By Iain Begg, a Professorial Research Fellow at the European Institute and Co-Director of the Dahrendorf Forum, London School of Economics and Political Science.
If Britain ever sought to rejoin the EU, it could not be on the terms of membership we previously enjoyed, warns Iain Begg (LSE). The UK’s budget rebate, exemption from Schengen and opt-outs from the euro and judicial cooperation will not be on the table again. This would make rejoining a difficult sell to the British public.
A curiosity of the Brexit saga has been the steadfast belief in the sanctity of the referendum result. Despite the ambiguous constitutional status of referenda in the UK and the narrowness of the vote, the main political parties fall over each other to “respect the verdict of the people”. Individual Members of Parliament are too worried about upsetting their constituents to insist that the principle of representative democracy should give them the final say.
Many Remainers cling to the hope that it will all prove to be disastrous, the country will return to its senses, and seek to rejoin the EU sooner rather than later. However, one dimension of this scenario has received surprisingly little attention: the terms of membership the UK currently has are very unlikely to be on offer in future.
First, the opt-out from the euro will be no longer apply, with the best the UK can hope for being to emulate Sweden – legally “in derogation” of its obligation to accede, rather than having an opt-out as the UK and Denmark do – by making no effort to join. In practice, this could be enough to enable the UK to retain the pound indefinitely, but if (and it is far from implausible) other countries accede to the euro following Brexit, leaving only one or two Member States outside, the position would be harder to sustain.
Moreover, the euro will not stand still. The Germans and the French struggle to agree on what the priorities are for strengthening the governance of the Eurozone, but it is the sequencing of the various reforms more than what needs ultimately to be done that is at issue.
Within a few years, a closer banking union (which the UK has not been part of) will be in place. Bank supervision has already been assigned to the European Central Bank for the largest Eurozone banks, and there is now a common bank resolution procedure. The next phase will very probably include some form of common deposit insurance and the establishment of a European Monetary Fund.
Eurozone deepening will also include additional budgetary capacities aimed at macroeconomic stabilisation – meaning automatic cross-border fiscal transfers – and the possibility of a common bond equivalent to the US Treasury Bond. Although resistance from creditor states has stalled these developments and is likely to mean only small funds in the first instance, the direction of travel is set. Ironically, it is a direction British ministers regularly advocated during the years of the euro crisis.