30 June 2016

Predictions for Britain and the European Union

Less than a week ago the United Kingdom voted by a narrow margin to leave the European Union. This was the most significant change in the EU's status since its expansion into eastern Europe in 2004. As one of the three big economies in the EU, Britain's leaving will have serious repercussions, and I have some predictions on how things will shake out.

Britain has always been at arms length from the EU. Despite being a founding member, it has stayed out of the Schengen area and euro currency. It has resisted attempts at further integration, causing the European quest for federalism to be slow and difficult.

The whole idea of integration was thrown into doubt with Greece's financial crisis and the Syrian refugee problem, and many misinterpreted these problems as a failure of the whole idea of integration. Rather, both situations were the result of taking fearful baby steps instead of a confident leap. The countries integrated incompletely, making a recipe for disaster. The answer is not less integration, it is more.

Many economists bemoan the idea of a currency union (the euro) without a fiscal and political union. In the case of Greece there was no effective central bank, no European budget controls, no consequences for violating the fiscal terms of the treaty. So of course Greece went to an extreme, its budget and debt became unsustainable, and its fellow countries had to throw together an improvised bailout. Of course it happened, because there were no controls. Since the crisis, Europe has now created a more powerful central bank, a stability fund, and other fiscal controls that will prevent and recover from financial instability. They integrated further, but still not far enough.

The EU's other pillar of integration is the Schengen area: countries that have no border controls and allow for the free migration of people, similar to inside the borders of the United States. Someone born in Portugal can drive to Sweden and find a job without needing a passport. But unlike the United States, there is no central authority patrolling the borders and controlling immigration. Each member state controls its own border, so in a sense, a million Syrian refugees pouring into Greece and Hungary to get to Germany was inevitable. If not Syrians in 2015, the hole in the system would be exploited eventually. Similar to the euro crisis, everyone now recognizes that maintaining the Schengen area means further integrating to create an EU-wide system of immigration control and shared burden of accepting refugees. Unlike the Euro crisis, basically no progress has been made on systemic border problems.

Both of the crises could have been averted with more intentional integration, but they were both implemented in the 1990s when integration was in small steps through treaties between independent sovereign nations. Those small steps were successful in creating something much more like a federal system of states, but now in the 2010s further integration is badly needed. But there are two areas of federal integration that are totally lacking and need to be addressed. Those are military integration and a constitution.

Several EU members have strong military forces, and most are also members of NATO, which defines security in Europe. A future step in integration will be to create a European army for the EU, then rethink or disband NATO. France's right as a legitimate nuclear weapons power under the NPT should transfer to the new military, which would be far more powerful than the sum of its current independent states.

The other step is a constitution. The EU attempted a constitution in 2004 that would have replaced a confusing set of treaties with a single reference for legal authority and created a system of voting to replace the unanimous agreement that is required for treaties. Somewhat ironically, it was never ratified because two countries out of 20 rejected it. This legal hump should be attempted again, as it is the surest way to create the authority necessary to fix some of the problems created by partial integration and avoid more problems similar to the Euro crisis (imagine a shared military without a central authority). Once the constitution is ratified, there should be a clear in/out among various nations with overlapping commitments. For example, Norway is part of Schengen but not an EU member, so it would likely be thrown out of the border deal unless it joins the constitution.

I predict that the UK's exit will do the opposite of what some leave campaigners were hoping. First, within 5 years of the actual exit, Scotland will vote again on independence and will likely secede from the UK, then negotiate entrance into the EU as an independent nation. It's also possible that Northern Ireland will do the same, which would cause the whole island to join Schengen. What's left would be a lonely England and Wales that are excluded from the benefits of the European market. Without Britain's obstruction, integration will accelerate on several fronts, and it will succeed while England fails. In the end, it will be a lesson in regional integration, not the harbinger of the end of the idea of federalism. Then England itself will try to join the United States of Europe.


  1. Certainly hope it leads to increased integration, interesting read, thanks. Btw, Wales not Whales ;-)