It’s about Europe’s future now

The Brexit drama seems to find no end. The divorce contract as well as the text outlining a perspective on how to organise the future relationship both got rejected by the House of Commons. A positive, constructively-minded majority there is not discernible.

Just as little inkling on the way forward can be derived from Theresa May’s course of action. There are no new proposals, and on 28th January, the Prime Minister even voted herself against the contract, which she had described as the only possible one.

The core of the political controversy, i.e. the backstop for Northern Ireland, was a British demand, which the EU accepted and for which it is scolded now. The proposal, to only keep Norther Ireland in the customs union – analogue to an arrangement of treating the Spanish Canary Islands as a fiscally special area – was brusquely rejected by Theresa May. The representatives of the EU institutions are now just as astonished as their European national counterparts. They feel deceived and mislead and see a growing danger for the EU as a whole.

Nevertheless, there are increasingly voices that only seem to see a duty for reason and rationality for the Europeans: one shouldn’t be too strict, should show some lenity, and generally be a bit more flexible, even more entrepreneurial. But any smart entrepreneur wouldn’t even start negotiations with such an erratic counterpart. There are other proposals that see a customs union as the solution. That undoubtedly has compelling arguments. One would wish, that it could become reality. But alas – the political will – or lack thereof - in the UK is preventing it.
Theresa May defines the same red lines for Brexit as does Nigel Farage: Brits shall “take back control” of their money, their borders and their laws. Thus, the single internal market and the customs union are no option. This is not changing, even with the crash-out day coming closer; and an uptick in the polls for Theresa May and the Tories. Economic advantage considerations obviously are irrelevant for the political elite and at least half of the population in the UK. Economic rationality thus leads to no avail or even astray, if it ignores compliances with EU rules and procedures.

No amount of lamenting will help, neither do all the sympathy statements for the Britons. The country is in a deep identity crisis. In the long run there even lurks the danger of a dysfunctional state, which consequently will be of little interest for international cooperation with third countries. Therefore, it is highly doubtful that a prolongation of the exit date will lead to anything. New solutions for new majorities are nowhere to be seen, all possible routes were explored during the past two years.

Now, everyone must realize what is important for them. For the European Union it is about making 2019 a starting point for renewal. The European Parliament elections are coming up, including the determination of a new EP president; EU Council presidency, EU Commission presidency as well as the ECB presidency are going to change; a new multiannual financial framework must be agreed. It is not only about the European institutions but about the competitiveness of Europe: investments in research (AI) and infrastructure (trans-European networks), continuation of the banking union, creation of a capital markets union, strengthening of the EU’s foreign policy capacities and of the defence cooperation.

In this context, Brexit must not be a priority. Vis-à-vis the global challenges and the European opportunities, it becomes second-tier – a dramolett. Europe has other tasks: it must reassure itself of its identity as a peace project and a common cultural area, in which the majority always faces minority-resistant rules and laws and the civil society has participation options. There is lots to do, as not least the migration crisis demonstrated. Brexit made clear that there is a political consensus to not endanger the basis of European integration, as some economists carelessly suggest regarding the fundamental freedoms.

But what does it all mean for companies? Do they have to accept a hard Brexit? Yes. Since last December, economically speaking, the escalating uncertainty around Brexit has been pointing in the direction of having to activate emergency plans. The economic calculation is obvious, otherwise the value of the option of such plans deteriorates. Thus, it becomes secondary whether it really happens. The costs of hard Brexit are priced-in. Whoever hasn’t yet activated their emergency plans will need to explain the risks of a loss of capital to investors.
The strategy of companies in the EU now must focus on strengthening the European internal market and develop its digital aspects. The Brexit has slipped to the level of operations. What we must not allow, politically, economically, culturally as well as socially is - what Brexiteers aimed for all along - that Brexit destroys the European integration project and unity. This is where the relevant economic risk lies now. It would be even more fatal to allow oneself to play into the hands – unwittingly, based on well-meaning reasons or mis-guided respect – of such destructive forces.

Read the Article at faz.net.