European Union more united than ever with Brexit
In 2017, the impact of United Kingdom (UK) initiating its exit from the European Union (EU) started to be felt, particularly within the UK economy. However, Brexit will indeed have a major political, economic and social impact in the UK, Europe and the world in the years to come.
Strong EU leadership and unity in tackling Brexit
The strong and calm leadership of the German Chancellor Angela Merkel was indeed valuable and influential to steer the EU through this crisis. The pro-Brexit British politicians initially believed that the result of the Brexit referendum was their mandate to start dictating their demands with the EU to break off as well as begin their trade negotiations with the various EU countries on a bilateral basis.
However Merkel stated that there won't be any pre-negotiation, before the UK triggered the Article 50 of the Treaty of Lisbon to formally declare that it was leaving the EU. Not only Merkel's strategy of having no pre-negotiation prevented the British from adopting a 'divide and rule' approach in their bilateral negotiations with other European countries, but also it gave time to the EU to re-assess the situation and prepare their Brexit team with Michel Barnier as the lead Brexit negotiator. Guy Verhofstadf was also appointed to be the main Brexit coodinator for the European Parliament.
" Not only Merkel's strategy of having no pre-negotiation prevented the British from adopting a 'divide and rule' approach in their bilateral negotiations with other European countries, but also it gave time to the EU to re-assess the situation and prepare their Brexit team with Michel Barnier as the lead Brexit negotiator. "
On the occasion of the 60th anniversary of the Treaty of Rome last March 25th, the 27 European leaders gathered in Rome to reaffirm their unity with a joint declaration and the European Council President Donald Tusk said that "Europe as a political entity will either be united, or will not be at all". Although Brexit was not a discussion topic during this event, the joint declaration of European unity provided a strong mandate to the European leaders to deal with Brexit as one.
Brighter economic outlook in EU 27
Another factor that helped the EU was the overall positive economic outlook in 2017. The economic growth within the euro zone improved and is estimated to reach 2.1% from 1.8% in 2016, according to the latest October IMF data (GDP, constant prices). Growth in France, Germany and Italy is predicted to reach 1.6%, 2.1% and 1.5% respectively. As for the UK, the Brexit uncertainties will cause the economy to dip slightly to 1.7%. In fact, according to the IMF, the French economy will marginally exceed the British economy in 2017. As a result, Britain will no longer be among the top five economies in the world.
The global economic outlook is also improving in 2017 with both advanced and developing economies showing better prospects. The world economy is expected to grow at 3.6% in 2017 from 3.2% in 2016. With brighter outlook, the EU 27 can expect to have better prospects in the near future. In the State of the Union Address 2017, EU Commission President Jean-Claude Juncker confidently declared : "Dix ans après le déclenchement de la crise, l’Europe connaît enfin un rebond économique. Et avec lui, un regain de confiance. Les dirigeants de notre Union européenne à 27, le Parlement et la Commission sont en train de remettre l’Europe au cœur de l’Union. Tous ensemble, nous remettons l’Union au cœur de l’Union." (Ten years since crisis struck, Europe's economy is finally bouncing back. And with it, our confidence. Our EU27 leaders, the Parliament and the Commission are putting the Europe back in our Union. Together, we are putting the Union back in our Union.)
Jean-Claude Juncker - President of the European Commission
As for the UK, the dark clouds of the Brexit uncertainties will still remain. By the end of 2017, Britain will have only fifteen months left for the Brexit negotiations to clinch the necessary trade deals, before it is officially out of the EU by end of March 2019. So far, Britain made little progress with no firm trade deals from the EU as well as its other global partners. Hence, Britain faces many risks that will definitely impact its economy in the short and long term.
Ongoing Brexit negotiations
On March 29th, Prime Minister May triggered the Article 50 of the Treaty of Lisbon to formally declare that the UK was leaving the EU. When Donald Tusk personally received this notification from the UK, he mentioned the joint declaration in Rome and said that Brexit made the EU 27 more united during a press conference. Moreover, Donald Tusk together with the other EU leaders have a strong mandate to protect the interests of the EU in the Brexit negotiations.
Subsequently Donald Tusk issued the guidelines for the Brexit negotiations, stating that there would be a phased approach to the negotiations with the UK discussing its 'divorce' with the EU first, before moving to any trade discussions. These tough guidelines pushed Theresa May to call for general elections in April, but unfortunately her initial plans to have a greater mandate to negotiate for Brexit backfired and she lost her parliament majority.
As a result of infighting within her own Conservative Party as well as her weakened position, Theresa May had to relent on her hardline Brexit position with the EU. Moreover, with pressure from businesses, that are triggering their own contingency plans to start moving out of the UK, May and her Brexit team had to make a deal fast with the EU. Eventually the tables were turned with the EU having the upper hand.
Theresa May - Prime Minister of UK \
Michel Barnier - European Chief Negotiator for the UK exiting the EU
In fact, May was in such a weakened state that Michel Barnier and the other EU leaders had to provide her some backing and leeway so that she could move the negotiations on her side. In the end, Britain, Theresa May and her Brexit team had to agree to most, if not all, the terms and conditions set by the EU, so as to have 'sufficient progress' made for the negotiations to move to the second phase on trade.
First, May agreed on a 'divorce bill', that required the UK to pay the EU up to £50bn on all its previous EU commitments before breaking away. Second, the rights of 3 million EU citizens in the UK and 1 million British citizens in the EU are guaranteed. Third, there won't be any hard border in Northern Ireland and the Republic of Ireland. Fourth, the UK will abide by EU rules during the Brexit transition, despite the fact that it won't have any say in the EU decision making processes.
It was until all these conditions were met that President Juncker said in early December that the next phase of the negotiations could now be tackled. However the EU-UK trade negotiations will prove to be very tricky and difficult on both sides.
The Brexit negotiations will be very hard and difficult. On the one hand, it is in the interest of both the EU and the UK to have a Brexit deal, since both economies are intricately linked and dependent on each other. On the other hand, the EU can neither afford to let go the UK easily nor can the EU let the UK make Brexit a success story subsequently, since both scenarios will then encourage other European countries to follow suit.
There are still many hurdles to overcome in all the Brexit negotiations. So far, it will seem that Brexit has lead to a more united EU with an EU Brexit team that is more focused in safeguarding the EU interests. As a result, the EU is now in better control of the negotiations and can potentially shape better the future outcome, that is better aligned in its interests.