Brexit sends Europe into Political and Economic Crises

June 28, 2016

The Brexit vote is leading to the fragmentation of the United Kingdom and a leadership crisis within the parties of Britain, and calling into question whether the European Union is unifying and peaceful venture, said Heiner Flassbeck, former Director of the Division on Globalisation and Development Strategies at UNCTAD.

"Germany is clearly responsible for much of the trouble in the eurozone. So in the European monetary union. But nevertheless, these eurozone troubles have clearly spilled over into Great Britain, and have given the image and the idea to the British people, to many British people, that this Europe doesn't function at all."

Flassbeck said that the Greek experience of neoliberal austerity, and Germany's subsequent denial of responsibility, has "not shown that Europe is a functioning union."

"We have a disaster situation, in particular in continental Europe, but also in the UK for the poorer part of the population," said Flassbeck. "And this disaster is due to the fact that Europe is implementing the wrong policies. And these policies are, in their character, neoliberal."

The Brexit vote is leading to the fragmentation of the United Kingdom and a leadership crisis within the parties of Britain, and calling into question whether the European Union is unifying and peaceful venture, said Heiner Flassbeck, former Director of the Division on Globalisation and Development Strategies at UNCTAD.

"Germany is clearly responsible for much of the trouble in the eurozone. So in the European monetary union. But nevertheless, these eurozone troubles have clearly spilled over into Great Britain, and have given the image and the idea to the British people, to many British people, that this Europe doesn't function at all."

Flassbeck said that the Greek experience of neoliberal austerity, and Germany's subsequent denial of responsibility, has "not shown that Europe is a functioning union."

"We have a disaster situation, in particular in continental Europe, but also in the UK for the poorer part of the population," said Flassbeck. "And this disaster is due to the fact that Europe is implementing the wrong policies. And these policies are, in their character, neoliberal."



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Story Transcript

SHARMINI PERIES, TRNN: It’s the Real News Network. I’m Sharmini Peries coming to you from Baltimore.

The fallout from Britain’s vote to leave the European union, the so-called Brexit referendum, is continuing in the economic realm. The drop in the stock markets around the world wiped out $2.1 trillion in value from stock markets. The British pound dropped to its lowest value in 31 years, and British businesses have warned that they will implement hiring freezes, and also implement investment cuts due to the economic uncertainty that the vote has provoked. In the political arena, Germany, France, and Italy have said they will not support any EU treaty negotiations until Article 50 of the EU treaty has been invoked–that is, the article that specifies the procedure by which a member country will leave the EU. In other words, they are forcing Britain to commit to leaving the EU and sign on it by an affirmative action before negotiations begin.

With us to discuss the recent development is Heiner Flassbeck. Heiner is the director of Flassbeck Economics, a consultancy for global macroeconomic questions, and the editor of Makroskop, an internet magazine. He’s also coauthor of a new book titled Against the Troika: Crisis and Austerity in the Eurozone, which he wrote with Costas Lapavitsas. Very good to have you with us, Heiner.

HEINER FLASSBECK: Thank you for having me.

PERIES: So, Heiner, let’s begin with the current situation in the UK. There is a political crisis and leadership crisis underway. Let’s begin by describing what that is, and then we’ll get into the economic crises.

FLASSBECK: Well, you see, the point to make first is that, so to say, the movement that carried the Leave vote was not the government. It was a broad movement of different types of parties. On the one hand, UKIP, the UK Independent Party, on the one. But there were also other organizations that were members from the Tories, members of Labour. So it was a huge and heterodox movement that drove the Leave campaign.

And so far, it’s absolutely clear that they don’t know how to react, because there is no government that could execute now the will of the British people, of the majority of the British people. And so they’re guessing around how to get a government that could really do that, because all the parties have split and the heads of the parties are also split. It’s only one very prominent leader, Boris Johnson, the former mayor of London, who was, so to say, the spiritual leader of the Leave campaign. But he’s not yet prime minister, and whether he gets a majority, that’s a very open question.

PERIES: Now, in terms of what is now appearing to be a crisis in terms of the European Union itself, Angela Merkel, and you’re in Germany there, just the night before the elections tweeted that we must not forget that the European Union was formed as a peacekeeping venture to keep peace and unity in Europe. But it is quite the contrary in terms of what has become of the EU in terms of its economic and trade ambitions. Give us a sense of how Germany is reacting to what happened in the UK.

FLASSBECK: Well, Germany is, again, as I call it, usually in a state of denial. Germany is clearly responsible for much of the trouble in the eurozone. So in the European monetary union. But nevertheless, these eurozone troubles have clearly spilled over into Great Britain, and have given the image and the idea to the British people, to many British people, that this Europe doesn’t function at all if at the core, the core countries, they form a currency union, and currency union is a disaster, and it’s Germany-dominated and everybody has to pay Germany.

Take the example of Greece, the terrible example of Greece. Against the will of the Greek people, Germany pushed through so-called reforms, what they called structural reforms, which is neoliberalism. But the Germany public and German politics are in full denial of that. They talk about everything and nothing. But no one, no one mentioned Germany’s role in that. And so far only in Italy and France media were honest and bold enough to say, well, this is a big mess. This mess was caused not only by Germany but in part by Germany. And on the other hand we have not shown that Europe is a functioning union, that it is a political union, that it is an economic union, because we have this mercantilist Germany in the middle of Europe, with a huge current account surplus, the others in current account deficit, and all the political tensions and the power tensions that are following from that.

PERIES: Now, you had penned a book with Costas Lapavitsas that we have also interviewed on this very issue, and he mentioned in his interview when you look at the people that voted to leave the EU, it was really a matter of class. Those who are impoverished, who have been looking for jobs, who are very frustrated with the healthcare system, people who are frustrated with not being able to find housing finally got an opportunity to exercise their will, and this is how they did it.

So when you take all of that into consideration and add to that long, elongated austerity measures in the UK now have all added up to this sum total of people’s desire, which is to leave the European Union. What political consequences do you think this is going to have on Britain, and then the European Union?

FLASSBECK: Well, for Britain the situation is extremely difficult. As I said, it is not a single party that would stand behind the decision. There is a big danger of a split inside the United Kingdom, because Scotland is opting out, or wants to opt out, in a new overall poll, and remain a member of the European Union. And so far there is a big mess coming up in Great Britain, and nobody can forecast what really is going to happen in the next month. I’m rather sure that they will delay the decision, they will not write the letter in which they ask for procedure following Article 50 that you mentioned in your introduction.

So what they’re going to do–they’re going to delay this decision for another two, three, four months, until they have a functioning government, and they have a government that really is willing to execute this protest. Then, even, the process will take another three, four, five years. Nobody knows. It’s extremely complicated to get one country out of such a huge legal, political framework, as the EU is.

On the other hand, what we have–and so far Costas is absolutely right. We have a disaster situation, in particular in continental Europe, but also in the UK for the poorer part of the population. That’s absolutely clear, because in particular, again, continental Europe and the European monetary union was in the last five years totally unable to escape a [recovery]. You cannot imagine what the discussions were in the United States. But if you were in such a situation–but if you compare the United States with Europe, to development of GDP and growth, unemployment in the last five years, then the United States was a paradise, so to say. But in the United States things are not going so well.

So Europe was a plain disaster. And this disaster is due to the fact that Europe is implementing the wrong policies. And these policies are in their character neoliberal, and so far Costas is absolutely right, and they are austerity-minded, which is just foolish, in my view, to say it very clearly. They’re just foolish in a situation where a country like Italy and France are in recession for five years. They’re in recession for five years. The unemployment rate is more than above 10 percent, and nevertheless they’re asked by the European Commission to cut their government expenditures to try to reduce the deficit further, which is against all logic, against all reason.

PERIES: All right. Heiner, let’s continue this discussion. There’s the political crisis and there’s the economic crisis, and then there’s the crisis in terms of the European Union, that all is posed by this decision for the UK to leave. Let’s take this up in our next segment. Thanks for joining us for now.

FLASSBECK: Thanks for having me.

PERIES: And thank you for joining us on the Real News Network.

End

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