At about midnight, London time, all seemed well in Britain and the other bits of the European Union. The early polls put the pro-EU side of the in-out referendum in the lead. Nigel Farage, the head of the UK Independence Party and one of the chief EU haters, went on TV and effectively gave a concession speech.
The pound soared and David Cameron, the British Prime Minister, was no doubt congratulating himself for a job well done. Having called the referendum on EU membership, he had emerged as the EU's main cheerleader. It appeared Britain would stay in the EU and the world's largest, and most democratic, open-market region would remain intact.
Two or three hours later, the worlds of Mr. Cameron, Britain and the EU were turned upside down and shaken violently. As the poll counts rolled in, a strong pro-exit – Brexit – trend emerged. Even before all the votes were tallied, Mr. Farage blustered his way back onto TV to declare the grand EU integration process, which began in 1957 and accelerated with Britain's membership in 1973, all but dead. "I hope this victory brings down this vile project," he said, beaming as the markets crashed around him.
He may get his wish. In an instant, two ambitious, powerful and wealthy unions – the United Kingdom and the EU – faced existential crises that could well ensure their destruction. Mr. Cameron resigned and Nicola Sturgeon, the Scottish First Minister, was quick to announce that Scotland, which heavily endorsed EU membership in the referendum, would put a second independence referendum "on the table" (the first referendum, in 2014, was narrowly lost by the Scottish nationalists). If Scotland goes, Northern Ireland, which also went pro-EU, might not be far behind.
The bigger question is what will happen to the EU, the world's greatest economic and geopolitical project since the Second World War and perhaps the most ambitious union since the Roman era. The question is not whether the EU will suffer economic and political damage – like a battle cruiser under sustained fire, it's a matter of how much damage, and all bets are off.
Shorn of Britain, which is roughly tied with France as the EU's second-biggest economy, and riddled with rising anti-EU parties, the union's future looks grim. The economic damage caused by debt-soaked Greece and its endless flirtation with exit from the euro zone and the EU was extensive enough. Imagine what the exit of an economy 10 times the size of Greece might inflict.
"The Leave victory is a huge blow to the process of European integration and is incomparably more than the threat of a Greek exit from the euro zone," said Nicholas Spiro, a partner at London's Lauressa Advisory. "For the first time since the European Central Bank stemmed the panic in the single currency area in 2012, the governance and the singleness of the euro zone is being called into question again."
The 28-country EU and the 19 countries within it that share the euro were in trouble well before the Brexit vote. You name it, the EU and the euro zone had it: soaring unemployment, recession followed by anemic growth, a banking crisis, three sovereign bailouts in 2010 and 2011, de-industrialization and negative inflation. The ECB and its increasingly desperate and expensive fire-fighting campaigns kept the euro zone, and the EU by extension, intact.
The worst was over by 2014, but by then, European integration had stalled. The weak countries were weary of German-inspired austerity and severe budget controls. A year later, the immigration crisis erupted and populist, and occasionally xenophobic, anti-EU parties gained momentum, including France's Front National and Germany's Alternative fuer Deutschland.
Even before the Brexit vote, Wolfgang Schaeuble, the powerful, pro-integration German Finance Minister, admitted the EU project was not going well. Were Britain to stay or go, he warned that the EU "could not continue with business as usual." Jean-Claude Juncker, President of the European Commission, and Donald Tusk, President of the European Council, essentially agreed with Mr. Schaeuble's analysis.
So did the polls. An extensive survey released early this month by the Pew Research Center revealed that Euroskepticism was on the rise throughout the EU – Britain's waning love affair with the region was far from unique. Most French and Greeks held "unfavourable" views of the EU. In Spain, Germany and Britain, about half of respondents held unfavourable views. Pew found little enthusiasm for transferring more powers to Brussels and general disapproval of the EU's handling of the economy. The disapproval ratings in the economy category captured majorities in Greece, Italy, France, Spain, Sweden and Britain.
On Friday, as Mr. Cameron's miscalculation became shockingly apparent, EU leaders, including German Chancellor Angela Merkel and Martin Schulz, President of the European Parliament, admitted that Britain's exodus was a huge blow to the EU. Ms. Merkel called it a "watershed moment for Europe and European unity" and vowed to find ways to keep the rump EU together. Mr. Schulz said he and Ms. Merkel would have to figure out ways to "avoid a chain reaction," with other EU countries demanding me-too referendums.
In theory, pushing the EU countries closer together might be simpler now that Britain is gone. Britain had always resisted the "ever closer" union principle embedded in the EU treaties. The EU open market could be preserved and the banking union completed. EU bonds could be launched, also an EU army.
But it may be too late for this utopian federal state vision. The EU could get ripped apart by centrifugal forces. Recently, governments in the Netherlands and Denmark lost referendums on EU matters. Well before Brexit, anti-EU parties were on the rise and some of them now are demanding referendums.
Shortly after the Brexit vote, Geert Wilders, leader of the Dutch Party of Freedom, a populist, right-wing, anti-EU party, demanded that the Netherlands hold its own referendum on EU membership. So did Marine Le Pen, leader of France's stridently anti-EU and xenophobic Front National. Support for a referendum is growing in Italy, which has been trapped in negative or low growth since it adopted the euro in 1999.
The EU is already gravely weakened without Britain at its side. The embedded anti-EU forces could force it to break into pieces. An irreversible EU is no longer unthinkable. "Brexit poses not only an existential threat to the U.K., but to the rest of the EU as well," said Megan Greene, chief economist in Boston for Manulife and John Hancock Asset Management. "If other European countries chose to leave the EU … the contagion to the global economy will be significantly amplified."
In spite of its well-advertised problems, the EU as an open market has worked fairly well. Britain was an economic laggard before it joined the EU in 1973. Since then, it has been its fastest-growing large economy, even outpacing mighty Germany. If countries bolt, and the borders go back up, growth could suffer greatly. Protectionism could resurface.
As if to prove the point, Brexit on Friday rattled the European bond markets. Although the flight to safety sent Germany's 20-year bond yields deeper into negative territory, Greek, Spanish and Italian yields rose, considerably widening the gap (or spread) over German bonds. Clearly, the threat of waning EU integration is doing no favours for the weakest EU countries.
With Britain out the door, the rump EU will have to reinvent itself. But how, and how fast? There is plenty of skepticism that the EU can use reforms that make the EU newly attractive to the remaining 27 member states. "Given the endemic inertia of the EU, the ramifications of the current euro zone crisis and the surge of Euroskeptic movements, this sounds at the moment as mission impossible," said Nikos Skoutaris of the University of East Anglia's European Law School.
Brexit has launched the EU into the great unknown.
Eric Reguly