Brexit would be a reverse but the EU project would continue

In Brussels the mood is one of quiet apprehension in the EU's institutions as they await the result of the UK's decision on whether it will stay or leave.

If the UK votes to quit in six weeks' time the EU will be faced with one of its greatest challenges as nothing like it has happened before. Greenland, a Danish territory, did vote to leave the European Economic Community in 1985. Algeria left after it won independence from France. Neither, however, equals the UK.

By 2050 the UK will bypass Germany as the EU's most populous country. Given its status as a nuclear power and the world's fifth largest economy in terms of GDP, the impact on the union would be enormous.

Since February’s EU summit at which a renegotiated settlement for the UK was agreed, the European Commission’s official policy has been to refrain from commenting on the referendum.

Mindful of accusations from the "leave" campaign of interference which surfaced during the Lisbon Treaty campaign in Ireland, the official line from Brussels has been that the referendum is a "matter for the British people".

Yet behind the scenes preparations are under way. A British taskforce which was set up by the European Commission last summer and headed by British EU official Jonathan Faull is still in existence. It led the negotiations up to the February summit. If voters opt to quit it will become the hub of the new "Brexit" unit that will have to manage separation talks over two years but which could last for a lot longer.

Across the EU key decisions are being deferred or managed to ensure there is no risk of a European crisis erupting before the referendum in a way that could increase anti-EU sentiment in the UK.

Greece, which faces repayment cliffs next month and in July and is struggling to meet the terms of its bailout, has been told by euro zone officials that the door to negotiations closes at the end of May and reopens on June 24th.

No one wants a repeat of last summer's tortured Greek negotiations – or as Minister for Finance Michael Noonan phrased it, "a series of successive meetings leading nowhere in Brussels" – just ahead of the vote.

An EU summit due on June 23rd and June 24th has been pushed back a week.

In a recent Centre of European Policy Studies report, Michael Emerson cautioned that the arguments promulgated by many in the "leave" campaign that Britain would cease to be a member of the EU immediately if it votes to leave is erroneous.

Big bang

“The idea of a clean break, or a ‘big bang’

Brexit

, is a total illusion,” he writes, pointing out that leaving would mean deleting around 5,000 regulation directives and decisions dealing with the internal market alone. Meanwhile, 1,000 international treaties between the EU and third countries, including all the EU’s preferential trade agreements, will need rewriting.

Instead, Britain is likely to explore different options about how its post-referendum EU relationship changes.

Would it, for example, remain a member of the single market, via a Norway-type model (which would mean still retaining a huge amount of EU legislation), or would it remain a member of the customs union without having full membership?

Would it try to negotiate some kind of trade deal with the EU, an option that promises to be fiendishly complicated given that virtually all EU states have ceded significant control over international trade matters to Brussels?

All these options would involve highly complex and detailed negotiations which are likely to last much longer than the two years laid down under article 50 of the Lisbon Treaty, the clause that sets out how a country withdraws from the EU.

Much of the progress will depend on the willingness of the 27 other EU states to engage. If the EU's recent engagement with Switzerland is anything to go by, the remaining 27 states will be unwilling to yield significant ground to a departing Britain.

The recent rejection by Swiss voters of EU free-movement rules in a referendum has threatened to jeopardise the country’s other agreements with the EU, with Brussels striking a hard bargain with Berne.

Similarly, EU leaders will not want to send a message to other restless EU members – demands are growing in some of them for UK-style referendums – that leaving the EU is an easy option.

While a “leave” vote on June 23rd would trigger a spectacular series of negotiations and trade discussions, even if Britain votes to remain a period of uncertainty and tough political negotiations will follow.

Should British voters choose to remain in the European Union the EU will be obliged to implement the terms of the "settlement" for Britain that was agreed at February's EU summit after months of talks.

The changes negotiated by David Cameron span four main areas – greater power for national parliaments, more protection for non-euro zone member states, economic competitiveness and limits on in-work benefits paid to migrants and index-linked child benefit payments.

While the renegotiations managed to avoid treaty change the European Commission will immediately have to move to implement the agreed changes into EU law on June 24th if Britain votes to remain.

In particular the commission will be obliged to create a number of new legislative proposals.

One proposal is to create a legal mechanism which would allow a member state in certain circumstances to withhold payments of in-work benefits for four years. A second is a change in secondary legislation which would allow countries to introduce a weighted system for paying child benefit.

These proposals would have to go to the European Council and the European Parliament for approval.

Negotiators took the wise decision of including senior European Parliament figures in the initial negotiations with Cameron in order to ensure the parliament's buy-in for the British renegotiation. However, European Parliament president Martin Schulz has said there is no guarantee that MEPs will back the deal, with the centre-left groups in particular already voicing concerns about possible threats to EU rules on free movement of workers.

Thus, whatever way the vote falls, the British referendum on June 23rd is likely to have a profound effect on the EU.

Existential questions

A vote for

Brexit

would raise serious existential questions for the union, and set a dangerous precedent for other countries at a time of growing euro-scepticism.

Even if Britain votes to remain, the prospect of Britain having a “special” relationship with the EU is likely to cause rumblings in other parts of the union.

This is particularly so given that it already has a semi-detached relationship with Brussels as a non-member of the euro zone and the Schengen area.

A further conundrum if Britain votes to leave is that the new settlement agreed in February will cease to exist. This is despite the fact that other EU countries are likely to want to piggyback on some of the changes secured by Britain, particularly in relation to benefits. The Pandora’s Box of changes to free movement rules has been opened, potentially storing-up headaches for the EU in future years as other countries demand similar changes.

Ultimately, however, whatever emerges from the referendum the reality is that the EU will still continue to exist, even though an EU without Britain raises serious issues for member states, particularly Ireland.

Despite the underlying anxiety in Brussels about the outcome of the referendum, for some European federalists the departure of Britain could remove an obstructionist partner. It could allow the rest of the union to integrate further, an alarming prospect for some states faced with increasingly sceptical publics.

This month the heads of the main EU institutions debated the future of Europe in the Capitoline museum in Rome where the EU's founding treaty, the Treaty of Rome, was signed in 1957. During the hour-long debate, Jean-Claude Juncker, European Parliament president Martin Schulz and European Council president Donald Tusk touched on everything from the refugee crisis, to the euro zone's economic policy in the wake of the financial crisis, to the future of a federal Europe. Not once was Britain's future in the union mentioned.

Six weeks before Britain becomes the first European country to vote on whether to leave the union, the omission was striking. It shows that Brexit is just one of a number of challenges facing the EU.

Whatever the outcome of the British referendum, the EU will continue to exist, with or without Britain, on June 24th.