CCW Legal: Brexit - the German view

Friday, 26 August 2016

From the German media’s reaction, the vote to leave came as a real surprise. It’s a surprise because David Cameron had successfully pushed through even more preferential treatment for the UK – more so than the “the UK rebate” negotiated by Margaret Thatcher.  A particularly strange decision was that of Cornwall: distinctly pro-Brexit; but receiving plenty EU subsidies for agriculture and infrastructure; and (critically) having achieved EU protection of Geographical Indication for Cornish Pasties!

Soon after the result of the referendum, German hopes grew that Frankfurt could attract financial business from the City of London. However, one month later, those hopes are fading a little, due to the fact that only a small part of the business that makes London a global financial centre is connected to EU-related transactions. Against that, the reaction of German Chambers of Commerce and Industry was that the expected growth in German exports to the UK of 5% before the vote turned into a decrease by 1% afterwards and by a further 5% decrease the following year.  Additionally, a quarter to a third of 5600 German companies questioned said they would consider cutting investment and jobs in UK subsidiaries.

On 28 June 2016, Chancellor Angela Merkel told the German parliament (Bundestag) that:

  • She recognized that this is a unique situation in the 60 years of the EU – and it may result in discussions about giving more sovereign rights from Member States to the EU or conversely the EU giving more power back to Member States.
  • A further division of the EU would have to be prevented from happening by all means. To achieve this, 6 points were stressed:
    • Decisions would have to be made by all 27 member states together.
    • It is solely the UK’s task to explain what the future relationship with the EU should look like. No negotiations (formal or informal), though, will take place before article 50 is triggered. Until the end of the 2-year period, the UK remains an EU member with full rights and obligations.
    • To Angela Merkel, the UK’s own interest seems to be to aim for a close partnership which would also benefit Germany. During the negotiations, the German government will take care of the interests of German citizens living in the UK.
    • Germany will assure that negotiations won’t turn into cherry picking. There has to be and will be a noticeable difference between being a member of the EU and not being a member. The UK will not get to keep the privileges without the obligations that go with them. Free access to the single market requires the acceptance of the Four Freedoms (which includes the movement of workers), for the UK as for anyone else.
    • A successful EU has to noticeably improve the lives of its citizens, and bridge the gap between winners and losers of globalization.
    • The EU is a project to create and maintain peace. Crises in its neighbourhood, refugee movements, climate change, hunger and terrorism can’t be addressed nationally but have to be treated on an EU level.
  • The EU is strong enough to cope with the UK leaving while still promoting its interests throughout the world.

The resignations of Nigel Farage and Boris Johnson and, more, the appointment of BoJo as Foreign Secretary were received by some with amazement (“I wouldn’t be surprised at the UK appointing Dracula as Health Secretary next” – speaker on foreign affairs of the smaller coalition partner SPD) and by others with understanding for the political need to integrate Leave-campaigners into the government.

A poll in Germany in early July then showed that recent events seemed to have acted as a wake-up call for Germans: 52% (up from 39%) had a favourable view of EU membership, while only 11% (down from 21%) saw disadvantages. And, significantly, support for the anti-EU, anti-migration party AfD, dropped to 12% from 15%. So, the UK decision seems to have made Germans value the EU more, not less.

Before Theresa May’s meeting with Angela Merkel, German President Joachim Gauck had called on European politicians to avoid being too harsh toward the UK; and to take a breath and negotiate calmly, to produce better results. More, he is less in favour of referenda. But, in relation to the Merkel/May meeting the consensus seems to be that it promised a matter-of-fact approach in future negotiations – a relief after a public dialogue dominated so far by prejudice and emotion.

The fact that Teresa May’s first foreign visit was to Germany is less seen as sign of German hegemony in Europe (which hardly any German would see as a goal of German politics) but more as meeting with one of the important partners in negotiations due to the size of the German population. However, German commentators do realise that Brexit means more (though generally undesired) power for Germany within the EU: a thought already exploited by Polish national-conservative party leader Kaczynski to argue against further integration.

Scotland’s position on Brexit has also received significant media coverage and generated overall sympathies.

One month after the result, news about Brexit features prominently in German newspapers, e.g. reports on Markit/CIPS UK Manufacturing PMI survey decreasing significantly, representing a negative effect on British economy even after positive effects of a weaker pound on exports have been taken into account, or reports on decreasing demand in the housing market. This is being illustrated by reports on EU migrants that had wanted to buy a house but are now hesitating due to their uncertain status in post-Brexit UK. In addition to that, the increase in reported hate crime following the referendum has not gone unnoticed.

It has also been said that Brexit would make TTIP less attractive for the USA, the UK receiving 25% of US exports to the EU. With significant opposition to TTIP amongst Germans (but not their government) problems with TTIP ratification might be seen positively.

Looking at Switzerland, by February 2017, the Swiss will have to pass a law based on a binding referendum to cut immigration (including from the EU). That must mean that the EU will not allow special treatment for the Swiss because of the repercussions on Brexit negotiations. Switzerland has already accepted the free movement of people in a bilateral agreement with the EU: failure to comply in the future (which their referendum seems to require) would also endanger other bilateral agreements determining the Swiss-EU relations.