“Britain could quit the European Union if Jean-Claude Juncker gets to job”. The nomination would “destabilise his government to such a point that it would bring forward a referendum on whether to exit the EU”.

Dear reader,

As you might probably know by now, the European elections are beyond us and the European People’s Party (EPP), headed by Luxembourg’s former Prime Minister, Jean-Claude Junker, arrived in first position. Socialist and liberal parties followed. But, if Junker managed to come out first in the elections, it was not a smashing victory, as his party lost over 60 seats in the European Parliament. Those votes were not grasped by the usual socialist and liberal parties, but, and were by a mix of populist and radical parties, notably, the far right. Among these, the highest scores went to the UKIP in the UK (23%), the People’s Party in Denmark (23%), and the Front National in France (25%). Very few people could imagine that in a country like France, one of the EU founders, the far right would outperform the mainstream parties. In this new article though, I will focus on the effects of a possible Brexit, for both the UK and the European Union.

Little Britain versus the EU, the US, China, India and Brazil

If most of the consequences of a possible Brexit would be negative for the country, the United Kingdom could also grab some short-term benefits if it was to leave the EU. First of all, Westminster would not have to pay the country’s net contribution to the EU, which amounted to around 11 billion euros in 2012. Secondly, the country would not have to implement European rules and regulations (slightly more than one third of the country’s new regulations), which would probably make the country more competitive on some trades. But these benefits would not have any effect until the country effectively leaves the EU, which even if it decided to do so, would still be many years away.

In the long term though, the UK is more likely to loose on the deal. Indeed, the country will no longer be member of the single market, which still accounts for roughly half of its exports, and will have to pay expensive trade fees to continue keep up its trade patterns with the EU Member States. It would be quite illusionary to hope that the UK would be given an economic status like the ones signed with Norway, Iceland, or the Liechtenstein. As a consequence, many multinationals, and especially car-makers, who use Britain as a base for their European activities warned that they would settle their headquarters in continental Europe, if the country was to leave the EU. Moreover, the City of London is quite worried of the situation, as it is home to the largest financial centre in Europe and the place where around 180 banks are settled. Several of those could also leave the City to establish their offices in Paris or Frankfurt. In total, hundreds of thousands of jobs are at risk, and the 11 billion euros (or 8 billion pounds) of savings will not be sufficient enough to deal with the situation. If Britons do not trust their policymakers, they should better trust businessmen who provide the jobs that it is in their own interest to stay member of the EU.

But the economy is not the only one who would suffer from the exit. From a diplomatic point of view, the UK will have much less power to impose its will. Besides, it will also loose a huge bargaining tool for the conclusion of new deals.

An ambivalent impact for the EU

Nevertheless the UK is not the only one who would suffer from the exit, as the EU would face its first splitting. As a consequence, the EU will also suffer from a lack of credibility and will encounter difficulties to implement its interests. And the 5-dollar-question is: “If the UK leaves the EU today, who will be next?”. Other countries, Northern mostly, could also ask or hold a referendum on whether to leave the EU. But, in spite of the credibility loss, the EU could also take advantage of Britain’s exit, as it would finally be able to move ahead and work more effectively. The EU construction has slowed down since Margaret Thatcher came to power, and the British are still the ones who block any step forward the EU wants to take.

It is definitely not easy to predict whether the EU would ultimately benefit or not from a Brexit, but it is very likely that the consequences will be negative for the UK, which is a pity as I really like this country. I hope Cameron knows what he is doing by pledging a referendum every three weeks, because if he knows that his country would loose for sure in case of an exit, the average British might not know that. The promise of the in/out referendum is a response to the surging UKIP (lead by Nigel Farage), but Cameron ought to be very careful with his pledges.