The Case for ‘Regrexit’: Why Britain Won’t Really Leave the EU

Despite the Brexit vote, Britain will remain a de-facto member of the European Union, writes Peter Vanham, Global Leadership Fellow at the World Economic Forum who is based in Belgium, in this opinion piece. (The views expressed in this opinion piece are his own and not those of the World Economic Forum.)

It’s irreversible. The people have spoken, David Cameron threw the towel, and it’s still unclear who will take over the Britannia ship. “Out is out,” as EU Commission President Jean-Claude Juncker had warned.

Yet Britain cannot and will not leave the EU. Why? Because any scenario in which it does is worse for all parties involved than any scenario in which it doesn’t. In such case, John Nash’s prisoner’s dilemma tells us what the equilibrium outcome will be, and Belgium’s surrealism tells us what its name will be: Britain will remain a de facto member of the Union — we just won’t call it a Regrexit.

Consider for a moment the scenario in which Britain does leave the EU (which it has to in order to respect the outcome of the non-binding referendum on its membership). In this case, all of the below events are likely or certain to happen in the UK: a secession by Scotland, a sour and lingering generational dispute, a mass exodus of talent and companies, an economic recession, a deficit in government budget and pension fund payouts, and a real estate crisis. As a matter of fact, many of those consequences are already in the works.

“Countries on both sides of the North Sea have a lot to lose from a real Brexit.”

If these kinds of consequences were solely contained to Britain, the reaction of EU leaders would be easy to guess: bye, bye, Britain. Angela Merkel, Wolfgang Schauble, and others in the same mindset as Jean-Claude Juncker have had enough of British leaders’ lukewarm attitude towards the EU.

An Intricate Web

But as always, there is a catch. As has become clear over the last few days, the negative consequences of a British exit are never contained to the UK. In Europe’s web of trade and finance, everything is connected. All of Europe’s stock exchange indices, including the German DAX and the French CAC, went deep into red territory in recent days. Italy’s banks might need a 40 billion euro bailout because of their exposure to the UK. Belgium, The Netherlands and Luxembourg will see their exports to the UK fall steeply.

Those consequences are just the financial ones. Then there are the political ones. Eastern European leaders have already been asking forthe resignation of EU Commission President Jean-Claude Juncker. Extreme right politicians and their supporters are asking for a referendum in The Netherlands and France. And if Scotland were to gain its independence, Catalonia would no doubt be next to ask for the same, which would add insult to injury for Spain’s struggling leadership.

The result is that countries on both sides of the North Sea have a lot to lose from a real Brexit.

Consider, then, the alternative outcome. What would be lost if Britain remained in the EU despite its referendum? In the UK, to begin with, a lot of people who voted out would be upset. Fifty-two percent of voters had backed a Brexit, and they would be disappointed if it didn’t happen. Some of them might turn away from the traditional Labour and Tory parties, and give a protest vote to the UK Independence Party.

But no heads would roll – indeed, they already did. Young people wouldn’t get on the streets to revolt – indeed, they would rather do so if there was a Brexit. Financial markets wouldn’t panic; to the contrary, they would calm down.

“The compromise will be that Britain will be a different member of the Union than before, to respect its referendum.”

Back in Europe, there might be some grumbling from Europe’s heads of state and government — but the call for resignations, referenda on independence and a departure from the EU in many countries would go mute. The bailout of Italy’s banks wouldn’t be needed. The exports from the Benelux and Ireland would return to normal levels.

Of course, politicians on both sides would need to be able to explain to voters they didn’t betray them. In Britain, the next head of government would need to call the revived British membership something else than before. In Europe, the same would be expected — “out is out,” right?

But in the end, the Belgian nature of the European Union would prevail. If you live in a place for a long time, you take over its habits. The Belgian nature is one of compromise and surrealism. The compromise will be that Britain will be a different member of the Union than before, to respect its referendum. The surrealism aspect will be that while it will remain a de facto member, nobody will call it that.

Or, as Belgium’s most famous and most Belgian painter — René Magritte — would say: “Ceci n’est pas un Regrexit.”