Brexit would leave EU less liberal, less Atlanticist

By Paul Taylor

BRUSSELS (Reuters) – A European Union without Britain would be financially poorer, less economically liberal and free-trading, less Atlanticist and less open to further enlargement.

A British vote to leave the 28-nation EU in a referendum on June 23 would not only deal a severe blow to the union’s self-confidence and international standing, amputating it of its second biggest economy and one of its two main military powers.

It would also blow a hole in the EU’s common budget and tilt the balance away from the open, competitive economy favored by the Netherlands, Sweden, Ireland and central European states, toward protectionism and heavier regulation.

Even committed European federalists acknowledge that Britain has made major contributions in opening up the community’s internal market, promoting an outward-looking foreign policy and sharing a pragmatic, empirical administrative culture.

“We would lose the intrinsic value of Great Britain – its global geopolitical vision, economic common sense and financial and legal know-how,” said Sylvie Goulard, a French member of the European Parliament from the centrist liberal ALDE group.

Supporters of a more deeply integrated political union centered on the 19-nation euro currency area would have no cause for rejoicing, since eurosceptics elsewhere would be emboldened to press for their own renegotiations and referendums.

“The real risk is not (Britain) remaining in the EU, it is a leave vote, which could perpetuate the disintegration of the entire European Union,” said former Belgian Prime Minister Guy Verhofstadt. A keen federalist, he represented the European Parliament in negotiations between Prime Minister David Cameron and other EU leaders in February that led to a deal exempting Britain from the EU’s treaty goal of “ever closer union”.

“Brexit would make the narrative of the EU about disintegration, not integration,” researchers at the London-based Centre for European Reform said in a report entitled: “Europe after Brexit: unleashed or undone?”

For one thing, much of the EU’s time and energy would be consumed for the next two years or longer by wrangling over the terms of withdrawal and the UK’s future relations with the bloc.

Aside from that, the EU’s historic Franco-German axis seems too weak to agree on any major strengthening of the euro zone, at least until after elections in both countries in 2017.

“I don’t think Europe can transform itself and make a bold leap forward in integration with the current cast of political characters. Perhaps with their successors,” Goulard said.

Unpopular French President Francois Hollande is in the last year of his term, while German Chancellor Angela Merkel is constrained by domestic resistance to an influx of refugees and to any more risk-sharing with southern euro zone countries.

POWER DYNAMICS

The power dynamics of European leadership would change if Britain quit. Germany would lose a counterweight to French economic dirigisme. France would lose its main partner in supporting EU military missions in Africa and elsewhere.

Europe might be less inclined to stand up to Russia, or to work as closely with the United States.

The EU would remain divided into a majority of countries which share the euro, and a minority that have not yet joined or have voted to stay out. But those non-euro countries – Sweden, Denmark, Poland, the Czech Republic, Hungary, Bulgaria, Romania and Croatia – would have less clout without Britain’s presence as the main financial center outside the single currency area.

Guntram Wolff, a German economist who heads the Bruegel economic think-tank in Brussels, said the Berlin establishment was in a funk, fearing that “we are left alone with all those Mediterranean spending countries with a preference for redistribution and we are going to pay for them and drift away from a liberal, pro-market, TTIP Europe. That’s the big angst.”

Among the headaches for the EU would be how to make up for Britain’s contribution to the common European budget, most of which goes on subsidies to poorer regions and to farmers.

The UK is the number three net contributor after Germany and France, paying in an average 9.23 billion euros a year more than it received from EU coffers in 2010-2014, according to the European Commission. It would continue to pay contributions for at least two years until it finally left.

Britain’s EU friends would lose a powerful ally on issues such as upholding free and unfettered competition, curbing state aid to industry, resisting tax harmonization, and opposing barriers to trade with China and other emerging economies. A hub of EU-funded research and innovation would drift away.

“I fear it would be a less open, liberal Europe without the Brits,” said a Swedish diplomat. “That would make it harder for us to win the economic arguments.”

London was the biggest supporter of the EU’s eastward enlargement to take in 12 mostly former Communist states in 2004 and 2007 – at least partly in the belief that a wider EU would slow centralization.

No country has fought harder for ambitious free trade pacts with the United States, Canada, Japan and other major economies.

Without energetic British backing, the Transatlantic Trade and Investment Partnership (TTIP) under negotiation between Brussels and Washington is less likely to come to fruition.

German and Austrian voters are reticent over data privacy and private arbitration courts, while the French are anxious over so-called “Frankenstein foods” – hormone-treated beef, chlorine-washed chicken and genetically modified crops.

(Corrects spelling of Wolff surname in paragraph 16)

(Writing by Paul Taylor; Editing by Andrew Roche)