The dangers for Europe of a no deal Brexit


A significant number of the Prime Minister’s cabinet have translated their no deal opposition from the opinion pages to the floor of the House of Commons. And the Westminster consensus, at least, is that government abstentions en masse, and a refusal to vote for no deal, has made the outcome much less likely.

Yet as Jacob Rees-Mogg inconveniently and immediately pointed out, this might be misleading. No deal it might look unappetising. MPs might complain. But no deal is still, to use that hackneyed expression, firmly on the table.

Let’s think ahead to what happens if the unthinkable happens. In the event of a no deal Brexit, there will plenty of blame to go around. And British Foreign Secretary Jeremy Hunt has warned the British public will reserve plenty of it for recalcitrant EU negotiators. The Foreign Secretary may indeed be right. Certainly, a number of Conservative MPs, along with their allies in the press, have an interest in pinning the blame for a disruptive outcome on Brussels rather than their own ineptitude.

Yet what of the EU itself? Presumably a disorderly Brexit would also impact on politics in the EU 27, not least with elections to the European Parliament fast approaching? This in turn, he argued, would poison relations between the UK and the EU for many years.

Ultimately, the politics will hinge on economic outcomes. And forecasting an outcome as unique and potentially disruptive as a no deal, is hardly an exact science. However, numerous studies illustrate that, whilst the economic impact on the UK would be significantly worse than for the member states, the latter (and the Republic of Ireland in particular) stand to suffer as well.

A recent study by the Halle Institute for Economic Research (IWH) forecast that a disorderly exit could affect 100,000 jobs in Germany, 50,000 in France, and around 46,000 in Poland and Italy. Meanwhile, the Czech Ministry of Finance has stated that a no-deal Brexit would result in GDP growth of below 2 percent this year, between 0.6 and 0.8 percent less than would otherwise have been expected.

Yet it is perfectly conceivable that, whilst such measures might cushion some of the shock, they will not protect everyone against all of it. The measures in place may well not be enough to prevent severe disruption or discontent in some quarters.

And tensions are already starting to emerge. There are signs, for instance, that the Commission, under pressure from some member states, has softened its initial stance on aviation, particularly concerning ownership rules. Meanwhile a ‘pragmatist’ group of member states including France, Spain Poland and Luxembourg have proposed a more accommodating approach to minimise the fallout.

Which brings us to the nub. On whom, ultimately, do French road hauliers or Irish farmers focus their ire in the case of significant disruption and economic costs? It may well be solely on the British, and particularly the UK Government and Parliament, for failing to approve what many on the continent regard as a very generous offer.

Yet it may be, too, that, as media attention focuses, as it will, on stories about queues, potential shortages and other examples of economic impact, dissatisfaction will be more widely spread.

Already we are hearing demands for compensation from those who stand to be worst hit by disruption. The Flemish Minister President Gert Bourgois has urged the EU to set up a Brexit ‘guarantee fund.’ What if these demands are not satisfactorily met?

Elsewhere, French ports have expressed their dismay at European Commission plans to re-route Irish trade to Belgium and the Netherlands, with spokespeople talking in terms of having been contemptuously sacrificed.

And populist parties might try to profit from popular concerns around no deal impacts. Indeed, some have already staked out positions clearing the ground for such a reaction. Italian Deputy Prime Minister Matteo Salvini, for instance, has accused the EU of trying to ‘swindle’ and ‘punish’ the UK.

Certain places are more vulnerable than others to both a no deal outcome and a populist reaction to it. The Front National already has strong bases in the Nord (20%+ majority) and Pas de Calais (25%+ majority). Hauts de France, the region containing both departements, comes bottom of the OECD’s regional rankings for France on income and health measures.

It’s already ripe for extremism, which will only be acerbated if the region is hit by disruption from a no deal, which could easily be blamed on the Commission, politicians in Paris or both, by a population which is already favourable to anti-establishment and Eurosceptic arguments.

In Germany, AfD got their highest share of the vote in Saxony in the last federal election (25.4%). The region is more exposed to a sudden fall in demand for goods across the EU in a no deal scenario than most other regions because 30% of jobs in the region are in manufacturing – above the average across the country of 27%. If no deal has a direct impact on the region’s ability to export to the UK, at a time when the national economy is already fragile, there could conceivably be a spike in populist support.

Obviously, Brexit is never going to be as central to the politics of other EU member states as it is to the UK, so the political pressure arising from no deal would translate more quickly, forcefully and directly into the UK political system than others. But this is not to say that there will be no political impact elsewhere.

What, then, to make of all this speculation? In the first place, it emphasises how politically damaging a no deal outcome might be. Second, it implies that the EU has much to gain from granting the UK a short extension – until the EP elections take place – to avoid the possibility of the kinds of unintended political consequences outlined above.

And finally, sadly, it might be that EU and member state leaders might have to take a leaf out of Jeremy Hunt’s book. Mutual blame and recrimination is hardly a solid basis on which to build a future relationship. Yet there are incentives for EU leaders to start to play point the finger at London, preparing the pitch for an outcome no one will want to be held responsible for.

By Anand Menon, director The UK in a Changing Europe. A shorter version of this piece originally appeared in Libération.

Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of the UK in a Changing Europe initiative.

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