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Who Will Exit the EU Next?

By Adriano Bosoni [4]

The European Union's future has been up for debate since the Continent's economic crisis began
nearly a decade ago. But questions about the bloc's path have multiplied in recent years as Greece
came close to quitting the eurozone and the United Kingdom voted to relinquish its EU membership for
good. "The bloc's demise is not a matter of if, but when," Euroskeptics insisted, to which their Europhile
peers replied, "The union is irreversible."

Read Bianco: Brexit Probably Most Bullish Thing That Happened This Summer [5]

Yet like all political creations, the European Union is a momentary construction in the vast expanse of
history. One day it will disappear, to be replaced by other entities, or it will continue in name only,
looking and operating far differently from the European Union of today. It is impossible to know exactly
when this transformation [6] will happen or just how long the process will take. There are some clues,
however, as to how the new Europe will come about and, perhaps even more important, what the agent
of change will be. If anything, the Continent's current crisis is a stark reminder that despite decades of
attempts to weaken it, the nation-state remains the most powerful political unit in the European Union.
And as it emerges from the rubble of the Continent's latest experiment in integration, it will play a crucial
role in charting Europe's course forward.

A Union That's Anything but Uniform

Not all EU members are created equal. Losing a member that belongs to the eurozone, for example,
poses a much bigger threat to the rest of the system than the departure of one that does not. The
prospect of Greece quitting the currency area in 2015 was probably more frightening to France and
Germany than Britain's decision to leave the bloc [7] a year later. To be sure, both events would have
serious consequences for the European Union, but a Grexit would have immediately shaken the
financial foundation of the entire eurozone. The consequences of the Brexit, however, will be more
gradual.
 [8]

Support for EU institutions likewise varies from country to country. According to the Pew Research
Center, 72 percent of Poles see the European Union positively — a view only 38 percent of Frenchmen
share. Meanwhile, the latest Eurobarometer poll has put support for the eurozone at a whopping 82
percent in Luxembourg, compared with a mere 54 percent in Italy. The Euroskepticism sweeping the
Continent has assumed different forms wherever it has taken root: France's National Front [9] advocates
leaving the European Union, while Italy's Five Star Movement calls for abandoning only the eurozone. At
the same time, moderate political parties are increasingly seeking to end the free movement of
workers and to reintroduce border controls, even as they hold onto their EU membership.

Amid these varying demands and faced with the prospect of a Grexit and Brexit, the European Union is
being forced to consider the process for leaving the union and whether countries should be allowed to
remain members of some parts of the bloc and not others. During discussions on the Greek bailout last
year, some countries argued that leaving the eurozone also meant leaving the European Union. Others
proposed ways to suspend Athens' membership in the currency area while preserving its place in the
Continental bloc. A year later, the same debates are being had about Britain. Several EU members
have said that access to Europe's internal market comes at price — namely, accepting EU workers —
while others have proved more open to finding a compromise. Regardless of how the talks between
London and Brussels shake out over the next few years, they will eventually result in a roadmap for
leaving the bloc [10] that other members could use to guide their own departures.

Read also Is the UK Economy Doing Better Post-Brexit? [11]

Of course, this raises another question: Why would countries want to leave the European Union or its
structures in the first place? Again, the answer depends on the member. Some governments, whether
backed by a popular referendum or parliamentary approval, might voluntarily choose to leave. Studies
like the latest Eurobarometer, which showed that the Continent's trust in the European Union dropped
sharply from 57 percent in 2007 to 33 percent in 2016, suggest that the British referendum may not be
the last of its kind [12] . On the other hand, some governments might be forced out of the bloc, should they
become politically or financially unable to accept the conditions attached to retaining their membership.
(Athens, for instance, made a conscious decision to consent to creditors' demands in order to stay in
the eurozone.) Still, others could depart as the entities they belong to dissolve, either as the result of a
consensual decision or because of an existential crisis.
Likelihood and Consequence

Which countries choose to renounce their membership in the European Union or its institutions will
determine the bloc's fate. The organization could probably weather Croatia's departure, but it would not
survive France's. There is also something to be said for the strength in numbers: The flight of a single,
small economy would not endanger the European Union, but a coordinated exit of several assuredly
would.

Certain political and geographic factors will affect members' chances of someday withdrawing from the
Continental bloc. A large Euroskeptic population could pressure its government to opt out of the
European Union, or encourage politicians to do so in pursuit of higher approval ratings. Countries with
strong economies or strategic locations on the Continent could use their advantages to wrangle a
better exit deal — or to exact concessions from Brussels in exchange for staying in the bloc. Members
with weaker economies, meanwhile, may have less choice in the matter, since they would likely be the
first casualties of any new EU crisis to arise.

By and large, EU members can be divided into four categories of countries based on the likelihood
and consequences of their departure from the union.

The Outsiders

In recent years, some of the European Union's harshest critics have been Central and Eastern
European members that do not belong to the eurozone. Many of these countries view the European
Union as a pact among states that should remain sovereign, and they have guarded their national
powers from Brussels' ever-expanding reach.Hungary [13] and Poland [14] lead the pack in their
resistance to deeper European integration, but states like the Czech Republic, Romania and Bulgaria
have become similarly skeptical of the eurozone and proposals to increase Brussels' authority.

Check out Michael Lewitt: We're in the Late Stages of Ponzi Finance [15]

This is not to say that these countries are willing to desert the bloc. All are net receivers of EU aid and
subsidies, and they see EU membership as a route to modernizing their economies and attracting
foreign investment. Some even view the bloc as a guarantee of the West's protection against Russian
aggression. The majority of voters in the region, moreover, still support the idea of staying in the
European Union.

Nevertheless, Central and Eastern European states will not hesitate to assert their national rights and
advocate weaker EU institutions. Their opposition to integration will lend momentum to Euroskeptic
movements across the Continent seeking to renegotiate terms with Brussels. Over time, persistent
anti-EU rhetoric could boost nationalist and populist forces in the region, cornering governments into
making decisions that may run counter to their strategic goals.

The Fragile Periphery

By comparison, countries in the eurozone's periphery tend to support deeper European integration,
though they are also among the most vulnerable economies in the bloc. These states, which include
Greece, Portugal, and Spain, rely on EU subsidies and development funds to stay afloat. They will
continue to back the concept of Continental integration as long as it means financial aid for their
foundering economies.
The region has had its own complaints about the European Union, but most did not appear until the
Continent's financial crisis — and the austerity measures that followed — began. Even then, instead of
the right-wing nationalism that emerged elsewhere in the bloc, these countries largely supported left-
wing parties [16] that wanted to increase spending and restructure debt rather than close borders or
restrict immigration. (Right-wing nationalism rose somewhat in Greece, but it did not rise nearly as
dramatically as it did in Northern Europe.)

The states along the eurozone's southern edge may leave the currency zone at some point. But if they
do, it is more likely to be in response to an unexpected crisis than a planned decision. Though these
countries have similar visions of what they think the European Union looks like in the future, their
political and economic weakness will make it difficult for them to form an effective alliance [17] and to
take charge of the bloc's decision-making process. And as weak growth, feeble banking sectors, large
debts and high unemployment continue to take an economic toll, these countries' traditionally pro-
Europe populations could slowly start to turn on the bloc.

The Coalition Builders

The closer Euroskepticism creeps to the Continent's economic and political core, the more dangerous
it will become for the bloc. Northern European countries such as Austria, Finland and the Netherlands
are some of the eurozone's richest and most fiscally disciplined members. These states are largely
preoccupied with protecting their national wealth from Southern Europe, and they have strong
Euroskeptic parties that seek to defend their sovereignty against the interference of EU institutions [18] .
That said, they also have an incentive, given their economies' reliance on exports, to protect their
markets abroad — most of which belong to the European Union.

Northern European countries tend to coordinate their moves with their neighbors [19] and with larger
powers. They are far more likely to collectively push for Continental reform or for the creation of regional
blocs than they are to risk their own isolation by acting unilaterally. Though states like Denmark and
Sweden are not part of the eurozone, they are culturally and ideologically similar to their counterparts in
Northern Europe and could someday join them in a regional replacement for the European Union. Talk
of forming a "northern eurozone" or "northern Schengen" has become common in this part of Europe.

Lithuania, Latvia and Estonia are in some ways an exception, though. They joined the European Union
and eurozone to discourage Russian aggression by linking themselves as closely to the West as
possible. As the home of the European Union's most important institutions, Belgium is also set apart
from its Northern European neighbors, and regional politics often take precedence over national efforts
to chip away at the bloc's influence. Each of these countries is unlikely to leave the European Union or
eurozone of its own volition, though they could become part of a northern alliance should the bloc
dissolve.

The Big Three

If the nation-state will be the primary agent of the European Union's coming transformation, it stands to
reason that the bloc's largest members — Germany, France, and Italy — will be at the forefront of it.

Italy has historically seen European integration as a means to tie itself to its prosperous northern
neighbors and to preserve the unity of the country. But over the past decade, Italians have become
some of the Continent's most Euroskeptic citizens, thanks to their country's skyrocketing debt and
political instability. Italy is, therefore, one of the countries that is most likely to use the threat of its exit to
squeeze concessions from Brussels [20] . Rome has already leaned, on the "too big to fail" argument in
its negotiations with the European Union, and future Italian administrations are likely to do the same.
But as Europe continues to fragment, each threat will become more dangerous to the bloc than the last.

France and Germany, meanwhile, hold the key to the European Union's future. Even the suggestion of a
French or German exit from the bloc or its currency zone would risk triggering a massive structural
overhaul. By the same token, the two countries' continued buy-in could be enough to keep the
European Union — or some version of it — together. But France and Germany face a paradoxical
problem: For strategic reasons, they need to maintain a united front, but their national interests continue
to pull them apart.

France, as both a Mediterranean and Northern European nation, has found itself torn between a desire
to protect its economy and the need to preserve its alliance with Germany. Paris tends to support
protectionist and risk-sharing measures, and it has a high tolerance for inflation. Berlin, however,
prefers to avoid policies that threaten its wealth and share the risk created by Southern Europe's weak
economies. Germany would only agree to France's approach if Berlin were given more control over the
fiscal policies of its neighbors — something many countries would find unacceptable. Of the
two, France is more likely to act first [21] in demanding the European Union's reorganization because of
its rising nationalism and sluggish economic growth. But Germany, hamstrung by its own national
interests, would find it tough to compromise with its longtime partner.

At this point, reaching a consensus on a path forward has become all but impossible for the European
Union's members. To knit themselves even closer together, EU states would have to compromise on
issues that are too important to budge on. The alternative option — reversing European integration —
is gaining ground, but it comes with the very real possibility of leading to the bloc's complete
dismantling. Members could take a middle road of sorts by choosing to keep things as they are, but
even inaction would come at a price, promising even greater problems for the troubled bloc down the
line.

"Who Will Exit the EU Next? [22] " is republished with permission of Stratfor.

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