The post-Brexit debate in the UK focuses on what kind of relationship Britain should have with the European Union. This is important, but it will be shaped by what kind of Europe emerges post-Brexit. Britain has a profound interest in what kind of Europe confronts it across the channel. As Churchill said before the First World War, the weather comes from Europe. Britain should work to shape the Europe that best suits its interests.
The European Union as currently constructed is institutionally unsustainable. The Euro has created asymmetries that will drive change. There are essentially three possible outcomes:
1. Europe Fragments: the rise of populist and European parties, a renewal of the migration crisis and a new financial crisis in the Eurozone proves too much. The European Union breaks apart as its political leaders bicker about who is responsible. Demands by the Luxembourg Foreign Minister that Hungary should be expelled from the EU illustrate the dynamic.
2. European Federal Superstate: faced by the threat of fragmentation, Germany agrees to radical reform of the Euro and the ECB to allow all EU members to join the EU immediately. In return, France accepts full political and economic union. Non-Euro EU members are given a stark choice: join the Euro or leave the EU. The Eurozone converts itself into a highly integrated European Superstate.
3. Permanent Two-Speed Europe: Europe recognises that the non-Euro members will never adopt the Euro, either because they don’t meet the criteria or because they don’t want to. The Eurozone avoids further crises through greater integration becoming ever more federal. Meanwhile the periphery becomes a looser intergovernmental confederation. European institutions are adapted to the new reality, and to ensure minimal friction between the two groupings.
Neither the first nor the second outcomes would be in Britain’s interest. Britain neither wants a Europe in chaos nor European Superstate. The third option most accords with British national interests: a Federal Eurozone surrounded by a Confederal Periphery. British foreign policy should work consciously and determinedly to secure this preferred outcome.