On June 23, 2016, British voters will decide whether they want to leave the European Union, a possibility widely referred to as "Brexit." Polls indicate that the result of the referendum is wide open, with the Remain camp and the Leave camp neck-and-neck in recent public opinion polls.
But how did the United Kingdom end up in this situation? Ahead of 2015 parliamentary elections, Conservative Prime Minister David Cameron agreed to hold the referendum should his Tories win and he be returned to 10 Downing Street. The pledge fulfills a demand that EU-opponents within his party have been making for years. Cameron himself hopes that British voters will choose to remain part of the EU, which is why he negotiated concessions for his country with European leaders, including the cutting of social benefits for citizens of other EU countries living in Britain and more freedoms for British banks, for example. The prime minister hopes that such reforms will encourage the UK electorate to vote to remain inside the EU.
Many in Britain, particularly Conservatives, believe however that the compromise with Brussels is insufficient. Several cabinet ministers announced their opposition to Cameron's position and have been campaigning on behalf of the Leave camp. They are free to do so because Cameron has relaxed party discipline on the Brexit question. Cameron, however, has been under fire from the opposition as well, with the Labour Party accusing the prime minister of senselessly putting Britain's future at risk.
Governments across Europe are looking to the UK with concern. Should British voters decide to leave the EU, it could throw Europe into a crisis with incalculable consequences.
There is not a clear answer to that question. But a look at history helps to better understand the British:
Twelve years prior to joining the EEC
Britain's path to European integration was a rocky one. Following the end of World War II, Winston Churchill called for "a kind of United States of Europe." The Continent should never again be able to blunder into a situation such as the one it found itself in prior to the two world wars. He apparently was not, however, thinking so much of Britain itself – he envisioned the country remaining on its own and following its own path.
As such, the UK initially held back and took part neither in the negotiations prior to the founding of the European Coal and Steel Community in 1951 nor in the later talks which led to the founding of the European Economic Community (EEC), the precursor to the EU. As a counterweight to the EEC, Britain founded the European Free Trade Association in 1960 together with six other European countries, but the economic alliance never became nearly as powerful as the EEC. Ultimately, the EEC's economic appeal proved irresistible and Britain began seeking membership in the 1960s at a time when the domestic economy was struggling. Both the Tories and Labour were in favor of accession, but it was ultimately achieved in 1973 under a Conservative government. Prior to becoming a member, French President Charles de Gaulle had twice vetoed British EEC membership. The path was only cleared once de Gaulle resigned.
Internal party disputes lead to the first referendum in 1975
The first movements to leave the community began just a short time later. Then, too, it was primarily a function of domestic political and economic conditions. The center-left Labour Party was particularly divided over membership, with the party's left wing opposed to being part of the EEC because the free market it espoused was not consistent with the alternative economic model the party stood for. In order to save his own party from disintegration, Labour Prime Minister Harold Wilson, who himself was pro-European, decided to reopen negotiations with Brussels and to hold a referendum over the country's membership. It was the first country-wide referendum in the United Kingdom's history. Though the negotiations with Brussels produced only marginal improvements for Britain, an overwhelming majority of voters chose in 1975 to remain part of the EEC, with more than 67 percent voting in favor of staying.
British rebate, Schengen, the euro
Debates over Britain's membership never completely went away. In the 1980s, Conservative Prime Minister Margaret Thatcher insisted the UK was paying more than its fair share into the EEC budget and pushed through the oft-cited British rebate at the 1984 summit in the French town of Fontainebleau. The deal called for Britain to be given back two-thirds of its net contribution to Brussels because the country didn't benefit from the community's agricultural subsidies to the same degree as other member states. The UK also elected not to become part of the Schengen border-free travel area, which was established in 1985 and continually expanded since then. And the UK also chose not to adopt the euro as its currency. In 1992, Britain was essentially forced out of the European Exchange Rate Mechanism because the pound, due to its weakness against the German deutsche mark, had become a target of speculation. That too fueled skepticism of an allegedly "overregulated" Europe.
Euro-crisis and immigration
Most recently, the eurozone debt crisis contributed to growing EU-skepticism in Britain. Critics are concerned that nation-states could lose their clout and have warned of German dominance in Europe. At the same time, the immigration of people from recently acceded EU states in Eastern Europe contributed to the rise of the anti-EU UK Independence Party (UKIP). The party, led by Nigel Farage, has increased the number of seats it holds in the European Parliament from three in 1999 to 24 today. The party received 13 percent of the vote in the last elections in addition to winning one seat in the House of Commons. UKIP's success has increased the pressure on Prime Minister David Cameron to adopt an EU-critical tone. In 2011, he rejected the European Fiscal Compact, which prescribed strict budgetary discipline on EU member states in addition to the implementation of national debt brakes. His government also introduced a law pertaining to EU reform that requires every change to the Treaty of Lisbon to be the subject of a referendum in Britain.
In public opinion surveys, the two camps are extremely close. Only very few polling agencies have registered a slight lead for the pro-Brexit camp.
But when it comes to the EU, the UK is divided along regional lines. In Scotland, for example, there is a clear desire to remain part of the European Union. According to a survey performed by TNS, 51 percent of Scots would like to remain in the EU while just 19 percent favor Brexit, with the rest not yet having made up their minds. The reasons are clear: Leaving the EU would have significant political and economic ramifications for Scotland, and could lead the country to hold another independence referendum.
Observers believe that, even as many British would like to leave the EU, economic considerations could lead undecided voters to reject Brexit. A crucial question will be how successful each side is in getting their supporters to turn out.
In general, pre-election surveys in the UK are viewed with a certain amount of skepticism, particularly since the 2015 parliamentary elections, which many pollsters got badly wrong. Then, too, surveys forecast a close race between David Cameron and his Labour challenger Ed Miliband, but the Conservatives won easily. Polls ahead of the Scottish independence referendum in 2014 were also inaccurate, with those opting to remain in the UK winning by a much greater margin than had been expected.
Ireland, Denmark and Poland also have special rights within EU legal structures, but Britain has invoked these so-called "opt-outs" most often. Certain EU laws are not automatically enforced in the UK. Conversely, the country can apply EU measures in certain policy areas as it sees fit (opt-ins). London, for example, has opted to apply some elements of the Charter of Fundamental Rights and of security and justice policy, but not all. In the most recent negotiations in Brussels, Prime Minister David Cameron secured the right to decline full social benefit payments to immigrants from other EU countries.
In addition, the following special rights apply:
From the very beginning, Britain opted not to join the common currency regime and has thus not adopted the euro. EU treaties identify the common currency as one of its goals. As such, countries that accede to the EU are obligated to adopt the euro as soon as they have fulfilled certain economic and fiscal policy criteria, such as price stability and budgetary discipline. But the United Kingdom, along with Denmark, secured an explicit exemption from this requirement in the 1992 Maastricht Treaty. The British, though, were not always completely opposed to the euro and even joined the European Exchange Rate Mechanism in the early 1990s, a precondition for joining the common currency regime. Following a wave of speculation against the pound in 1992 (Black Monday), Britain was more or less forced to leave the ERM.
For many British, the advantages of staying away from the euro are clear: London has maintained a significant degree of independence on fiscal and economic policy and is neither bound by European Central Bank (ECB) decisions nor is it required to pursue greater budgetary discipline. In the financial crisis, the Bank of England was able to implement monetary policy measures of its own.
The United Kingdom is not a part of the Schengen area, which guarantees freedom of movement for individuals within the EU. That means that EU citizens must show their passports when traveling into the UK and the British must do the same when traveling to the rest of Europe. The British preferred to maintain tight controls of their borders, and Ireland joined the UK in remaining outside of Schengen so as to avoid having to install special border controls along its frontier with Northern Ireland.
In 1984, Conservative Prime Minister Margaret Thatcher forced through the so-called "UK Rebate" during a summit in the French city of Fontainebleau. Here famous quote – "I want my money back" – remains memorable even today. The rebate ensures that Britain gets back two-thirds of its net EU contributions because it does not benefit from generous agricultural subsidies to the same degree as other member states. In contrast to countries like France, Britain has a relatively small farming sector. In the EU's 2014 budget, this rebate was worth 6 billion. Nevertheless, the UK remains one of the largest net payers in the EU.
David Cameron – opposed
The Tory prime minister was once extremely critical of the EU, primarily to quiet Euroskeptics within his own party. In 2013, Cameron pledged to hold reform negotiations with the EU and to hold a referendum over Britain's membership in the 28-country bloc. Cameron claimed in early 2016 that the negotiations in Brussels produced a positive result for Britain and he has been campaigning for Britain to remain in the EU since then. But he has relaxed cabinet discipline on the Brexit question, with the result being that seven ministers in his government are now favoring Brexit. Cameron's political future is dependent on the outcome of the referendum.
George Osborne – opposed
Osborne has been Cameron's chancellor of the exchequer since 2010 and is considered the prime minister's closest political ally on many issues, including Brexit. Osborne hopes to one day succeed Cameron as Tory leader but has weak standing at the moment. Just months ahead of the referendum, he was forced to reverse course on extremely controversial welfare cuts.
Jeremy Corbyn – opposed
The left-wing head of the Labour Party long remained noticeably silent in the Brexit debate and he is not considered to be much of an EU proponent. But he recently spoke out for the UK to remain a part of the European Union. The union is important, he said, for guaranteeing workers' rights and environmental protections. In the first referendum in 1975, Corbyn voted against membership in the EEC and later, as a Labour MP, was often critical of the EU.
Nicola Sturgeon – opposed
She doesn't want to appear together with Cameron at pro-EU events, but Sturgeon, head of the London-critical Scottish National Party (SNP) is a de facto Cameron ally in the effort to prevent Brexit. The Scottish government head intends to hold another independence referendum if the UK electorate votes to leave the EU and if a majority of Scottish citizens vote to stay. In 2014, her SNP party failed in its attempt to convince Scots to vote in favor of independence from the UK.
Boris Johnson – in favor
The former mayor of London is seen as one of the Tory's most popular and distinctive politicians. His decision to join the Brexit camp at the beginning of 2016 generated a significant amount of attention and robbed Cameron of a powerful ally in his battle against Brexit. Johnson is widely thought to hold aspirations of succeeding Cameron as the British prime minister and many observers believe he could move into 10 Downing Street behind Cameron should the Brexiteers prevail.
Nigel Farage – in favor
No other British politician is as closely identified with the Brexit camp as Nigel Farage, head of the right-wing populist UK Independence Party (UKIP). His party was founded in the 1990s with the express goal of leading Britain out of the European Union. Ironically, however, UKIP has consistently done better in EU elections than in domestic votes and Farage has been a member of European Parliament since 1999. The popularity of UKIP's anti-EU rhetoric was a significant factor in Cameron's decision to hold an EU referendum.
Michael Gove – in favor
Gove is one of seven cabinet members to have spoken out in favor of leaving the EU, calling it "the most difficult decision" of his political career. The UK's secretary of state for justice, Gove was long considered to be a loyal follower and friend of David Cameron's. Now he is campaigning for the Leave campaign.
Gisela Stuart – in favor
Born and raised in Germany, Gisela Stuart is one of the few Labour parliamentarians who is in favor of Brexit. She has been a member of the House of Commons since 1997 and was among the UK representatives appointed to the convention tasked with writing a European constitution. The experience apparently left its mark and she has thrown her weight behind the Vote Leave campaign together with Michael Gove.
Iain Duncan Smith – in favor
The former Tory party head resigned from Cameron's cabinet in March 2016 in protest over controversial cuts Chancellor of the Exchequer George Osborne planned to make to disability and welfare benefits. Those plans were ultimately withdrawn, but some observers believe that the long-time Euroskeptic Smith, who was Cameron's work and pensions secretary at the time of his resignation, had been looking for a pretext to damage pro-EU cabinet members by resigning.
The most prominent anti-Brexit campaigner is the man who made the referendum possible in the first place: David Cameron. For years, the British prime minister complained vehemently about the EU, but now he is doing his utmost to convince voters to remain part of the 28-member bloc. He has presented the compromises he pushed through in Brussels as being sufficient and is using them as the basis for his pro-remain position.
Cameron has received an "emergency brake" to limit immigration from other EU member states. If such immigration reaches an "exceptional magnitude," London may invoke an "alert and safeguard" mechanism to cut or eliminate social benefits.
Britain now has the ability to make the payment of child benefits dependent on the country where those children reside. That applies, for example, to children who remain in their home country when their parents move to the UK for work. EU regulations currently require the country where parents live and pay taxes to pay such benefits.
The EU is to strengthen efforts aimed at increasing competitiveness as a way to create growth and jobs. "Concrete steps" are to be taken to facilitate better regulation and the reduction of administrative bureaucracy.
Sixteen members of Cameron's cabinet support his course, but he has been forced to defend it against many skeptics, particularly within his own Conservative Party. Several ministers have announced their opposition and have joined the Brexit camp. Secretary of State for Justice Michael Gove, for example, has cast doubt on whether the compromise with the EU is legally binding while Iain Duncan Smith, Cameron's recently resigned secretary of state for and pensions, believes the emergency brake for social benefits to be ineffective.
Roughly half of all Conservative parliamentarians are in favor of leaving the EU. They believe that Britain is thwarted by a surfeit of EU regulations and argue that UK contributions are too high and that the benefits of membership are too meager. They also demand that Britain have complete control over its own borders. One of Cameron's main opponents is also a Tory: Boris Johnson, the former mayor of London. The populist is one of Britain's most popular politicians and surveys have shown that voters trust him.
Pro-Brexit Conservatives have a significant ally in right-wing populist UKIP head Nigel Farage, who has called Cameron's EU reform compromise "pathetic." Farage is one of the most significant voices in the Brexit camp and has said that remaining in the EU would mean mass immigration. He has said that allowing Turks the right to travel to Europe without a visa, as called for in Chancellor Angela Merkel's immigration deal with Turkey, is "completely mad."
The other half of Conservative lawmakers support Cameron's course and the premier has also received backing from the opposition, with the Labour Party in favor of remaining part of the EU. Labour head Jeremy Corbyn has, however, accused Cameron of holding the referendum solely out of strategic considerations.
Those in favor of remaining emphasize the benefits associated with EU membership, such as the simplicity of trade with other EU member states and the fact that the influx of young and hard-working immigrants promotes economic growth. Furthermore, they say, the UK has more weight on the foreign policy stage as part of the EU.
Other opposition parties in the House of Commons – such as the Scottish National Party (SNP), the Welsh party Plaid Cymru and the Liberal Democrats – likewise support this line of argumentation.
Scotland, Wales and Northern Ireland profit from EU financial support to a greater degree than England. Wales alone is set to receive almost 2 billion in EU Structural Funds between 2014 and 2020. Northern Ireland is to receive more than 500 million and Scotland stands to benefit to the tune of 900 million.
It's no wonder, then, that these countries are considered more pro-EU and are also warier of the implications of Brexit when it comes to their financial well-being and influence abroad. In policy areas over which they have control, such as agriculture and environment, they have their own representatives in the EU bureaucracy.
In Scotland, particularly, a country with a strong independence movement, fears of Brexit are great. In May 2015, Scottish First Minister Nicola Sturgeon demanded that a "double majority" provision be applied to the EU referendum. The provision would have required that, in addition to a majority of all UK voters, the Brexit camp would also have to win a majority in each country of the United Kingdom: England, Scotland, Wales and Northern Ireland. Her demand, however, was ignored. Should Great Britain indeed vote to leave the EU, Scotland could call for another independence referendum such as the one that failed in 2014. Scotland could then apply for EU membership on its own. Because Scotland has already implemented EU law, such a process could proceed quickly. It is unclear, however, whether London would agree to allow the Scots to hold another referendum.
The neighboring country of Ireland has very close economic ties with Britain, with the UK serving as its most important trade partner. If the UK were to cut ties with the EU, trade could plunge by 20 percent or more, according to forecasts. Ireland would then likely seek to boost its trade ties with countries like France. Imports into Ireland from the UK would also become more expensive, which would harm Northern Ireland in particular.
In 2008, Ireland slid into crisis and spent three years as a ward of the European Security Mechanism (ESM), the EU's bailout fund. Today, the country is in much better shape, partially thanks to stable UK growth. In 2015, Irish growth came in at 6.9 percent, making it the fastest growing economy in the EU. The reawakened "Celtic Tiger" is thus particularly concerned about the effects that a Brexit could have on its trade relations. Furthermore, the reintroduction of border controls could have a negative impact on peace in Northern Ireland. Should Brexit become reality, the free movement of people would be limited and the EU's external border would run right through the island of Ireland.
Brexiteers maintain that leaving the EU would be good for the British economy. Their key argument is that Brussels' seeming love affair with regulation paralyzes the British economy. But OECD figures show that the British economy is one of the least regulated in the world. The Leave camp also ignores the advantages of EU membership – above all, free access to the EU's internal market.
The British would be required to withdraw from the single market within two years of leaving the EU – and nobody knows for how long. Insiders believe the European Commission would not make it easy for Britain to return to the single market to avoid strengthening anti-EU movements in other countries. The EU could also argue – not implausibly – that it currently has more pressing problems to deal with than negotiating with Britain: the refugee crisis, the Greek debt drama and the conflict with Russia, to name a few.
At the same time, London would have to negotiate new free trade agreements with countries around the world. Brexiteers like to claim this would happen quickly, but Brexit opponents consider this to be sheer lunacy. US President Barack Obama, for example, made clear during his visit to London in April that Washington had no interest in protracted, free-trade negotiations with individual states. If the British vote for Brexit, he said, they would have to take their place at "the back of the queue." With companies able to easily relocate their business operations to the considerably larger EU, it is also questionable whether other governments will go through the trouble of negotiating new, unilateral trade deals with Britain.
UK's Top Five Foreign Trade Partners in the EU (2014)
In the best case scenario, the British would be faced with a long period of uncertainty, which isn't good for investment. David Lidington, Britain's minister of state for Europe, sounded the alarm fully a decade ago about the state of economic limbo that would result if his country was no longer able to benefit from the EU single market and had not yet negotiated new trade agreements.
Even if the British again gained access to the EU internal market at some point, it is unlikely they would have gained anything: They would simply be right back where they were before they left. Norway, for example, which Brexit supporters like to hold up as an example for the future, is a member of the European Economic Area (EEA) and not the EU. But even in the EEA, around 80 percent of the EU single market regulations apply, including the free movement of people, one of the provisions most opposed by Brexiteers. It is highly unlikely that the EU would grant the British access to the single market while allowing the country to cut off access to its own labor market.
Politically, the outcome for Britain could potentially be a lot worse because the British, similar to the Norwegians and the Swiss, would still have to adhere to many Brussels regulations for economic reasons, but they would have no say in decisions pertaining to those rules. By default, this would mean a further waning of Britain's international importance. One of the reasons Britain is such an important partner to the Americans is that it has a voice within the EU. Were that no longer to be the case, the US president would be more inclined to speak to his counterparts in Berlin or Paris in the future.
UK Trade with EU and non-EU Countries (2015)
As is true for all international alliances, it is possible for member states to leave the European Union. At the instigation of the British, the process was first codified in the Treaty of Lisbon in the form of an exit clause. Article Nine, Paragraph 1 of the treaty came into force in 2009 and reads: "Any member state may decide to withdraw from the Union in accordance with its own constitutional requirements."
Paragraphs two to four further explain the procedures of a formal withdrawal. They stipulate that Britain must officially inform the European Council, the powerful body made up of EU member state leaders, of its intention. The EU member states must then agree on an EU negotiations leader. Generally, this would be the European Commission, but the task could also be delegated to the president of the European Council, a position currently held by Donald Tusk of Poland. The goal of the negotiations would be an agreement detailing the provisions of the withdrawal and the establishment of a framework for future relations between the EU and the departing nation. Paragraph four states that the withdrawing member state may not participate in Council consultations pertaining to the withdrawal or in the vote on the resulting resolution.
The European Council must approve the agreement with an enhanced qualified majority, meaning approval from 20 of the 27 remaining member states representing at least 65 percent of the EU population. The European Parliament would also have a veto right. Theoretically, the United Kingdom would have the right at any time to abandon the exit procedures and remain a part of the EU. Two years after the Council was informed of Britain's intention to leave the EU, the UK could leave without an agreement, though it isn't likely London would take such a step. Doing so would mean that the UK's future relationship with the EU would not be codified and Britain would not have any access to the European market of the kind that a withdrawal agreement is likely to provide.
In order to ensure such access, Britain could, for example, opt to join the European Economic Area (EEA), which includes non-EU member states like Iceland, Liechtenstein and Norway. But when it comes to the EEA single market, the same rules and duties apply for these countries as their EU counterparts. EEA member states, however, have no say in determining these regulations. Cameron is aware of this danger. At the end of 2011, he warned: "Outside, we would end up like Norway, subject to every rule for the single market made in Brussels but unable to shape those rules." On Sunday, Cameron confirmed he would pull Britain out of the single market if voters approve Brexit, saying he would see the ballot as an "instruction" to do so. But he also warned that pulling out of the single market would be like planting a "bomb" under the British economy.
Another variant could be a bilateral agreement like the one the EU has with Switzerland. Such agreements have the advantage that individual aspects can be taken out, but agreements of this type require a lot more time to negotiate and are more bureaucratic. And the country still wouldn't have any say in determining EU regulations.
The times in which Britain was a global power have long since passed. Britain is nevertheless in cultural, economic and militarily terms one of the world's strongest and most influential countries. An EU without Britain would obviously be a smaller and weaker Europe. This applies in particular to foreign policy, where Europe's weight in relation to the United States, China and emerging powers like India and Brazil would diminish even further.
The balance of power would also shift within Europe, with the situation growing particularly uncomfortable for Germany in areas like economic policy. In this regard, the market liberal British have traditionally counterbalanced the regulations loving French. Without Britain, it would become even more difficult for Germany to prevent the EU from going down the path of becoming a transfer union, complete with eurobonds and shared liability for national debts.
There's also a threat that Brexit would strengthen the position of politicians who support withdrawal from the EU in other countries as well. In France, Marine Le Pen of the right-wing populist Front National, for example, has been calling for the country to leave the common currency as well as the Schengen regime of borderless travel. In the Netherlands, calls were likewise made for a "Nexit" after a nationwide referendum resulted in the rejection of the EU Association Agreement with Ukraine.
One thing is certain: The timing of the possible Brexit couldn't be any worse, with the EU currently facing what may be the deepest crisis since its founding. The euro crisis and the Greek drama have exposed the enormous economic differences between Northern and Southern Europe. Then, in the refugee crisis, Western and Eastern European countries clashed. Currently, it seems that all EU member states are fighting exclusively for their own interests on the refugee issue.
For precisely this reason, though, some believe that a withdrawal by the British, who are constantly making special demands, would be advantageous for the EU. It would make the community more homogenous and it would drive the remaining member states closer together, analysts at IHS Global Insight recently wrote.
With a share of 8 to 12 percent of the country's gross domestic product, the financial sector is of particular importance in Britain. A withdrawal from the EU could have a serious impact because many of the banks secure so-called passporting rights through their London subsidiaries which provide them with access to the entire EU. In the event of Brexit, these institutions would be forced to either move their entire business or part of their operations to other EU countries.
Major US banks like Goldman Sachs and J.P. Morgan along with British institutions like HSBC have warned of the possibility of such a scenario. A study by the consultancy firm Capital Economics found that the loss of passporting rights alone could result in a 50 percent drop in financial services exports to the EU – translating into a loss of nearly 10 billion pounds a year.
Britain is currently home to the largest share of financial services in the EU. One area where the country is ahead is in euro currency trading, despite the fact that the country isn't even part of the common currency area. The European Central Bank has already sought unsuccessfully to curtail this trade. Following Brexit, it would be significantly easier for it to do so.
Industry representatives believe numerous further risks would be associated with Brexit. One example: It would make it more difficult for banks, insurance companies and hedge funds to recruit personnel from the Continent if the freedom of movement for workers in the EU no longer applies. Mark Carney, the governor of the Bank of England, has also warned that liquidity on the financial markets could also get tighter.
There are, however, also those who believe that Brexit could provide opportunities for the finance sector. Accordingly, Britain could court investors more aggressively once burdensome EU regulations were lifted. One example is the planned register disclosing corporate ownership, whose introduction came in response to the Panama Papers disclosures about offshore firms.
In order to be able to continue to trade with the EU, the British government would likely preserve many current legal provisions. And that would make the legal situation even more complicated. Britain's global bank Lloyds has warned that Brexit will not create a "regulatory nirvana" and would instead be harmful to its business.
Around 3 million foreigners from EU member states currently reside in Britain, including 131,000 Germans. The future status of their residency permits is a question that would have to be addressed in negotiations following a successful Brexit referendum. The British government has an interest in ensuring its citizens retain as many of the privileges as possible that they have enjoyed as EU members.
This could look like Switzerland or Norway. Neither country is a member of the EU, but their citizens enjoy the right to live and work in any European Union country. In exchange, EU citizens are also permitted to live and work in both countries. The only requirement is that they have an employment offer or can prove that they have sufficient financial means to get by.
The declared goal of the British government is to reduce the number of immigrants from other EU countries. Critics have primarily focused on the 853,000 Poles living in the United Kingdom. British fear the competition thus created on the labor market in addition to the strain on schools and the healthcare system.
Indeed, immigration is one of the main reasons so many in Britain want to leave the EU. But if Britain were to require citizens from EU countries to leave, the Brits themselves would quickly be stripped of their right to live and work where they please across the continent.
Britain is one of Germany's most important trading partners. The only countries to which Germany exports more goods are the United States and France. More than 2,500 German firms have subsidiaries in Britain and their 370,000 local employees represent 1 percent of all the people working in the country. A total of 3,000 British companies also have subsidiaries in Germany.
The closer we get to the Brexit vote, the louder the voices are growing in the business community on both sides of the English Channel seeking to prevent a yes vote. A poll conducted by the Bertelsmann Foundation showed that 83 percent of German entrepreneurs are against Brexit, with 76 percent in Britain opposing it. Representatives of the financial industry express particular concern.
"Apart from the British themselves, Germany would probably be the biggest loser in the event of Brexit," warns Clemens Fuest, the head of the Ifo Institute, an influential economic think tank. "A withdrawal would affect all German industry." Holger Schmiedig, chief economist at Berenberg Bank, also expects an "economic setback."
It's difficult to calculate just how great that risk is, because it remains entirely unclear which trade agreements would be eliminated after a Brexit and which would be replaced by new agreements. For studies like the one conducted by Bertelsmann, primarily large corporations were surveyed that do business across Europe and benefit to a significant degree from the single market. Some 80 percent of members of the British CBI industrial association spoke out in favor of remaining in the EU, whereas only 47 percent of small business owners with the association FSB opposed Brexit.
A British withdrawal from the EU would also change a few things on the political level. At summits and talks with Prime Minister David Cameron, Chancellor Angela Merkel has persistently made the case for Britain to stay. She is well aware that it would also weaken the EU as a whole if Britain were to leave. A weakened EU would also have ramifications for Germany. It's also important to note that London is often an important ally of Germany's within the EU, especially in terms of economic policy.
At the same time, Brexit would also mean one less difficult antagonist for Merkel on the EU stage. In the early stages of the debt crisis, Cameron was been part of an anti-Merkel alliance. He has also repeatedly stood in the way of the chancellor's policies in the refugee crisis. After Brexit, the former world power would no longer have a voice in the EU.
There are also implications for trans-Atlantic relations. Germany could actually stand to profit from a weakened Britain when it comes to relations with the United States. Britain has always been the European country with which Washington has had the closest relationship. But President Barack Obama recently warned of the consequences of Brexit, saying Britain would be at the "back of the queue" for any trade deal with the US if the British chose to leave the EU. He also said Britain could do more to combat terrorism, strengthen the economy and create jobs inside the EU than outside. Berlin, meanwhile, is positioning itself as a reliable partner to the Americans. Marco Overhaus, an expert on the Americas with the respected German Institute for International and Security Affairs (SWP) in Berlin says that the US views the German government as a guarantor of cohesion in an EU that is currently being put to the test on a number of challenging fronts. It's an assessment that could become even more concrete in event of Brexit.
Authors: Markus Becker, David Böcking, Almut Cieschinger, Vera Kämper, Claudia Niesen, Carsten Volkery
Research and fact-checking: Almut Cieschinger, Rainer Lübbert, Claudia Niesen, Anika Zeller
Graphics and production: Katja Braun, Frank Kalinowski