German Chancellor Angela Merkel has emerged once again as the steady hand in a continent suddenly gripped by fear and loathing. She will not be the one to ignite the combustible mix left by Britain's decision to leave the European Union.
Others are certainly reaching for the matchsticks. European leaders, facing the biggest threat to European unity since the Second World War, are divided over how swiftly divorce talks should start. While Ms. Merkel is urging patience, Paris wants haste and European Commission President Jean-Claude Juncker said he wanted to "start immediately."
"Honestly, [the Brexit process] shouldn't be indefinite, but I'm not going to push for an immediate withdrawal," Ms. Merkel said. "We must, along with the 27 member states, decide how to react to British proposals for separation."
French politicians from across the political spectrum are sending a different message. They have made clear in recent days that a quick divorce is necessary. Some are describing Brexit as an opportunity for France to reassert its leadership in the EU.
French President François Hollande declared there was no going back on Brexit. "What was once unthinkable has become irreversible after the vote of a majority of the British people," he said
European leaders will meet in Brussels on Tuesday when Prime Minister David Cameron will speak to fellow leaders on the Brexit vote.
Within hours of the the final results of the British referendum, anxiety turned to rage in Brussels and other capitals on the continental side of the EU.
On Saturday, the foreign ministers of the founding six founding EU countries also urged Britain to leave the EU promptly. "There can be no cat and mouse game," French Foreign Minister Jean-Marc Ayrault said. Martin Schulz, leader of the European parliament, ramped up the anger factor by saying that Mr. Cameron had "taken a whole continent hostage for internal party considerations" by waffling on exit timing.
By all rights, Ms. Merkel should be mad, too. She had urged Britain to stay put, got along well with Mr. Cameron and appreciated Britain's Liberal, pro-market economic stand, a useful counterbalance to the sclerotic socialist forces on her side of the EU. Then came Brexit. Ms. Merkel acknowledged losing Britain was a "blow" to the 60-year-old European integration process.
Yet she tempered her anger and urged a cooling-down period. It was a smart move, but not one driven by any affection for Britain or Mr. Cameron or his near-certain successor, Brexiteer and former London mayor Boris Johnson. It was done because she is a superb negotiator who, alone among the EU leaders, understands the implications of Brexit on the global level as well as the more parochial local and regional levels.
Ms. Merkel wants the best, that is, least the harmful outcome for Germany and the rest of the rump EU (for she is the effective leader of the EU). She knows that her negotiating power will suffer if she antagonizes the other side, reveals her position and admits to being rushed to ensure Britain bolts.
She also appears to be the only EU leader to realize that Britain can't be rushed, for the simple reason that the EU cannot invoke Article 50 of the Lisbon Treaty that is effectively the EU's constitution. This is the law provisioning an EU member country's exit from the union.
It's up to Britain to hit the button and the article does not put a deadline on when it must be done. Railroading Britain into exiting now makes the EU look nasty and vindictive, another blow to its image when approval ratings for the EU are plummeting across the continent.
The bigger reason for Ms. Merkel's go-easy position is that she must be aware that a hasty, nasty, ill-conceived divorce could trigger another financial crisis. To be sure, Brexit stands to hurt Britain more than the EU, but the EU would not get away unscathed. Ms. Merkel saw the damage inflicted on the EU and the euro zone (the 19 EU countries that share the euro) by Greece. A messy Brexit could magnify that damage several times.
One theory gaining momentum is that the EU, minus Britain, might actually emerge in better shape under Brexit. According to the economists at Citigroup, Britain soaks up about 21 per cent of the direct foreign investment into the EU, almost twice as much as second-place Germany. With Britain out of the EU, big companies are bound to favour the bigger market – the EU – and direct their investment away from Britain, Citigroup said.
At the same time, Frankfurt or Paris might attract some or most of the euro trading and clearing businesses now dominated by London. It's hard to imagine the Germans and the French allowing London to dominate the euro show if Britain is absent from the EU. But the shift of investment and banking from Britain to the EU could take years, even decades, or may happen only in a small way if Britain succeeds in negotiating sweet market-access deals to the EU. At this stage in the game, it's impossible to predict Brexit's win-lose balance.
Ms. Merkel appears to know that a Brexit done in haste, with both sides at war, could inflict terrible damage in the short to medium term. If there is one lesson from the financial crisis of 2008 and beyond, it's that financial shocks in one country are transmitted to another country almost instantaneously, sometimes amplifying along the way. Greece's sovereign-debt crisis almost took down Italy and Spain and triggered the bailouts of Portugal and Ireland.
Already, central bankers in Britain and the EU are preparing for the worst. The Bank of England is expected to drop interest rates next month, may ramp up quantitative easing and could launch helicopter money. The European Central Bank no doubt will announce market-calming measures, too.
So why risk financial chaos again? Ms. Merkel was right to ask for cooler heads to prevail. Let Britain go, she was in effect saying, but let it go gently into the fog.
With a report from Reuters