Brexit, or the Idea of a United Europe on the Defensive

Justin Frosini

The agreement between Tusk and Cameron aims to avoid the exit of the UK from the European Union. But infighting among the Tories and the Panama Papers make the outcome of the referendum uncertain.

February 19 in Brussels featured the last stage of the negotiation between the British Prime Minister David Cameron and European Council President Donald Tusk to avert Brexit. The text, unanimously approved by the European Heads of State and Government present, is not an international treaty, but it still binds the parties that signed it. This way, the complex procedure for revising a European Treaty is avoided. The agreement, according to legal experts of EU institutions, determines the key to interpreting the Treaty of Lisbon and the five accompanying Declarations. In addition, it sets the stage for the formation of a multi-level EU, where the eurozone will continue to pursue an ever closer Union, but without having to force Britain, now invested with a special status, to do so. The text will be submitted to the UN, but it will be binding only after the 23 June UK referendum on whether the country will remain in or leave the European Union.

The agreement signed is composed of four parts. Cameron obtained, first of all, that, in the next revision of the Treaty, London will be exempted from the concept of Ever Closer Union, the key principle on which European integration has been based since 1957. It exempts the UK from joining in the formation of a common European army or from participating in the financial rescue of the euro area and introduces a veto mechanism, whereby national parliaments representing 55% of 28 member countries, can block European legislation, if they consider that it exceeds the powers accorded to the EU by national member states. Second, it ensures that eurozone countries respect the Single Market and the interests of countries that are not members, who in turn shall refrain from vetoing greater political integration of the eurozone. Currently it is expected that banks, insurance companies and British financial institutions can benefit from specific provisions in the Single Rulebook, also regarding their prudential requirements. The autonomy accorded is however tempered by obligation to create a level playing field in the internal market. In addition, the City will not be exempted from the supervisory powers of EU control authorities such as EBA and ESMA. Third, the EU is committed to strengthening the internal market and adapt it to reduce operating costs for SMEs. Finally, there is a provision that in exceptional circumstances the freedom of movement of workers can be restricted and that access to the UK welfare system will be given gradually over four years (starting from no assistance).

When Cameron and Tusk closed the deal, the EU Council members breathed a sigh of relief, knowing that British Prime Minister could now campaign for the "yes", i.e. for the UK to remain in the EU permanently. However, the road to a yes vote is not at all downhill. Two days after the agreement, the Mayor of London announced he favored Brexit. According to many this decision is dictated more by the desire of Boris Johnson to challenge Cameron's leadership of the Conservaties, but by backing the no vote the now ousted mayor scored a remarkable political and media coup in favor of the supporters of Brexit. Even some members of the government have joined the 'no' front and Cameron suspended the collective responsibility of the Cabinet to enable individual ministers to campaign as they choose. The most recent polls seem to indicate a result is too close to call, thus creating a climate of great uncertainty. Finally, one wonders what effect the Panama Papers will have on the referendum, considering that Cameron's father seems to have evaded taxes, with the risk that this is in turning into a vote for or against the Prime Minister. Meanwhile, as in the song by the Clash, many Brits are wondering: "Should we stay, or should we go?

Carlo Altomonte

In case of victory of the no in the referendum on the country's EU membership, at stake are not only the relations between Britain and Europe, but also between the United Kingdom and the United States

Do we have to be concerned about Brexit? One way to look at the issue is to consdider the technicalities of British relations with the EU, in particular with respect to two developments of the European integration process: the Banking Union and freedom of movement. As the banking union is concerned, the problem is to adapt the emerging legislation applicable to eurozone countries to the needs of countries not participating in the Single Currency, with the complication that eurozone financial companies actually conduct a large part of their operations from London. How to reconcile the demands of eurozone's financial markets that are rapidly becoming more integrated, and therefore require common rules, with operational headquarters where in theory of those rules do not apply, the is the first issue at the base of British claims towards the EU.

The second issue is access to British welfare by European individuals and household who migrate to London, a right that according to EU rules should be guaranteed to them as European citizens, but that given the scale of the phenomenon constitutes a considerable financial burden for the UK Treasury.

The British government has struck a deal with EU institutions on these issues and the outcome of this bargain will be put to referendum to decide whether Britain will stay in the Union. Sticking on the technical aspects, these questions were in fact resolved by the compromise reached within the European Council, in which the UK's Protocol of Accession to the EU Treaty was changed, with mutual satisfaction of both parties. Following this, the British government has therefore put its weight in favor of the permanence of the United Kingdom in the EU in the late June referendum. Evidently, however, a referendum calling citizens to vote is a political issue, not a technical one. More generally, as is the for several years now in Europe, the referendum is likely to become the venue for a frustrated middle class to vent its anger at being increasingly cut off from globalization and facing growing inequalities with respect to the past, a situation against which the British government has not done much to redress in recent years. The referendum not only is strategic for relations with the EU, but also for US-EU relations, and the very ability of the EU to conduct a common foreign policy. The UK remains in fact the main American ally in Europe, the country with the most extensive logistic capacity for military intervention, and the one whose intelligence services are most integrated with those of the United States. So the risk is that a referendum intended to be a weapon of British pressure to get concessions from the EU that were likely to have been anyway, might cause a political schism in Europe, damaging to both the Continent and Britain.

With bank assets totalling 5 times the level of GDP, and a large current account deficit which would no longer be integrated in the Single Market, the UK might well lose its triple-A debt rating and experience severe financial instability in the event of a no outcome. Europe, in contrast, would probably be a less secure and less protected common area, where for the first time in sixty years the process of integration has gone into reverse, possibly triggering further disintegration. To conclude, the words of Mahatma Gandhi: "If I had no sense of humor, I would long ago have committed suicide." Let's hope British humor is up to scale of the challenge.