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After the earthquake

The consequences of Britain’s decision to pull out of the EU are nothing if not far-reaching and momentous

28 June 2016, 8:25am
Cartoon by Mark Scicluna
Cartoon by Mark Scicluna
It is certainly no exaggeration to describe the Brexit referendum as a ‘historical’ event. History is, at the end of the day, a process of gradual (and sometimes sudden) upheaval and change. And the consequences of Britain’s decision to pull out of the EU are nothing if not far-reaching and momentous.

Before turning to the many implications, any analysis of the referendum result must perforce take note of the curious political context. Technically, the question of how and when a country secedes form the European Union is catered for by existing treaties: negotiations will have to take place between the two sides, and an exit strategy must be in place after two years.

However, the treaties do not enter the merits of the negotiations themselves: and in this case, it is difficult to predict the outcome, as many of the promises made by the Leave campaign – including full access to the EU’s internal market, without any of the constraints of membership – are highly unlikely to be met.

So even if the decision to leave the EU has now very emphatically been taken, the withdrawal process itself cannot be predicted at this stage. Britain’s immediate future now looks very uncertain indeed… and, as widely predicted before the referendum, so too does the EU’s future. 

In this sense, Brexit is certainly ‘historical’, as it has set in motion a process that can only result in a profound change to Europe as a whole. Already, the decision has had an immediate negative impact on global markets. The Sterling plummeted immediately when news of the result emerged Friday morning; credit ratings agencies have downgraded their outlook for the future of the British economy; London’s banking sector is reportedly facing lay-offs, and it is expected that ripple effects will be felt as far afield as America, Japan and China.

The political ramifications are just as chaotic. Britain now faces internal pressure towards further fragmentation, with Scotland likely to be resuscitating plans for a second independence referendum and Northern Ireland likely to question its allegiances, with all the ‘trouble’ this has traditionally foreboded in the past.

On a smaller yet equally ominous note, it transpired that a staggering 96% of the tiny British possession of Gibraltar also voted to stay. Traditionally, the Gibraltarians have always been equally proud of their European and British heritage. Those two realities are now at loggerheads; and while it may be too early to predict any change to the status of Gibraltar’s future as a British territory, the fact is that Brexit has thrown all these issues into disarray.

On Europe’s part, many are bracing themselves for a domino effect. There have been calls (mainly from the Far Right) for copycat referenda in various EU states, including the Netherlands, Denmark, France and Italy. A complete break-up of the Union is unlikely to arise directly from this fact – the parties concerned do not represent large enough majorities in their respective countries – but there can be no escaping the fact that the EU is under immense internal pressure.

Last but not least, there are questions – many of them relevant to Malta – regarding the millions of British ex-pats residing all over Europe under the terms and conditions of membership… and also the many millions of EU nationals living and working in the EU. 

Clearly, then, this is a time for leadership and vision at the highest European levels. Whatever one’s reaction to the actual result – be it jubilation or despair – on one thing we can all safely agree. It is in both Britain’s and the EU’s interest for the transition to a new Europe to proceed as smoothly and serenely as possible.

What form will this ‘new Europe’ take, and how will members be affected? For one thing, the changes necessitated by this development are such that all Europe – including Malta – must be involved in the discussions. Malta is arguably harder hit than other EU countries: in Britain, Malta lost a crucial ally against the further harmonisation of European tax laws and financial services regulations. This will make it hard for Malta to retain its tax competitiveness; not to mention mitigate the adverse effects on Malta’s tourism market, as the sterling weakens against the euro, making it more expensive for British tourists to come here.

The same discussion must also centre on two crucial aspects. One, Europe must confront the negative perceptions – sometimes, though not always, rooted in genuine causes for complaint – that made the British decide to leave. Democratic deficits which plague the European system must be satisfactorily ironed out; otherwise it is inevitable that more members will eventually follow Britain’s lead.

The second consideration concerns the rise of the extreme Right, which will no doubt be buoyed by this ‘victory’. Here, Europe must take a long hard look at itself, and ask if its own governments and institutions may have stoked the fears behind this populist movement: in its reactions to immigration, for instance, or in the economic policies that brought Greece to its knees.

Ultimately, the European Union will have to change following Brexit, whether it wants to or not. The way forward is therefore to manage the change as best we can.

DealToday
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