Brussels has to start by admitting its mistakes before it can move forward, writes Brian Caplen.

June 23’s referendum on whether the UK leaves or stays in the EU will not settle very much in terms of regional challenges. If the vote is to leave then it will inspire other anti-EU parties across the bloc to follow suit. 

The EU’s threat to make life difficult for a departing UK, so as to deter others from following the same course, shows just how far off Brussels is from any sensible course of action. The big question not being asked in Brussels is why are large sections of the population in key EU member states, including Germany, disillusioned with the so-called European project?

This situation also prevails if the UK votes to stay in. While a referendum is a very bad way of deciding a critical issue such as EU membership, the UK government would not have called one in the absence of growing political opposition to EU policies. 

This extends across the political spectrum, from those on the right who embrace globalisation and free markets and do not like the advent of the EU superstate, to those on the left who see immigration as undermining pay and jobs for the unskilled. (It is interesting to note that if the former got their wish of leaving, their policies would make the plight of the second group even worse than it is now.) 

The response the UK’s prime minister, David Cameron, got when he tried to renegotiate the terms of the UK's membership to address some of these issues was that, for example, the “free movement of people” was a principle of the single market and could not be negotiated. This is hardly a practical response to the continent-wide challenges of large-scale migration which is undoubtedly an economic benefit but needs sensitive handling to avoid alienating large sections of host countries’ populations. 

Similarly in Germany, rather than address the fundamental flaws in the design of the eurozone that has brought growth to a standstill, politicians are blaming each other for the rise of the anti-EU Alternative for Germany (AfD). 

Finance minister Wolfgang Schauble blames the European Central Bank’s easy money stance and negative interest rates for the rise of AfD rather than questioning the basis of the euro’s design. Former chancellor Helmut Kohl, who admits that Germans would never have voted to adopt the euro had they been given the chance, blames current chancellor Angela Merkel for endangering the European project with her liberal stance on migration from Syria. Again he fails to examine his own flawed approach to the adoption of the euro. 

As long as no one is prepared to admit that serious policy mistakes have been made in Europe, solutions will not be found and Euroscepticism will continue – regardless of whether the British stay or leave. 

Brian Caplen is the editor of The Banker.

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