Maine Le Pen, the Far Right candidate in the French presidential election, who has very real chances to win like any other major candidate, has reiterated her scepticism about the European Union (EU) again, just less than a week before the decisive second round of the French presidential polls on May 7. The first round of polls of April 23 remained inconclusive with no one getting majority including the top contenders, centrist Emmanuel Macron and Marine Le Pen.
Le Pen has said that if elected, she will hold a referendum to take France out of the EU. Leaving the Euro currency and the Schengen travel zone, a passport less free travel zone of 26 European countries, have also been Le Pen’s consistent promises. If that happens, that would be a shock for the EU that may hasten its demise, because unlike the United Kingdom (UK), that has announced to leave the EU after a successful referendum on the issue, France is the founder member of the EU and had formed the Union in 1951 along with Germany, Italy, Belgium, the Netherlands and Luxembourg. Other countries joined it later on.
After the UK’s exit, a French exit would further chop the size of the EU economy. According to the World Bank data, the European Union GDP in 2015 was $16.315 trillion in nominal terms, i.e., GDP evaluated at current market prices without accounting for inflationary changes. The European Union is a block of 28 European countries with the UK in the process of leaving it, a development that has come to be known as ‘Brexit’.
If we see GDPs of major economies of the EU separately, we find five EU economies with their GDPs above $1 trillion. Germany is the largest European and EU economy in terms of nominal GDP with a GDP of $3.36 trillion. It is also the world’s fourth largest economy. Next comes the UK with $2.86 trillion, the world’s fifth largest economy and Europe’s second largest, based on the 2015 GDP figures. But the UK is no more an EU economy now and it has officially begun the process to leave the EU.
That makes France the second largest EU economy with a GDP of $2.42 trillion. France is the world’s sixth largest economy. Italy and Spain are the other two major EU economies in the trillion dollar club with GDPs of $1.82 trillion and $1.19 trillion respectively.
The combined GDPs of these five major economies are $11.65 trillion. In comparison, all other EU economies are like minnows with their combined GDPs not crossing even the $5 trillion mark.
Now if the UK and France leave the EU, two economies worth $5.28 trillion will be off the EU coffers. Experts are still divided, in the European countries and the UK, on how the Brexit will shape the EU’s and the UK’s economies. But going by a report in the Guardian, the Brexit could harm the EU if not negotiated to protect the ‘financial eco-system’ of which the City of London is the driver.
“UK-based financial services account for 40% of Europe’s assets under management and 60% of its capital markets business. And UK-based banks provide more than £1.1tn of loans to the other EU member states,”, the Guardian report says, quoting a leaked EU report. The report further says that if such a deal is not reached at, “the economies of the remaining member states will be damaged”.
Imagine this is the case when the UK is exiting the EU. In case of France, it would be a double whammy, because Germany and France are seen as the political heavyweights of the EU, and France being a founding member of the EU, its exit will send a message to the other nations like Poland and Hungary, who have shown willingness to limit the role of the EU in their countries due to their socio-political compulsions, to completely withdraw from the Union. While the effects of the Brexit are being discussed in terms of a financial eco-system, a French exit from the EU will have its social and political angles as well.
Besides, France is as large an economy as the UK is and is as influential globally as the UK is. The country has been more vocal, in fact than the rest of the EU majors, when it comes to taking positions in geopolitical matters, be it Libya or Syria or Iraq or its ongoing operations against the Islamic State (IS). If that voice is lost, the EU will certainly lose the geopolitical weight that it carries right now. It will then be a Germany centric bloc of countries only. The EU may be based on the principle of economic cooperation, but political influence of its major economies is the glue that it needs to keep its flock together.