On Thursday 23 June the British people have spoken and the majority of them decided to leave the EU. While the economic and political fall-out is becoming clear it remains silent on how the BREXIT will translate itself on the military level. So far it remains unclear if the UK will actually leave the EU but it is very unlikely that the British government can afford to ignore the referendum.
Economic level
The first damage that happened was the massive drop of both the British Pound and the Euro. The Pound dropped 10% this morning but managed to stabilize back to a 7% drop. At the same time the Euro took some losses compared to the US Dollar but the damage so far seems less then was feared. At the time of writing the US stock markets did not yet open and the economic damage is going to get worse. It is expected that once the US stock markets open that both the British Pound and the Euro will receive further losses. This will result in a stronger US Dollar on the global markets for some time.
The UK is also the second biggest economic market within the EU, coming after Germany. Losing access to this economy will hurt the EU significantly. It is expected that the average GDP in the EU will decrease by 0.2% in the next two years making an end to the slow growth within the EU.
So far the current trade agreements are still in force but a new trade agreement between the EU and the UK will have to be forged. This process could take about a year, depending on the level of cooperation the UK still want with the EU.
The British economy will be hurt the most. Without the free trade the UK will suffer from import and export taxes unless a deal can be made on the free trade of goods with the EU. Britain will however see a flight of capital out of London as many European corporations will relocate to the continent. London will lose some of its status as the financial capital of the EU and it looks already that Frankfurt will be biggest winner in this case.
The EU will also get hurt but can draw on more resources and its free traffic of goods, services and people to lessen the damage. The flight of capital and the return of European corporations to the continent will strengthen the EUs economic power in the long run.
Political level
The UK will face several political challenges in the short term. The immediate result is already the resignation of British Prime Minister David Cameron who will be replaced by another member of his party. No re-elections will be held that could open the way for a Prime Minister with strong Eurosceptic feelings. Such a Prime Minister would only make the creation of a favourable new agreement between the UK and the EU more difficult.
Internally the UK is deeply divided as we witnessed in the narrow margin the BREXIT vote came to be. When looked regionally we see that Scotland, London and Northern Ireland (Belfast excluded) voted in favour of staying in the EU. The economic conditions for the UK will become worse than they are now and this will spark some social unrest that needs to be dealt with, forcing the British government to focus in domestic issues.
Scotland will be the biggest problem since the region rejected a BREXIT. Already Scotland plans to hold a new referendum for staying in the EU. The political fall-out on this topic will be big. Scotland seeking to stay with the EU will put it at odds with England and will only increase the Scottish people to push once again for their independence. The Scottish wish for staying in the EU will also reflect negatively on how the UK and the EU will cooperate in the near future.
On the EU level the BREXIT is the culmination of a failed EU-policy that has been under pressure since the financial crisis of 2008. BREXIT shows that nationalism is a strong topic within the EU and that people remain more connected to their countries then they feel themselves as Europeans. This nationalism can not be dismissed as just something simple as being Eurosceptic. For its entire history the European continent has been divided in countries and alliances that were constantly at war with each other. It is foolish to believe that the connection of the EU citizens with their countries due to this long history of interstate rivalry can be put aside overnight.
The EU has received a very strong wakeup call that it needs to act differently. The biggest problem that is holding the EU back as a fully working state like the US is the fact that state rights are more important than EU rights. No EU member wants to transfer its own political power to EU level as this will make the EU members less in control of themselves.
The EU will need to readdress itself. If it can not become an efficient working organisation on the political level then more and more countries will start to turn away from the EU. The BREXIT is important because it serves as a precedent that other countries will use to leave the EU in disagreement with the EU policy. The EU will need to focus more internally on solving the issues that drives it members away. The UK has always been a very huge Eurosceptic member so its loss could help to create a stronger EU and strengthen the EU on the political level.
BREXIT will also give other Eurosceptic parties in the EU a newfound strength in pushing their agendas. It is possible that these countries will use the BREXIT to increase their campaign efforts and further dismantle the EU from within. If the EU fails to transform into a fully functional organisation then its progress to strengthen the EU will be further hampered, leading to more countries thinking of leaving the Union.
The UK will leave a power vacuum and it will be filled by France. France is not only a powerful military player that is still a EU member but it is also a member of the UN Security Council. The loss of the UK means that the EU can only count on France as its representative in the UN Security Council that has veto rights. This gives France the power to shape the international policy of the EU.
Military level
The most difficult to predict will be how the BREXIT will translate itself on the military level. Since the EU does not have a single EU army the consequences will be relative low on the strategic level. Most military issues within the EU are done through NATO and the UK has not left that organisation. Prior to the BREXIT referendum the British government reassured Lithuania that the UK will remain committed to the defence of Eastern Europe.
Obviously the UK will no longer contribute to the EU Battle Groups (EUBG), the permanent military unites the EU can call on in the case of a military crisis. The EUBGs were never actively deployed but served as a useful platform for military cooperation between EU member states.
The biggest problem will arise in all the defence projects the UK was involved with other EU members. The prospect of the Eurofighter Typhoon aircraft remains unclear. The UK was a vital contributor in the construction of this aircraft together with other EU members. It is unlikely that the production of this aircraft will be stopped as the UK is also using this aircraft in its Air Force but the construction was easier under the EU framework.
The military cooperation with France will no doubt be scaled down. France already made it clear that it will not give the UK an easy time when negotiating a new deal with the EU. France benefits from a BREXIT as the country now becomes a more powerful player in Western Europe. It is even likely that with the EU gone that France now become the only major player in Western Europe as Germany is once again looking to strengthen its position in Central and Eastern Europe.
France is now definitely the biggest military player in Western Europe that the EU can count on now that the UK left. While Germany is also a big military player it can not match the combat experience that France has acquired over the last decades in operations abroad. France is also a nuclear power and can count on amphibious ships and an aircraft carrier to project power abroad.
The Joint Expeditionary Force that the UK is creating will remain as this force is based on a coalition of likeminded countries and held together by bilateral agreements and thus created outside the EU framework.
Conclusion for the Baltic Region
The loss of the UK because of the BREXIT will be a huge political and economic win for the Baltic Region and most notably the Visegrad Group. For decades the three biggest players in the EU were France, Germany and the UK. The loss of the UK will leave a power vacuum that France will fill.
The BREXIT however will give Eurosceptic parties in Western Europe new confidence to push their agendas. France, the Netherlands, Belgium, Germany and Austria all have Eurosceptic parties that are on the rise. If the EU hesitates to close its ranks and work out its deficiencies then it will be forced to deal with these Eurosceptic parties in the EU parliament, leading to a further inefficiency at the EU level.
Eurosceptic voices will become bigger in the near future in Western Europe while Eastern Europe will remain a supporter for the EU. This makes the Eastern European members more reliable members in the eyes of many EU policy makers. In term this will translate itself in more political power for Eastern Europe, allowing them to take the lead in the EU. A BREXIT will shift the centre of gravity towards the east.
Economically the loss of the second biggest economy in the EU will make the other economies even more important. The economies in Eastern Europe already made great improvements over the last years and they are among the fastest growers in the EU. While the GDP overall will stagnate it will unlikely that this economic growing curve will stop. The Visegrad Group will now also become the fourth biggest economy of the EU and this economic power will also lead to more political power that can be used to shape the EU.
In general we can conclude that the BREXIT is an economic loss for both the EU as the UK and a lot of time will be needed to undo the damage. At the same time the military consequences remain unclear but since the defence of the EU still happens through NATO there should be little consequences. On the political level there is uncertainty but Eurosceptic parties in Western Europe will gain new strength and weaken Western Europe on the EU level. This will create a shift in the centre of gravity of EU power towards the east where the most reliable and supporting EU members are found. This shift will allow Eastern Europe to exercise bigger political power and have a bigger saying in how the EU should work.
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