The day after the EU-UK referendum, leaders will attempt to control political risks of a different nature, depending on the outcome.
European Council President Donald Tusk recently claimed that a “Brexit could be the beginning of the destruction of not only the EU but also of Western political civilization in its entirety”. While the prediction behind this activist view favoring a Remain vote seems overly dramatic, such a declaration illustrates that all eyes are now fixed on Britain.
When Britons go to the polls on 23 June, their vote will mark the end of an epic political battle that will leave deep scars in society, whatever the outcome.
Polls were still putting VoteLeave and Remain neck to neck as the campaign restarted after the interruption following the tragic murder of pro-EU British MP Jo Cox. Although bookmakers have consistently favored the In-camp (see charts below), either popular decision will carry its lot of political risk for the UK and its neighbors.
Britain stays in, Cameron fights
Should Britons vote to remain, it would be a sound victory for the Prime Minister David Cameron, but he would still have to handle the aftermath of a campaign that saw his Tory Party fracturing. The PM will have to reunite his party (and make sure he keeps his majority of 12 in the House of Commons with almost half of his 330 MPs supporting Brexit), including by reshuffling his government and probably offering top jobs to Out supporters.
A second phase could see the new government introduce new — and consensual for the Tories — policies, both in order to create a sense of part unity and to weaken the opposition. This strategy could include votes on pulling out of the European convention on human rights — which would raise eyebrows in Brussels — or on the renewal of Britain’s Trident nuclear weapons system — scheduled for July and which is highly controversial among Labour MPs.
The stakes are high for the PM to appease tensions. If he fails, several scenarios are conceivable, the most likely being a call for snap elections, with hopes of winning an outright majority considering the demise of the Labor Party under Jeremy Corbyn’s leadership. That said, the Conservative Party could well break up, with Cameron moving to the centre of the political spectrum, whereas Eurosceptic members would either join the ranks of UKIP, or create a new right-wing party.
The day after a “Remain” vote, Cameron will have to maneuver skillfully if he wants to avoid political uncertainty for the UK. A failure to do so would result in a fragmented political spectrum, and UKIP could well fill the vacuum left by a splitting Tory Party, and revive Euroscepticism before it is allowed to disappear for some time.
The day after Brexit
In the event of a Brexit vote, Cameron may not have the same kind of trouble, as his defeat will revive calls for his resignation. Eventually, whoever leads the country will have to guide the constitutional way out of the EU, to manage negotiations for a new trade agreement and to control the effects of the vote on the country.
Chris Grayling, cabinet minister and one of the leaders of the Leave campaign, has made plans for the UK to leave by 2019. Mr. Grayling said he would not use Article 50 of the Lisbon Treaty, which sets a two-year deadline for exit talks before the UK would be ejected. Instead, Westminster should aim for an informal process by starting negotiations on a trade deal before initiating the exit in exchange for a continuation of the UK’s participation in the EU budget.
Ideally, Britain would start introducing bills to limit the power of the European Court of Justice to intervene on human rights issues, to scrap VAT on tampons and energy bills, and to establish an “Australian-style points system” to control immigration.
At the same time, the government would start negotiations for trade agreements with third countries, while managing both the Scots’ reemerging claim for independence and the economic impact of the vote, with multinationals and the City starting to implement their contingency plans and to relocate part of their activity to EU soil.
Destination unknown
But Brussels and other EU capitals are expected to show a strong hand at the negotiation table. This posture would surely be a consequence of the policies Mr. Grayling would theoretically implement, but most importantly it would be an attempt to give the impression that leaving the continental bloc is a burdensome prospect, and thereby to prevent (rising) Eurosceptic political forces from banking on Brexit.
As a result, Britons can have no guarantee as to the nature of the trade partnership they would be able to get. Since the beginning of the campaign, Brexiters have looked at the EU trade partnerships of Switzerland, Norway or Albania, but they all present some downsides.
Realistically, the UK will probably have to join the free-trade zone, especially considering that services — which are worth 80% of the country’s economic output — are not included in traditional trade deals. This would mean that Britons would still be exposed to Brussels’ rules, to VoteLeave campaigners’ despair.
In the meantime, the uncertainty regarding trade and the potential impact on the UK economy will put a lot of pressure on the government in place, which will probably look for a quick deal to avoid further risks. According to the government’s estimates, an exit would cost the UK economy to shrink by 6% in the next two years, inflation would rise more sharply, and house prices would be 18% lower.
Window for EU integration
For the EU, the time will be formidably challenging. In fact, not only would the bloc have to formally organize a break up for the first time, but this would, above all, mean losing one of its most influential members, worth a fifth of its economy as well as a strong military and a great deal of soft power.
In the short term, the Bank of England and European Central Bank have contingency plans to deal with a “Brexit shock” to sterling and the euro. A series of political meetings between the Presidents of the EU (Tusk, Juncker and Schulz) and state leaders will also start on 24 June, with an aim to start building the EU negotiating line with the UK, but also to discuss the future of the EU project.
Talks of moving on to further integration have started to flow again in europhile circles. Once rid of the UK, Brussels could decide to push for the creation of an EU army (of which the Britons were the main opponents). Soul-searching will also touch on the actual shape of the Union, for instance with the idea of opting for a further integration of the eurozone (with a government and budget).
Instead of going backwards as the anti-EU supporters want, EU leaders could use the momentum created by a Brexit vote to restart the European project. Political agendas in Germany and in France with general elections in 2017, however, do not favor a drastic move. But the EU will have to propose some kind of solution to Europeans, if only to avoid giving credit to those that sketch it as both obsolete and decaying.
