Why a Brexit would hurt Europe, by Dirk Heilmann.
A British withdrawal from the European Union would hurt not just Britain, but the rest of the EU as well. Germany, in particular, has every reason to keep Britain in.
The European Union faces many crucial tests. The refugee crisis is putting the continent under serious strain. The terror attacks in Paris yet again demonstrated the threat posed by fanatical Islamism. And Europe still has a long way to go to overcome the economic, financial and political fallout of the euro crisis.
But the greatest threat to Europe comes from what many here on the Continent still view as an odd curiosity: Britain’s referendum on June 23 on whether to stay in the EU or leave it. A“Brexit” would not just be bad for Britain itself. If Britain left, it would plunge the rest of the EU into an identity crisis. The economic consequences for the EU would be disastrous.
In Britain, a Brexit has strong support. Euroskeptics are gaining ground in the ruling Conservative Party. The populist UK Independence Party, or UKIP, has successfully stirred up fears of uncontrolled immigration from other EU countries. The Labour Party, a traditional stalwart in supporting EU membership, is being shaken up by its radically left-wing leader, Jeremy Corbyn. Even the British business community’s long-standing support for the EU seems to be fracturing. Prominent voices from industry and the financial sector are pro-membership, while small and mediumsized companies tend to support Britain’s going it alone.
If people on the Continent have followed these British debates at all, they tend to look on with a bemused skepticism. But it would be shortsighted to see a Brexit as just a British affair, or as being primarily disadvantageous for the British by cutting them off from their most important alliance and market. A Brexit would seriously damage and weaken the EU. Germany would lose its most important ally in its effort to expand and intensify the“single market” — the highly successful policies that have created growth and prosperity across Europe by removing barriers to Europe-wide competition. Those EU countries that prefer to shield their economies with protectionism and unfair subsidies would gain power over countries like Britain and Germany that have benefited from the EU’s free and borderless market. In security policy and defense, the EU would lose one of its most important heavyweights, weakening Europe’s global stature even more.
A Brexit would also open up a gaping eco-nomic hole. Europe’s second-largest economy after Germany, Britain has also been one of the stellar performers, with 2.6 percent GDP growth in 2014 and a jobless rate of only 5 percent. By 2040, strong population growth is expected to catapult Britain past France and close in on Germany as the EU’s most populous country. London’s significance as a European magnet and
global financial center will only grow.
What can their EU partners do to convince the British to stay? In late February, British Prime Minister David Cameron negotiated a deal with the EU that went a long way towards meeting Britain’s demands. It includes new curbs on the welfare payments Britain is required by EU law to pay to migrants from poorer parts of the EU, as well as exemptions for British banks in complying with EU financial-market rules. The com promise also includes language exempting Britain from future plans to further unify the continent.
The only problem is that no deal can ever satisfy Britain’s hard-core euroskeptics. But to win over the majority, the EU needs a new, positive and concrete narrative. Part of that could be a new push to provide concrete benefits for voters and consumers. One project to push forward would be the so-called “digital single market,” which would remove the national barriers that have slowed down Europe’s Internet entrepreneurs and prevented Europeans from enjoying the full benefits of the Internet economy. Another such project would be a common energy policy that provides greater climate protection at a lower cost to companies, taxpayers and consumers. If the threat of Brexit prodded Europe to achieve such useful, doable and necessary goals, then all sides would win.
Germany would lose its most important free-market ally, and the EU its biggest security heavyweight.
Dirk Heilmann is Handelsblatt’s chief economist and heads the Handelsblatt Research Institute.
British Prime Minister David Cameron wants a better deal with the EU.