What next for Europe as it faces its biggest ever crisis?

Analysis: Leave vote gives legitimacy to calls by eurosceptics in other states for ballots

So long: A file image shows British prime minister David Cameron leaving an EU summit in Brussels, Belgium, in February 2016. Photograph: EPA/OLIVIER HOSLET

So long: A file image shows British prime minister David Cameron leaving an EU summit in Brussels, Belgium, in February 2016. Photograph: EPA/OLIVIER HOSLET

 

As the sun rose over Brussels this morning the European Union awoke to a new dawn. In what had seemed an ominous warning, lightning strikes and torrential rain had engulfed the city throughout the night. The metaphor seemed too obvious.

In fact it proved to be brutally accurate.

The European Union has woken up to face the biggest institutional crisis since its foundation. The organisation which was formed from the ashes of World War II as a political and trade community but morphed and expanded into something much, much more, was unable to face the scrutiny of its people when it came to a referendum.

Just like the French, Danes, and Irish, when given the opportunity to vote on the EU project, voters rejected the EU. British voters have followed suit.

But this time the implications are far more serious as a government has now been given a democratic mandate to withdraw from the bloc.

While shock has greeted the British referendum result, the signs were there. anti- EU sentiment has been brewing throughout the bloc for at least the last decade, expressing itself in national and local elections across the continent where eurosceptic parties, both from the right and the left, have been gaining ground.

The European Union received a significant warning just over two years ago. The European Parliament elections of May 2014 delivered unprecedented victories for anti-EU parties with eurosceptic groups topping the polls in France, Denmark, and Britain.

Analysts, including many in Ireland, dismissed the results, arguing that most people had still voted for mainstream parties.

But the fact that France, one of the founding members of the European Union, had seen Marine Le Pen top the poll indicated something was seriously wrong in the state of Europe.

Today, the European Union must face the ramifications.

In the short term, statements are expected from the European Central Bank to shore up the markets, with ECB president Mario Draghi insisting last week that the bank had contingency plans in place.

The scheduled meeting between the three heads of the EU institutions and the Dutch premier this morning is expected to be followed by a series of emergency meetings throughout the day and weekend to prepare for the re-opening of markets next week, involving EU ambassadors, Commissioners and officials.

A scheduled summit of all 28 EU leaders next Tuesday and Wednesday is expected to go ahead as planned, though a eurogroup meeting of finance ministers may be convened before then. MEPs are likely to be recalled.

The next stages in negotiating the process of exiting the European Union constitute unchartered waters.

Article 50 is the clause in the EU treaty that refers to a withdrawal from the European Union.

The brief, five-clause article, states that once the article is invoked, a two-year period is set in train, though it could be extended if the EU members states decides to extend the period.

A central question throughout the campaign is when the British government might choose to invoke the article. Some on the Leave side have suggested not invoking it and negotiating a withdrawal in other terms; others have suggesting delaying the invocation of the article to ensure the two-year clock does not start ticking.

Should the referendum result in a change of government, the invocation of the article may be delayed until a new leader is in place.

In parallel, negotiations will begin on trade deal between Britain and the European Union. This could take many forms. Some have suggested a Norway-style arrangement.

The Nordic country is a member of the European Economic Area (EEA) but not the European Union. It has access to the single market but is not part of the Common Agricultural Policy.

Crucially, however, the country has to adhere to EU regulations without having any input into shaping them, and also must subscribe to free movement rules.

As a result the Norway-model is likely to be unpalatable to Britain. Switzerland, though similar, has a series of bilateral trade relationships with the EU.

But the relationship is complex, particularly since the rejection by Swiss voters of migration elements of the deal two years ago which has opened up a legal standoff with Brussels. EU officials are not thought to favour replicating such a deal.

Other options include a customs union such as Turkey has with the EU, or a complete retreat from an EU trade deal into the realm of the WTO, an idea that has been promoted by many Leave campaigners, but which would see British goods subject to tariffs of an average of 15 per cent in some cases.

Given Britain’s size as an economy, the most likely scenario is some kind of bespoke relationship with Britain that will be worked out over the coming years.

While trade deals can take up to five or seven years, the fact that Britain already complies with EU regulation might speed up the process.

During both the Article 50 withdrawal negotiations and the trade talks, Britain’s current arrangements with the EU are likely to remain in place, as a sort of ‘phony war’ situation takes root.

The British referendum result will also open-up serious questions about the future of the European project.

Within minutes of the outcome being called, Dutch politician Geert Wilders tweeted “ the Netherlands will be next.”

The prospect of further referendums across the bloc has been unleashed. Finland and the Czech Republic are among those countries where the idea of a referendum has been mooted.

Marine Le Pen, the leader of the National Front in France, has also said that France should follow Britain’s lead and hold a referendum on EU membership. The solid leave vote has given fresh legitimacy to calls by eurosceptics for ballots across the bloc.

How the European political establishment responds to this threat remains to be seen. The EU landscape is politically delicate. Spain holds a general election this Monday, while France and Germany both have elections next year.

Where the EU goes now is a central question that will be considered by the remaining 27 EU member states in the months ahead.

One possibility is that the founding members of the EU - France, Germany, Italy, Belgium, Luxembourg and the Netherlands - reclaim and redefine the idea of the European Union.

The foreign ministers of all six countries are due to meet in Berlin on Saturday to discuss Europe, the third such meeting in the last year.

Another possibility will be a renewed focus on the core 19 member states of the euro zone. Ever since the creation of the single currency, the notion of a ‘two-speed Europe,” one increasingly divided between the euro-ins and euro-outs, has been seen by many as the logical future direction of the European project.

A huge policy document known as the “Five Presidents’ Report” published last year outlined plans for further integration of the euro zone, though any serious move to push further economic and political union around the single currency will probably not take place before next year’s German elections.

As the EU ponders its future any step towards further integration is likely to be viewed cautiously. Throughout the euro zone and migration crises of the past few years a central dichotomy has been exposed at the heart of the European Union.

In order for the EU to work effectively, far more integration is needed - for example the logical endpoint of the single currency is a single budget and single finance minister - but the reality is that Europe’s citizens do not want that further integration.

What the British referendum result has revealed is that, as the European Union morphed into an ever-more complex political project, its citizens were left behind. In many ways a British exit from the European Union is the inevitable outcome of an institution that forgot its people.

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