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The importance of the Brexit vote is not about the future of the United Kingdom; the vote consigned that once great nation to increasing irrelevance on the world stage. The importance of the Brexit vote is existential for Europe and the future of the European project that began with the European Coal and Steel Community 65 years ago. To survive as a coherent entity, the European Union must either strengthen the economic and monetary union or abandon it and step away from the prospect of political union.
It was a mistake to launch the euro area in 1999 with 11 initial members; politics triumphed over economics and now 19 of the 28 members of the European Union have been admitted. It is now clear that the euro area is a flawed structure. The core of the European project is rotten. Therefore, if the European Union is to be saved from further disintegration, the euro area must be addressed first by (1) completing the banking union without de facto opt-outs, exclusions, or cross-border conditions on financing deposit insurance; (2) establishing a fiscal authority empowered to execute countercyclical fiscal policy for the area as a whole; and (3) nothing less than setting a course for political union based on mutual trust of other member states.
However, before moving forward, the lesson of the Brexit referendum is that the elites and career politicians who dominate European decision making lack the legitimacy to make these decisions without consulting the people first. It follows that if the European project is to move forward, each member of the euro area should devise a mechanism appropriate to its political system to collect public endorsement for consolidating and strengthening the euro area in well-specified areas. If all of the current participating countries endorse moving forward, their leaders can work out the details. If a cohesive subset of countries does so, those countries can work with the other countries to dissolve the euro area as it currently exists and move forward on their own. If only a few countries endorse progress, then the euro area should be completely dissolved and the European project should evolve as a confederation. It will have all the advantages and weaknesses of variable geometry in which members can preserve as much or as little national sovereignty on selected issues as they like.
From the perspective of US history, the European project faces an Articles of Confederation moment. More than 225 years ago, after a decade during which the former British colonies cooperated via a weak governmental structure in which members could in effect choose whether or not to follow or support the policies adopted by the Congress of the Confederation, the states chose the current political structure. Each state adopted the constitution in special state conventions, but only nine of the 13 states needed to ratify the constitution for it to become effective. The resulting structure permits substantial policy differentiation at the state level but also embodies a basic commitment to abide by and financially support common policies to maintain the union as a coherent whole. New policies must be approved by both houses of the legislature, receive the signature of the president, and pass any constitutional challenge.
The European project need not evolve into a united states of Europe. But the participants in the European Union’s capstone urgently need to address the question whether that is their goal.
