Brexit, Grexit, Czechout, Byelgium, Outstria, and Departugal: Troubling Times in Fortress Europa

EU Parliament - Credit 2016 European Union

In 1942, French lawyer and economist Robert Schuman joined the French Resistance after two years as a prisoner of the Nazi political police known as the Gestapo. For the remainder of the war, he spoke out about the eventual defeat of Nazi-controlled Germany and Europe’s need for post-war Franco-German reconciliation. Just a few short years later, as Prime Minister of France, he proposed a framework for the European Community Single Market, a trading partnership whose aim was “to make war not only unthinkable, but materially impossible.” In May 1950, he presented a new government policy in a declaration that became the founding of the European Coal and Steel Community: the first supranational European union and the building blocks of the European Union.

2014 Half Briggs
“Europe will not be made all at once, or according to a single plan,” he wrote. “It will be built through concrete achievements which first create a de facto solidarity… The pooling of coal and steel production... will change the destinies of those regions which have long been devoted to the manufacture of munitions of war, of which they have been the most constant victims…”

In 1957, the Treaty of Rome created the European Economic Community (EEC), a six-nation organization dedicated to integrating the national economies of Belgium, France, Italy, Luxembourg, the Netherlands and West Germany. 

Over the next 40 years, a number of treaties created courts, councils and commissions culminating in the 1992 signing of the Treaty on European Union in Maastricht which formally created the European Union out of three “pillars”: the European Communities, Common Foreign and Security Policy, and Police & Judicial Cooperation in Criminal Matters.

By 1979, eight of the nine members of the Eurozone had agreed to an Exchange Rate Mechanism, pegging their currency to the Deutschmark. This directly led to the creation of a single European currency, establishing criteria for member states that included targeted inflation rates, ratios of government deficit to GDP and policy on national long-term interest rates. By 1999, the Euro entered the financial world as an accounting currency, and by 2002, banknotes and coins replaced the Deutschmark, Franc, Guilder, Lira, and the other 22 separate currencies of various EU members.

Even from the start, the grand European partnership showed cracks. In 1961, when the United Kingdom, Denmark, Ireland, and Norway applied to enter the EEU, French President Charles de Gaulle blocked their entry fearing the influence of the United States through their special relationship with the UK. Over the years, governments changed and by the formation of the European Union in 1992, the additions of Denmark, Ireland, the UK, Greece, Portugal and Spain meant that the newly formed body had 12 members. Since then 16 other countries have joined the EU, with 6 applicants under consideration and negotiation as of 2016.

What is the EU?

EU Flag - Credit European Union
Put simply, the European Union is an organization dedicated to the promotion of peace, trade and the sustainable growth of its members. With an annual budget of €143 billion ($158 billion) funded proportionally by its members, the European Union is able to pass regulations that have the force of law within its member states. The directives bind its Members to achieve a particular objective, decisions that require compliance of states, corporations or individuals and recommendations which have no binding force but are opinions of the supranational body.

The treaties forming the partnership describe policy areas in which decisions can be rendered upon including trade, customs, competition rules, monetary policy for the Eurozone and the conservation of fish. In addition, the EU can support member states’ efforts in other areas, such as overseas aid, scientific research, space, education, culture and tourism.

It is important to note that one of the founding principles of the EU is that of supremacy: each member state is required to fulfill obligations agreed to by the community, even if that conflicts with national laws or constitutional elements.

The Rocky Road to Brexit
The United Kingdom’s June 2016 vote on their membership in the European Union was not a unique event. In 1975, just two years after joining, the UK held a referendum on the EEC and European Common Market that passed with over 67% approval. At the time, only the counties of Shetland and the Western Isles of Scotland (less than 20,000 voters total of a national turnout over 20,000,000) declined to show support for intergovernmental consanguinity.

2014-houston-pilots-ad-yellow-rose
According to reports in the British media, the genesis of the most recent UK referendum on EU membership may be traced back to a 2103 pizza-stop at Chicago’s O’Hare airport. There, discussing the rising challenges from the United Kingdom Independence Party (UKIP), a right-wing populist party focused on civic nationalism, Tory (Conservative Party) Prime Minister David Cameron, in consultation with his close advisors William Hague and Ed Llewellyn, decided to focus on reshaping the UK’s relationship with the European Union.

While the results are anything but what PM Cameron initially expected, the logic for holding a referendum was simple: pacify hard-line right wing and populist elements in Britain, unite the Tories and force Labour, Britain’s democratic socialist party, to fight a campaign that it didn’t want to fight. Initially, the strategy looked like a success. In the 2015 general elections, with a wave of popular support, PM Cameron became the first conservative leader of the House of Commons in over two decades. His campaign included a focus on renegotiating EU membership and an explicit promise to hold a non-binding referendum on membership, a promise kept when Royal Assent was given to the proposal in December 2015.

Vopak-GHPB_Ad-PRESS-012115
For two years, PM Cameron held talks aimed at reducing the power of the European Union over its member states, carving out specific legal exemptions for the United Kingdom in order to toughen border control and restrict economic benefits provided to immigrants.

By February of this year, PM Cameron announced that very little had changed between the EU and the UK as a result of his negotiations. While foreign leaders such as German Chancellor Angela Merkel and Dutch Minister-president Mark Rutte spoke out in favor of the UK’s continued membership in the EU and the single-market, they also warned that such an occurrence would only transpire if the UK maintained compliance with the EU’s four freedoms: the free movement of goods, free movement of persons, free movement of capital and free movement of services.

At the same time Prime Minister Cameron announced the stalled negotiations with the EU, one of his closest political allies, former London Mayor Boris Johnson dealt the Remain campaign a body blow. Johnson, who had, only months before, referred to UKIP supporters as “the type that would abuse their vacuum cleaners” at a Conservative party conference, soon became the poster child for UKIP’s backing of the Leave option.

Hemorrhaging support, and beginning to admit that a Leave vote was possible for the first time since calling the referendum, Prime Minister Cameron’s team doubled down on their original messaging. Put simply, their argument was that the risks of leaving far outweighed any possible benefits. A vote to Remain was a vote in favor of a stable economy and a British voice in EU regulation/legislation, while a vote to Leave would be a xenophobic reaction to fears created by rising immigration. Sir Lynton Crosby, one of the Tory’s leading strategists, noted that the Leave campaign could pull ahead if they could “make changes to the [UK’s] immigration system, or advocate changes that would result from Brexit”.

2015-11-05  GT High Res Port of Galveston - Efficient Part of Your Supply Chain - Updated
The campaign’s rancor ratcheted up steadily and was punctuated by the June 16 murder of Labour MP Jo Cox of West Yorkshire. Yelling “Britain First”, a man shot and stabbed the 41 year old MP who had been an outspoken supporter of government efforts to tackle the European refugee crisis and was a supporter of the Remain campaign. The incident was the first non-IRA-related assassination of a serving Parliament Member since 1812 and only the 8th since the founding of the United Kingdom of Great Britain and Ireland. As a sign of respect for the event and her life, both the Leave and Remain campaigns suspended their work for the day.

Stars, Hide Your Fires
On the morning of June 24, Prime Minister Cameron stepped outside of Number 10 Downing Street to give an emotional speech: “The British people have voted to leave the European Union and their will must be respected. … and as such, I think the country requires fresh leadership to take it in this direction.” After the 51.9 percent Leave to 48.1 percent Remain vote and that announcement, he effectively relinquished his post as head of the Conservative Party, and made clear that a new leader would be in place by the Party Conference in October. By June 29, the party had already started the process of electing a new leader, and early polls suggest Theresa May, the UK’s Home Secretary, will become the next Prime Minister of the United Kingdom after Boris Johnson announced on June 30 he would not run for Prime Minister.

DAVID CAMERON POST REFERENDUM ANNOUNCEMENT The British Prime Minister, David Cameron, stood in front of assembled media at Number 10 Downing Street and announced that Britain had voted to leave the European Union.

DAVID CAMERON POST REFERENDUM ANNOUNCEMENT
The British Prime Minister, David Cameron, stood in front of assembled media at Number 10 Downing Street and announced that Britain had voted to leave the European Union.

Article 50 of the Treaty of Lisbon notes that “Any Member State may decide to withdraw from the (European) Union in accordance with its own constitutional requirements. … A Member State which decides to withdraw shall notify the European Council of its intention… the Treaties shall cease to apply to the State in question from the date of entry into force of the [negotiated] withdrawal agreement, or, failing that, two years after the notification.” 

Though the Leave campaign won the referendum, the United Kingdom is still a member of the European Union until the conditions of Article 50 are satisfied. Following the vote, Prime Minister Cameron explained that beginning the process is “clearly what our partners want us to do… we need to determine what kind of relationship we want with the EU and that is something for the next PM and their cabinet to decide.” On the other side of the fence, European Commission President Jean-Claude Juncker made multiple statements both before and after the referendum saying that there is very little tolerance by EU member states for lengthy negotiations with the United Kingdom.

To complicate matters further, the British Parliament still has to pass laws that begin setting the stage for invocation of Article 50. For example, the government will have to call for the repeal of the 1972 European Communities Act, and any withdrawal agreement will have to be ratified by Parliament. This means that MPs could, in theory, block the withdrawal agreement, keeping the UK in the EU. Practically, the only scenario where that may occur is if two-thirds of Parliament call for a general election and the new ruling party claims that their new mandate resulted from an electoral platform of staying in the Union.

By no later than September 2, but perhaps as soon as later this month, there will be a new Prime Minister of the United Kingdom of Great Britain and Northern Ireland. However, that is where geopolitical certainty ends. Beyond the mechanics of replacing PM Cameron and the steps necessary should the UK trigger Article 50 in accordance with the referendum, nothing is clear. Upon the news, world financial markets and currencies reacted to the uncertainty with great volatility, and British media outlets began publishing furiously to inform the public about everything from the potential practical consequences of the vote to Whitehall backroom gossip.

Print
Beyond Britain
Whether or not the United Kingdom remains in the European Union, criticism of the multinational filiation is on the rise. According to the Pew Resource Center, in the last decade, national polls have shown a drop in the the EU’s favorability perceptions in nearly every country of the partnership, including dramatic declines in France (from 69 percent favorable in 2004 to 38 percent in 2016), Italy (from 78 percent to 58 percent in the same period), and Spain (from 80 percent to 44 percent). Even countries where EU favorability remains positive, many people have grave concerns from immigration to the handling of refugees, to the distribution of financial aid and fiscal stimulus packages across the continent. However, when Ispos Global polled individuals in Italy, France, Sweden, Belgium, Poland, Germany, Spain and Hungary, support for individual referendums ranged from 38 percent-58 percent. No group of respondents indicated a plurality for breaking up the partnership or their own nation’s departure.

In 2016 and 2017, the Austrians, French, Hungarians and Portuguese will hold presidential elections; the Czech Republic, France, Germany, Spain and Ireland will hold parliamentary elections. One of the largest issues for each nation will be the role of the European Union in national life. President of the French National Assembly’s Elisabeth Guigou wrote that “We need to restore trust with bold actions”, but maybe the discussion will be a bit simpler. President Clinton’s campaign advisor James Carville famously said “It’s the economy, stupid”, when discussing messages that would become the crux of the 1992 U.S. presidential elections.

The backbone of Robert Schuman’s idea 60 years ago was the fostering of peace through international trade, economic interdependency, and a mutual dedication to shared growth so when the World Economic Forum noted that they “expect the cyclical upswing in the EU economy to continue in 2016-2017”, that may just be enough time for the leaders of the EU to restore that trust that currently seems perilously balanced between national interests and united growth.

Effects on Houston
It is too early to know what direct effects there will be on Houston, but there will be effects. What can be certain, if there are any further signs of breakup of the European Union volitility will exist for months and years to come.

  • Date July 18, 2016
  • Tags July 2016