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Brexit Will Fundamentally Change The Future Of Europe

Britain's vote affects over 500 million people living throughout the EU.

25/06/2016 10:03 AM AEST | Updated June 26, 2016 01:05
Mary Turner/Getty Images
People protest against the U.K.'s referendum vote to leave the EU in London on Friday. Some 52 percent of voters chose to exit the EU on Thursday, while 48 percent voted to stay.

Some 33 million people in the U.K. voted in Thursday’s referendum, but their votes will affect the lives of over 500 million people living throughout the European Union.

The 52 percent to 48 percent victory of the British campaign to leave the EU is a historic moment not only for the country, but also for the EU’s 27 other member states.

“Today is a turning point for Europe and the European unification process,” German Chancellor Angela Merkel said after the vote for British exit, or Brexit, of the EU was announced.  

“To move forward, Europe cannot act as before,” French President Francois Hollande said Friday.

JACKY NAEGELEN via Getty Images
EU leaders acted with dismay the referendum result, and pressed for a swift and orderly exit. Above, French President Francois Hollande holds an extraordinary cabinet meeting after the referendum.

A U.K.-Sized Hole In Europe

The U.K. is the EU’s second-largest economy after Germany. It has one of the largest militaries on the continent, and is one of two EU nuclear powers alongside France.

The U.K. is one of the oldest members of the European institutions that emerged in the 1950s in the aftermath of World War II. Britain joined the precursor to the EU, the European Economic Community, in 1973 when it functioned primarily as an economic bloc and consisted of just nine countries.

After Thursday’s vote, the U.K. will become the first-ever country to leave the EU, and its absence will be noticeable.

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Britain joined the precursor to the EU in 1973 and held a referendum on membership two years later, which was won by the "in" campaign.

The First Domino?

The top priority of EU leaders is making sure that Brexit does not have a contagion effect. On Friday, they stressed their desire for a swift and orderly British exit from the union, and analysts expect European leaders to play hardball in negotiations over Britain’s future relationship with the EU to deter further departures.

But they face a serious challenge staving off a wave of Euro-skepticism gripping the continent. A recent Pew survey found while 44 percent of Britons view the EU positively, in France only 38 percent have a favorable opinion of the EU, and just 27 percent of Greeks feel the same.

Meanwhile, anti-EU political parties are gaining ground in several EU nations. The leader of France’s far-right National Front, Marine Le Pen, is ahead in the polls for next year’s presidential election and has called for France to hold its own referendum on the EU.

“The danger from extremists and populists is immense,” France’s Hollande said Friday.

In the Netherlands, which also has an election next year, the leader of the anti-immigrant Party for Freedom, Geert Wilders, is also leading the polls and called for an EU referendum.

The prospect of Brexit had already stoked discussion in Sweden, a close U.K. ally in the EU, about holding a referendum of their own. Meanwhile in Greece, whose debt crisis has pushed it repeatedly to the brink of exiting the Eurozone and possibly the EU in recent years, the president said the signs of the crisis had been there for a long time.

"The decision is going to be respected, but it shows an identity crisis within Europe,” Greek Prime Minister Alexis Tsipras said Friday.

U.K. Independence Party leader Nigel Farage, who led a fierce anti-EU campaign that was accused of stoking xenophobia, celebrated the prospect of the disintegration of Europe.

“The other big effect of this election is not what happened in Britain, but what will happen in the rest of Europe,” he said after the referendum results were announced Friday. "The EU is failing, the EU is dying, I hope that we've got the first brick out of the wall."

Vincent Kessler / Reuters
U.K. Independence Party leader Nigel Farage led a fierce anti-EU campaign emphasizing migration, and celebrated Friday as the first step in the demise of the EU.

An Ever-Closer Union

Farage and Le Pen’s predictions of the end of Europe may be overblown, but the Brexit vote seems likely to push the EU into a period of introspection about its most fundamental tenets. Whether they are strengthened or discarded depends on the ability of the 27 remaining members to reach an agreement about what the future of Europe should look like.

One of the founding principles of the EU was to be a bastion of peace in a continent long scarred by war. The original members, which did not include the U.K., said in order to do this they would pursue an “ever-closer union.”

The phrase has long been a bugbear of British EU skeptics who feel the union has grown into a bureaucracy and policy-making machine of outsize proportion. British Prime Minister David Cameron negotiated the U.K. out of that commitment earlier this year, but it didn’t save him the referendum campaign (he urged the country to remain) or his job (he announced his intention to resign Friday.)

Now the EU now has a choice about whether and how to reform its institutions, whether to continue to try to bring in new members, and what forms of integration it will pursue among the member states that remain.

ASSOCIATED PRESS
The EU emerged out the embers of World War Two. In 1957, six founding nations set up the European Economic Community, forerunner of the EU.

An Ever-Closer Currency Union?

One of the major issues facing Europe is the future of its shared currency, the Euro, which was set up in 1995.

The 2008 financial crisis exposed some major challenges of having a monetary union of 19 countries (which do not include Britain) without a shared fiscal policy. The crash emptied the coffers of many EU governments, particularly in southern Europe, but deprived of their own currencies or fiscal transfers from wealthier nations, there was little they could do to stimulate a recovery.

At the same time, European Union institutions increased the economic pain for debt-mired countries on Europe’s periphery by raising interest rates and imposing stringent fiscal austerity measures in exchange for loans. Greece, the most desperate of the debt-ridden European nations, remains stuck in a cycle of onerous debt repayments that have crippled its economy.

Analysts say that tBrexit could propel calls in several European countries to leave the currency, especially if the U.K.’s departure brings more economic turmoil to the continent. The crisis could push Europe to consider further fiscal integration, but if the Brexit further weakens confidence in European institutions, that is likely to be political non-starter.

Alkis Konstantinidis / Reuters
Greece's economy has buckled under the weight of debt and austerity measures, and the specter of a Greek exit from the Eurozone and possibly EU has lingered for years.

Closing Europe’s Borders

Another key EU principle that has already come under extreme pressure is the free movement of people within EU territory.

EU citizens can freely travel and work in any other member state, and concerns over immigration levels came to dominate the British campaign to leave the EU. The status of over 2 million EU citizens living and working in the U.K. will now be a component of EU-U.K. negotiations on Brexit.

The U.K. never fully signed on to Europe’s policy of open internal borders. Britain opted out of the Schengen agreement, which since 1995 has dismantled borders in Europe and enabled most European citizens to travel without passports through the continent.

Yet the Schengen deal has frayed as European countries have reintroduced border controls, and in some cases erected fences, after over 1 million refugees and migrants fled to the continent last year. Terror attacks in Paris and Brussels have also highlighted the ability of European citizens to evade national authorities across borders. For the past two years there have been clamors to suspend the Schengen agreement altogether.

Laszlo Balogh / Reuters
Hungary was one of the first countries to shut its borders last year, as over a million refugees and migrants fled to the continent.

“Europe is strong only if it can give answers to major issues such as immigration that would strengthen Europe itself and not weaken it,” Hungary’s right-wing prime minister Viktor Orban, who was one of the first European leaders to close his country’s borders to migrants last year, said after the Brexit vote. “The EU failed to give these answers.”

The EU has struggled to form a coherent response to the refugee crisis on its borders, making a deal to stem migrant boats from Turkey but trapping thousands of refugees in Greece.

“The crises the EU has faced over the past few years have been just as much about European unity,” London School of Economics’ Tim Oliver wrote earlier this month. “There has, for example, not simply been a refugee crisis facing Europe as much as a European crisis facing refugees.”

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