The BREXIT referendum results have not only surprised the Brexiters, but have caused a shock to all of Europe. The events in Britain since then, the partial abandonment of their demands by leading advocates of Brexit, their fear of having to lead extremely difficult separation negotiations, their attempts to gain time and lead pre-negotiations before activating Art. 50 TEU, their lack of a plan for Britain after Brexit, their unrealistic wishes to Santa Claus (maintaining full access to the Single Market for British enterprises while restricting EU citizens‘ immigration), the inner-party battles in both the Tory and Labour Parties about their future leadership and direction – all these we can leave to Britain. For the EU, this Britain-instigated chaos will lead to a vast distraction from the already existing problems of the EU (unemployment, Russia, Mid-East, Eurozone, migration), requiring vast human resources and attention. As an Austrian saying goes: The EU needs the Brexit referendum result like a goiter, meaning: We have a lot of other, more important problems to deal with. Britain has shot itself plus the EU through both knees. Cameron badly misjudged his inner-party strength, giving in to his desire to calm the EU-sceptical members of his party, the leaking of his voters towards the irresponsible xenophobic UKIP. In the end, Cameron may go down in history as the person who has led Britain out of the EU, and Scotland and possibly Northern Ireland out of the United Kingdom: David, alone at home! In the end, his (and his predecessors‘) continuing railing against the EU have made his last-minute attempt during the Brexit campaign to promote „Remain“ not credible.
If it were only a British problem, it would be bad enough. But we have seen the whole of the world economy reacting badly: East Asia, the US, all of Europe are affected. The up-to-now unsuccessful attempt of the EU to escape from the 2008 crisis (in 2016 the EU barely reached the GDP of 2007 – 8 years of stagnation, unemployment is exorbitant, investment stalled), has received another negative jolt which might result in another recession. One has to realize that the Brexit vote is the first real significant reversal in the 60-year old history of the EU (in spite of a number of earlier setbacks), giving succour to EU’s foes, the LePens, Wilders, Straches and their companions, as they celebrated in their recent infamous „Vienna Spring“ meeting.
EU authorities show deep concern. At their summit meeting of June 28 they expressed their concern and demanded from prime minister Cameron (who had already announced his resignation) a clear and early exit announcement, and promised him constructive negotiations. As a sign of their concern, they announced to speed up a number of agenda items on their to-do list: migration, digital agenda, energy union, banking union, plus investment initiatives. In addition, a political dialogue is to be held in Bratislava (Slovakia holds the rotating EU Presidency from July 1, 2016) in September.
All this is not enough to turn the wide-spread EU-scepticism of the EU population around. While the above initiatives may be necessary to promote further integration of the economies of the 27 remaining members , they do not address the worries and demands of the populations! These initiatives are, more or less, „business as usual“, difficult as they may be to achieve. The Brexit vote must be used to deliver a forceful signal, that the EU authorities understand citizens‘ concerns that globalization, that EU economic policy has helped enterprises, but not (enough) citizens. People have lost jobs, remaining jobs are badly paid, international competition has changed working and salary conditions and lead to exorbitant youth unemployment and grotesquely widening income gaps. Citizens do not understand that hundreds of billions of Euros have been channelled into banks (more after the Brexit vote), but that government-led investment programs are severely curtailed by the single-minded direction of EU economic policy towards budget consolidation and that EU funds to combat unemployment are in the single-digit billion Euros.
A recent, EU-financed research program, led by the Austrian Institute of Economic Research, „Welfare, Wealth and Work for Europe“ (WWWfE) proposes a joint EU strategy, combining economic dynamics, social inclusion and environmental sustainability, instead of the fragmented approaches approved by the EU, which frequently contradict each other, have different implementation and reporting mechanisms – and have been ineffective so far. While in the medium term all three elements, economic, social, environmental need to be pursued jointly and equally, in the short run, and especially right now, after the Brexit vote, the citizen-centered, social inclusion phase must take precedence, but in a way that investments into job-creating, environment-friendly and economy dynamics-enhancing sectors do not contravene the other areas. Lack of investment is the starting point: private sector firms do not invest because of lack of demand, because of uncertainty about the future direction of the EU, because of the uncertainty-enhancing effects of the Brexit vote, and, not at all least, because of the restrictions of the EU Stability and Growth Pact in all ist manifestations (debt brake, European Semester, Sixpack, Twopack, etc.). The EU needs to show fast and vigorously to its citizens that it understands the underlying cause of the Brexit vote. This underlying cause, the lack of protection from globalization, the uncertainty introduced into citizens lives by the falling-away of borders, which not only enhances free travel of goods, but also of persons, of drugs, of crime, has permeated all of Europe. The citizens blame mainly the „EU“ for this lack of protection, to some extent also their own national „elites“ (who are also part of the EU authorities).
The old (very convincing to my generation) slogan of the EU as a „Union of Peace“ does not inspire the younger generations: they take peace in Europe for granted. A new, convincing direction must be developed to establish te EU in citizens‘ minds as a „Union of Sustainable Well-Being“, not just as a slogan, but as a daily reality felt by the people. To achieve this, the shackles of the Stability and Growth Pact must (temporarily) be relaxed, a large EU-led investment program towards social and environmental well-being, going far beyond the puny Juncker investment initiative (EFSI) be implemented by the member states which lays the foundations for a better life for all, for low unemployment rates, for decent salaries, for involving the young people into the future of the European Union. EU authorities must realize that their previous strategy to „generate growth via budget consolidation cum structural change“ has failed. There is nothing wrong with these objective, but they do not generate the necessary demand, if the private sector hesitates. Thus, government and EU-led investment initiatives must for a time supplement demand and in this way stimulate private investment down the road.
In addition to a change in economic policy as outlined above, the EU must quickly address the problems of their procedures. EU procedures are extremely cumbersome, the 40.000 legal acts contained in the Acquis Communautaire (the compendium of EU laws and regulations) contains dozens of thousands of pages. Citizens are puzzled e.b. by the „Report of the 5 Presidents to Complete the Economic and Monetary Union“ issued in June 2015: why 5 presidents? What do they do? would not 2 suffice? Or why does the EU concern itself with lightbulbs, tractor seat specifications or the curvature of cucumbers? Why not „just“ with large items beyond the regulatory reach of the member states? Concentration and simplification are the relevant buzzwords.
And then there is the frequently decried „democracy deficit“ of the EU. EU citizens must be much more involved in the preparation of legislative acts (not necessarily in decision-making). Citizens do not understand why thousands of lobbyists promote the interests of enterprises, but very few deal with labor rights and consumer concerns, let along the environment. Citizens are frustrated when one of the recent concerns, supported by a million persons, the Transatlantic Trade and Investment Partnership agreement between the EU and the US was denied (on formal competency grounds) an EU Referendum. Thus, citizens participation is an absolute must – not least also in the EU member states.
The Brexit clarion call is arguably the last chance to heed the concerns of EU citizens and to fight the populist clamor for destroying the EU (see Nigel Farage’s brazen speech at the EU Parliament after the Brexit vote). EU authorities must quickly show to their citizens that in the future the EU will be a „citizens‘ union“, not predominantly an „enterprise union“. Business as usual, as proposed by the recent EU Summit, i.e. speeding up the existing agenda, will not be enough. EU authorities need to understand that they have to change the direction of EU economic policy, as well as simplify and democratize the procedures by which decisions are reached. To wait for September might be too late. In the meantime, EU authorities (and this includes the heads of state of the member states) must give clear signals that they have understood the message of the Brexit vote and that they are willing to learn their lesson. Otherwise, the last 50 years will have been an (all too brief) period where the will to face the difficult future of Europe by measured steps of integration, by rational argument and a sense of solidarity were eclipsed by European „little Englanders“. This would be a drama.