23 July 2017

Wolfgang Munchau: An exit from Brexit would prove a messy affair

There is a lot of noise at the moment about an exit from Brexit, as the newly appointed leader of the UK Liberal Democrats put it. [...] So let us assume, for the sake of argument, that these politicians get their wish. [...]

The first thing to note is that we are entering a legal grey zone. It may, or may not be possible. The consensus seems to be that it is possible to halt Brexit, but that it requires the explicit consent of the European Council. The European Commission’s legal interpretation is probably the best guidance we have. “Once triggered, [an Article 50 notification] cannot be unilaterally reversed. Notification is a point of no return.”

So what will happen when the UK prime minister writes the No Brexit letter to Donald Tusk, president of the European Council? This would have to happen before March 29, 2019, the day when Brexit would otherwise take effect. The first thing Mr Tusk will presumably do is to consult the other 27 EU leaders. Will they simply say “great, let’s move on”?

Some may, but I could easily imagine at least of one of them raising their finger to ask whether the EU should attach a few political conditions. Would this not be a good moment, for example, to ask the UK to revoke the budget rebate?

The rebate was negotiated by then prime minister Margaret Thatcher in 1984. It was justified because of a mismatch in the size of the agricultural sector between the UK and other European countries. But agricultural spending accounts for a much lower proportion of total EU spending these days.

Other leaders might ask for an early political agreement on the next EU budget, which takes place after the current budget period ends in 2020. If the UK remains torn about EU membership after a rueful decision to revoke Brexit, would the UK government not try to drive a hard bargain to reduce its contributions further, or even veto the entire budget?

A further complication is the reform of the eurozone. After the German elections in September, discussions will start between France and Germany on a treaty change to strengthen the governance of the eurozone. Emmanuel Macron, the French president, may well ask whether the UK might help or hinder this process. Brexit gives France and Germany a unique opportunity to establish a financial centre within the borders of the eurozone. Would they not revoke this opportunity if they agree to an exit from Brexit?

And then there is immigration policy, and several other areas from which the UK opted out.

At this point, the consensus may well be that it would be a lot easier to say “No” to the UK. Or to insist that the UK can rejoin but only after March 29, 2019. European law at least has a provision for that situation — Article 49 of the Lisbon treaty. It would mean that the UK would reapply for EU membership from scratch.

From the point of view of the 27, this procedure has the advantage that it strengthens their negotiating position. The UK would have to join the EU without rebates and opt-outs.

If you think Brexit is messy, an exit from Brexit is no different. Last year’s Brexit referendum did not define the meaning of Brexit. But the second scenario would be no clearer. Nobody will know for sure what an exit from Brexit means — a return to the status quo ante, or something else entirely?

There are, however, two alternatives. Both require that it “is absolutely necessary” for Brexit to happen. The first would be the Article 49 procedure. I do not think that the degree of regret in the UK could ever get that big that the UK would want to join the euro. But who knows?

Alternatively, the UK could seek an association agreement with the EU, one that goes far beyond a trade deal, and that may even serve as a blueprint for the relation between the eurozone and other peripheral EU countries.

What both of these options have in common is that they require sufficiently long transitional periods. If the EU supporters in the UK had any sense and saw beyond March 2019, they should support Philip Hammond, the UK chancellor, in his fight to secure political support for a transitional period. And they should press for that transition to be very long and renewable.

The reality, though, is that once you take into account the politics of the other EU member states, an exit from Brexit is no longer an option.

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