Sit up and take note
by Lorenzo Piccoli
In June I anticipated something, right after the Brexit referendum results where known:
This is [now] the terrible responsibility of European leaders who have an interest in containing populist movements in their countries: they are obliged to make sure that for the British the process of leaving is painful. Because if it is not, it will make it even the more tempting for populist movements in Italy, France, Hungary, and the rest of Europe to loosen their ties with the European Union
That post was followed by a fine debate where James argued that trade interests would ultimately trump hard political considerations:
The likelihood of the EU attempting to ‘punish’ the UK to set a precedent is low. France and Germany, who enjoy strong trade surpluses with the UK, will quickly come under pressure from their own exporters for assurances about bilateral access. Indeed, German car manufacturers are already calling for minimal trade restrictions between the UK and EU. Unelected officials and commentators are more likely to call for blood. The consensus: some ‘retributive’ symbolism but little action.
Indeed, Germany has a lot at stake: the UK is Germany’s third-largest export market. In fact, senior German officials had initially hinted that the UK might be granted generous access to the single market if it made concessions on free movement. But that was before a nasty turn in the Tory party. Following some horrific declarations made by her fellows at the party conference in Birmingham last week, Theresa May indicated that she prioritises immigration curbs over single market. Her speech hardened the mood on Brexit in the rest of Europe and this week the Financial Times published an article “that should make Brexiters sit up and take note.”, reporting on the last meeting of Angela Merkel, Francois Hollande and Jean-Claude Juncker in Berlin. The core part of the article goes like this:
Digital issues were the main topic. But of course Brexit could not be avoided. One executive cheekily explained that he had been lobbied by Britain to stress the importance of preserving good economic ties, to make clear that while Britain was leaving the EU, the benefits of the single market should not be totally sacrificed. Leaving aside the “I was lobbied” disclosure, this is the kind of intervention Brexiters had long envisaged would be decisive. German industry would weigh in and Chancellor Merkel would tell the EU to cut a favourable Brexit deal.
The first reply came from the French president and it amounted to a traditional defence of core single market principles. Then the chancellor spoke. Ms Merkel explained that she had at first wavered over this issue. But she was now convinced there was no alternative. She agreed with Mr Hollande. Any special deal would be dangerous. Giving up the union’s principles would threaten the existence of the EU itself. According to one guest at the table, Mr Juncker then intervened in slightly theatrical fashion: “all of you here should listen very carefully to what the president of the French Republic and German Chancellor just said.”
German Economics Minister Sigmar Gabriel joined Angela Merkel in saying the EU shouldn’t give in to the U.K.’s demands that would, he warned, effectively result in “selling-out Europe.” And today François Hollande has reiterated the message that Britain “will have to pay a heavy price for leaving the European Union“.
Brexit will be a long process and the final outcome remains wide open. A prominent EU diplomat put it this way: both sides would probably be better off if they worked together, while both would lose out from a disorderly exit. But in the end the temptation to screw the other side might prove too much. The prisoner’s dilemma goes on.
Update, 12/10: some Members of the British Parliament who seem to live in the nineteenth century are not making things easier.
Frau Merkel, the UK rejected free movement. It’s free trade or a trade war. German business won’t be clapping if we stop buying BMWs #brexit
— Sir Gerald Howarth (@geraldhowarth) October 7, 2016