What the EU must do now

There are parallels between Brexit and Singapore after Separation in 1965, says one writer, while two others argue that Brexit points to failings of the one man, one vote system.

WASHINGTON, DC • Britain's Brexit vote is arguably the greatest disaster ever to hit the European Union which must now act fast - not least by ending the post-vote market turmoil - if it is to survive.

British Prime Minister David Cameron, having lost the referendum, did the obvious thing by resigning. But the other loser is the European Commission (EC), whose president, Mr Jean-Claude Juncker, did little to change the outcome of the Brexit vote. Not since Mr Jacques Delors was head of the commission, from 1985 to 1995, has that position been filled by a leader with any vision or political clout. Mr Juncker should accept responsibility and resign. The EU needs a strong leader again.

Before the post-referendum dust settles, the EU should set an ultimatum with clear and onerous principles for Britain's exit - clarity to minimise the cost, and severity to deter populists in other member states from also calling for exit votes. Sensibly, EC leaders have already acted by voiding concessions the EU made to Britain in February and declaring there "will be no renegotiation".

The European Council has already called for an immediate summit. Having failed for six years to resolve the Greek financial crisis, the EU finally seems to understand that its very survival depends on swift and decisive action.

But the EU must do more. For the last four decades, Europe's fundamental problem has been complacency in the face of low economic growth caused by excessive taxation and regulation. This must change. Europe has to carry out fundamental reforms: cut unjustified social benefits; liberalise services, labour markets, and digital markets; reduce labour taxes; deregulate industry; improve education; and promote research and development.

Current EU rules are clear on the responsibilities of EU institutions and national governments, respectively. The problem is that most European governments (especially British Conservative governments) tend to scapegoat the EU to mask their own political myopia. Little wonder that the EU has grown so unpopular. Given that it already receives the blame, the EC should now be granted the power to act politically. The EU has a strong case to make for itself, but it needs good-faith leaders to deliver its message to the people.

European populists point to the mishandling of migration issues to justify their cause. So, for starters, the EU should establish an orderly migration policy with quotas and criteria, as Australia and Canada have successfully done, and impose proper control over its external borders. The EU border control agency, Frontex, needs a stronger mandate and more resources to fulfil this crucial role.

Going further, the EU should institute a joint foreign and defence policy to address the underlying causes of the migration crisis - namely, the conflicts in Libya and Syria. For a quarter-century, Europe has benefited from the post-Cold War peace dividend and irresponsibly allowed member states' average defence budget to slip to a paltry 1.4 per cent of GDP. This should be raised to at least the 2 per cent of GDP each Nato member has promised. Today, only five EU countries have defence expenditures at that level.

With good reason, US President Barack Obama has called Europeans "free riders". Republican presidential candidate Donald Trump, going much further, openly questions both Nato and US military expenditures abroad. In the near future, Europe may no longer be able to rely on the US to defend it and should prepare for a scenario in which it is forced to fend for itself.

The principle of representative democracy is at the heart of European identity; ironically, only non-EU member Switzerland has a strong tradition of referenda. One of the positive consequences of the squalid Brexit campaign is that it showed referenda and plebiscites are demagogic, not democratic. EU members should recognise the risks of so-called direct democracy and tighten the criteria for the passage of referenda which should at least be required to achieve a supermajority with a high percentage of voter turnout.

The best one can say about Brexit is that it finally may have put an end to European complacency. We will know for sure only if, and when, Europe chooses to save itself.


•Anders Aslund is a senior fellow at the Atlantic Council in Washington, and the author of Ukraine: What Went Wrong And How to Fix It.

A version of this article appeared in the print edition of The Straits Times on June 28, 2016, with the headline 'What the EU must do now'. Print Edition | Subscribe