BREXIT - an existential crisis for the EU

The European Union (EU) has agreed recently to a new deal offering a "special status" for the United Kingdom (UK) to forestall BREXIT (exit from the EU) which has been gaining ground for some time in the UK. Whether these concessions can forestall BREXIT will be decided in a referendum likely to be held in June this year. But a life after the EU is emerging as a real option for the UK. While Euroscepticism has always been a part of the British political debate but the recent surge in Euroscepticism is a product of the rapidly changing political, social and economic climate both in the UK and the continental Europe. EU's current difficult economic  situation,  especially since the onset of the global financial crisis (GFC) in general and Euro crisis  in particular, has aggravated the situation.  The list of UK's grievances include Brussel's bureaucracy and its firm grip on  decision making (i.e. democratic deficit in the EU), erosion of sovereign rights to make laws, or even control its own  borders, it's very considerable financial contribution to the EU budget (e.g. totalling £11.3 billion in 2013) which is likely to go up further because of  Britain's above average economic performance relative to other EU countries  - and the list goes on. All this has given further momentum to BREXIT.
The situation in the EU has been exacerbated by the huge refugee influx from  war-torn countries in the Middle East and Afghanistan, North Africa  and from Syria in particular. This is a Europe-wide crisis - and not particularly a British one. But Britain, along with France and also Italy, is partly responsible for the refugees originating from Middle East and North Africa. The refugee influx that Europe faces now is the direct consequence of their military interventions in support of their ally the USA or on behalf of the USA in those countries. Their military interventions have practically destroyed Afghanistan, Iraq, Syria and Libya.  In effect, the refugee influx is their own creation. However, for the UK, the primary focus is on legal immigrants coming from other EU countries.
A BROADER HISTORICAL PERSPECTIVE: This is no wonder that difficult economic times have always been a fertile ground for populist political and economic solutions and xenophobia.   The support for BREXIT is not only confined to the ultra-right nationalists in the UK represented by the UK Independence Party (UKIP) but also elements within the two mainstream political parties i.e. the Conservatives and the Labour. The feeling has become so strong that there is a coalescing of the right and the left to push the BREXIT agenda. But to understand the UK's ideas on and its response to an integrated Europe, one needs to take a broader historical perspective.
John Maynard Keynes travelled to Paris in January, 1919 (he was 35 then) to attend a conference as a member of a British delegation headed by its Prime Minister David Lloyd George. The conference was also attended by the President of the United States, Woodrow Wilson and the Prime Minister of France Georges Clemenceau (it involved more than 32 countries and nationalities).  The conference is known as the Paris Peace Conference or Versailles Peace Conference. Woodrow Wilson, Lloyd George and Clemenceau were the principal actors at the conference. Its main objective was to set the peace terms for defeated Germany in the wake of the armistices of 1918. While the conference took a number of other important decisions but its main thrust was Germany and to put responsibility for initiating the war on it. The conference, therefore, stipulated very high reparations Germany was to pay. By all reasonable reckonings of the time, Germany was not at all in a position to fulfil its reparation obligations. The most hawkish of the three leaders was Prime Minister Clemenceau, who was determined to box Germany economically forever so that France's powerful neighbour could never again pose any challenge to France, both militarily and economically.  Possibly Clemenceau was trying to squaring up the treatment meted out to France by Germany under the Treaty of Frankfurt in 1871 that ended the Franco-Prussian War. The treaty that eventually emerged bore all the hallmark of a Carthaginian Peace treaty. The problem is you cannot choose your neighbours, they are geographically pre-determined. A fact of life we are all too familiar in our part of the world.
Prime Minister Clemenceau finally got his way with nods from the other two leaders, in particular from President Wilson who was besotted by Clemenceau with all his charms and political manipulation skills. A senior British civil servant, who accompanied the British delegation, commented that Wilson was anything but a strong man; Clemenceau could buy him at one end of the road and sell him at the other end. Keynes described President Wilson as "the greatest fraud on earth".  While Lloyd George pursued a middle course, he also finally caved into Clemenceau line of action: Germany must pay punitive reparations.
Keynes was appalled at the terms imposed on Germany. He warned that the punitive measures would ruin Germany financially which, in turn, would have very serious economic and political consequences for Europe and the world at large. In effect, the Treaty was setting the ground for another war.
Keynes did the honourable thing to do under the circumstances. He wrote the Prime Minister informing his resignation from his position.  He packed his bag and went home in despair. Many other Britons also expressed similar views, and prominent among them were Beatrice Webb and Herbert Asquith.
Keynes proved absolutely prophetic. By 1939, Europe not only plunged into another war but also saw the emergence of another Caligula in the shape of Hitler. Once again, Germany was on the march in Europe under the leadership of Hitler. The war that ensued and the devastation that caused we are all too familiar with that. The main brunt of the war was borne by the Soviet Union costing 10.1 million military lives alone not to speak of lost civilian lives and the corresponding human misery. The UK and USA also paid a huge price in terms of military lives (UK 384, 000 and USA 407,300); this figures do not include war-related civilian deaths and misery.
The Allied victory in 1945 put an end to the devastating war. Now, challenges of the peace included not only the reconstruction of Europe but also the charting of the course for the future direction of the continent so that Europe again does not plunge into another devastating war or wars.
Central to the debate was the "German Issue" or more precisely how to deal with the problem described as the "German Problem".  The repeat  of the Versailles Treaty was out of question. It was tried and tested, and it dismally failed. Therefore, a more pragmatic and effective means were needed. This was the considered view at the time, despite suggestions from a section of the US establishment to de-industrialise Germany and turn it into a pastoral agricultural country and to put the people of Germany on a permanent diet of potatoes at the conclusion of the WW II (many in the British establishment also shared the same view). Therefore, the line of argument was whether German identity could somehow be subsumed within a wider European identity. It all means that only way ahead was to Europeanise Germany. To be even-handed, it would apply to all other European countries who wish to join together and this would make it palatable to Germany.
The Council of Europe was established in 1949 as the first step towards European integration. By moving through various stages of integration with varying number of states at various stages, it has now moved to the stage what is called European Union (EU) with 28 member-countries. Countries such as Switzerland, Norway, Iceland and the tiny Liechtenstein are not member of the EU.
EUROZONE AND ITS IMPLICATIONS: The EU even introduced a common currency called Euro in 1999 which is the currency of 17 Eurozone countries within the EU now. Many EU member-countries do not fulfil the criteria to join in  the Eurozone  (countries that adopted the euro as their national currency) also called as "euroland" and others like the UK, Sweden and Denmark did qualify and still qualify but opted out the arrangement.
From the economic point of view the Euro has been fraught with a great degree of uncertainty and scepticism. Two main, though unrelated, issues are involved in it. One, if a member-country is affected by shocks such as the exchange rate, wage rate and balance of payments, it has no recourse to using the exchange to adjust the impact of the shock, as was exemplified in the Greek crisis last year and which is still there waiting for final resolution. Secondly, it is commonly understood that the Euro is nothing but de-facto Deutsch Mark. It means if you take Germany out of the common currency equation, the Euro will collapse in a heap in minutes, even not hours. Germany has literally underwritten the Euro.
 Many argue that the Euro is more a politically motivated act than a prudent economic decision. It may sound like a strategic economic decision to unite Germany and France into a tight-knit economic and monetary relationship so that they never go to war again. But cynics believe that it may actually lead to the opposite effect. How? Look at the plight of the PIGS countries (Portugal, Italy, Ireland, Greece and Spain); it has resulted in a depreciation of the Euro, hence the booming German exports. Imagine Germany still has its own currency; Deutsch Mark, it will just appreciate significantly under the current economic climate in Europe. Greece even thinks Germany is too tight-fisted with its piles of money earned at their expense. While Germany is laughing all the way to the Bank [European Central Bank], it has not gone unnoticed by countries under severe economic strains in the EU. The Euro has become a noose around their neck.
Germany is having the last laugh; instead of becoming europeanised, it has, in effect, turned Europe Germanised. That remains a sore point for the British establishment, in particular, and also the French. And more galling is Chancellor Markel with the help from President Hollande (in the spirit of European unity, not that Chancellor Markel really needs him) are in practical sense running the EU. In the final analysis, Germany appears to have achieved by peaceful means what it could have achieved through military conquests. In effect, Angela Merkel has assumed the informal Presidency of Europe. Now you get the cynic's point of view. May we call it a counterfactual narrative!
The writer is an independent  economic and political analyst. muhammad.
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