What will happen to the EU after Brexit?

Peter Foster
European flags in front of the Berlaymont building, headquarters of the European Commission in Brussels - Alamy

After Brexit, what now for the European Union?

The departure of the UK from the European Union (EU) after more than 40 years leaves a major hole in the world’s largest economic and political union. Here we look at the potential consequences for Europe thrown up by Brexit.

Where does Brexit leave Europe's place in the world?

Britain's departure leaves a substantial hole in the EU which now loses the world's fifth-largest economy, a nuclear power and a member of the UN Security Council.

Much will depend on the kind of relationship Britain establishes with the EU after Brexit. Theresa May has signaled she wants to use the UK military power and diplomatic heft as a way of the UK demonstrating it is committed to maintaining security "in the neighbourhood". 

If negotiations turn nasty, and talks break down, it may take some time to build the diplomatic apparatus to allow Britain to contribute to "European" diplomacy from outside the EU.

The result is likely to be less influence for both the EU and the UK in a fracturing global architecture where bilateralism is on the rise and the US is increasingly unwilling to play the world's policeman.

Theresa May and German Chancellor Angela Merkel at the EU summit in Brussels in March 2017. Credit: Reuters

What about an EU army?

There is much talk of this, but in practice EU nation states cannot agree on what a European defence policy should look like. France is Europe’s only major military power after the UK, and officials in Paris are clear that there is no appetite for a real EU army.

At the moment, the new EU Headquarters is limited to “non-executive military missions” – which essentially means peacekeeping and logistics – but there are fears on the British side that some EU state may seek to expand the mission after the UK leaves.

In the view of the British, this would be to the detriment of Nato which the UK believes must remain the cornerstone of EU defence.

FAQ | EU army

Will other countries want to leave the EU now?

The current polling data in Europe suggests that this is unlikely any time soon, even though a growing number of EU countries, led by the Netherlands, France, Italy and Poland have a significant eurosceptic political element.

There is much dissatisfaction in Europe about the failure to generate jobs and a better economic future, but surveys show that even in countries where demand for a referendum is high – like Italy and the Netherlands – voters still do not wish to leave the EU for now.

What could change that?

Europe’s politics is currently riven with populist discontent – from Marine Le Pen in France to the Five Star Movement in Italy and the hard-right Freedom Party in Austria. 

A big win from one of these parties, particularly Marine Le Pen in France, could fundamentally alter the political dynamics in Europe.

Head of the French far-right party Front National (FN) and presidential candidate Marine Le Pen. Credit: AFP

Long-standing issues with the euro, from the Greek sovereign debt crisis to the creaking Italian banking system also make the eurozone vulnerable to a major external economic shock like the credit crunch of 2008.

Many experts question whether after years of near zero-interest and ECB quantitative easing, the eurozone could survive another such shock intact.

Coming so soon after Brexit, all these "black swan" events are likely to demonstrate the limits of EU political solidarity – much as the migration crisis has done – and that is likely to further undermine the efficacy of the EU as a political entity.

Profile | Jean-Claude Juncker

What about money?

This is potentially another source of future tension in Europe. Britain's departure from the EU leaves a 10 billion euro a year hole in EU finances which risks further undermining the cohesion of the EU.

Rich countries like Germany, France and the Netherlands are already balking at the prospect of paying more to poorer member states who joined after 2004, but who rely on EU handouts funds to help them catch up with richer economies and stimulate investment-led growth.

Brexit | What happens next?

If the financial benefits of being an EU member become less clear to recalcitrant EU member states like Poland and Hungary, then the political support for staying in the EU becomes less certain.

No scenario can be ruled out. The EU establishment never seriously believed the UK would leave the EU, but that turned out to be a false assumption.

What about Brussels? Will we see more or less Europe?

This is a very open question.

There are those in Brussels who still hope that Brexit will inject new life in the grand European project – spurred on, they hope, by the election of Emmanuel Macron in France and, possibly even the pro-EU Martin Schulz in Germany.

With these two new leaders in place, the Franco-German axis which has always driven the direction of the EU might suddenly fire into life. Sceptics note however, that on the major questions such as the Euro, EU defence and immigration, France and Germany remain poles apart.

It is also a reality that many more European citizens want "less Europe" than "more Europe", with a Pew Survey of 10 major EU countries finding that nearly twice as many EU citizens wanted more power to flow back to EU capitals than to Brussels.

The attempt to forge a common policy on the future of Europe after Brexit, starting with Jean-Claude Juncker's white paper setting out five scenarios for Europe, has only highlighted divisions.

The smart betting says that Europe muddles on through as before, but is increasingly internally divided and less resilient to a major external shock.