UN-UNITED EUROPE BREXITS AND ITS EFFECTS ON EUROPEAN COUNTRIES

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UN-UNITED EUROPE BREXITS AND ITS
EFFECTS ON EUROPEAN COUNTRIES:
Introduction:
Britain's relation to the European Union has never been simple. Britain was initially not
interested in joining the European Economic Community. When it changed its mind its
membership request was vetoed by France twice. It finally joined only in 1973, but even since
the relation has been complicated. The Brexit the withdrawal of the United Kingdom from the
European Union has been on the agenda ever since it joined in 1973. In 2013, however, David
Cameron Conservative prime minister committed to hold a referendum after his re-election:
The referendum is scheduled for 23 June 2016. Britain would not be the first departure from
the European Union, since Greenland has left in 1985 over disagreements in fishing rights, but
it would be the first sovereign country and its departure would have widespread effects on life
and economy both in the UK and in Europe (Buckle et al., 2015; Dagnis Jensen and Snaith,
2016; Oliver, 2016). Our goal is not to provide a comprehensive review of such likely effects:
we look at the consequences of the Brexit on the voting in the European Council, better known
by its former name, the Council of Ministers.

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The European Council is one of the main decision making bodies of the European Union.
Unlike in the European Parliament, for instance, each country is represented by a single
individual; the size differences between countries are expressed by weighted qualified majority
voting. Since the treaty of Lisbon voting is successful if at least 55% of the countries, having
at least 65% of the population vote in favour. Previously each country had, additionally, an
artificial weight and this weight played the primary role in determining voting power. Back in
those days each extension of the European Union created long debates on the new weights; the
new voting rules made the accession of Croatia smoother, but also enables us to have clear
predictions on what will happen should the United Kingdom choose departure.
What is Brexit?
Brexit - British exit - refers to the UK leaving the EU.
A public vote (known as a referendum) was held in June 2016, when 17.4 million people opted
for Brexit. This gave the Leave side 52%, compared with 48% for Remain.
What is the European Union?
The EU is an economic and political union involving 28 European countries. It allows free
trade, which means goods can move between member countries without any checks or extra
charges. The EU also allows free movement of people, to live and work in whichever country
they choose. The UK joined in 1973 (when it was known as the European Economic
Community) and it will be the first member state to withdraw.
What happens after Brexit day?
The UK formally left the EU on 31 January 2020, but there is still a lot to talk about and months
of negotiation to come. While the UK has agreed the terms of its EU departure, both sides still
need to decide what their future relationship will look like. This will need to be worked out
during the transition period (which some prefer to call the implementation period), which began
immediately after Brexit day and is due to end on 31 December 2020.During this 11-month
period, the UK will continue to follow all of the EU's rules and its trading relationship will
remain the same.

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What needs to be agreed?
The transition period is meant to give both sides some breathing space while a new free trade
agreement is negotiated. This is needed because the UK will leave the single market and
customs union at the end of the transition. A free trade agreement will allow goods to move
around the EU without checks or extra charges.
If a new one cannot be agreed in time, then the UK faces the prospect of having to trade with
no deal in place. That would mean tariffs (taxes) on UK goods travelling to the EU and other
trade barriers. Aside from trade, many other aspects of the future UK-EU relationship will also
need to be decided. For example:
 Law enforcement, data sharing and security
 Aviation standards and safety
 Access to fishing waters
 Supplies of electricity and gas
 Licensing and regulation of medicines
Prime Minister Boris Johnson insists the transition period will not be extended, but the
European Commission has warned that the timetable will be extremely challenging.
What is the transition period?
The transition (sometimes called the implementation period) is due to last until 31 December
2020. During this period, the UK will remain in both the EU customs union and single market.
That means, until the transition ends, most things will stay the same. This includes:
 Travelling to and from the EU (including the rules around driving licences and pet
passports)
 Freedom of movement (the right to live and work in the EU and vice versa)
 UK-EU trade, which will continue without any extra charges or checks being introduced

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Now transition has begun the UK will automatically lose its membership of the EU's political
institutions, including the European Parliament and European Commission. So, while the UK
will no longer have any voting rights, it will need to follow EU rules. The European Court of
Justice will also continue to have the final say over any legal disputes.
Why is a transition necessary?
The idea behind the transition period is to give some breathing space to allow new UK-EU
negotiations to take place. These talks will determine what the future relationship will
eventually look like. Both sides have already outlined their broad aims, in a 27-page document
known as the political declaration.
What needs to be done during the transition?
Top of the to-do list will be a UK-EU free trade deal. This will be essential if the UK wants to
be able to continue to trade with the EU with no tariffs, quotas or other barriers after the
transition. Tariffs are a type of tax, usually paid on imported goods. If goods are subject to
quotas, it means there are limits on how many can be traded over a given period.
Both sides will also need to decide how far the UK is allowed to move away from existing EU
regulations (known as level playing field rules). However, a free trade deal will not eliminate
all checks between the UK and EU. So businesses will need to prepare.
In 2018, total UK trade (goods and services) was valued at £1.3 trillion, of which the EU made
up 49%.

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Where does the UK trade?
% of total UK trade in 2018
What is the Brexit deal?
The transition period and other aspects of the UK's departure were agreed in a deal called the
withdrawal agreement.
Most of that was negotiated by Theresa May's government. But after Mr Johnson replaced her
in July 2019, he negotiated some changes to it.
The key change is that under Mr Johnson's deal, a customs border will effectively be created
between Northern Ireland and Great Britain. Some goods entering Northern Ireland from Great
Britain will be subject to checks and will have to pay EU import taxes (known as tariffs).
These would be refunded if goods remain in Northern Ireland (ie are not moved to the Republic
of Ireland).

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The rest of the withdrawal agreement is largely unchanged from the one negotiated by Mrs
May. This includes:
 The rights of EU citizens in the UK and British citizens in the EU (which will remain the
same during the transition)
 How much money the UK is to pay the EU (estimated to be about £30bn).
Why did Brexit take so long?
Brexit was originally meant to happen on 29 March 2019, but the deadline was delayed twice
after MPs rejected the deal negotiated by Mrs May, the prime minister at the time.
After MPs voted down the deal for a third time, Mrs May resigned.
Mr Johnson needed a Brexit extension of his own after MPs failed to get the revised deal passed
into law.
This led to the new deadline of 31 January 2020.

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Mr Johnson then called an early general election, to which MPs agreed.
The election, which happened on 12 December 2019, resulted in a Conservative majority of
80. With a sizeable majority in Parliament, it proved straightforward to pass the Brexit
legislation.
Impact on the European Countries:
Some argue that Brexit would lead to the collapse of the EU, but this is highly unlikely. The
web of socioeconomic ties between the remaining member states has been woven so intricately
and deeply over the past six decades that Brexit would not unravel the fundamental post-World
War II order in Europe.
But unfortunately for the rest of the EU, the consequences of Brexit would not be limited to
the UK. Brexit would fan the flames of growing anti-EU sentiment in Europe, emboldening
nationalist and eurosceptic movements, and leading to a retreat from EU-level solutions to
cross-border challenges. Brexit may also boost a new generation of nationalist leaders (most
likely in France, Hungary, and Poland) to copycat the ‘blackmail tactics’ employed by David
Cameron to obtain concessions from the rest of the EU. Hungarian Prime Minister Viktor
Orban has already emulated these tactics by calling for a national referendum in the hope of
obtaining a popular mandate so as to better resist attempts by the European Commission to
accept its quota under a new refugee relocation scheme.
In addition, by removing a major power from the EU, Brexit would increase the already
dominant influence of Germany in the Union. This in turn could heighten tensions in countries
suspicious of Berlin – including France, where Marine Le Pen and her far-right National Front
party have gained strength ahead of the 2017 presidential elections. Germany and its like-
minded partners in the EU would nevertheless try to put the house together again with renewed
integration initiatives to counter the reputational damage of UK secession. Rhetorical resolve
would be immediately forthcoming, but real action would be delayed as Germany will be
caught up in its own national election in 2017.

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How might Brexit impact on EU policies? There are four likely
areas of change: the euro currency system, the EU’s budget and
liberalisation, the nexus of immigration and border management
and foreign and security policy more broadly.
 First, in the wake of a Brexit, there is a risk that the euro will depreciate. In the longer run,
however, the eurozone would have more power to drive economic and financial policy in
the EU. France, Germany and Italy all say they want to make the euro system more robust
on the fiscal side, but behind this simple statement lie profound disagreements, with Italy
wanting Eurobonds, Germany blocking anything that smacks of a transfer union and France
making speeches about the need for an EU ‘finance minister’. Progress towards a capital
markets union would also continue, although at a slower pace and in a different direction
from London’s preferred approach. Some major US banks have already declared that they
might relocate their European branches from London to Europe.
 Second, without the UK, the EU budget would have to do without the UK’s €10.5
billion net annual contribution. This would certainly require a thorough review of budget
allocations and revive a debate about raising new resources for the EU. Also, the weight of
the ‘economically liberal’ bloc in the EU (currently the UK, the Netherlands, Sweden,
Denmark and Estonia) would decline. Because of this, pundits have suggested that a post-
Brexit EU would probably become more protectionist, yet there has been a growing
consensus across the Union in favour of liberalising internal markets in goods, services and
labour.
 Third, on the immigration front there is much to be done. The refugee crisis of the past year
has clearly demonstrated that the EU needs to move towards a centralised border control
and asylum mechanism. Although such momentous moves are unlikely in the foreseeable
future, the need for common action will only increase as migration pressure from Africa is
added to the current movements from the wider Middle East, creating an ever-bigger
challenge. At the same time, a Brexit would reduce the EU's ability to tackle cross-border
organised crime and transnational terrorism, unless new coordination and cooperation
mechanisms can be established with the UK.

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 Finally, foreign and security policy would perhaps be the least-fraught areas. It is
undeniable that Brexit would seriously threaten the EU’s global standing and soft power
status, its ability to play a greater role on global security issues and the likelihood of
concluding the Transatlantic Trade and Investment Partnership (TTIP) deal with the United
Sates before the end of President Obama’s term. On the other hand, EU decision-making
without the historically ‘unruly’ UK would become simpler and lead to a more
truly common Common Foreign and Security Policy. Indeed, without the UK, there would
be less opposition to the establishment of a permanent structure for defence cooperation,
with more pooling and sharing of capabilities, more cooperation on defence planning and
the creation of a single military headquarters in Brussels.
Changes:
Size and Wealth:
 Budget
The UK's contribution to the EU budget in 2016, after accounting for its rebate, was €19.4
billion. After removing about €7 billion that the UK receives in EU subsidies, the loss to the
EU budget comes to about 5% of the total. Unless the budget is reduced, Germany (already the
largest net contributor) seems likely to be asked to provide the largest share of the cash, its
share estimated at about €2.5 billion.
To help fill the gap, the European Commission has looked at reductions in regional spending
of up to 30%, which has concerned some of the poorer member states which rely heavily on
the regional funds. However the EU has been under-spending on regional funds to the extent
that €7.7 billion of unpaid funds was paid back to member states in 2017 (in addition to several
billion more that came in due to cartel and anti-trust fines). The result may be that most of the
savings in the EU budget could be located in regional funds which are being under-spent
regardless.
The budget issue oppose those who expect the budget to be 1% of the GDP and those who
expect it to be 1.074%

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Policy changes:
 Defence and foreign affairs
The UK was a key asset for the EU in the fields of foreign affairs and defence given that the
UK was (with France) one of the EU's two major military powers, and has significant
intelligence capabilities, soft power and a far reaching diplomatic network. Without the UK,
EU foreign policy could be less influential.[6] The US saw the UK as a bridge between the US
and Europe, and the UK helped align the EU positions to the US and provide tougher responses
to Russia.
However, Brexit also produced new opportunities for the European defence cooperation, as the
UK consistently vetoed moves in this direction, arguing it would undermine NATO. It
attempted to do so again – even after its withdrawal referendum, in relation to the
establishment of a military HQ. With the UK's withdrawal and a feeling that the US
under Donald J. Trump may not honour NATO commitments, the European Council has put
defence cooperation as a major project in its [post-Brexit vote] Bratislava and Rome
declarations and moved forward with setting up a European Defence Fund and
activating Permanent Structured Cooperation (a defence clause in the Lisbon Treaty).
Economic changes:
 Trade with UK
After Brexit, the EU would become UK's biggest trading partner, and the UK will become
EU's third biggest trading partner after the United States and China. After Brexit, the UK and
the EU would become each other's biggest trading partner but some member states, notably
Belgium, Cyprus, Ireland, Germany and the Netherlands, are more exposed to a Brexit-
induced economic shock. The economy of the Republic of Ireland is particularly sensitive due
to its common land border with the United Kingdom and its close agribusiness integration with
Northern Ireland.
The reintroduction of a customs border would have been economically and politically
damaging to both sides, particularly because of the risk to the Northern Ireland peace
process that a physical border presents.[20] Despite protestations of good will on both sides, it

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was not obvious how border controls could have been avoided unless the UK has a Customs
Union with the EU. Arising from the agreements made at the Phase 1 negotiations (after
the DUP intervention), any arrangements to be made to facilitate cross-border trade in Ireland
will apply equally to cross-Channel trade but the details remain unclear. In October 2019, the
UK and EU renegotiated the Northern Ireland Protocol of the draft Brexit Withdrawal
Agreement so as to keep open the border in Ireland and to have a customs border between
the island of Ireland and the island of Great Britain (leaving Northern Ireland 'de facto' in the
EU Customs Union in some respects).
The sectors across the EU that would be most hit by the UK's withdrawal are motor vehicles
and parts (the UK is a large manufacturer and depends on an EU chain of supply for parts),
electronics equipment and processed foods. Export of raw materials from the Ruhr
valley would also be impacted.
Institutional Changes:
 Agencies locatedin the UK
In 2017, the UK was currently hosting the European Medicines Agency and the European
Banking Authority. As an EU agency could not be located outside the Union, the Council began
a process to identify new host cities for the agencies. Hosting an agency is seen as a valuable
prize for a city, so the process was hotly contested by nearly two dozen cities not just on the
objective criteria, but on political grounds. By November 2017, it was agreed that they would
relocate to Amsterdam and Paris.
The backup data centre for the security behind the Galileo satellite navigation system was also
relocated from the UK to Spain due to Brexit.
 European Parliamentseats
The UK was allotted 73 seats in the 751 seat European Parliament, which became vacant upon
its withdrawal in 2020. 27 of these seats were redistributed to other countries, with the
remaining 46 reserved for potential new member states, reducing the number of MEPs to 705.
Under normal procedures, the UK's seats would have been redistributed between the remaining
members according to the standard formula, but there were a number of alternative proposals.
The European Parliament originally proposed that 22 seats would be redistributed and the

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remaining 50 would be reserved either for new members, or an additional transnational list of
MEPs which would be elected across the Union in an effort to deepen a direct democratic link.
This was a long-standing proposal, notably supported by the European Green Party and French
President Emmanuel Macron. However, due to the legal uncertainty around Brexit, any bold
moves were opposed by constitutional affairs committee chair Danuta Huebner.
Computations were proposed in a paper titled "The Composition of the European Parliament"
on 30 January 2017. The constitutional affairs committee eventually decided on 23 January
2018 that 27 of the UK's seats would be redistributed and 46 reserved for new member states
and transnational lists. On 7 February 2018, MEPs approved the redistribution of 27 seats, but
voted against the introduction of transnational lists. On 31 January 2020, all UK MEPs vacated
their seats; reallocation began on 1 February 2020.
How does Brexit affect the euro?
Now let’s consider the Brexit effect on euro. This was noticeable in the aftermath of the
Brexit referendum in 2016 when the euro declined versus the dollar. The Brexit effect on the
euro exchange rate was also recently marked with the announcement of Boris Johnson’s new
Brexit deal, which sent the euro higher versus the dollar. As we discussed, when there has
been good news surrounding Brexit and the likelihood of a Brexit deal has increased, the euro
has increased versus the US dollar, but fallen versus the pound.
When there has been bad news regarding Brexit and the chances of a no deal Brexit have
increased, it has not been uncommon to see the euro decrease in value versus the US dollar,
but increase in value versus the pound.
Why is there a Brexit impact on the euro currency?
This is because the pound is the most heavily affected currency by Brexit developments.
Therefore, the pound will experience the most volatility and the strongest moves in relation to
Brexit. The euro often syncs the pound’s moves but in a less extreme manner. This is because
the type of Brexit will also impact on eurozone economies. A Brexit deal would reduce
uncertainty and risk. This is beneficial for eurozone companies and economies. A no deal
Brexit would elevate uncertainty and risk and would be damaging to eurozone economies.

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For example, Germany, the largest economy in Europe and an exporter nation, is sitting on
the brink of recession. Brexit has played a role in reducing German factory orders as business
confidence falls. Jobs across Germany, France, Belgium and the Netherlands could be at risk
as a no deal Brexit would almost certainly result in a hold up in trade and reduced trade.
Falling confidence and slowing trade in the eurozone, an economy which is already
experiencing a slowdown, could force the European Central Bank to ease monetary policy
further in an attempt to shore up the weakening economy. A more dovish ECB could pull the
euro lower. On the other hand, a Brexit deal could return some certainty, boosting
confidence. This could go some way to increasing trade and consumer confidence. Under this
scenario the ECB may not be forced to ease policy as much, or at all, offering support to the
euro.
What’s the value of the euro since Brexit?
The value of the euro against the US dollar has fluctuated since Brexit. The pair fell sharply
in the months following the Brexit referendum to a low of $1.03 in January 2017. However, it
is worth noting that this was not just Brexit. Other factors such as Trump’s tax cuts and
lacklustre eurozone inflation also played a large role. So, is the euro going down? No, it
rebounded, and the euro is once again trading around $1.11.
Conclusion:
Brexit would not only be bad for the UK, but would also be on balance bad for the EU. Both
parties could waste years negotiating a new relationship. At a time when the post-World War
II international order is under strain and Europe's societies are increasingly threatened by
protectionism, it is abundantly clear that the EU needs more than ever to be able to resolutely
face the big global challenges. But if the Remain vote prevails on June 23rd, the EU could be
strengthened on multiple fronts – internally, through further liberalisation of the single market,
and externally, as a robust pillar of a liberal order in an increasingly hazardous and chaotic
world.

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https://www.tandfonline.com/doi/abs/10.1080/14781158.2017.1385597
https://www.thebalance.com/brexit-consequences-4062999