Last updated on June 24, 2016
By Adriano Bosoni
Britain’s approaching referendum has led to rampant speculation about the economic and financial consequences of a vote to leave the European Union. And indeed, in the wake of a Brexit, uncertainty — the archenemy of economic growth and financial stability — would abound. But if Britain withdraws from the Continental bloc, its primary effect would be geopolitical, shaking the balance of power in Europe to its very foundation and forcing the bloc to rethink its role in the world.
The Franco-German alliance is the cornerstone on which European power dynamics rest. Conflict between the two drove three Continental wars between 1870 and 1945; its resolution facilitated peace after World War II, planting the seeds of eventual integration through the European Union. But France and Germany are not the only countries shaping Europe’s course. A third actor plays the role of power broker between the two, stabilizing their relationship and, by extension, the Continent: the United Kingdom.
When France and West Germany founded the European Economic Community (EEC), the European Union’s predecessor, in the 1950s, they had two goals. The first was to create a political and economic structure that would bind the two states together, reducing the chances of another war breaking out in Europe. The second was to facilitate trade and investment to rejuvenate Europe’s war-weary economies. Both were pleased with the solution they found: France felt it had neutralized its eastern neighbor while maintaining control of Continental politics, and Germany had successfully reconciled with the West.
Meanwhile, the United Kingdom’s relationship with the European project was somewhat ambiguous. As an island nation, Britain historically had been shielded from events unfolding on the mainland. If the United Kingdom intervened in Continental affairs, it was usually to ensure that power remained balanced and yet dispersed enough to keep Britain safe. When the EEC was born, London initially reacted with skepticism, wary of any project that would transfer more sovereignty from the British Parliament to unelected technocrats in Brussels. France, moreover, was eager to keep Britain out of the bloc; it was concerned about granting EEC membership to a country Charles de Gaulle described as “an American Trojan Horse in Europe.” De Gaulle was also reluctant to include the only country in Western Europe capable of competing with France for leadership of the bloc. It came as no surprise when, in the 1960s, France vetoed Britain’s membership twice.
But in the early 1970s, things changed. De Gaulle was no longer France’s president, and both Paris and Berlin were quickly realizing the geopolitical importance of expanding the EEC’s membership. Across the English Channel, London had lost its empire and was in the midst of reassessing its international priorities and trade relationships. Though it saw EEC membership as an opportunity to influence the process of Continental integration, Britain’s interest in accessing the common market far outweighed its aspirations of building a federal Europe. Unlike France and Germany, Britain had little enthusiasm for transforming the Continent into a United States of Europe.
These motives formed the basis of Britain’s modern relationship with Europe, which was largely established during the administration of Prime Minister Margaret Thatcher. Under the Tory leader, Britain simultaneously pushed to lower its contribution to the EEC budget and eliminate trade barriers inside the bloc. In Thatcher’s now-famous Bruges Speech, she dismissed the notion of a federal Europe, instead describing the Continental organization as an agreement among sovereign states to establish free trade. A few years later her successor, John Major, negotiated Britain’s opt-out from the eurozone.
Thatcher also advocated enlarging the EEC to the east, a strategy Labour Party Prime Minister Tony Blair continued in the early 2000s. Bringing the former communist states under the Continental umbrella not only sped up their transition to market economies but also created new demand for British exports. As an added perk for London, the bloc’s expansion into a larger and more loosely connected entity helped to dilute France and Germany’s hold over Europe.
But Britain’s approach has produced only mixed results. Few new EU members have joined the eurozone, showing the limits of the federal union, and many share Thatcher’s view of the bloc as a pact among sovereign states. At the same time, the admission of countries such as Poland and Romania has led to a significant increase in immigration to the United Kingdom, a development that Brexit supporters consider a primary reason for leaving the bloc.
Upsetting the Balance of Power
If Britain quits the European Union, though, it risks disrupting the base of power the bloc has come to rest on. Germany relies on Britain’s backing when it comes to promoting free trade in the face of France’s protectionist tendencies. France sees Britain as not only a key defense partner but also a potential counterweight to German influence. Removing Britain from the equation would shatter this tenuous arrangement at a particularly dangerous time for the deeply fragmented Europe, when neither Germany nor France is satisfied with the status quo.
Should the “leave” camp win the British referendum, tension would rise between the Continent’s north and south. Countries in Southern Europe want to turn the European Union into a transfer union that redistributes wealth from the relatively rich north to the less developed south and shares risk equally among members. Northern Europe, by comparison, is eager to protect its affluence and would agree to share risk only if the bloc assumed greater control over the south’s ability to borrow and spend. The regions also disagree on how the European Union should use its funds. Southern Europe advocates generous subsidies for agriculture and development, a view most Eastern European states share, but Northern Europe would prefer to freeze or even reduce the bloc’s budget.
As a net contributor to the European Union’s budget, Britain has been particularly vocal on these issues. According to VoteWatch Europe, the country was on the losing side of votes related to EU spending more often than any other member between 2009 and 2015. Generally speaking, Northern European states such as Sweden, the Netherlands and Denmark tend to vote alongside Britain. Germany also usually sees see eye to eye with Britain on certain topics, such as Europe’s common market, though the two tend to disagree on issues like the environment. But regardless of other members’ stances, Britain has proved more willing than any of its peers to openly voice opposition to EU decisions. Without it, the European Union would be short a liberalizing and market-friendly member, and the bloc’s political balance would shift in the favor of protectionist countries in Southern Europe such as France, Italy and Spain.
As fears of a takeover by this Mediterranean group grow among Northern European governments, they would probably become more resistant to the process of Continental integration. After all, the European Union is already deeply divided over related issues such as the eurozone and Schengen Agreement, which have little to do with Britain since it is not a member of either. The looming referendum has only revealed more points of contention within the bloc that would be aggravated by a Brexit. The Dutch government, for example, recently argued for limiting membership in the Schengen zone to a handful of countries in Northern Europe, while the right-wing Alternative for Germany party proposed the creation of a “northern eurozone.”
The north-south divide would not be the only gulf to widen on the Continent, either. Should Britain leave, the European Union would split between east and west, too. Countries in Central and Eastern Europe see Britain as the defender of non-eurozone members’ interests, and many share London’s views on the sovereignty of member states. Poland, Hungary and the Czech Republic, for instance, are generally supportive of the European Union but suspicious of Brussels’ attempts to interfere with their domestic affairs. In particular, these countries have sympathized with British Prime Minister David Cameron’s campaign to give national parliaments more power to block EU legislation. Poland and the Baltic states also see Britain as a critical partner on the issue of Russia, since London has fought for a tough European stance against Moscow in response to its annexation of Crimea. In the event that Britain leaves the Continental bloc, its Central and Eastern European allies may eventually become more isolated from Brussels.
Weakening Europe’s Influence Abroad
The loss of one of the few EU members that is able to operate on a global scale would undermine the bloc’s external strength as well. Only France can match the international presence Britain has, thanks to London’s vast political and economic connections and its considerable military prowess. Though a Brexit would not keep Britain from cooperating with Europe completely, given its continued NATO membership and shared security interests with France and Germany, its collaboration with the Continent would be limited. As a result, Europe’s ability to cope with challenges abroad — whether the migrant crisis, international terrorism or a more assertive Russia — would diminish.
Germany’s and France’s recent calls for the European Union to deepen its military and security cooperation seem to suggest the two are concerned about this very outcome. Berlin has steadfastly avoided taking on the more active role in world affairs that a Brexit would require. Since the start of the European financial crisis, Germany has reluctantly shouldered the burden of leading the bloc’s political and economic policymaking, but assuming a prominent military role is another matter. France, for one, would accept it only within the framework of an EU-wide military union, something that would be difficult to achieve amid the atmosphere of isolationism that has settled over the Continent. The political calculations of French and German leaders preparing for general elections in 2017 would make such cooperation even harder to come by.
No matter what British voters choose, the damage to Europe has already been done. If Britain leaves the European Union, it would throw the Continent into yet another political and economic crisis, giving Euroskeptic forces greater ammunition against the bloc and voters fewer reasons to defend it. But if Britain keeps its membership, it would have proved to other European governments that it is possible to demand concessions from Brussels while winning support at home. And so, regardless of what happens June 23, Britain has set a precedent that Brussels cannot stop other EU members from following.
<a href=”https://www.stratfor.com/weekly/how-brexit-would-undermine-europes-balance-power”>How a Brexit Would Undermine Europe’s Balance of Power</a> is republished with permission of Stratfor.