As the reality of Brexit sinks in, the European Union faces unprecedented challenges. While the end-times scenario painted by European leaders in the run-up to Britain’s referendum was a wild exaggeration, urgent and determined action is needed to avoid the fragmentation that threatens the European project.
All eyes are on German Chancellor Angela Merkel as she takes on an uprated leadership role for the Union. This is what her to-do list should look like:
Rule out more special deals
Avoiding a free-for-all clamour from member states hoping to negotiate special membership arrangements is a top priority. It will demand an especially delicate balancing act. Merkel is determined to hammer home the message that the member states must pull together at this time of crisis. However, if she steers too heavily towards greater integration, she risks alienating both the non-eurozone members and those with a more statist orientation.
After Brexit, the eight remaining non-Eurozone countries will make up only around 14% of EU GDP. They will feel more vulnerable than ever to integrationist pressures.
An all-inclusive focus on strengthening the single market may go down better with those countries determined to stay out of the shared currency (such as Sweden, Denmark, Poland and Hungary) than renewed pressure for outliers to join, or for a formal two-speed Europe. Early moves to shore up the single market will also help offset the worst short-term economic impacts of Brexit for more vulnerable member states.
The OECD anticipates that by 2020, GDP in the European Union could be around 1% lower than it might otherwise have been without Brexit. As early as 2018, significant impacts may be seen on economic activity in those European economies with strong economic links to the UK, including Ireland, Luxembourg and the Netherlands.
Merkel also has to balance the needs of her own, pro-liberal national party support base with more statist demands for European governance. Particularly France and Italy remain suspicious of a “Anglo-American” model dominated by market forces and globalisation. Brexit is likely to strengthen calls for a more “European” approach to managing the EU, involving greater regulation, internal transfers and distributional policies.
By cementing the Franco-German alliance, Merkel has already taken steps to manage any dissent from French leadership circles. However, with the working agreement between the French and Germans on saving the EU based more on mutual dependence than true ideological affinity, issues raised during election campaigns on the ground in France, Germany and the Netherlands in 2017 will inevitably test this bond.
Neutralise the populists
Near the top of the to-do list must also be urgent consultations with established political parties on how to stem the tide of radical populist and anti-EU movements across the European continent. These movements have been growing for some time and have been strengthened by Brexit.
They are well placed to exploit newly-legitimised anti-EU sentiment by linking nationalism with racist discourse. This is particularly true of the countries most affected by the migrant crisis, including Hungary, Poland and Sweden.
Talk to Turkey
The dramatic attempted coup of July 15 has catapulted Turkey to the top of Merkel’s EU agenda. She is the most experienced of the EU leaders when it comes to managing fraught relations with this neighbour. And these relations are fundamental. Turkey occupies a position of unique strategic importance to Europe, the US and the Middle East.
Germany hosts the largest Turkish diaspora in the world and Turkish politics enjoys a high profile in the national media. Recently, German-Turkish relations have been clouded by high profile diplomatic incidents over Germany’s formal recognition of the historic Armenian genocide and contemporary freedom of expression.
Amid growing concerns over President Erdoğan’s increasingly authoritarian displays, Merkel negotiated a controversial EU deal on migrants, with Turkey agreeing to take in refugees after they’ve arrived in Europe. Doubts about whether Turkey is safe enough to make it a legal destination for people seeking asylum have now been confirmed by the military uprising.
The migration deal and the EU’s planned new phase in Turkey’s long-running accession negotiations may now be dead in the water. Top priority is to halt Turkey’s descent into political violence. Merkel’s focus must be on stabilising a fragile geopolitical relationship for the long term. This will call for a more intensive German input into trans-Atlantic cooperation than has been the case to date.
Merkel is also one of the few European leaders who has experience in dealing with another high-stakes neighbour. The restructuring of relations between the UK, NATO and the EU post-Brexit will inevitably affect Europe’s already fraught relationship with Russia.
Franco-German cooperation has dominated the EU’s position on the renewal of economic sanctions against Russia over the impasse in Ukraine. At the same time, Merkel offered an “outstretched hand for dialogue” ahead of the recent NATO summit.
The EU’s relations with Russia may prove significant not only in the international arena, but also closer to home. In Europe, the cult of Putin has struck a chord with populist, anti-EU parties, including Germany’s own Alternative for Germany (AfD), who see in Russia a model for “strong” governance imbued with national pride.
In the longer term, Project Saving Europe will depend to a large degree on changing the current narrative of division and disgruntlement into something more positive. To survive, the EU needs to inspire confidence as a symbol of progress, stability and growth.
There is one notable omission from Merkel’s to-do list. Negotiating the UK’s exit deal is firmly on the back burner. Merkel and François Hollande have ruled out any informal discussion prior to the formal triggering, by the UK, of Article 50, so that will have to remain in another leader’s in-tray for now.