Monday

19th Nov 2018

Brexit: EU prepares for the morning after

  • "There are two ways to divorce: an orderly one and a messy one," an official said. (Photo: raghavvidya)

EU leaders have been saying for weeks that there is no plan B if British voters chose to leave the EU in Thursday's (23 June) referendum.

But if they wake up Friday morning with the unprecedented reality of a member state quitting the club, they will have to react quickly to contain markets instability and political uncertainty, as well as to prepare the first steps of the divorce process.

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"There are two ways to divorce: an orderly one and a messy one," an EU official said. Although no one in EU circles wants to speak of a divorce, the main institutions believe that the initial reaction could be crucial to avoid the messy type.

The clock will start ticking between 5AM and 7AM British time, when the final results come out. The political decisions at the EU level will then be taken at an EU summit on 28 and 29 June.

But one can expect the following from the European Commission, Council, Parliament and European Central Bank in the next few days.

Central Bank

In case of Brexit, the first institution to be tested would be the European Central Bank (ECB).

Global markets will follow the counting all night and the risk is that European banks could face a shortage of liquidity. Plans on how to cope have been laid down in recent months between the ECB, the Bank of England, eurozone national banks and all concerned banking establishments.

“For each bank that is likely to be impacted, we have a plan,” the head of the ECB's supervisory body, Daniele Nouy, told MEPs at a hearing last week.

“We challenge these plans. We make sure that they are adequate to the headwinds that might be coming from the market,” she said.

A source with knowledge of the plans told EUobserver that banking authorities think "there is enough liquidity" available. But in case of a problem, central banks would open so-called swap lines: the Bank of England would provide British banks with euros while the ECB would provide eurozone banks with sterling.

Several other central bank governors also pledged to provide additional liquidity if needed, the source said.

"It's difficult to know how all players [markets and political leaders] will act," the source added. "We will need to pass on reassuring messages and to coordinate all efforts".

ECB president Mario Draghi will speak in Sintra, Portugal, at an ECB forum which takes place on 27-29 June.

But if the post-Brexit vote market reaction requires it, he could take to the podium earlier and say he would be ready to "do whatever it takes" - the expression he used at the height of the eurozone debt crisis in 2012.

Commission

On Friday morning, European Commission president Jean-Claude Juncker will host a meeting with Donald Tusk and Martin Schulz, his counterparts from the European Council and Parliament, as well as with Dutch prime minister Mark Rutte, whose country chairs the Council of the EU until 30 June.

The meeting will be the first coordinated effort by institution leaders in Brussels to prepare the next steps - implementation of the agreement on EU reform reached in February between the EU and the UK, or the Brexit process.

Their decisions and comments will set the tone of the following days and weeks.

In the Berlaymont building, the European Commission HQ, seven people will be ready to act whatever the result of the referendum is.

The Task Force for Strategic Issues related to the UK Referendum, which was put in place last year, helped to draw up the agreement on EU reform reached in February between the EU and the UK. It would be in charge of implementing it if the UK remains in the EU.

The commission will not say what Juncker would propose in case of Brexit, nor whether the task force is also preparing to participate in an eventual Brexit process.

But an official who was in close contact with the commission during the EU-UK agreement process told this website he would "be surprised" if the commission really had no plan B.

Parliament

In the highest floors of the EU parliament, Friday will kick off at 8.00AM with an extraordinary conference of political group leaders and Schulz.

A parliament official said the meeting would be to determinate the EP's position on the referendum result before Schulz goes to the meeting with Juncker, Tusk and Rutte.

Another source told EUobserver that in case of Brexit, the parliament could propose a resolution saying that article 50 of the Lisbon treaty should be seen as having been triggered as soon as British prime minister David Cameron informs other EU leaders about the result of the vote.

Article 50 is the article that organises a country's exit from the EU. It is applied when the member state which decides to withdraw notifies the European Council of its intention.

With the resolution, the parliament would ask EU leaders not to wait for a formal notification but instead to use the mere notification of the vote's result to start the process.

This is to avoid letting Cameron - or his successor if he resigns - delay the notification and to try to use the delay to obtain more favourable term in the UK’s future relationship with the EU.


The resolution would be put to the vote in an extraordinary plenary session, probably on 28 June just before the start of the EU summit.

Council

All meetings and declarations from Friday will be part of preparations for the summit, where EU leaders will set the direction for what has to be done.

At their last meeting on Wednesday (15 June), EU states’ ambassadors worked on the other issues on the summit agenda but did not mention Brexit.

"The idea is to have all other issues agreed so leaders can focus on the UK" when they meet, an EU source told EUobserver, referring to migration, economy and external affairs.

The first discussion at a political level between the 28 countries will be on Friday morning in Luxembourg at a Europe ministers’ meeting, known as the general affairs council.

The EU ambassadors will then meet once or more to include the UK in the draft summit conclusions.

But the most important discussions ahead of the summit will be between EU capitals and the leaders' sherpas or aides.

In case of Brexit, "the main goal will be to avoid cacophony" between the remaining 27 member states, a diplomat told EUobserver, adding that it would be almost impossible to reach an agreement by the summit on how to proceed.

He said that France and Germany had taken the lead in discussions between the six EU founding countries - together with Italy, Belgium, Netherlands and Luxembourg - to present a proposal that other countries could rally round.

Last week, after a meeting with his French counterpart Jean-Marc Ayrault, German foreign minister Frank-Walter Steinmeier said that "whatever the UK decides," the two countries "will jointly take on the responsibility of ensuring that the European Union continues and can function”.

Sources from other countries and in Brussels said the June summit would not be ripe for a Franco-German initiative.

Real discussion


When leaders meet on Tuesday (28 June), they could have a quick first discussion on the outcome of the referendum, before moving to other issues on the agenda and spending the dinner talking more extensively about the UK, a source said.

If Brexit happens and article 50 is triggered, they could spend the second day of the summit in a group of 27 only, without Cameron.

"The real discussion would be at 27," the source said. "The question will be: what do we want with the Union now?”.

But there would be no deal on the table to agree on, just a political direction to lay out.That means that a second summit in July, after more discussion and preparatory work on how to proceed with the Brexit process, would be possible, the source said.

"But it’s pure speculation," he said, using a word journalists have heard from all institutions recently.

"Don't forget that the UK staying in is still a possibillity," another EU official said.

Tusk: Brexit talks could take seven years

Council chief warned UK could face long divorce from EU, as it could take up to seven years before the new relationship with Britain would be approved by other member states.

Analysis

After Brexit, EU leaders start soul-searching

The general public and financial markets are waiting for the EU's response to the British shock. But when leaders meet at next week's summit, there will be more questions than answers.

Column / Brexit Briefing

Leach the poison from the political well

At the end of a campaign, in which hyperbole, exaggeration and flat-out lies have masqueraded as debate, it’s still not too late for a positive case for EU membership or leaving the bloc to be made.

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