Why a Br­ex­it would hurt Eu­ro­pe, by Dirk Heil­mann.

Handelsblatt Global Edition Magazine - - Table Of Contents - 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.

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