international analysis and commentary

The “in-out” referendum: a double-edged sword for UK and the EU stability

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The newly formed Tory government owes part of its legitimacy to the campaign for the “in-out” referendum on Britain’s membership in the European Union. Contrary to other member states, which have registered rising levels of anti-European stances only in the past years, in the UK anti-Europeanism is not a new trend. It dates at least back to 1985, when The Times used the word “Euroskepticism” in reference to the United Kingdom’s opposition to an integrated common market. The strength of Euroskeptic sentiments shared by Britons has continued to grow ever since and to date more than six in ten Britons consider themselves Euroskeptic.

Within this framework and in the attempt to boost his popularity, Prime Minister David Cameron launched the idea of an in-out referendum in January 2013. On that occasion, he committed any conservative (or Tory-led) government elected in 2015 to negotiate new conditions with the EU and then to hold a plebiscite on whether the country should continue to be an EU member. Since then, not only the Tories, but also the referendum itself has been gaining more and more consensus. Yet, the outcome of such a political strategy might result in a double-edged sword.

Back in 2013, as a British Social Attitudes (BSA) survey shows, the majority of citizens would have voted for withdrawing from the EU. Currently, despite widespread British europhobia and so-called wafer-thin European legitimacy, support for a full “Brexit” is at 35%. Moved by more pragmatic – rather than ideological – political reasons, 38% of Britons would indeed opt to stay in a less powerful EU, where their country could have free access to a set of economic facilities, such as the common market. This vision is certainly shared by Cameron, who has admitted he would campaign for the UK to stay in the EU on the basis of a new settlement to be agreed with Brussels. In this respect, while the in-out referendum is certainly a democratic tool, it also appears to be a political expedient. Indeed, fear of a citizens’ legitimated “Brexit” might push the EU to accept the UK’s demand for more “flexibility”, up to the point of detracting the founding principle of an even-closer union.

Among the envisaged membership reforms, Cameron has underlined the need to lessen bureaucratic ties to Brussels and to modify the regulations on immigration and free trade. For instance, free movement rules could be tightened to the point of limiting the rights of EU migrants to move and claim benefits in the UK. With 41% of Britons believing that immigration costs outweighed benefits, such reform is deemed to downgrade the number of “welfare shoppers” moving to the UK to depend on its state-benefit system. Still, in 2014, EU citizens represented 48% of the total migrants (558,000) and yet they were only 7.5% of the entire number of benefits claimants (3,989,100).

David Cameron intends also to overcome what are believed to be European anti-competitive and stifling regulations to allow the UK to individually negotiate free trade agreements with non-European countries. In other words, Cameron envisions a “two-speed Europe”, whereby the UK would enjoy the advantages of a full membership, while being exempted from the burdens of Brussels’ heavy regulations.

Yet, the renegotiation of European ties is certainly a difficult target. It will require British officials to convince member states to agree on changing many of the EU treaties’ dispositions and Cameron has to move quickly: in order to minimize uncertainty for financial markets and trade and to avoid clashing with Britain’s presidency of the EU, scheduled for the second half of 2017, the in-out referendum has to be held as soon as possible, even before 2017. In this framework, technical discussions between British officials, Cameron himself, and members of the European Council have been taking place to make the case for the reforms.

Although no decision has been taken, there is a high level of concern in Brussels about the possible economic and security consequences for the EU. To date, 53.2% of British imports come from the EU and the country’s net contribution to the European Union is estimated around 13.5 billion euro. A Brexit would certainly impact the EU internal budget and trade. But it would also affect the European defense capacity, making the EU more dependent on the US (even more than it is already) when it comes to global security threats as well as regional challenges.

Hence, the uncertain consequences of a British exit might well persuade the other member states to grant the UK some membership reforms. Yet, there is less and less tolerance for British demand for more flexibility: with its opt-outs from the euro and the Schengen free travel area among others, the UK appears to have already acquired a privileged position in the Union. Chances are that a Brexit would be a negative turning point for the UK as well. For instance, as demonstrated during the Scottish independence referendum of September 2014, the EU has been playing a key role in supporting the integrity of the UK – for instance by telling the Scottish government that its eventual future membership to the EU was not to be taken for granted. With the country losing free access to the market of the European Union, which is the largest economic area in the world, London could then fail to keep its stage as the main European financial center. As far as the opportunities for free trade agreements with non-EU countries are concerned, already in 2014 the overall trade surplus with the latter reached 38 billion euros. Yet, the fact that British exports towards the EU have been growing by 3.6% each year between 1999 and 2014 makes the common market very valuable. In other words, within a complex, fragmented and yet more interconnected global arena, a Brexit could make the UK lose some of its relevance on the international chessboard.

In this respect, pressured by the business and financial community, the London government might moderate its requests to Brussels. Some countries, like Germany, have agreed in principle on the possibility to renegotiate some institutional amendments. This might allow the British government to secure a middle ground agreement with EU leaders and convince citizens that membership, even if not completely renewed, is still the best solution for the UK. If all the proposals were rejected, citizens might well decide to withdraw from the EU.

To date, despite high levels of Euroskepticism, 57% of Britons are keen to stay in the EU because of the economic advantages provided by the membership (data from BSA). Yet, the triumph of EU supporters, even if moved by pragmatic reasons, would clash with the aspiration of Cameron’s Euroskeptic electorate, resulting in his government losing political legitimacy, together with the necessary leverage at the EU level to ask for further reforms.

Depending on the number and level of institutional changes agreed, such scenario might have contrasting effects over EU stability. On one hand, it could boost EU legitimacy and, contrary to the UK government’s expectations, even strengthen the idea of a political union. Indeed, Britons would thus demonstrate their will to be part of the European community. On the other hand, it might provide a political precedent for growing European Euroskeptic forces to ask for “tailored” memberships for their own countries. Having averted a British exit, the EU would have to face the risk of becoming a common market with no political drive, whereby groups of countries could decide to cooperate more closely upon specific political matters, while pursuing purely selfish national policies in other areas. Following the UK, other countries could indeed ask for a renovated membership, jeopardizing any further European political projects based on deeper integration. The EU, like a giant with clay feet, could even risk to slowly but inexorably fall apart.