Foreign Policy Research Institute A Nation Must Think Before it Acts The European Legacy of the Brexit Referendum: A Positive Impact on the EU
The European Legacy of the Brexit Referendum: A Positive Impact on the EU

The European Legacy of the Brexit Referendum: A Positive Impact on the EU

Elections to the European Parliament would not be the same without the now traditional round of soul-searching about what the rise of anti-EU populists means for EU integration. This year is no different, though the soul-searching seems especially intense in the era of Brexit, and in light of the number of EU states (from Italy and Austria to Poland and Estonia) which include such parties in their national governments.

The parliament that will be elected in late May by 400 million EU citizens—including, ironically enough, UK voters because of the current delay to Brexit—looks set to include an unprecedentedly large number of Euroskeptic MPs. Nevertheless, before one overemphasizes the dangers of that prospect for the future of the EU, it is necessary to look beyond the doom and gloom of newspaper headlines to take stock of the state of EU politics. In particular, the polling success of the anti-EU camp masks a fundamental evolution in European public opinion regarding the attractiveness of EU-exit, a change prompted by the tumultuous Brexit negotiations.

Nigel Farage, the Trumpian leader of the United Kingdom Independence Party who scared David Cameron into promising a referendum on EU membership, predicted back in 2016 that Brexit would create a domino effect. In an Italian newspaper interview, he identified Denmark, the Netherlands, Sweden, and Austria as the next countries to leave a rapidly disintegrating EU. By the time of the UK referendum in 2016, however, the EU had managed—at great financial and reputational cost—to contain the risk of Eurozone fragmentation. Whereas the contagion effect convulsing the Eurozone from 2010-15 revolved around investor confidence in sovereign debt, the domino theory of Brexit concerned public confidence in the EU polity itself. Would the UK’s departure and, more specifically, the terms of its new arrangement with the EU, sap faith in European integration and hasten the departure of other member states? More than two years since the vote and in the midst of the European parliamentary electoral cycle, the answer appears to be a clear “no.” Farage’s predicted imminent exodus of other Northern European countries failed to materialize, while the UK government successfully begged EU leaders to postpone the timing of its departure. If anything, it looks as if Brexit has left a positive European legacy.

Why No Domino Effect?

In theory, there are good grounds to expect—depending on the precise terms of exit—that the withdrawal of one EU member state would increase the probability of other departures. This would constitute what economist Richard Baldwin called a “domino theory of regionalism,” but in reverse.  That is, if the existence of regional trade blocs increases the incentives for outside countries to join in order to avoid exclusion from the benefits provided by regional integration, an exit that provides similar benefits and fewer constraints would similarly tempt more member states to leave. This logic explains the EU27’s preference from the outset for an UK-EU settlement whose value is less than that of formal membership. Michel Barnier, the EU’s designated Brexit negotiator, delivered precisely this message when presenting his “stairway” model of the future trading relationship to the European Council in December 2017. Each step away from full EU membership represented a lower level of integration, accompanied by progressively lower levels of market integration and higher levels of trade friction.

What could not be known beforehand, however, was whether the EU27 would remain united behind this negotiating gambit of forcing the British government to accept an inevitable trade-off between leaving the EU and frictionless market access. Domestic discontent with EU migration policy and the further constraints of Eurozone membership meant that there could have been some support for UK cherry-picking in any Brexit negotiations.  This logic also meant that EU27 leaders had good reason to rule out such cherry-picking in order to undercut Euroskeptic opposition promises. France offers a clear example of this political challenge. In the 2017 presidential campaign, Marine Le Pen’s Front National actively praised the British government’s approach to the EU, going as far as to advocate emulating Cameron’s renegotiation and referendum tactic in her party manifesto. Her intention was to ride a wave of French Euroskepticism to the Élysée Palace by offering a radical break with the pro-EU consensus. Meanwhile, Emmanuel Macron, though also claiming to be a political outsider, doubled down on the pro-EU consensus. The choice presented to French voters was between Le Pen’s more flexible position on negotiating with the UK and Macron’s insistence that EU obligations could not be bartered away. Macron’s election, therefore, forestalled any possibility that France would enter the Brexit negotiations with any sympathy for the British position.

Nevertheless, the willingness of the other EU governments to remain united in the negotiations could not be taken for granted. Hungary and Poland, for instance, took a confrontational stance with the Commission in the same period as Article 50 talks were underway. Moreover, Hungary had previously joined the UK in opposing the nomination of Jean-Claude Juncker as Commission President after the 2014 European elections.

Thus, the extent to which Brexit could trigger a domino effect very much depended on the outcome of the Article 50 negotiations, which were destined to set the benchmark for what a departing member state could or could not expect to gain. The UK’s request to leave the EU created an unprecedented situation in which citizens and politicians alike struggled for want of any comparable historical experience. In fact, political scientists, such as Catherine de Vries, have shown that the paucity of adequate benchmarks for assessing the risk of leaving played a significant role in the referendum result. Support for leaving the EU reflects how voters think their country would fare in such a scenario, which in turn depends on their benchmark of how they rate national economic or political strength. The more they rate themselves as stronger, especially compared with their neighbors, i.e., the more they have a positive national benchmark, the greater the willingness to take a punt on EU withdrawal. This helps to explain the paradox of greater electoral support for hard Euroskeptic parties in more prosperous EU countries, such as Austria, Denmark, the Netherlands, Sweden, and UK, mirroring the expectations of Nigel Farage for wider post-Brexit disintegration.

Brexit as a Learning Experience for European Voters

Hence to gauge the mood in Europe, it is vital to understand how the Brexit talks—dramatically extended on request of the UK government until potentially 31 October 2019—have affected attitudes toward the EU. After all, citizens across the EU now have a much better understanding of what it means to leave a single market where capital, goods, services, and people are able to move freely across national borders. Signals and threats made by both sides publicized the standoff whereby the UK asked for concessions to maximize frictionless trade and limit rule-taking, while the EU resisted. The EU remained united and did not compromise on its red lines in order to avoid a no deal outcome. Meanwhile, the UK, in the absence of a parliamentary majority for a defined type of post-Brexit trading arrangement, played for time in the hope that European unity would crumble and that a preferential deal would emerge in the nick of time.

Polling data in the four countries identified as “most likely to leave” by Farage on the eve of the UK referendum suggests that conduct and outcome of the Brexit talks have provided ample information to re-shape public expectations about the viability of exit.  In all four countries, there is a clear trend of citizens holding increased positive perceptions of the EU and a corresponding decline in negative views. According to the bi-annual polling of Eurobarometer, in the period from November 2016-November 2018, there was a rise in those holding a positive opinion of the EU of 12 percentage points in Austria, 16 in Denmark, 13 in the Netherlands, and 18 in Sweden; negative perceptions fell by 13, 8, 12, and 14 points respectively. By comparison, the overall change across the EU28 in this period was an increase by 8 percentage points in citizens’ positive attitudes and 5-point decline in negative ones. Thus, all four countries earmarked as candidates for EU exit by Farage exhibited a steeper decline in negative attitudes than the EU average and a higher than average increase in positive attitudes. This pattern is replicated in the change between March (Eurobarometer 89) and November 2018 (Eurobarometer 90), when EU-UK negotiations became bogged down and no deal planning was announced in more detail. As a no deal outcome became more realistic, or at least formally acknowledged as a real possibility, public opinion in Austria, Denmark, the Netherlands, and Sweden swung more positively towards the EU than the EU average, with more pronounced positive effects in the Netherlands and Sweden.

Consequently, important swings in public opinion have taken place in countries where confidence in the strength of the domestic economy and governance would hitherto make the possibility of life outside the EU more attractive than in Southern or Eastern Europe. This has happened in an unprecedented context where far greater information has become available to citizens about what it means for a country to try to forge a new path outside the EU. More widespread still is public support for the EU’s unwillingness to countenance a special status for the UK, which would allow it to cherry-pick economic benefits of the EU market with a minimum of legal obligations. Europeans are thus taking a transactional approach to the UK’s imminent departure rather than a dewy-eyed one.

Risk Aversion and the Limits of EU Disintegration

The populist illusion of getting a better deal outside the EU than as a member state was most believable in the absence of any formal exit talks. The self-confidence of the UK elites that promoted Brexit was linked to confidence in getting a “better deal” as a third country, for which the Article 50 talks represented the acid test. The UK approach was to use time and the prospect of an unwanted disorderly exit to extract concessions. For its part, the EU, which had an overriding institutional incentive to protect its legal order, never offered a compromise that might weaken its integrity. These moves resulted in dragging out and embittering the talks, leading both sides to publicly prepare for a no deal outcome and showcasing to many Europeans the inherent difficulties of accepting the trade-offs that come from leaving the EU.

The UK’s travails in attempting to negotiate its way out of the EU have demonstrated for the first time the true risks of going it alone. Risk aversion thus explains the lack of a Brexit domino effect and the limited attractiveness of “exit scepticism,” i.e., the hardest anti-EU attitude found in the Euroskeptic party political landscape. This does not mean that Euroskepticism is on the decline—the best predictions are that anti-EU parties could gain up to 35% of the seats in the European Parliament. Yet, the nature of their skepticism centres on reforming the EU in line with preferences for protecting sovereignty and reducing non-EU migration while remaining within the bloc. Hence, the challenge facing the EU is more one of rolling back its legal principles and undermining its policy effectiveness than of further territorial disintegration.

In other words, the forthcoming European elections are gearing up to be a fair fight. What supporters and opponents of political and economic integration contest are the ends as well as the means of supranational policy cooperation. This sets the ground for a genuine democratic debate over how far Brussels should determine the agenda of national politics. The outcome of this clash of ideologies will matter a great deal inside and outside Europe given the delicate position the EU finds itself in over banking reform, migration, and relations with the United States as well as Russia. Nevertheless, Europe is better off having such a contest in a context where the promises of snake oil salesmen selling a simplistic alternative of leaving on better terms have lost their appeal.