinians.  Some analysts agree that the exclusion of a UN Security Council permanent member and NATO lynchpin like Britain would likely diminish the EU’s influence and respect around the world, and as the Chinese and Russians might take advantage of this development to exert more pressure and divide the EU further, the latter will likely be more inward-looking.  Latin America and Southeast Asia, which regard the EU as a model for regional groupings such as Mercosur and ASEAN, will lose interest in forging partnerships with Europe.  Even the EU’s very own Common Security and Defence Policy (CSDP) will be wrecked as 22 of its present 28 members belong to the U.S.-led NATO for security needs.  Hence, is Schauble’s optimism misplaced?

Here are several more factors to consider.

Global role.  The United States at one time argued that a united Europe will prevent devastating continent-wide wars from ever happening again.  They were right about this as relative peace had prevailed since the founding of the European Coal and Steel Community (ECSC) in 1950 that will “make war not only unthinkable but also materially impossible”, in the words of French foreign minister Robert Schuman.  This was followed in 1973 by the Conference in Security and Cooperation in Europe (CSCE) which transformed into the present Organization for Security and Cooperation in Europe (OSCE) in 1995 after the break-up of the Soviet Union.  The OSCE’s principle mandate was really to spread western democracy in the former communist world.  That was the opinion of Russia when OSCE adopted the Charter for European Security in 1999 during the Chechnya crisis.  President George W. Bush even invited the OSCE to observe the 2004 U.S. presidential election.  Indeed, through its Office for Democratic Institutions and Human Rights (ODIHR), it has sent observation teams to 150 elections and referendum within the OSCE area, including twice outside (Afghanistan, 2004).  Its Representative on Freedom of the Media provides early warning on violations in freedom of expression in OSCE members.  Ethnic tension resolution is provided by the OSCE’s High Commissioner on National Minorities.  In short, the good work of the OSCE attracted outside partners from North Africa and Middle East (Algeria, Egypt, Israel, Jordan, Morocco, Tunisia), and Asia and Oceania (Japan, South Korea, Thailand, Australia).  Without Britain as part of the EU, the OSCE’s global role will be affected, as much of the ideas behind the organization’s activities actually come from a traditionally free society like England.  Britain’s inevitably diminished role as a result of Brexit will weaken the OSCE.

German economy.  Schauble would not be so optimistic if he realizes what would happen to his country’s economy if Britain (or anyone else for that matter) exits the EU common market.  Whilst it is true to say that a single market of 500 million people should benefit everyone, this is not the reality.  Taking the Current Account Balance of Payment (as a percentage of GDP) as indicator of the trading position of an economy, with Surplus meaning that it exports more than imports, and a Deficit meaning that it imports more than it exports, then the picture becomes much clearer.  Greece suffers -1.8% deficit, France -1.4% deficit, and with Italy (2.2% surplus), Portugal (0.7% surplus), Spain (1.5% surplus), Belgium (1.6% surplus) all well below the EU average of 3.7% surplus.  Britain suffers a -5% deficit and a lot worse if not for its surplus in the financial sector.  Germany (8.8% surplus) and the Netherlands (9.1% surplus) are the biggest winners, and naturally the most resistant to break-up of the EU.  Furthermore, even though Britain is not part of the Eurozone, a Brexit will definitely weaken the resolve of suffering Eurozone members like Greece to make an exit, and eventually followed by others.  That will definitely hit the German economy the hardest as two-fifth of German exports in goods and services go to the Eurozone and the rest of the EU supports a quarter of the German economy!

So, the reality is that Germany and its proud leaders should not be so confident of little fallout from Brexit.

Comments welcomed.