Current situation and future potential of further integration between UK and EU

Abstract

Abstract: The article analyses potential consequences of Brexit as well as the current costs and benefits of UK’s membership in the EU, furthermore focusing on alternative agreements that may result between the members. Keywords: financial and economic integration, economical and political institutions, European Union. In 2013, David Cameron, British prime minister deliv-ered a speech on Britain and Europe. He offered the British public a referendum concerning the United Kingdom being part of the European Union [1; 4]. The “Brexit” is a very structural reform that will have a substantial impact both for the UK and the EU.The UK is one of the largest mem -bers with big contributions both in economical and political spheres of the EU.Both countries will come across the challenge of manag-ing the process of separation. Despite the fact, that there is an article that informs the process of the separation included in the Treaty of the European Union, there has been no practical experience since the EU emerged [1; 6].Secondly, it may change the ongoing cooperation of the European Union after the loss of one of its most influential states [2; 12].Last but not least, it is hard to predict the relationships of the UK and the EU after the withdrawal [3, 44].The essay is structured in the following way: first section explains what happens in the UK and its “value” for the EU. It is crucial to understand the implications of the separation to in order to have a full understanding of the situation in Europe. Hence, the first section will explain why the UK may benefit without being a member state of the EU. To keep the chronology, the second section concentrates on the procedural actions towards the withdrawal and institutional changes necessary for the separation. It will take a look on the core economical and political institutions of the EU and analyse their changes after the UK withdrawal. Third sec-tion will be focused on the post-withdrawal operations of the EU and relationships between United Kingdom and the European Union.David Cameron has announced committing a future Con-servative government to renegotiating Brittan’s relationship with the EU, to then be put to a referendum, widely expected to be around 2017 [1; 7].The Euro crisis made a crucial impact on the British pub -lics’ faith in the European Union. Stepping forward further in-tegration is not something the Britons are comfortable with. The past experience of Portugal, Italy, Greece and Spain made both the UK government and the UK citizens to understand that it will be harmful to use EURO as a currency. Therefore, we can see that the efficiency of Single Currency Area The-ory is not applicable for the United Kingdom at the current stage of development of the Euro Zone [4].The UK will also be benefiting from less migration, no EU budget payments, better opportunities with emerging markets and less regulation from the EU [2; 14]. The last argument explains the actions of Cameron towards “Brexit”. The big controversies between the UK and the union appeared dur-ing the EU summit in December 2011 [5]. David Cameron put a veto on the EU fiscal treaty 2011 for two reasons. Firstly, the UK did not want further European Integration; secondly, the following changes in Growth and Stability Pact may lead to economic downturn of the UK [6].In the Article 3 of Fiscal Compact there were made some changes in Stability and Growth Pact. The main idea of the pact is that the ratio of the general government debt to gross domestic product should be significantly below 60% in order to keep the risks of default relatively low and the structural deficit should not accumulate more than 0.5 % of nominal GDP [7]. The new fiscal treaty contained the in-formation about stricter sanctions for the countries that ac -cumulate higher level of debt. A country can be funded up to 0.1 % of GDP [6].The change of pact helps Europe to minimize the risk of a default of its member states because it does not allow the country to get heavily indebted. The changes in the fiscal treaty are made to prevent a country such as Greece getting heavily indebted [6].It is possible to look on this situation through the prism of Fiscal Fatigue theory.