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The ‘Leave’ Camp Won. That Doesn’t Mean Brexit Will Happen.

The ‘Leave’ Camp Won. That Doesn’t Mean Brexit Will Happen.

Last Thursday, British voters approved a referendum to leave the European Union, triggering political and economic shock waves across the globe. But it’s far from certain that British leaders will abide by its results and actually leave the European alliance.

The decision by British voters last week is not legally binding; it is simply an advisory to British leaders. In order to leave, the government would have to invoke Article 50 of the Lisbon Treaty that governs the EU. So far, no one is willing to do that.

On Monday, Boris Johnson, the former London mayor who backed the so-called Brexit and who is one of the leading candidates to replace Prime Minister David Cameron, urged calm and pushed for the U.K. to remain part of the European common economic market, along the lines of an agreement the EU has with Norway, a notion politicians in Brussels immediately rejected. He said the U.K. should not immediately invoke Article 50.

In an editorial for the Daily Telegraph, Johnson wrote the U.K. “is part of Europe, and always will be” and that changes “will not come in any great rush.” He also promised a Britain “rebooted, reset, renewed and able to engage with the whole world.”

However, Johnson made clear there would be room for talks. “There is only one way to get the change we need, and that is to vote to go, because all EU history shows that they only really listen to a population when it says No,” he wrote in another op-ed for the Telegraph in March.

Cameron, who opposed Brexit, said it’s up to his successor to getting the ball rolling on the country’s exit; last week, he announced he would resign in September after voters sided against him. British leaders will have until the fall to decide whether they will follow through on their people’s clear vote to leave Europe.

“That means we’ll be [three] months past the vote,” said Daniela Schwarzer, the director of the Europe program at the German Marshall Fund of the United States. “The financial cost will be felt in a strong way still, and the polarization of the campaign will have sobered down.”

Avoiding a Brexit could happen in a number of different ways. British lawmakers could ignore the will of 52 percent of voters by not endorsing the prime minister’s decision to invoke Article 50. London could also open negotiations with its current European partners on a path for Britain to stay in the EU.

The three-month break allows lawmakers in London some wiggle room to backtrack from the decision. One needs to look no further than last summer for evidence of how this would work.

Last July, Greek voters rejected an austerity package mandated by Europe in exchange for a massive 86 billion euro, or $95 billion, bailout package Athens needed to stay afloat. This vote turned out to be a failed negotiation ploy by Greek Prime Minister Alexis Tsipras, who wanted to spare his nation further pain. In the end, he accepted much harsher spending cuts to get his hands on desperately needed cash.

Ireland has also ignored the results of a referendum. In 2008, Irish voters rejected an update to the EU’s Lisbon Treaty designed to streamline decision-making in Brussels — and then adopted it less than a year later.

The fallout from Brexit continued to unfold Monday as investors sold off British stocks, traders pushed the pound to its lowest level against the dollar since 1985, and 3 million Britons signed a petition for a second referendum on whether to leave. The Dow Jones industrial average is in the midst of its largest two-day drop in 10 months. European markets were also down sharply.

On Monday, Standard & Poor’s downgraded the United Kingdom’s sovereign credit rating by two notches, from “AAA” to “AA,” citing last week’s referendum. “In our opinion, this outcome is a seminal event, and will lead to a less predictable, stable, and effective policy framework in the U.K. We have reassessed our view of the U.K.’s institutional assessment and now no longer consider it a strength in our assessment of the rating,” the ratings agency said in a news release. Fitch also downgraded U.K. debt from “AA+” to “AA.”

This kind of market bloodletting, and lack of confidence about the financial health of the U.K., could put both Britain and the EU in a mood for compromise. If a remorseful Cameron tries to use the referendum as a bargaining chip, EU politicians might be willing to enter the game. This is what happened when Athens was on the verge of leaving last summer: Instead of kicking Greece out of Europe, as Germany had long threatened, EU members continued negotiations and ultimately got Athens to agree to harsher austerity measures than they’d initially demanded.

In other words, faced with the choice between financial ruin and compromise, Greece chose the latter. Britain could do the same.

“The people in the U.K. will feel that it is not a free lunch to leave the EU,” Schwarzer said.

On Monday, after a meeting of the heads of state of Germany, France, and Italy with European Council President Donald Tusk, German Chancellor Angela Merkel said no informal discussion on Britain’s exit would begin until London actually triggers Article 50. But she did not close the door on talks about leaving down the line.

“I have neither a brake nor an accelerator. Rather, I have the job of reflecting when this message [to leave the bloc] arrives about how exactly we implement it,” Merkel, who dominated last summer’s talks with Greece, said at a Monday press conference.

Cameron is set to meet with his European counterparts Tuesday. Mujtaba Rahman, the head of the Eurasia Group’s European practice, said the powerful German chancellor would try to find middle ground between the U.K. and Europe.

“Merkel does not want to punish the U.K. for its decision,” Rahman said Monday. “Merkel’s pragmatism speaks to the fact that she will ultimately be the one who sets the tone with all the EU’s other leaders on Tuesday, will have to lead the negotiations, and would ultimately like to keep everyone on board.”

There is good reason to negotiate to keep Britain in the U.K. — on both sides of the equation. A recent research note published by economists from Citigroup said Brexit “will be highly negative” for both economies because it would throw out the trade blueprint between the U.K. and the European alliance. About 45 percent of British exports going to Europe would be at risk, as would the 16 percent of total EU goods that cross the English Channel on their way to the United Kingdom. 

If Britain leaves, the EU would lose roughly $3 trillion in GDP, because it would lose the alliance’s second-largest economy (Germany has the largest). In February, the ratings agency Moody’s said “the economic costs of a decision to leave the EU would outweigh the economic benefits,” citing declining exports and “a prolonged period of uncertainty, which would negatively affect investment.”

There are also elements of U.K. unity at play. Scotland, Northern Ireland, and Gibraltar, three British territories that voted to stay in Europe, could call their own referendum on remaining part of the U.K. According to the BBC, Scotland and Gibraltar are already in talks to form an alliance that would join the EU.

“I can imagine a situation where some parts of what is today the member state United Kingdom are stripped out and others remain,” Fabian Picardo, Gibraltar’s chief minister, told the BBC Monday.

Pro-Remain members of Parliament are now starting efforts to rally support for a new referendum. Michael Heseltine, a member of Cameron’s Conservative Party, told Sky News, “There is no way you are going to get those people to say black is white and change their minds unless a) they know what the deal is and b) it has been supported either by an election or by another referendum.”

Even former Prime Minister Tony Blair has said there is room for a second tally. “As I’m looking at it here, I can’t see how we can do that. But, you know, the point is, why rule anything out right now?” he said. For now, though, Cameron has ruled out a second referendum.

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