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Here’s How Much Europe Depends on the UK

Politics / BrExit Jul 12, 2016 - 12:10 PM GMT

By: John_Mauldin

Politics

Euroskeptiscism is on the rise in Europe. Countries like Poland and Hungary have actively sought to limit the EU’s influence and ignore its rules—most recently with regard to refugee policies.

Even the most Euroskeptic governments, however, campaigned against Brexit. While European nations may want to limit the EU’s role and influence at home, both economic and security interests led them to support the UK’s membership in the EU (read our free special report on Brexit implications).


This opposition to Brexit is an example of why interests—much more than ideology—matter in geopolitics.

European powers depend on exports to the UK

European nations are heavily invested in their relationship with the UK. The UK is the fourth-largest importer in the world, and the EU needs British import demand.

EU member states’ trade ties with the UK vary, but several European economies send a significant amount of their exports to Britain.

Nearly 14% of Irish exports went to the UK in 2015. 9% of the Netherlands’ exports and 7.4% of Germany’s exports also went to this nation in 2015.

With countries like Germany facing reduced global demand for their goods, European governments cannot afford to lose access to British customers.

The UK was a major contributor to the EU’s budget

12.6% of the EU’s revenues came from the UK in 2015. When less developed countries joined the EU, the older members took on a greater financial burden. They hoped that expansion would boost investment opportunities and enhance the bloc’s security in the long term.

The UK was one of only 10 net contributors to the EU budget – along with Germany, France, the Netherlands, Italy, Sweden, Austria, Denmark, Finland, and Ireland. For these wealthy European economies, a British exit means an increased financial burden.

Eastern Europe needs access to UK labor markets

British job opportunities and remittance flows are highly significant for Eastern Europe. Eastern Europe has enjoyed low unemployment rates—in large part because millions of Eastern Europeans work in other EU countries… most notably, the UK.

Over 740,000 Polish citizens and over 160,000 Lithuanian citizens resided in the UK in 2014 according to Eurostat. There are also reportedly over 500,000 Hungarians abroad, with an estimated 300,000 in the UK.

Britain and the EU are likely to reach a trade deal. Nevertheless, if this deal is bilateral, there are no guarantees that workers from Central Europe could continue working in the UK.

Brexit is more than just an economic threat to Europe

Europe’s unease is about more than economics. Some countries see Brexit as a threat to the region’s security interests. The Kremlin has been working to split the Western alliance, while the EU has been fragmenting under the weight of internal challenges and diverging interests.

Eastern European nations fear that Western Europe may abandon them. Countries like Poland know that a more divided Europe is even less likely to act rapidly and cohesively to aid allies in the east.

The UK is a highly strategic ally for European nations. Britain boasts one of Europe’s most powerful militaries, despite some downsizing and a reduction in overseas operations over the years.

Plus, The Royal Navy remains the second-largest navy in NATO, after the US Navy.

All of this confirms that Europe can’t afford a break-up with Britain. The EU and Britain, therefore, are likely to reach a trade deal and maintain close economic and military ties despite the Brexit vote.

Free Special Report: How Brexit Will Affect the UK, Europe, and the US

Britain’s vote to leave the EU sent shockwaves throughout the world, plunging markets into chaos and Europe into an existential quagmire.

Get this free special report from Geopolitical Futures founder and acclaimed intelligence expert George Friedman to uncover the truth about Brexit—and the devastating fallout we can expect to see worldwide.

John Mauldin Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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