Brexit Lessons

A Wake-Up Call for the E.U.

London Big Ben and traffic on Westminster Bridge
Now that the U.K. is leaving Europe, it's time to take a look at what went wrong. Photo: Getty Images
  • Why it matters

    Why it matters

    The European Union is facing a series of political and economic crises, and needs to re-examine its core values if it is to succeed, the author argues.

  • Facts

    Facts

    • Germany exports goods worth €90 billion to the United Kingdom.
    • Its exports to Germany amount to €40 billion, meaning Germany runs a trade surplus of €50 billion with the U.K.
    • The European Union has not yet opened formal negotiations with the United Kingdom over the terms of its exit, which puts economic relations in limbo.
  • Audio

    Audio

  • Pdf

Let’s take another look at Brexit. But this time, let’s treat it as though we’re looking at a company trying to extract itself from a merger that didn’t work out. In this scenario, the company (the United Kingdom) wants to make sure that lucrative relationships with old partners (European Union members) aren’t destroyed in the process.

We can think of Germany as one of these old partners, exporting goods worth €90 billion to the United Kingdom. Its exports to Germany amount to €40 billion – and that means Germany runs a trade surplus of €50 billion with the U.K.  With figures like that, any businessman worth his salt would want to make sure proper trade contracts are signed to ensure that business continues on a stable basis post-Brexit.

This is now all the more important considering that there will be a shift in the balance of power between the remaining 27 nations. Up to now, the four major industrial nations, France, Great Britain, Italy and Germany, have been able to use their blocking minority of 34 percent to resist unreasonable initiatives from the rest of Europe. But without the U.K. in the future, there will be no such “protective power.”

If we're making laws about vacuum cleaners but can’t manage a functional refugee policy, then we're doing something wrong.

The remaining trio of France, Italy and Germany will have to remain practical and make new alliances. The E.U. should also look at the reasons for the U.K’s decision to leave. You don’t have to dig deep before coming across the expressions “nanny state” and “overregulation.” Too much Brussels is just as toxic as parochialism from the smaller members.

Companies with their own role models and values are successful when they cautiously integrate the attitudes of other companies they are involved with. Companies that fail try to enforce uniformity with narrow parameters and frequent intervention. In terms of the European Union, that means that if we’re making laws about vacuum cleaners but can’t manage a functional refugee policy, then we’re doing something wrong. It shows that the European Union is being reduced to a community of rules, characterized by an absence of trust in individuals, who are to be “educated” by more rules.

Everyone is sensitive to excessive state intervention – the Britons rather more so in their self-image as a kingdom. In economics, we have unfortunately become used to policy being implemented based on various measuring devices and rulebooks. Across Europe, such measuring devices are often seen as instruments that undermine national identities without replacing them with new common ground.

The most important element of an alliance is mutual trust, meaning that governing bodies must also trust in the will and abilities of the free individual. But our current situation shows that we have a long way to go toward achieving such trust.

And yet the the behavior of E.U. leaders is working against this aim. Take the example of how E.U. Commission President Jean-Claude Juncker is accepting cases of unauthorized exceptions from agreed debt limits, or the way some European leaders are searching for loopholes for crisis-hit Italian banks. They are creating further cracks in the E.U.’s foundation by damaging the public perception of how it functions. It’s been transformed from a community characterized by stability to one of emergency, signaling that its inner values are negotiable.

So what does Europe have left to offer? Prosperity, peace, and freedom of movement – things that should not be taken for granted, but will continue to require hard work. That is the core brand of Europe, and an incentive to continue building the trust required to achieve it. After all, as Foreign Minister Hans-Dietrich Genscher said: “Europe is our future. It is the only one we have.”

 

To reach the author: gastautor@handelsblatt.com

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