The EU will treat Britain like Greece

By Matthew Holehouse, brussels 

26 JUNE 2016 • 3:40PM

I arrived in Brussels as the Daily Telegraph’s correspondent in early June, 2015. A fortnight later, Alexis Tsipras snubbed Brussels, and called a referendum on the third bailout that was designed to save the Eurozone from collapse.

The terms he was later given - €50bn of assets  sold and a de facto control of economic policy surrendered - were so harsh they were later denounced as a "coup".

It taught me two things: that in the cause of its salvation the European Union can be profoundly flexible and exceptionally brutal, and that events can swiftly take a momentum that is hard to control.

Nothing of that experience gives me hope for the years that now await our country.

Britain is almost certainly out the European Union

As far as Brussels is concerned, Britain has left.

At home on Friday morning, Britons were dumbstruck, agog at the result, or chuffed at having taught Brussels a lesson.

We now see street protests to overturn the result, internet petitions, suggestions that the UK or Scottish Parliament could revoke it or somehow make it go away. Westminster is occupied by Labour coups and Tory successions. Few seem to believe we are going.

Donald Tusk had warned he was ready for Brexit

In Brussels, they have been ready to say goodbye for a long time. Britain had been half-way out the door for forty years. David Cameron had announced this referendum in January 2013. He had won an election on the back of it, and many expected him to lose it. He, and they, repeated many times that it was final and binding. Patience is exhausted.

On Friday there was grave sadness, but no panic. The timetable for the talks was announced days before the vote. Martin Schulz, the president of the Parliament, spoke at dawn; Donald Tusk, the president of the Council, delivered a statement at 07.40 GMT. The founding members' foreign ministers met on Saturday; sherpas for the 27 remaining states will meet today to sketch out the months ahead.

Leaders have demanded Article 50 is activated immediately, to create certainty. Realistically, Mr Cameron has until Christmas.

Scotland is ready to quit, and diplomats are quite open to welcoming them into the EU club. 

The treaties say that all Britain’s rights and obligations must remain for two years once Article 50 is activated. But Lord Hill, Britain’s commissioner, quit yesterday, and Downing Street said it had no plans to replace him, and Jean-Claude Juncker told Ukip MEPs to pack their bags.  Is the legal order fragmenting? What other clauses in the treaties - which protect British expats on the continent, among other things - will now be ignored without consequence?

So the Brexit locomotive has left the station.

Can it be halted?

Lord Hill

The European Council has offered a narrow window, saying that Britain has not left until Article 50 is activated formally by the Prime Minister, “if it is indeed the intention of the British government.”

Mr Cameron has left it to his successor to activate it. Mrs Merkel is in no hurry. Senior EU sources say they can wait until Christmas, but prevarication would trash Britain's credit-worthiness.

There are two problems. Firstly, to not activate Article 50 would be a rejection of democracy on a scale that could only be described as a coup, and would poison British public life for generations. 

Secondly, a wave of movements demanding referendums on the terms of membership, given a huge boost by Mr Cameron, is tearing across Europe – in France, Denmark, the Netherlands, Slovakia, Italy, Hungary.  Marine Le Pen could will run rampant in French elections in the spring.  

Leaders anticipated that Boris Johnson would pursue a 'vote leave for a better deal' strategy, and ruled it out from February, precisely to prevent this scenario.

Jean-Claude Juncker said on Friday: “The repercussions of the British referendum could quickly put a stop to such crass rabble-rousing, as it should soon become clear that the UK was better off inside the EU.” Britain simply has to go, on bad terms, pour encourager les autres.

Jean-Claude Juncker is profoundly angry with Britain

Britain has very few friends

In European eyes, David Cameron has had a remarkably generous lot: already out the euro, ever closer union, justice and home affairs obligations and Schengen, he was offered an enhanced deal that confirmed the perks of membership with scant obligations.

Yet he attacked Brussels for years for domestic advantage. Mr Cameron campaigned hard against his appointment. Stories about Mr Juncker's alleged drinking and the war record of his father, a conscript in the Wehrmacht, emerged.  Yet Juncker offered an olive branch by giving Jonathan Hill the financial services portfolio Mr Cameron craved, in order to preserve the City. He is profoundly angry.

In his brutal negotiation, Alexis Tsipras had a number of cards to play. There was the “solidarity” that EU states are obliged to show each other, the pity and guilt at the plight of the Greek people who had been punished through no fault of their own, and the €83 billion of German taxpayer cash in Greek banks that risked going up in smoke. Their referendum had been hasty, the question unclear, Mr Juncker said; Greeks made plain they wanted to remain Europeans.

Countries which could also leave the EU:

No such goodwill exists for Britain, now an ex-member. Mr Johnson, the possible next prime minister, caused genuine and grave offence by likening the European project to the ambitions of Hitler. His declarations that Brexit will trigger events that unravel the entire project is, in effect, a declaration of war that must be met.

Recall how inflexible European leaders were during Mr Cameron’s attempted renegotiation, when he put a gun to their heads and threatened to leave unless they submitted to his demands.  He has fired that gun in the air, and locked himself out the room.  Britain’s only leverage is how much damage a messy Brexit would inflict on European economies. 

Time is not on our side

Once Article 50 is activated, events will move frighteningly fast. It took Mr Cameron seven full months to secure his meagre renegotiation. He will have just two years to get an exit deal covering every facet of British life, and a trade deal that will do the least harm to the fragile, debt-laden economy.

The government is in disarray, the Labour party in meltdown, and the imminent exit of Scotland means it will be unclear with who or what, exactly, the EU is negotiating with. The French foreign minister yesterday implored Cameron to find a successor to take charge. 

A ban  issued from Downing Street on Brexit preparations – lest it boost the leave campaign – meant Britain’s most senior officials were permitted to “think” about a Brexit, but not allowed to write anything down.

Several take their guide from Flexcit, a book by a blogger Richard North that advocates a Norway-style deal as a half-way house under a “soft” exit. The crucial weeks ahead of polling day were spent in purdah, tending the garden. 

The UK has next to no trade negotiators, and will need hundreds, to replicate the market access it currently has with 50 states around the world .

But the EU is ready. Talks in Jean-Claude Juncker’s in house think-tank began months ago. Foreign ministries have been preparing position papers.  Lawyers are busy: Brussels has had 70 years of practice in writing treaties, signing trade talks, fixing accessions and bailouts, making and breaking nations. 

Norway is lovely, but Britain won't get a deal like theirs

We don't get to be Norway

The Leavers’ best hope – a Norway deal that means EEA status, retained rights for the City and immigration - is almost certainly off the table.

Britain has made clear it doesn’t want free movement – and so any deal on those grounds would be so impossibly fragile as to be a waste of time. Frankfurt and Paris would certainly like our banks. Mr Juncker is determined to undo Britain's attempt to create a multi-currency union, meaning clearing houses that trade in Euros and generate billions for the Exchequer will have to be domiciled in the Eurozone.

Leaders have made clear, before and after the vote, that Britain is not getting access to the single market.

“Out is out,” said Wolfgang Schaeuble, the German finance minister, some weeks ago.

“There will certainly be no cherry picking,” confirmed Mr Juncker, saying it will be a "clean" divorce.

More likely is a Canadian-style trade deal, that will set tariffs on imports and exports. That may be fine for German manufacturers. But Britain’s service economy will be cut up like an old car. British graduates are about to learn what it's like to use an Australian-style points system.

Cameron with Hollande and Merkel

Unlike now, Britain will not be in the room when its exit deal is decided

We do not control this process

Article 50 is designed so that it leaves any state that activates it is a supplicant. 

The remaining EU states will negotiate between themselves and deal with the UK as one, just as they would for Albania or Turkey.

If a deal covering trade arrangements isn’t struck once the two-year period expires, Britain is  simply released from the EU treaties and left on crippling WTO terms - something the Treasury terms  a "severe shock scenario" and which it envisages would likely result in a cut in GDP of six per cent and increase unemployment by 800,000, not including the risks presented by emergency spending cuts, or the "tipping points" presented by the crystallisation of financial stability risks.

It means the government will effectively be forced to take any fait accompli presented at the last minute, or face ruin.

Even then, any further trade deal will require ratification by EU parliaments, meaning Belgian MPs, amongst others, can veto it.

The Leave campaign is fond of a quote attributed to Churchill: “Each time we have to choose between Europe and the open sea, we shall always choose the open sea.”

Oh, hear us when we cry to Thee, For those in peril on the sea.

http://www.telegraph.co.uk/news/2016/06/26/the-eu-will-treat-britain-like-greece/