An Ideas-Based Online Magazine of the Global Network for Advanced Management

Brexit: Keep Calm and Carry On

The Brexit has occurred. As outlandish as the prospect of the United Kingdom could have looked like a year ago, the scenario became a reality early this morning. Europeans may be prone to panic. This reaction is not necessarily legitimate though: European disintegration need not be the only outcome, especially if leaders can use this opportunity to reaffirm the long-term relevance of the European project.

Brexit graffiti

Note to all Europeans panicking today (including on financial markets): Just stop it… This is not Armageddon. It might not even be a crisis. It is just a clarifying moment that might prove life-saving for the EU in the long run. So now is not the time to overreact.

Here’s the paradox: the entity that is at risk of disintegrating is the United Kingdom, not the European Union. As argued here, London’s attitude towards the European project has never been short of ambiguous. It seems that the only thing that ever mattered to the UK was maintaining access to the Single Market and the supremacy of the City in the continent. Beyond that, it was about looking for ever-growing exceptions that were untenable. Now that the main threat against the European Union’s overall cohesion is gone, it is time for European leaders to bounce back and to reinvent this whole project all together.

In fact, a few steps in the very short run can help the EU transform the current tensions into a long-term opportunity.

First and foremost, do not underestimate the power of symbols and the power of words. Remember in particular that in 2012, when many financial observers had doubts about the euro’s long term future, ECB chairman Mario Draghi was able to save the single currency with three words: when asked what he would do to protect the euro, “whatever it takes” was his response. A few weeks later, he detailed the “Outright Monetary Transactions” program that would allow the ECB to buy back sovereign bonds of Eurozone member-states under specific conditions. In the end, he never needed to implement this program in practice: his explicit and stated commitment to the euro was enough to calm markets down. European leaders would do well in remembering this as early as this weekend: if you’d like to organize an impromptu meeting in Brussels to demonstrate that there is a pilot in this big European plane, a pilot who looks to turn the page and who thinks about the future with great enthusiasm, now may be the time…

Second, it may be time to double-down on existing initiatives so as to reaffirm how relevant of a tool and efficient of an institution the EU can be. This could mean expanding investment efforts, like the Juncker investment package for instance. If Brussels is able to show how the EU can benefit local societies by bringing infrastructure up to date, that would go a long way to undermine the current populist tide. Similarly, it may be time to increase coordination efforts among EU navies in the Mediterranean. It seems crystal clear that if EU member states cannot solve the migration crisis, not only will its image be tarnished be it will also be very hard to imagine what the EU could ever do. A brand new clear policy for the Mediterranean region, that looks to solve current issues and that provides a long-term strategic vision for the region’s economic integration would help. Former President Sarkozy had a plan but never went forward with it.

Last but not least, it is important to remember that, from a historical point of view, the United Kingdom has rarely been comfortable with its “splendid isolation,” in particular because London always realized that European continental affairs could deeply affect the Kingdom. The Brexit may be a reality now, but there will be a time when both parties may want to start speaking again. When that time comes, the European Union may be far less vulnerable and have more leverage than it thinks, given how significant it is for the United Kingdom.

HEC Paris France