News analysis

EU faces fight for life as political paralysis looms over Britain

Britain has stunned the world and its European partners with its decision to walk out of the European Union, setting off shock waves globally.

For the EU, it is also a dangerous leap into the unknown as populists of every stripe in Europe are guaranteed to demand similar referendums. This puts the entire EU project in jeopardy, and averting its unravelling will preoccupy its leaders for many years to come.

More immediately, Mr David Cameron, who will remain as prime minister until October, is guaranteed an icy reception when he meets his EU counterparts at a summit next week.

While EU leaders may blame him for the continent's predicament for calling the referendum, the last thing Europe needs now is a public spat with Britain, which may spark off a wider rout for financial markets.


Furthermore, the process of separation is likely to take two years and so it may suit all EU governments to tone down their immediate grandstanding.

But events are likely to spin fast and beyond anyone's control. Populists and extreme nationalists in Europe have already started agitating.

French National Front leader Marine Le Pen declared "Victory for freedom!" and called for a referendum in France.


Dutch far-right leader Geert Wilders also called for a referendum and said: "We want to be in charge of our own country, our own money, our own borders, and our own immigration policy."

Europe's "divorce" negotiations with Britain will, therefore, have to run against the backdrop of domestic pressures in many EU countries.

And as Mr Cameron will discover during the emergency parliamentary sessions next week, the British government will struggle to get the necessary mandate it needs for the launch of the separation negotiations with the rest of the EU.

All anti-European MPs, most of whom belong to Mr Cameron's party, will want the government to impose immediate border controls and restrictions on immigrants.

But Mr Cameron cannot afford to give in to such demands; he would wish to appear to be respecting EU regulations throughout the period of the separation negotiations.

But to hold the anti-EU lawmakers at bay, he would need the support of the opposition Labour Party. That's a tall order as the opposition's main task now is to make the government's life unbearable, hoping this would precipitate an early general election.

The result could well be that Britain will be gripped by political paralysis.

Mr Cameron must also face a stock market meltdown and a nosediving national currency and it will be some time before financial markets regain their poise, especially since the main question for banks and investors now is whether Britain will be able to maintain its status as Europe's pre-eminent financial centre.

Paris and Frankfurt, London's historic rivals, may now seize an opportunity to take its spot.

European Union officials have also said Britain-based banks and financial firms would lose automatic access to sell services in Europe if Britain no longer applied EU principles of free movement of goods, capital, services and people, casting doubt on how the financial services sector - a major pillar of the British economy - will adapt.

Britons will also come to discover that many rights they take for granted, such as the freedom to travel, work or settle anywhere in Europe, will suddenly appear less secure.

But that's the inevitable consequence of tearing apart arrangements which governed Britain's relations with the rest of Europe for the past half century.

A version of this article appeared in the print edition of The Straits Times on June 25, 2016, with the headline 'EU faces fight for life as political paralysis looms over Britain'. Print Edition | Subscribe