Four Scenarios for a Post Brexit Europe [I]

Aon, Britain June 24, 2016.       REUTERS/Toby Melville
  • By Octavian Manea

The UK’s departure – Brexit – cannot be reversed and constitutes the first major backwards step in the process of European integration.

According to Timothy Less "the significance of Brexit is that it could – and probably will - serve as a catalyst for the decline of the EU by provoking a debate on reform that exposes the Hobson’s choice at the heart of the Project Europe". Last autumn he argued for a new academic niche called “European disintegration studies”. The need for such a school seems to be all more relevant today. In the first part of a three part interview Less reveals the four scenarios for a post Brexit Europe.

Is Brexit the first major crack in the European project? The start of a Europe with (again) multiple Europes? The start of some centrifugal trends in Europe? It may be even the end of the UK in the current frontiers.


Brexit is a profoundly important development. Since its foundation, the EU has moved in only one direction: towards ever-closer union. There have been occasional setbacks before now, most obviously the rejection of the European constitution by French and Dutch voters in 2005, but none of these have been more than momentary. By contrast, the UK’s departure cannot be reversed and constitutes the first major backwards step in the process of European integration.

Whether the EU now disintegrates is an open question but I am increasingly pessimistic about its prospects for survival. At the most fundamental level, the EU no longer has a clear raison d’etre. It was formed in response to various factors that prevailed in the second half of the twentieth century such as the desire to tie down Germany; the onset of the Cold War and the threat from the Soviet Union; the retreat from globalisation caused by decolonisation; and, in the post-communist period, the American commitment to a ‘Europe, whole and free’. However, most of these factors no longer apply. Germany has been tamed, the Cold War is over, most of Eastern Europe is free and democratic, and the old Third World is now a land of booming markets with which Europeans want to re-engage.

The future of the EU is further jeopardised by a number of defects in its design which have created all sorts of internal fissures. The most obvious of these are the excess of integration – far more than is needed to achieve a basic peace on the continent - and the EU’s insistence that all states move in lockstep towards ever closer union. Given that the EU consists of multiple nations, each with their own culture, history and institutions, this inevitably means that, whenever the EU adopts a policy position, it is unlikely to be optimal for all its members. The most obvious example of this is in the area of economics. Liberalism has worked well in northern Europe but, in Central Europe and the Balkans, its adoption has destroyed the basic social contract that prevailed during the socialist period. Similarly, the creation of a single currency has helped the EU’s rich and competitive north, which benefits from a weak euro and unfettered access to the whole European market; but it has saddled the less competitive economies of the Mediterranean with an overvalued currency that prevents them from trading their way back to solvency, without any compensating system of Europe-wide fiscal transfers.

More recently, migration has had the same divisive effect. Central Europeans demand the right to live and work in the developed West but large numbers of people in the recipient countries believe that the movement of millions of people has undermined job security and social cohesion. When it comes to immigration from outside Europe, we see further division, only this time in reverse because it is the Central Europeans who are most opposed.

The significance of Brexit is that it could – and probably will - serve as a catalyst for the decline of the EU by provoking a debate on reform that exposes the Hobson’s choice at the heart of the Project Europe. Either the EU must embrace a political union in which the rich northern states agree to make large fiscal transfers in perpetuity to the poorer south, and accept a permanent mixing of populations. Or the EU must embark on an orderly loosening, in which powers that cannot be wielded successfully in Brussels are returned to member states. This would begin with a managed downsizing of the euro zone, including debt relief for countries like Greece; curbs on the freedom of the Single Market; and a re-nationalisation of immigration policy. Unfortunately, the emerging evidence suggests that there is no such consensus: some actors, such as the Foreign Ministries in Germany and France, and the European Commission, are arguing that the solution to the crisis created by Brexit is a Great Leap Forward towards a European superstate; and others, such as the Central Europeans, are calling for a radical rebalancing of powers in favour of member states. My fear is that universal recognition of the need for reform combined with a lack of consensus on what shape that reform should take, will eventually break the EU.

How exactly this happens remains to be seen. For the moment, national governments across Europe all support the EU, even if they dislike many aspects of it and, in every country, a majority of people supports membership. For the EU to collapse, popular hostility to the EU must increase and anti-EU parties must either enter government or successfully impose themselves on government, as UKIP did in Britain.

One scenario is that a eurosceptic government in a powerful, western state such as France and Italy follows the UK’s example and demands major concessions from other members. If the negotiating state meets resistance from other members which have vested interests in the status quo, it could be tempted to get its way by threatening an in-out referendum, as the British did – in effect, a demand to give it want it wants or to blow up the EU. What the British case tells us is that, when electorates are offered a one-off opportunity to vote for change, public opinion on the EU can cross the line: in the UK, only around 40% people supported withdrawal from the EU at the start of 2016 – less than in Italy right now - but by June this had become a majority.

A second possibility is that pro-European parties manage to hold onto power and a coalition of powerful Western governments from countries such as France, Germany, Italy, Belgium try and impose more integrationist measures on the rest of the EU, leading to mass defection: not only by rich countries in the north like the Netherlands, Finland and Denmark, which refuse to accept the burdens of political union, but also by countries outside core Europe such as Poland, Hungary and the Czech Republic, which place a high value on national sovereignty.

And, of course, there is always a third scenario in which nothing is agreed or tried and the EU continues along the road of steady decay, marked by loss of vision, the breakdown of the community spirit, policy failure and growing rebelliousness by smaller states. In such a scenario, the outward form of the EU will remain intact but the institutions will become increasingly hollow. The Commission will continue to initiate policy, the Council and Parliament will continue to meet, and member states will continue to profess their support for the European cause. But in reality, the EU will become increasingly irrelevant as a place where politics is conducted and decisions are made. Instead, member states will abide by the EU’s dictates only when it suits them, ignore them when it doesn’t and increasingly assert themselves as sovereign actors in the international sphere. At some point, the end will come, but probably at the instigation of the markets, which will force a troubled state out of the euro zone, rather than any premeditated move by a European government.

You also asked about the UK which is vulnerable to internal collapse in the wake of the referendum. A majority of Scots want to stay in the EU because they fear living in a UK dominated by the English in which London has fully restored its sovereignty. And the Scottish government has threatened to hold a second referendum on independence sometime in the next couple of years. However, Scotland still hasn’t resolved the problem it faced ahead of the first referendum in 2014, namely, how it would preserve its social system as an independent state when London subsidises Edinburgh by £15bn a year, or around 14% of Scotland’s GDP. On independence, the country would immediately lose that money while re-entry to the EU as an independent state would expose it to the fiscal disciplines of ERM and a membership fee of around 1.5% of GDP. The inevitable outcome of this would be sharp tax rises and a massive cut in public spending, something which would destroy the social contract between the government and the Scottish people.

I think when Scots consider their options, they will conclude that the near-total autonomy which London has promised Scotland – the so-called ‘devo-max’ - represents a more attractive future than independence and readmission to the EU, even though Scots will continue to have ambivalent feelings towards the English. Already, we are seeing this reality reflected in opinion polls. Although there was a spike in support for leaving the UK after the British referendum in June, more recent polls suggest a majority of Scots favour remaining. For as long as this remains the case, the Scottish government will not risk calling another referendum on independence.


Timothy Less is the director of the Nova Europa political risk consultancy. Tim spent a decade working as an analyst, diplomat and policymaker at the British Foreign and Commonwealth Office where, among others things, he ran the British Embassy Office in Banja Luka (Bosnia and Herzegovina) and the EU Institutions Department, and served as the Political Secretary at the British Embassy in Skopje (FYROM).