Last month it was "Brexit or no Brexit". Now it is "punishing" or not "punishing" London. Many voices, in the last two weeks in Brussels and some other European capitals, have been arguing that it was important to make the exit of the UK as painful and difficult as possible, lest Brexit would have a domino effect on other lukewarm members or on Eurosceptic populist groups also asking for a referendum on their country's membership to the EU.
The fact that personalities, such as Jean-Claude Juncker, the president of the European Commission, have been threatening to treat the British people as "deserters" if they voted to leave the EU and have been joined by top French and Italian ones urging a "tough" stance against London is one more example of a long list of dysfunctional European responses to the crises and challenges which have been confronting the EU in the last 10 years. This shows the depth of political autism in which the EU has fallen when people feel that they need to threaten people of harsh reprisals to keep them in a grouping - as if this was a prison in which inmates had to be intimidated and coerced lest they would be tempted to escape. The smart reaction to Brexit or to the surge of Euroscepticism would rather be to ask why is it that such a significant segment of people through the continent (and of course in the UK) look now at the European integration process or at the Eurozone as a problem and a hindrance rather than as an opportunity; and what has gone so wrong that needs to be corrected lest the whole edifice would crumble.
Of course there are voices asking these kind of questions. However, one can reasonably doubt that they will heard and will prevail because this would raise many embarrassing questions about the way Europe has evolved in the last 20 years. People like Martin Schulz , the president of European Parliament or President François Hollande of France prefers to talk about the need for "more Europe" - which means more blind bureaucratic centralisation, more loss of national sovereignty and this is exactly what an increasing number of people furiously reject today.
Thankfully, meeting President Hollande and Prime Minister Matteo Renzi of Italy after the Brexit vote Chancellor Angela Merkel of Germany put things back in place stressing that there was "no need to be nasty towards the UK", and Wolfgang Schäuble, her finance minister, warned that talking about more European integration after Brexit was "a crazy thing to do". He was just taking into account a recent survey showing that 64 per cent of Germans want now more tasks and responsibilities returned to the remit of national authorities.
Other people in the Brussels bubble are also now talking about launching some big new projects that would make more apparent to people the benefits they can derive from European integration. Apart from the fact that an important source of funding for these projects would have to come from Berlin and that Ms Merkel would not want to hear about it, this reaction completely misses the real message of Brexit and of the rise of populist Euroscepticism. The key issue is not about new projects. It is about the fact that the European integration process has been conducted in a way perceived to be a threat against national identity.
All the arguments of the "Remain" camp were about the dreadful economic consequences of the UK leaving the EU, while all the arguments of the Brexit camp were to a large extent about the issue of identity. And there have been quite a number of examples in the last 10 or 15 years of votes where the issue of identity was pitted against the economic gains or losses deriving from the choice of the electorate - with identify prevailing in many cases. This is not surprising: The assertion or protection of identity will increasingly be one of the key driving forces of national and international politics in the years ahead, as the impact of globalisation is driving people to cling to their identity.
In such a context I would be ready to make a bet: While the UK will go through a number of challenges in the next three or four years - and might even go through a recession - in the medium term the EU will suffer from the Brexit more than the UK suffering from the decision it made on 23 June 2016. Whether in or out of the EU, the UK has very important assets that it can leverage. It is not insignificant that five major US banks declared their support for London to retain its position as a leading international financial center. This, as France was saying that it would roll out the red carpet for the financial community to move from London to Paris. Who, as a banker or a financier, would want to move to a country whose president declared that finance was his Enemy Number One, and which has a long and solid suspicion and even aversion towards wealth, and wealth creation?
Of course this implies that London will be able to manage well the new relationship to be established with the EU. In that respect, the fact that Theresa May, until now Home Secretary, will succeed David Cameron as prime minister is a very promising development. On the EU side, the major issue for the future is that the departure of the UK is exposing structural flaws in the process of European integration which will be difficult to correct as this would mean putting into question a number of taboos and having the courage to abrogate some very unwise past decisions. Even more importantly Brexit highlights two worrisome realities: First that the process of European integration is not irreversible. A precedent has been set and nobody can predict whether and when it will hang again above the EU like a Damocles sword. Second, Brexit is presumably the finishing touch for Europe now being fully in a "German Europe" situation. This will create problems and frictions as the 27 remaining EU members try to move ahead, since nobody in Europe - except the Germans and may be the Finns - wants the "Berlin consensus".
The writer is the president of Smadja & Smadja, a strategic advisory firm
Twitter: @ClaudeSmadja
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
