Can The European Union And The UK Avoid A Complete Train Wreck?

After the UK’s slightly surprising referendum results, the ‘Brexiters’ are gleefully extolling Britain’s new found ‘independence’ from the perfidious European Union while most of the sober main-line newspapers are wringing their hands over the country’s descent into prolonged economic and political confusion. Both reactions are premature, at best.

While there are clear winners -- Vladimir Putin and real estate agents in Frankfurt and Dublin for example– and some likely losers such as Prime Minister David Cameron and London’s financial district, the full impact will take months if not years to become apparent.

The biggest loser of the UK's referendum

If, and I do realize it is an enormous If, both the UK and European Union officials exercise just a bit of imagination and some flexibility both sides could emerge from this mess with a semblance of order. There is precedent for the EU forging a new type of relationship with the UK, but other EU countries would first have to get over their collective anger and pique that someone could reject their over-engineered structure.

That precedent, something like a privileged partnership, has been on the table for several years with Turkey. While most of the EU countries reject the very idea of a country as large and autocratic as Turkey becoming a full member they have from time to time offered the idea of this privileged partnership. Essentially, such a partner would enjoy most of the benefits of the trade privileges of the EU, but would not be part of the decision making process. Turkey, with its exaggerated amour proper, always rejected this compromise as being beneath its dignity. What the Turks so indignantly rejected could be very usefully be offered to the UK.

While the exact nature of this partnership would take long and tortuous negotiations to hammer out it is far better that both sides work out a compromise rather than storm off in a huff of injured pride. Broadly speaking the UK would have to recognize that a complete rupture could do serious damage to the Western European economic and geopolitical structure that – while imperfect – has provided an unparalleled level of political and material security to its citizens since the end World War II.

It would be idiotic beyond belief to put this at risk just because of injured pride. A look at Vladimir Putin rubbing his hands in glee at the self-immolation of the EU should reinforce this point. How long does anyone think he would take to increase the pressure on the Baltic states or countries like Romania and Bulgaria to return to the ‘true’ fold?

The EU would have to realize that such a complete rupture would not be in its best interests. Free trade between the UK and the EU benefits both sides enormously. The ‘Brexiters’ in the UK will also soon find out that trade with the rest of the world without the EU behind it could be very difficult with all the new treaties that would have to be negotiated.

Most likely the cost of this trade relationship is the continued free movement of labor within the EU and the UK. Again, while the ‘Brexiters’ loudly condemned this free movement, it is very difficult to see how this free movement within the EU has hurt the UK. Quite the contrary, with the UK’s unemployment rate hovering around 5% it is clear this movement of labor has supported the UK’s growth.

In this new relationship, it is difficult to see the City of London retaining its pre-eminent position. Yes, London, even outside, the EU, offers much deeper financial services than any other place on the continent. But the EU may well insist as part of any deal that UK financial service firms can operate in the EU only if they are based in the EU. The only two EU cities that have any of the required financial infrastructure to handle such an influx of business are Dublin and Frankfurt.

In short, there is plenty of room for both sides to reach a compromise that does not threaten the geopolitical structure of Western Europe. But first, EU officials must recognize that the common perception of them as elitist, dogmatic, undemocratic technocrats out of touch with real citizens has led to this impasse. It is well past time for them to do a little soul-searching about their constant over-reach and intrusion into the life styles of member states.

It would also be nice if the ‘Brexiters’, for their part, recognized that no country has the absolute sovereignty they loudly proclaim. The world is simply too interconnected these days. A wrong word in London, Beijing, New York, Tokyo, or Berlin can have an instant economic and political impact. We will soon see if both sides are mature enough to step back from the abyss they have opened to reach a reasonable compromise.

          Then again, maybe nothing much has changed Britain's view of the European Union since the days of the famous comedy series Yes Minister.

Is This A Tory Party Bun Fight Or A Serious Debate?

What should be a serious debate about Britain’s place in the European Union has descended fairly quickly into nothing more than a food fight in a rather exclusive secondary school. On one side you have Prime Minister David Cameron and the Chancellor of the Exchequer George Osborne lobbing day-old bread rolls across the dining room at other Tory party grandees who respond in kind with volleys of butter pats. Stewards at some of London's finer gentlemen's clubs aren't quite sure which members are no longer on speaking terms.

            Make no mistake. This is a Conservative Party issue. Most of the non-political population of Britain seemed perfectly happy muddling along in the bosom of the European Union with the ease of visa-free holidays overriding nebulous issues of ‘sovereignty’. There were a few dissenting voices, but they were largely relegated to some colorful fringe elements. Most of the rest of us are left with mouths agape at the finest example of British fratricide since the civil war in the 17^th century. The Labour Party can only marvel at this sudden turn of good fortune that has taken attention off its own internal problems. 

            Those Tory party members champing at the bit to leave make a great claim about regaining British sovereignty and ending the rule of faceless, unaccountable EU bureaucrats in Brussels. The problem is they haven’t really defined exactly what they mean by sovereignty and how much that perceived sovereignty has been curtailed by Brussels. They forget the considerable success that British diplomats have achieved in winning substantial concessions for Britain. One of the main British victories allowed London to remain the leading financial center in Europe.

In their more fevered moments some members of the Leave campaign sound as if they would like to re-fight the Battle of Hastings. And this time the good, solid Saxons would send the poncey Frenchmen scuttling back across the English Channel to Normandy. One forgets that it was the Plantagenet heirs of those poncey Frenchmen that won eternal glory for the English at Crecy, Poitiers, and Agincourt.

            The debate has divided the British cabinet with several members taking prominent roles in the Leave campaign. The ever-calculating mayor of London, Boris Johnson, has thrown his lot in with the Leave campaign by trying desperately to sound like his hero Winston Churchill during the Battle of Britain. Unfortunately for him his thundering denunciations of the EU make him sound much more like Basil Fawlty than Winston Churchill.

            The main fault of the Leave campaign is that it only speaks in vague generalities about what Britain would look like outside the EU. Oh, there are brave words about how the economy would flourish, trade would soar, British-made justice would rule the land, and the British lion’s roar would once more be feared. But there are precious few specifics about how all this would be accomplished. No answers to questions about British access to European markets. No answers to questions about Britain’s relationship with the United States. No answers to questions about the likelihood of another referendum for Scottish independence. No answers to questions about the willingness of companies to re-locate or even remain in an EU-less Britain. No answers to questions about how seriously an EU-less Britain would be taken by the rest of the world. We are supposed to take it on faith that all would be good in this best of all possible worlds. Right.

            One of the biggest victims of Britain’s withdrawal from the EU could well be one of the most important parts of the country’s economy – the financial sector. London is without doubt the financial capital of Europe, if not the entire world. This status could be crippled by Britain’s departure from the EU by eliminating the ability of London-based financial firms to ply their trade in the EU. It’s not just the financial firms at risk. Think of the lawyers, the accountants, insurance companies and others that underpin much of the financial world. How long would they stay in a City of London stripped of its ability to operate within the EU? That crunching sound you might hear could well be the price of London office space landing on the suddenly empty streets.

            The best argument the Leave campaign might use has nothing to do with the imagined loss of British sovereignty to a bunch of Eurocrats. The best argument may well be that the European Union itself is crumbling under the weight of its own internal contradictions. Is it a loose federation of sovereign states? Or is it the beginning of the United States of Europe? Rather than deal conclusively with these hard questions the EU leaders preferred to bask in the glow of good feeling – almost as if they were a bunch of campers holding hands around a campfire singing Kumbaya. Meanwhile the real issues like common monetary policy or common foreign policy were left in limbo.

            If the British referendum on EU membership does nothing else, it should sharply focus the minds of everyone in the EU about the future of the entire project.