The EU is also facing the challenge posed by the return of the nation-state as the most popular model of socio-political organization across the globe. Right now all supra-national and/or international organizations, from the United Nations to NATO, are regarded with suspicion, if not outright hostility, not only in Europe but also throughout the world.

Brexit has highlighted the key challenges that the EU faces. The first challenge concerns a widespread overestimation of the EU's role. This is due to its perception as a supra-national state, which it certainly is not.

The first problem with the EU is that, though it is called a union, it isn't really one. The EU is essentially an economic club; not a state.

(Image source: iStock)

With the Brexit saga's denouement still uncertain, the European Union would do well to re-examine its performance as a daring experience in socio-political engineering on a grand scale. Even if, as expected, the United Kingdom somehow manages to fudge Brexit and remain tied to the EU, the fact remains that millions of Brits and other Europeans are unhappy with aspects of the experience.

The first problem with the EU is that, though it is called a union, it isn't really one. To be sure it has a flag, an anthem, a parliament, a council of ministers, and even pseudo-embassies in many countries, but despite such trappings of a state, the EU is essentially an economic club; not a state.

Even then, the EU is basically concerned with two branches of the economy: industry and agriculture, sectors that represent around 32 percent of the combined gross domestic product (GDP) of the 28 member states. In the case of Britain, which is primarily a service-based economy, industry and agriculture account for around 25 percent of GDP.

The EU's annual budget accounts for around one percent of the total GDP of its 28 members. However, on average, the state in the 28 member countries controls the expenditure of around 50 percent of GDP.

Key aspects of the economy, including taxation, interest rates and, apart from members of the Eurozone, national currencies are not within the EU's remit.

The EU's member states represent many different historical memories and experiences. The British are shaped by two centuries of colonial experience, followed by a brief flirtation with social-democracy morphing into the Thatcherite version of capitalism caricaturized in a single word: greed. The EU's Nordic members emerge from seven decades of social democracy with "welfare" as the key concept.

Germany and Austria pride themselves in their "social market" economic model, which is regarded with deep suspicion in other European countries. Italy, and to a lesser extent Greece, Spain and Portugal have a "black-and-white" model in which the unofficial or black economy is almost as big as the official one. The Benelux three, Belgium, Holland, and Luxembourg have lived with what they call "social capitalism" -- a system in which the principal role of the state is redistributing the wealth created.

France, depending on the party in power at any given time, has vacillated between the German-Austrian and the Benelux models.

The Central and Eastern European members were all parts of the Warsaw Pact and the Soviet-dominated Comecon and used to expecting the state and the party in control, to take all decisions and cater for all needs.

The 28 member states also have different political systems, ranging from traditional monarchies to republics with a revolutionary background and nations emerging from the debris of empires.

They also have long histories of enmities with one another. Leaving aside a long history of wars, some lasting over 100 years, little love is lost between the French and the Germans or the British for that matter. For the Hungarians, the number-one hated people in the world are the Romanians who still rule over four million "captive Hungarians" whose territory they annexed in 1919.

The Irish love the Brits as much as the Dutch love the Germans, that is to say not very much. Italians still remember oppression under the Austrians and the Spanish haven't forgotten their struggle against Napoleon.

It is a wonder that the EU has managed to bring together so many nations in a region that has the longest and most intense history of national rivalries and enmities compared to any other region in the world. Part of that success was due to fears fomented by the Cold War and hopes risen after the fall of the Soviet Empire.

The Western European nations felt they needed to set aside old enmities to face up to the Communist "beast from the East". In the post-Soviet era, the Central and Eastern European nations hurried to join the EU and NATO to put as much blue water as possible between themselves and their Russian former oppressors.

Needless to say, the United States encouraged the formation of the original Common Market and supported its morphing into the EU as part of a grand strategy to contain the USSR. In that context, the EU played a major role in ensuring peace and stability in a continent that has witnessed most of the wars that humanity has seen in its history.

The EU has also done a great job with the so-called mise à niveau (bringing up to standard) policy of helping new members achieve some measure of parity with the founding members in key fields of the rule of law, democratic values, economic regulations, and international behavior.

Brexit has highlighted the key challenges that the EU faces. The first challenge concerns a widespread overestimation of the EU's role. This is due to its perception as a supra-national state which it certainly is not. Local politicians in many member states like to blame the EU for their own failings even in domains that do not concern the union.

The EU is also facing the challenge posed by the return of the nation-state as the most popular model of socio-political organization across the globe. Right now all supra-national and/or international organizations, from the United Nations to NATO, are regarded with suspicion, if not outright hostility, not only in Europe but also throughout the world.

EU leaders and those who support it would do well to offer a more modest and realistic image of the union as an economic club concerned with just certain aspects of its members' economies and not as a putative "United States of Europe."

The EU has been pretending to be a machine trying to impose uniformity on nations that have always prided themselves in their specificity. It may survive and even prosper if it works for unity in diversity.

Even if it never actually happens, the message of Brexit to the EU is: Pull down thy vanity!