Updated: Nov 3, 2022
In the last decade, two member countries of the European Union (hereinafter “EU”), Greece and the United Kingdom have seen an extended and messy exit from the Union. Famously labelled Grexit and Brexit respectively, the two events have brought with them many questions. Primarily, one must be wondering what led to two members breaking away and whether the Union is worth joining in the first place. This article will briefly deal with the causes behind Brexit and the proposed Grexit and then analyse the case of Norway, which refused the membership of the Union in two separate referendums.
What Led to the Fallout?
European countries are tiny by Asian standards and it only takes an hour or two to drive to another country. For example, Norwegians usually go to Sweden if they want to eat at McDonalds because of almost half the prices. So, a common currency seemed very convenient until the global recession that began in 2008 was bad around the world, but it was much worse in countries that had adopted Europe’s common currency, the euro. The unemployment rate increased to more than 20 percent in the Iberian Peninsula, which triggered a huge debt crisis. Seven years after the beginning of the recession, those countries were suffering from similar unemployment rates multiple economists were of the opinion that euro was the primary culprit. The unemployment rate of Greece at 25% is about as high as the worst months of America's Great Depression. Meanwhile, the German economy is booming. The unemployment rate there, recently fell below 5 percent, the lowest since unification. The ensuing Government debt crisis massively affected the country’s governance, social equality, and worsened unemployment, prompting mass emigration.
Despite the government’s efforts to raise revenue by increasing taxes, cutting expenditure, and other reforms, the country ended up needing bailouts from the International Monetary Fund (IMF), the Eurogroup, and the European Central Bank (ECB). On 30th June 2015, Greece became the first developed country to fail to make an IMF loan repayment on time
Finally, in 2018, Greece managed to revive its economy with the help of the bailouts and this ended the Grexit crisis. But the consequence of this was the loss of freedom for the country to manage its own economic affairs. The European Commission was placed as an authority for constant surveillance.
Britain did not adopt the Euro because it would lose control over deciding interest rates and taxes. That could have been damaging to the British economy which was in recession but was injecting money into the economy in the form of higher taxes than the EU. But being a member of the Union, the country had to adopt Euro at some point or the other.
Apart from this, Britain also had political apprehensions, or Euroscepticism, regarding control over the British market and policies by the EU headquarters at Brussels. The Single European Act, 1986 (SEA) was signed with the aim to establish a single market for all the 12 members of the erstwhile European Community. Former British Prime Minister Baroness Margaret Thatcher had initially supported the SEA and claimed credit for framing it. But she ended up making compromises in the SEA which included a future political union, that is, the EU and a monetary union, that is, common currency. These were opposed by the Conservative Party in Britain, the one in control of the government then. She had hoped to avoid these unions but had to accept them eventually after being pressured by the then German Chancellor Helmut Kohl. This possibility of a political union started the Euroscepticism in the Conservative Party including the Prime Minister.
These developments led to the formation of the Burges Group, a think tank which researched upon alternative international relationships for Britain and led the Eurosceptic policy debates. The organisation played a major part in the 2016 Brexit Referendum where Britain voted to leave the EU by a thin margin.
Norway: A Lonely Neighbour
Norway is a country situated almost at the Northern tip of Europe. All the countries surrounding it are member states of the EU, whereas it is not. Instead, Norway is one of the four members of the European Free Trade Association (EFTA). The three other members are Iceland, Liechtenstein, and Switzerland, all non-EU members. The EFTA is a free trade area which operates parallelly to the EU. Initially, EFTA had seven founding members but they ended up joining the EU in later years. The EFTA basically translates into a lack of coordinated trade policy, unlike the EU. So, all of its member states have made joint Free Trade Agreements (FTA).
Norway did conduct two referendums in 1972 and 1994 to consider joining the erstwhile European Economic Community (EEC) and EU respectively. In 1972, the Norwegian Parliament had voted in favour of joining the EEC, upon which they held a popular referendum, where 53.5% of the votes were against joining. Consequentially, Norway entered into a trade agreement with the EEC. The second referendum in 1994 yielded similar results which led to Norway’s membership application getting frozen for the time being. Since then, two of its Nordic neighbours, Sweden and Finland, have joined the EU. This begs the question of why the Norwegian people vary from joining the Union completely.
Norway is a country with not many natural resources. It largely relies on imports for sustenance. The discovery of oil in the North Sea in 1963 gave the country leverage over exports and helped its economy. Further, the fishing industry has historically been a supplement to farming and important for feeding the population.
A major concern regarding membership is the sharing of these two critical resources. Norway has heavily invested in research, development, and training to extract and export oil in a profitable manner. If other EU member states get access, it can severely impact not only the economy of Norway but its sovereignty as well. Further, the EU has a Common Fisheries Policy, which defines limits for the kind of fish each member state is allowed to catch and makes market interventions in the industry. Norway also has a higher Gross National Income per capita, so it would have to pay a higher membership fee. As it has very few underdeveloped areas, it would not receive much EU aid in return for the high membership fees. Apart from being a member of the EFTA, the country also gets involved in EU projects since it already pays for them to some extent.
Lastly, the issues in the general populace run deeper. Like most countries, Norwegians are concerned about the dilution and infringement upon the country’s culture. There are also apprehensions about compromising the sovereignty, similar to Thatcher’s.
At this juncture, especially with the ongoing and expected financial crises prompted by the COVID-19 pandemic, it seems highly unlikely that Norway would seek to join the EU. It is more likely that other members might consider following the Brexit route. To conclude, it depends on each country’s situation to evaluate membership. The answer is more complicated than a simple yes or no to membership in the mighty European Union.