The EU’s Hotel California Problem

With the UK’s referendum on EU membership now only a month away, one thing is becoming increasingly clear: no one is quite sure what a post Brexit would look like.  Oh sure, the Leave and Stay camps have both rolled out their utopian and dystopian visions respectively but these are guesses at best.

Despite the fact that the procedure for leaving the EU is clearly spelled out in Article 50 of the Lisbon Treaty, there is an incredible amount of uncertainty surrounding the Brexit. How would the UK access the EU market in a post Brexit world? How would the negotiations for a Brexit go? When would it start? How long it would take?  Some have estimated that it might take over ten years for the UK to completely withdraw from the EU.  All this uncertainty exists because there is no precedent for a country leaving the EU and, there for, no roadmap to follow.

This is not the first time that the EU has faced the possibility of a member state exiting the union. It was only year ago when the EU was staring the possibility of a Grexit in the face.  Although the drivers of Brexit and Grexit are very different, the UK is voting to the leave the EU and Greece was in danger of being expelled from the Eurozone, both countries faced the same uncertainty as to how they would actually exit the EU.

It would be wrong to think of the uncertainty of the Brexit and Grexit as an unintended consequence of the EU.  The uncertainty of how a country would leave the union is an intended feature of the EU, not a bug.  In short, the EU was designed as Hotel California – you can check out any time you like, but you can never leave! As I discussed before, the Hotel California design clearly applies when it comes to financial regulation but also extends to the geopolitical aspects of the EU as well.

With sixty years of relative peace and stability across Europe, it is easy to forget that the history of Europe wasn’t always so peaceful. The Norwegians Nobel committee expressed this view, when it awarded the Nobel Peace Prize in 2012:

Over a seventy-year period, Germany and France had fought three wars. Today, war between Germany and France is unthinkable. This shows how, through well-aimed efforts and by building up mutual confidence, historical enemies can become close partners.

In the 1980s, Greece, Spain and Portugal joined the EU. The introduction of democracy was a condition for their membership. The fall of the Berlin Wall made EU membership possible for several Central and Eastern European countries, thereby opening a new era in European history.”

One of the driving forces behind the formation of the EU, and its forerunner institutions, was to create greater integration amongst European countries.  The idea was to evolve beyond simply encouraging economic stability to include geopolitical stability as well.

With this as a backdrop, it is easier to understand why the EU was deliberately designed as difficult to leave and why uncertainty is a byproduct of this design. Of course, this knowing doesn’t help reduce the uncertainty but, at least, it may help explain it. One thing is for sure; as the referendum date nears the uncertainty is likely to intensify.