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There is life for the EU after Brexit

One evening in November 2017, finance ministers from the Baltic states, Nordic countries, and Ireland dined together in Brussels, their Dutch and German colleagues joining them for coffee

By: EBR - Posted: Thursday, March 29, 2018

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There is nothing unusual about ministers meeting informally while they are in the European capital for official meetings. Conservative and socialist ministers of finance regularly convene over breakfast before Economic and Financial Affairs Council, or Ecofin, meetings. The Eurogroup was an informal gathering itself for years, before it was granted a legal basis under the Lisbon Treaty in 2009. But there is a new dimension to these meetings in the margins: Brexit.
There is nothing unusual about ministers meeting informally while they are in the European capital for official meetings. Conservative and socialist ministers of finance regularly convene over breakfast before Economic and Financial Affairs Council, or Ecofin, meetings. The Eurogroup was an informal gathering itself for years, before it was granted a legal basis under the Lisbon Treaty in 2009. But there is a new dimension to these meetings in the margins: Brexit.

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 by Caroline de Gruyter*

This “Hanseatic League 2.0,” as the group was quickly baptized, discussed, among other things, eurozone reform, the next multiannual EU budget, and upcoming vacancies for top EU jobs.

There is nothing unusual about ministers meeting informally while they are in the European capital for official meetings. Conservative and socialist ministers of finance regularly convene over breakfast before Economic and Financial Affairs Council, or Ecofin, meetings. The Eurogroup was an informal gathering itself for years, before it was granted a legal basis under the Lisbon Treaty in 2009. But there is a new dimension to these meetings in the margins: Brexit.

If the UK leaves the EU as planned in March 2019, the political ballgame in Europe will change profoundly. A great deal of attention has been paid to the details of the Brexit negotiations themselves and how the UK’s departure will affect big EU member states like France and Germany. But how Brexit will impact the political weight of and the dynamics between smaller member states has garnered far less attention than it should.

The departure of the UK—a large, liberal, northern country—will change the balance of power in the European Union. Its northern allies, including the Nordics and the Dutch, will lose about 12 percent of their voting power in Brussels without the UK, and southern states will gain prominence. The remaining twenty-seven EU member states are aware that this will affect the way they conduct politics in Brussels—the question is how, exactly.

As a result of Brexit, two mutually reinforcing trends are emerging. First and foremost, there is a clear realignment going on across the continent. Many EU member states—particularly smaller ones who often sided with the UK in the past—realize that they will have to rely more on coalition building, with a broader roster of partners, post-Brexit. In all capitals, diplomats and policymakers are actively seeking new partnerships across the continent. 

This is not because these officials have suddenly discovered a greater infatuation with the EU, but because they need each other more than before to make themselves heard in Brussels. A striking example of this is a joint paper on euro reform that the so-called new Hanseatic League finance ministers produced in early March. These eight northern ministers, clearly worried that France and Germany will bypass smaller countries on euro reform and isolate non-euro countries, warned Paris and Berlin to avoid “far-reaching transfers of competence to the European level.”

The second trend is more political, more long-term, and, therefore, more difficult to detect: Brexit has unified the EU in some regards. On issues such as defense, where the UK was a spoiler, there is now more unity—or, at least, the balance of power is shifting that way. This could lead to a change in political direction. Klaus Welle, secretary general of the European Parliament, sees new political energy emerging in Europe, not only in the field of defense but also on financial regulation and the budget. “For the EU,” he says, “Brexit means losing capacity, because a large and influential country is leaving. But Brexit also means that we gain the capacity to act. We are fully on the move again. It will be a different union from now on.”

SOUNDING OUT NEW POTENTIAL PARTNERS

Visiting national capitals, a new sense of dynamism is apparent, as European diplomats and policymakers explore new potential partnerships. This process is forcing everybody to reset priorities and develop new goals and strategies. `After years of crises, political deadlock, and euro-pessimism, policymakers are looking to the future again. This is changing the tone of conversations in Brussels. “There is unmistakably a renaissance of European politic[s] going on,” says Rem Korteweg, senior research fellow at Clingendael, the Netherlands Institute of International Affairs, in the Hague.1 There is a new game in town, and even those who deeply regret Brexit admit they find it exciting.

The need to build new coalitions runs through all post-Brexit strategic debates in Europe. Countries that have leaned heavily on the UK for years are realizing that there will not be one single replacement for this pillar. Smaller EU countries in particular are suddenly looking to identify other member states that have shared hopes or priorities. Former liberal-democrat member of the European Parliament Andrew Duff, now president of the federalist Spinelli Group, explains that “in a way, Brexit makes European countries more European. It obliges them to deepen relationships on the continent, to learn more about each other’s positions, and to look for issues that can unite them.”

Deliberations in Northern Europe are changing markedly. Gone are the days, for instance, when the Netherlands or Denmark could count on almost automatic support from the UK on the liberal issues they care deeply about, including trade, innovation, and competition in Europe’s internal market. In the past, if The Hague or Copenhagen wanted to block or push a particular issue in Brussels, they would often sound out London first. With London’s support assured, they would have almost enough votes in Brussels, and finding a few more allies to reach the necessary threshold was often easy.  

That is no longer the case. Nowadays, there are profound deliberations in Dutch ministries about post-Brexit strategies. In Copenhagen, too, brainstorms are being held about new tactics; even retired Danish officials are invited to participate on occasion. In Stockholm, senior officials admit that they have so heavily relied on British “guidance” and support since their entry into the EU in 1995 that they often saw the union entirely through a British prism. Even in the European Parliament, no member state voted more often alongside British lawmakers than the Swedes.

Since the Brexit referendum, Swedish policymakers have realized they need a new strategy. In Stockholm, “it is as if Sweden finally [is] becom[ing] a member of the EU,” says Eva Sjögren, director of the Swedish Institute for European Policy Studies, which produced an interesting report about the country’s place in the EU after Brexit. She agrees that if Sweden can no longer rely on its heavyweight, like-minded northern neighbor, it will need to consider countries elsewhere on the continent for political support, in some cases for the first time. Like their counterparts in other member states, Swedish ministers and diplomats are sounding out colleagues they have hardly ever spoken to before.

It is not just the UK’s closest partners in the north who feel orphaned. Countries that do not use the euro feel similarly affected and are also seeking a new political direction. In the past, the UK has often acted as a powerful spokesman for the nine EU countries operating outside the eurozone—known as the “outs”— when they needed to defend their interests vis-à-vis monetary issues.

When the eurozone set up the European banking union in 2012, for example, London forcefully negotiated a say on behalf of all the “outs.” As a big country housing one of the world’s largest financial centers, the UK had the necessary clout to make dominant eurozone countries like France and Germany listen. The request was promptly granted. Non-eurozone countries are well aware that a smaller member state would almost certainly not have achieved this. Fearing marginalization after Brexit, some are now seeking ways to move closer to the center of EU decisionmaking.

Sweden, for example, recently tried to become a member of the European banking union. Their attempt failed because, while the government—prompted by the Nordic banking group Nordea threatening to move its headquarters from Sweden to Finland, which is a member of the banking union—favored joining the union, there was not enough support in the Swedish Parliament. Nordea has moved to Helsinki, but analysts expect another Swedish attempt in a few years’ time. In Denmark, similar discussions about banking union membership are ongoing.

Signs of renewed engagement are apparent in Central Europe, too, where countries traditionally seen as more skeptical of integration are showing signs of deeper cooperation in certain areas. The Czech request for “observer status” in the Eurogroup in the summer of 2017 is one example. Former Czech prime minister Bohuslav Sobotka’s statement that permanent structured cooperation on defense “should be initiated as soon as possible” is another. Sobotka’s successor, Andrej Babiš, has offered contradictory opinions about the EU so far—both positive and negative—but has reiterated that he wants to remain close to Germany and France.

During an off-the-record meeting in Vienna last summer, a Czech politician explained that the shock of Brexit had been profound in his country. The Czechs, he said, had taken a euroskeptic route in recent years. While economically dependent on Germany, they moved politically closer to Budapest and Warsaw (and, to a lesser extent, Bratislava), for example opposing the EU-wide redistribution of refugees. Czech President Miloš Zeman, a severe EU critic, seems closer to Moscow than to Berlin. Still, the politician in Vienna said, “the minute we heard the result of the Brexit vote, the debate about euro membership flared up in political circles in Prague. We are in the heart of Europe. We cannot afford to be politically isolated.”

To avoid being isolated, officials from Northern Europe are making working trips to Madrid, Rome, and other capitals they say they would otherwise probably not visit. Dutch Prime Minister Mark Rutte spent New Year’s Day in Vienna at the invitation of new Austrian Chancellor Sebastian Kurz. Afterward, the two leaders said they agreed: even if Brexit leaves a hole in the European budget, net payers should not pay a penny more. A minister from one Western European country said he recently visited a colleague in Central Europe because he happened to be in the neighborhood and decided to stop by, for once. In Brussels, he said, “we greet each other in the corridors, but we’ve never talked. Now we sat down and discussed Europe. It was useful. I understand now why he takes certain positions. I’m planning to do this with other colleagues, too.”

THE PRESSURES OF A MULTISPEED EUROPE

Another reason why smaller EU member states think they will have to struggle harder to be heard in Brussels after Brexit is that big countries will become relatively bigger. At the same time, the collective relationship between large and small countries seems likely to change in favor of the small ones. With a large country exiting the EU, alliance building is becoming more important.

This effect is likely to be reinforced by the revival of the Franco-German relationship, which long served as the driving force of EU policymaking but has lain dormant during the past few years of crises. French President Emmanuel Macron is trying to change this. He has launched an ambitious plan for EU reform and more economic, political, and security integration with Germany, regarding the eurozone as its nucleus. German Chancellor Angela Merkel was tied up for most of the autumn and winter with her efforts to form a government, but she has indicated that she welcomes “a lot of material” in Macron’s EU reform plans. Merkel has now managed to form another grand coalition with the Social Democrats that, many expect, could deepen cooperation between France and Germany.

Since Macron won the French elections in the spring of 2017, German and French government officials have quietly been meeting to lay the groundwork for negotiations on the future of the EU. Some think the Franco-German axis will be less powerful than before. Former Swedish prime minister Carl Bildt disagrees, observing that there will always be divisions in Europe, and Germany is right in the middle. “It wants to keep East and West and North and South together. Germany will be the swing power in Europe. As a consequence, all others will slowly move towards the center.”

Whenever France and Germany get active in Europe, other EU member states tend to get slightly nervous. This time, because of Brexit, some are especially concerned. Smaller eurozone countries fear that these two big countries will present them with faits accomplis—especially when the UK is no longer around to act as a counterbalance. Member states on Europe’s periphery are afraid of being cast aside altogether.

There has been a lot of talk lately about a “two-speed Europe” or a “multispeed Europe.” The concept has been around for a long time as a solution for political deadlock in a union whose numerous members agree on little.  Jean-Claude Juncker, the president of the European Commission, mentioned it as one of five possible scenarios in his March 2017 “White Paper for the Future of Europe”—although it was clearly not his preferred scenario. That same month, the leaders of France, Germany, Italy, and Spain—four big eurozone countries—signed a declaration in Versailles to stress the possibility of multispeed Europe. “We need to have the courage for some countries to go ahead if not everyone wants to participate,” Merkel said. Those who are not in the inner circle of the eurozone got the message, leaving them terrified of becoming second-class member states.

The former head of the European Council’s legal service, Jean-Claude Piris, wrote in 2011 that the mere hint of a partition within Europe is usually enough to make the more reluctant Europeans jump in line. This is no less true today. Merkel’s priority has always been to keep the EU together; like Juncker, she is not known to favor a two-speed Europe.  But she may have indirectly boosted EU unity by mentioning the concept in the Versailles statement, which encouraged EU countries to prevent second-class membership by actively exploring ways to coordinate agendas.

Weeks before the November dinner in Brussels, Ireland’s prime minister had already met his Nordic and Baltic counterparts in the margins of an EU summit in Brussels. British Prime Minister Theresa May had asked to attend but was rebuffed. Meetings of this group of senior-level diplomats have been taking place since the start of 2017. One diplomat confirms that this new club was a direct, natural response to Brexit and recent moves by France (in tandem with Germany) to drive the EU agenda.

EUROPE’S REGIONAL COALITIONS

Small and medium-sized countries are realizing they need to make their voices heard. Regional groupings, like the new Hanseatic League, may offer a way.

In the Netherlands, there is sudden enthusiasm for joining a Nordic bloc—close to Germany but also big enough to influence it. In the early days of the European communities, the Netherlands and the other Benelux countries, Belgium and Luxemburg, often acted as a counterbalance to the three big member states. However, when Merkel decided in the summer of 2016 to consult all member states on the future of Europe after Brexit, she gave the Dutch prime minister his appointment together with the Scandinavian countries, rather than with Belgium and Luxemburg. Some Dutch wondered if Merkel was marginalizing them. Others thought that, by having this meeting with the Nordic countries that primarily see the EU as a single market, the chancellor may have been signaling to federalists like Macron that her first priority for the EU is unity with its remaining twenty-seven members.

Whatever the case, Rutte gets along well with his Scandinavian counterparts. They are pragmatists, not political visionaries, sharing a liberal, no-nonsense approach. In the Netherlands, the Benelux nations are sometimes seen as a family, whereas the Nordic nations are viewed as friends: one attends family gatherings out of obligation, whereas one attends friends’ parties out of free will. But Rutte does not want to rely on the Nordics only. He also uses the Benelux to foster alliances in Europe. Benelux leaders met with their Visegrad Group counterparts—the Czech Republic, Hungary, Poland, and Slovakia—in June 2017 to discuss the future of the EU, and were recently hosted as a group by Slovenia.

In Southern Europe, too, there are talks of new partnerships. Mariano Rajoy, the Spanish prime minister, has already hosted three summits of southern European countries. At the last one, held in April 2017 in Madrid, seven southern EU leaders discussed the future of Europe, the economy, and defense and security. Rajoy said: “The specific nature of our geography enables us to bring added value to the European process.”

During the last decade, southern influence often has been limited because of eurozone politics and economic crises. Southern leaders were economically weak and, as borrowers, not in a position to force hands in Brussels. None of them, except Spain, felt free to block then Dutch finance minister Jeroen Dijsselbloem’s nomination as Eurogroup president when Germany proposed him in 2012—although initially some clearly didn’t like the appointment. 

Even then French president François Hollande stayed away from his southern colleagues, for fear of being labeled weak. But the crisis has peaked—except perhaps in Italy, whose elections in early March resulted in renewed political turmoil between radical, euroskeptic parties on the left and right. Spain has economically recovered and is slowly coming back as a European player. If Rajoy manages to sort out the Catalan crisis without too much damage, Spain could claim a prominent place at the European table again.

Finally, Central Europe is waking up, too. While Poland and Hungary are at loggerheads with Brussels about the rule of law, migration, and other fundamental issues, other central and eastern European countries feel squeezed. Brexit reinforces this feeling, because the UK gave many of them a voice in Brussels. Without it, they feel vulnerable. Their response is often to sail closer to the winds from Brussels.

While the Czech Republic is seeking closer ties with the eurozone, Slovakia is finally allowing refugees in as a way to move closer to the center in Europe, after being part of the Visegrad opposition to the European refugee distribution plan. Then prime minister Robert Fico made it clear last summer that he is “very much interested in regional cooperation within the Visegrad Four, but Slovakia’s vital interest is the EU.” Both Slovakia and the Czech Republic eagerly engaged with Macron when he proposed changes to the “posted workers” directive, while the two hardline Visegrad countries, Hungary and Poland, did not.

There is also talk that Bulgaria and Romania may join the Schengen Area in the near future. Macron is rumored to have promised them membership in exchange for their support on the revised workers’ directive. Some say Austria, a self-declared bridge between east and west with a firm interest to remain in the euro core, could play a pivotal role in a loose, moderate Central European group—like it did when Vienna convened ten regional countries in February 2016 to close the so-called Balkan route for refugees. 

The young, conservative new chancellor, Sebastian Kurz, keeps his cards close to his chest. Austria’s neighbors have differing agendas and are allergic to “Habsbourgish” regional policy initiatives coming from Vienna, but people around Kurz have occasionally evoked a new “Mitteleuropa”: not east, not west, but somewhere in between. Kurz, himself, has mentioned Austria’s function as a bridge several times.

CONCLUSION

It is impossible to predict whether these new groupings and regroupings have any future at all. It is equally difficult to foresee a more harmonious Europe after the UK’s departure—considering, for example, the fundamental standoff between the European Commission and Poland, or a recent Greek veto preventing the EU from condemning human rights violations in China and Venezuela. Christophe Hillion, research professor at the Norwegian Institute of International Affairs, argues that “after the crises of recent years and Brexit, EU countries are trying to close ranks. . . .  Flexibility in the sense of derogations is moving out of the union, together with the UK. Member states are tired of opt-outs, cherry-picking, and divisions. To those who want more flexibility, the answer will be: ‘For that you can use article 50.’” In other words: you can leave, just like the Brits.

It is fair to say, however, that Brexit has prompted a great deal of political movement. The direction of this movement is yet unknown, but it has instilled a new sense of unity among the EU’s twenty-seven remaining members. Contrary to what some had predicted, Brexit has not led to enthusiasm for more EU departures. On the contrary, member states have so far demonstrated they want to explore new ways to stay together.

This development is, to a certain extent, logical. Take Denmark, for example—if Copenhagen needs more partners in order to remain politically effective in Brussels, those partners will, of course, demand Danish support for theirownpolitical agendas in return. This means Denmark cannot publicly oppose those positions anymore. The government, bound in so many ways by so many partners, will have to soften its stances accordingly. Danish ministers, some of whom routinely lashed out against Brussels, have clearly moderated their tone. One Danish diplomat was recently overheard saying, “It was easy for us to be euroskeptic as long as the British were around: we always got away with it, since they were much more extreme anyway.”

Something similar is happening in the Netherlands. A couple of years ago, when the far-right Party for Freedom supported a minority government, ministers toyed with the idea of withdrawing from European institutions they disliked. There was an atmosphere of euro-carelessness then, perhaps similar to the one in London now. Prime Minister Rutte is traumatized by Brexit, and he realizes this could easily happen in the Netherlands, too. In a radical break with the past, then minister of foreign affairs Halbe Zijlstra gave a speech about Europe just before Christmas for EU ambassadors in The Hague—its contents were overwhelmingly positive. Zijlstra, who used to be known as an EU critic, suddenly spoke about the EU as an indispensable structure in the age of globalization, about common values, and about plus jamais ça—or “never again.”

In a similar move, the Swedish minister for European affairs, Ann Linde, recently kick-started public discussion about the EU with a project called “The EU Handshake.” Without the effects of Brexit, officials say, she would not have done that and Europe would have remained a taboo political subject, as it has long been.

Linde appears to be one of many Europeans who clearly smell a change in the air: Europe is moving again. The direction of this movement is unknown and the obstacles are many, but political energy is percolating in all corners of the union. Many countries are eager to make use of it.

*Europe correspondent for NRC Handelsblad and is based in Oslo
*First published in carnegieeurope.eu

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