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The IBA’s response to the war in Ukraine
Would the last country to leave the EU please turn out the lights?’ That was the deliberately provocative headline for a recent article in the stridently anti-EU British tabloid The Sunthat suggested other member states would eventually follow the UK’s example and ‘resign’ from the bloc.
For many people, this is a preposterous idea. One opinion poll, taken a few days after the UK voted to leave the EU in 2016, suggested that Europeans were more supportive of the EU than ever. It also found that a majority of people in France, Germany, Italy, Poland and Spain were against holding a referendum on EU membership. If a referendum were to be held, all five countries would choose to remain, with the backing of at least 63 per cent of voters.
And yet there are others who are convinced there will be more departures. ‘Brexit will open the floodgates for other anti-European forces within the Union,’ wrote billionaire investor George Soros in the days after the UK referendum. ‘Indeed, no sooner was the referendum’s outcome announced than France’s National Front issued a call for “Frexit” while Dutch populist Geert Wilders promoted “Nexit”.’
His theory will be tested very soon. The Netherlands is due to hold parliamentary elections in March this year, while the French presidential election is to follow in May. ‘With economic growth lagging and the refugee crisis out of control, the EU is on the verge of breakdown and is set to undergo an experience similar to that of the Soviet Union in the early 1990s,’ Soros added earlier this year.
One EU-based lawyer who spoke to Global Insight was dismissive of this. ‘Soros just lost a billion dollars on Trump, didn’t he? Maybe he is losing his touch,’ the lawyer said. The investor allegedly lost out as a result of the stock market rally spurred by Donald Trump’s surprise election as US president.
‘I don’t believe that the EU as an institution will fall apart,’ the lawyer adds. ‘It certainly needs reform and everyone understands that. My assumption would be that the EU member states will have the political will to reform the EU and that it can and will exist in the future.’
Martin Šolc, the new president of the IBA, wants Soros to be proved wrong. ‘I hope that the election of Donald Trump in the US and the more selfish and protectionist US policy likely to follow will make Europeans realise that staying together gives us a better chance to deal with global challenges,’ he says. ‘A united Europe is stronger than the sum of its individual member states.’
Certainly there are a number of barriers to be overcome before any more countries can leave the EU. Most obviously, a member state’s voters need to elect a leader who is committed to holding a referendum on EU membership. In the UK, that condition was fulfilled when David Cameron’s Conservative Party gained a majority in the House of Commons in the general election of May 2015.
It looked like Austria would follow suit by electing the strongly anti-EU Norbert Hofer as president in December 2016, but he was defeated by retired economics professor Alexander van der Bellen. This means the prospect of ‘Öxit’ has receded for now.
In the Netherlands, however, opposition to Brussels appears to be growing. A poll in February 2016 found that 53 per cent of the Dutch wanted a referendum on EU membership. Were such a vote to be held, Nexit should be considered a real possibility: the Dutch rejected the treaty establishing a constitution for Europe in 2005 (as did the French) and agree with many of the criticisms of the EU aired by the UK government.
Dutch voters also rejected an EU association agreement with Ukraine in 2016 after a campaign that led many to believe the country would soon join the bloc. In a bid to allay their concerns, EU leaders have given the Netherlands written guarantees that Ukraine has not been promised EU membership or any help from European armies in the event of invasion as part of the agreement. It now awaits the approval of the Dutch parliament, even though it has already been signed by the other 27 EU member states, approved by the Dutch government and partly entered into force.
According to Jan-Willem van Rooij, a partner in the corporate practice group and the energy team at Loyens & Loeff and a member of the IBA European Regional Forum, this episode underlines one of the main barriers to Nexit: referenda in the Netherlands are not binding on the government. ‘The Dutch government still signed up to the Ukrainian deal, even though the referendum sent a very clear no,’ he says. ‘A change as important as Nexit, even if it were to be approved by a referendum, would also have to command a majority in parliament.’
At the moment, the anti-EU PVV, led by Geert Wilders, is the most popular party in opinion polls and expected to obtain as many as 35 seats in the House of Representatives when elections are held in March. ‘However, you need at least 75 seats for a majority vote, and no other parties support Nexit,’ says van Rooij. ‘This is a significant barrier to the Netherlands leaving the EU.’ There is also a huge majority in favour of EU membership in the Senate, the other house of the Dutch parliament.
Even in the UK, where there is no written constitution, the process of leaving the EU is not proving straightforward. The UK government was recently defeated in the courts on the issue of whether it could proceed with Brexit without a vote in Parliament. The UK Supreme Court decided that leaving the EU would impact domestic law and so ruled that MPs had to have a say. ‘We are determined to respect the will of the British people and intend to trigger Article 50 (of the Lisbon Treaty, notifying the EU of our intention to leave) by the end of March this year,’ the government said in response to the defeat.
In France, opinion polls suggest National Front leader Marine Le Pen is likely to top the first round of the presidential election on 23 April but then lose the 7 May run-off to conservative Francois Fillon or centrist Emmanuel Macron. It is widely believed that supporters of all other political parties will turn out in force to keep Le Pen out of the Elysée Palace.
This is what happened in the 2002 run-off, when supporters of the left-wing Lionel Jospin backed conservative candidate Jacques Chirac in order to keep Le Pen’s father, Jean-Marie, out of office. On that occasion, Chirac obtained 82.2 per cent of the vote.
In addition, the French constitution states that ‘the Republic is part of the European Union’. This means that even if Marine Le Pen were to become President and a referendum were to approve Frexit, constitutional change would be required to take France out of the EU. While this is not impossible, it does look difficult.
Article 89 of the French constitution says that any such change must first gain the approval of the National Assembly and the Senate. The president can then put Frexit to a referendum, or seek approval from a three-fifths majority in a combined sitting of both houses of parliament. All this would be a big challenge for the National Front, which currently has only two members of parliament and two senators.
Governments have not always followed these rules. In 1962, President Charles de Gaulle – the driving force behind the current French constitution when he assumed office in 1958 – proposed an electoral reform that was backed by a majority of voters and became law. He did not get the required parliamentary approval for it.
‘Frexit is not going to happen,’ says Christine Blaise-Engel, a partner in the corporate department of French law firm Fidal and member of the IBA European Regional Forum. ‘France is very proud of its role in building the EU and is one of the leaders in Europe, so it is going to stay in Europe, for sure.’
Blaise-Engel believes Le Pen does not have enough support to be elected. In regional elections in 2015, the National Front led the first-round voting in six of 12 mainland regions but failed to win any of them in the run-offs. Voters from other parties joined together to back the strongest alternative candidate in order to keep Le Pen’s party out.
‘All political parties apart from the National Front want France to stay in the EU,’ says Blaise-Engel. ‘They believe we need a strong Europe in the age of globalisation.’
Similarly, Sweden’s EU membership is laid down in the country’s constitution, says Peder Hammarskiöld, senior partner at Hammarskiöld & Co and a former member of the IBA Financial Crisis Task Force 2008 – 2010. For Sweden to leave (Swexit), the constitution would need to be changed. ‘A change of the Swedish constitution requires two votes of parliament and a general election to be held between each vote,’ Hammarskiöld says. ‘In addition, there is at present only a small minority of voters in Sweden who would want to leave the EU.’ That general election would have to take place according to a pre-determined schedule – it would not be possible to call a ‘snap’ election in a deliberate bid to get more anti-EU candidates into parliament.
Other countries considered relatively strong candidates to leave the EU include Greece, which looked to have averted ‘Grexit’ a few years ago. However, it is now being discussed as a serious prospect again. If Greece’s embattled government fails to break the deadlock in increasingly difficult talks with creditors, the country’s debt crisis could return with renewed vigour. The International Monetary Fund recently predicted that Greece’s debt load could become ‘explosive’ by 2030.
‘Italeave’ is also considered more likely following the rejection of former Italian Prime Minister Matteo Renzi’s plans for constitutional reform in a referendum in December 2016. Some also argue that the woes of Italy’s banking sector could force the country out of the eurozone and the EU.
However, Article 75 of Italy’s written constitution says the country cannot hold a referendum on anything related to international treaties. This means that holding a vote on EU membership would require an anti-EU leader to gain power and then attempt to amend the constitution. Any change would have to be backed by two majority votes by both the House of Representatives and the Senate, with at least three months between each.
If the Netherlands and/or France were to vote to leave the EU, then the outlook for the bloc would be bleak. ‘After Brexit last year, if enemies of Europe manage again in the Netherlands or in France to get results then we face the threat that the largest civilisation project of the 20th century, namely the European Union, could fall apart,’ said Sigmar Gabriel, the former leader of Germany’s SPD, when he addressed the country’s parliament recently.
‘If France leaves, there is no EU any more,’ says Blaise-Engel. ‘If France were to vote to leave, on top of the UK vote, the EU would not have an answer to that,’ adds van Rooij.
Jan-Willem van Rooij
A partner at Loyens & Loeff and a member of the IBA European Regional Forum
However, Hammarskiöld thinks it could carry on in some form. ‘I’m not as negative as Soros, I think it could be business as usual for the remaining countries,’ he says. ‘Or perhaps the other eurozone countries could continue. There are lots of scenarios where the show could go on – it would just be on a smaller scale. But there does have to be a breaking point for the EU somewhere.’
Some observers are looking further ahead to a radically overhauled European system that would take account of complaints about the perceived lack of democracy and transparency in the current EU set-up. The economist Thomas Piketty, for example, has proposed pooling at least some of the eurozone countries’ debts and creating a new parliament for the eurozone composed of members drawn from the national parliaments, proportionate to each country’s population.
Others believe proposals like this are not fully grounded in reality. ‘The EU’s saving grace for the moment is that no one has any convincing alternative to it,’ said UK-based political scientist Chris Bickerton in his book on the EU published last year. ‘It is fanciful to believe that out of the present-day European Union chrysalis, organized under the guide of secrecy and run by national political elites, will emerge a beautiful, supranational and democratic butterfly.’
Like Hammarskiöld, van Rooij is open to other potential models for Europe. ‘In the Netherlands, there have been discussions about a northern European Union that omits the “net takers” from the EU and is based on a strong currency including Germany, the Scandinavian countries that use the euro, Belgium and Luxembourg,’ he says. ‘But that would be a totally different ball game – it would be “Benelux-plus” rather than the European Union. You could also have a southern EU, with a weaker currency, which might be better for the economies in that part of Europe.’
Whatever barriers exist to countries leaving the EU unilaterally, the bloc ultimately rests on the capacity of national governments to command the will of their citizens, says Bickerton. ‘As anti-establishment feeling becomes a material force in contemporary European politics, so the representative capacities of governments decline. The EU may one day find that the ground it thought it was resting on has simply disappeared, and the EU with it.’
In which case, he adds, those in Brussels may end up feeling like Wile E. Coyote in his endless, fruitless pursuit of Road Runner. ‘In many ways, the EU is like the cartoon character that keeps on running, even when there is no cliff underneath it any more.’
Jonathan Watson is a journalist specialising in European business, legal and regulatory developments. He can be contacted by email at firstname.lastname@example.org