Brexit Domino Effect: Risks and Consequences
The world woke in surprise on the morning of Friday June 24. The Brexit referendum proposed by ex-Prime Minister David Cameron resulted in Britain voting to leave the European Union. This will have its own set of implications, both for Britain and for the EU. But what if other countries decide to leave the EU?
French President Francois Hollande was strongly against Britain’s leave from the EU. Since the outcome of the referendum, he has been urging that the Brexit negotiations be performed as swiftly as possible. Why? He wants to discourage other EU countries from considering their own exits. In fact, most French politicians disagree with a Frexit, ranging from Hollande to his centre-right opponents. But step into the far right and you will be greeted by some keen supporters to leave. Marine Le Pen, leader of the far-right Front National party, jumped up and down with delight on the morning of June 24th and has promised France its own referendum if she becomes president in next year’s elections. She has announced that the Brexit is a “movement that can’t be stopped.”
IN THE PHOTO: “FREEDOM’S VICTORY! AS I HAVE BEEN ASKING FOR YEARS, WE NOW NEED THE SAME REFERENDUM IN FRANCE AND IN EU COUNTRIES” PHOTO CREDIT: @MLP_officiel TWITTER ACCOUNT.
Following the recent series of attacks in France, many are becoming increasingly drawn to Le Pen’s promises to increase national security and close French borders. This was reflected in June’s polls, where the FN’s popularity grew to 28 percent. After becoming France’s number one party in the European arena in the 2014 elections, it is becoming increasingly possible that the FN will be voted into power and lead France out of the EU.
If France does leave, what would be the potential consequences? From the most updated analysis on the EU website, the EU spent €14.5 billion (approximately 9 percent) of its budget in France in 2015. Around 40 percent of this went toward agriculture and rural development, making EU membership very important for French farmers (as well as for the rest of the world, as France is the world’s fourth biggest agricultural exporter). Much of the remaining budget for France goes towards large projects, funding infrastructure, energy, employment, environmental protection, and so on. An example of a current and ongoing project is a railway spanning from Bordeaux to the Spanish border, to which the EU has invested €5.6 million. This infrastructure benefits both France and Spain, meaning that both would suffer if France left the EU. French cities would also lose on EU funding coming from the European Capital of Culture (ECoC), awarded to Lille in 2004 and Marseille in 2013. The latter granted Marseille €59.7 million for cultural events and investments of €670 million in Marseille’s infrastructure. These are just two of hundreds of examples that benefit France as a result of its long membership to the EU. Needless to say, these privileges would be revoked if France were to wave goodbye.
Moreover, the EU is one of the world’s strongest economic regions. It holds 7.3 percent of the world’s population, but makes up 23 percent of global GDP. Keeping its access to the €15 trillion single market (allowing free movement of goods, capital, services and people) is invaluable for EU nations — it boosted European households’ income by €5700 in a space of 10 years and inward investment increased from €23 billion to €159 billion between 1992 and 2005. It would not be possible for France to keep these economic benefits by leaving the EU but staying in the single market, as it would still have to “pay virtually the same net contribution, [would] have to accept free movement of labour, and [would] have to accept EU regulations.” It is all or nothing.
On a political level, the EU won a Nobel Peace Prize in 2012, symbolising the level of stability it has provided for its members. Socially, France has over 2 million jobs directly tied to its EU exports alone and over 1.6 million French live in other EU countries. Furthermore, some 30,000 French students use the Erasmus programme (and the full EU funding) to study abroad every year. All of these privileges would be compromised by a Frexit.
On the other hand, what would be the advantages of France leaving the EU? France put a whopping €19.012 billion into the EU in 2015 (around 4 ½ billion more than what it got back). Pulling out of the EU would therefore save France around €4.5 billion annually, at face value. It seems tempting, does it not? But to observe Britain’s case, what it will save from leaving the EU will be spent instead on Brexit negotiations and trying to keep the British economy stable. Is it worth it? On a political level, a Frexit would give France more freedom to determine its own policies and regulations. Considering the anti-immigrant sentiment that is currently growing in the country, the FN would jump at the occasion to be able to make its own immigration rules. There is no saying what this would do to already-existing social divisions in France, exemplified most recently by the ban on burkinis in Corsica.
On the morning of the Brexit announcement, Nigel Farage claimed that the Netherlands may be the next country to exit the EU. Geert Wilders, head of the Dutch Freedom Party, has pledged to make a referendum a key issue in 2017’s elections. He claims that the country needs to stop immigration and Islamisation, which he believes cannot be done inside the EU. In the past, Wilders has called for a ban on the Qur’an, and his opinions almost had him banned from entering the UK. Yet, in January 2016, the Freedom Party was leading in Dutch opinion polls. On the one hand, a Nexit seems possible.
On the other hand, the Netherlands was one of the six founding countries of the European Union. All of the other Dutch political parties are against a Nexit. The nation uses the Euro and is one of the world’s five biggest exporters. Germany alone makes up more than 25 percent of Dutch exports. Leaving the EU trade bloc should be absolutely unimaginable for the Netherlands. Furthermore, despite claims that the January referendum on an EU-Ukraine partnership is evidence for Dutch Europhobia, voter turnout was only 32 percent, making it a poor representation of overall Dutch sentiment.
Looking at the budget statistics, the Netherlands puts more into the EU than it gets out (at face value). In 2015, the Dutch put a total of €5.76 billion into the EU budget and got back €2.36 billion. Yet, one in six Dutch jobs rely on EU exports, and half a million Dutch live abroad in the EU. Overall, it will come down to who wins next year’s elections and where the government takes it from there.
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Hungary is one of the Visegrad Four (along with Czech Republic, Poland, and Slovakia) and another contender for an exit. It was not until 2004 that it joined the EU and, the day after the Brexit announcement, it was not invited to the immediate meeting in Berlin. In fact, none of the V4 countries were. In the meantime, Hungary has been developing favourable economic ties with Russia.
Hungarian Prime Minister, Victor Orban, has let on that he will take Hungary out of the EU. Maintaining tense relations with Brussels and EU leaders, Orban recently expressed support for Donald Trump’s foreign policy objectives on immigration in the EU. Hence, it is quite plausible that Hungary could soon throw in the towel.
What do the figures say? Hungary put €94 million more into the EU than it got out last year. Again, this figure can be misleading and omits the value of Hungary’s membership to the union. Nevertheless, opinion polls show that Hungarians disagree with many EU policies. For example, opinion polls from this February show that 94 percent of Hungarians disagreed with EU mandatory migrant quotas. The government reflects this view, wanting to draw up its own plans for a less centralised EU. At the same time, unlike France and the Netherlands, Hungary does not use the Euro. Leaving the EU would mean risking a major hit to its national currency, the Hungarian Forint. In Britain, the weakened Pound imports made become relatively more expensive, causing an increase in inflation in July. Analysts have yet to see how the Brexit will affect the British economy, and the results are something that Orban will want to take into account.
For a full mindmap behind this article with articles, videos, and documents see #brexit
Looking outward, the V4 countries united make up the fifth largest economy in Europe and the 12th largest in the world. Despite their apparent unity, the group is politically divided on the subject of the EU. As aforementioned, Hungary is increasingly pro-Russia, whereas Poland has recently welcomed a U.S. military base on its soil. The Czech Republic is very pro-EU, as is Slovakia’s Prime Minister Robert Fico. Therefore, the V4 Euroscepticism seems to be restricted to Hungary alone.
Many more European countries have their own populist parties calling for referendums. Examples include Italy’s Five Star Movement and Northern League, as well as Germany’s Alternative fur Deutschland. However, neither Italy nor Germany are likely contenders for exits. Italian polls in March indicated that 61 percent of Italians wanted to remain and only 40 percent of Germans even want an EU referendum. Austria’s Norbert Hofer, from the anti-immigration Freedom Party, narrowly missed being elected last month and is calling for an Austrian referendum (Austria is holding presidential re-runs this October, meaning Hofer could be coming to power sooner than anticipated). Sweden’s far right is also growing, particularly with current challenges regarding integration of refugees. Yet, all of these nations remain heavily invested in the European Project, and it is highly unlikely that they will be leaving the EU anytime soon. The economic and political costs are too high.
To conclude, Jean-Claude Junker, current President of the European Commission, has reminded Europe that the EU has decades of experience in overcoming crises. The advantages of being in the EU are historically great. Yet, Brexit has opened the door to a new era of Eurosceptic possibility. Fraurevoir, Nethermind, Finish, Byegium, Quitaly, Departugal, Angeleave Merkel… The puns can go on, to the pleasure of the Brussels-bashers out there. And with the growing presence of anti-immigration referendums, like in Hungary, perhaps populations will become increasingly open to holding referendums on their EU membership. Perhaps the stability of the European Union has been forever compromised. As the saying goes, only time will tell.
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