Trump and Brexit Strengthening EU

The international  media is constantly speculating about a possible impending break-up of the European Union (EU), due to the momentum of the Brexit and Trump populist victories. The opposite is true: Trump and Brexit are actually strengthening the EU.

Elections.
The media point to three ‘crucial’ elections in 2017 – that of the Netherlands, France and Germany – that may end up derailing the EU, because anti-EU parties are poised to gain power. Not really. In both the Netherlands and Germany, anti-EU parties could increase the number of their parliament seats, but that is all. In France,  Le Pen of the Front National (FN) may get the biggest vote in the first round of the French presidential election, where five main parties (and some minor ones) have candidates. But in the second round, with only the two top candidates left to fight it out,   Le Pen will lose, since the supporters of all the other parties will vote for whoever stands against her. This has happened once before, when Le Pen’s father (Jean Marie Le Pen) also won in the first round of the 2002 presidential elections, but got trounced in the second round.
There is very little chance that any country will opt to leave the EU, other than the UK.

Brexit
The people in EU countries are well aware of the economic and political mess Brexit is bringing to the UK. Even before the UK triggers Article 50 of the Lisbon Treaty (which will formally start the process of leaving the EU); the negative economic effects of Brexit have started to take effect: the British Pound devaluated by more than 10%, foreign companies are preparing to move their Europe headquarter offices out of London,  inflation is rising, etc. To add to the UK’s woes, Scotland will most likely leave it and join the EU.  Far from being an inspiration for other countries to also leave the EU, Brexit is showing everyone the horrors of leaving the EU. Recent opinion polls in the EU show a rise of pro-EU sentiment because of Brexit.

Brexit is the logical end result of years of UK government policies.  Various British Prime Ministers, with David Cameron as the last, had regularly threatened to take the UK out of the EU if its demands were not met. Just before the Brexit vote, the EU gave in to most of the UK’s demands for a special deal, including with regards to EU citizens working in the UK. Before that, the UK had succeeded in opting out of the Euro single currency and the Schengen Agreement (for free travel within most of the EU, plus Norway and Switzerland), and other EU-wide arrangements. The UK had long had one foot outside the EU;  Brexit is the natural continuation of this trend.
The UK was alone in this unique position; other EU countries, with both feet in EU, are not likely to follow the UK’s lead.

Trump
Ironically, the presidency of Donald Trump is having the effect of strengthening the EU. Trump’s open disdain for the EU, and his wish that it breaks apart, has mobilized latent anti-American feelings among many EU citizens which have been channeled into pro-EU sentiments.

Trump is widely perceived as being supportive of Europe’s far-right parties. These parties, e.g. France’s FN, have thrived on their anti-immigrant platform. Now, the Trump victory has pushed them to take a more pronounced anti-EU position. As a result, these parties have backed themselves into a corner. Being anti-EU is effectively being pro-Trump; and since Trump is unpopular in Europe, the far right parties are losing support.

Another thing about the Trump victory in the US is that it shows how wrong elections could go, and that it does matter that people vote. When before, many people (especially young people) would not vote, because “the result will be the same anyway”; now they know how bad a bad result could be. Not voting could result in a Trump or Brexit-like victory. Because of Trump and Brexit, younger voters are now more likely to vote in future elections; and most of them tend to be pro-EU.

While the EU faces all kinds of problems today e.g. the Greek debt crisis or the floodof migrants from Africa and elsewhere, these are far from existential. The EU will overcome them, just as it has done for the last 58 years.

 

UK Options in Brexit Negotiations

In the 23 June 2016 referendum, the people of the United Kingdom (UK) voted for their country to leave the European Union (EU). The UK’s new Prime Minister Theresa May has affirmed her government’s commitment to implement the people’s will. ‘Brexit is Brexit’ she said. She still has not officially started the process of the UK leaving the EU, however. This will only happen when she would formally inform the European Council of the UK’s intention to leave. This will activate Article 50 of the EU’s Lisbon Treaty; which provides for two years of talks to arrange the separation.

Before activating Article 50, PM May wants the UK to first determine exactly what it means by ‘Brexit’. What exactly will it bargain for? Her government is expected to come up with an answer before the end of the year, so that the UK could start the process of leaving the EU.
The UK generally has a choice between two main options.

The general positions of both sides are known. The UK wants to retain (most of its) access to the EU Single Market while getting the right to regulate EU migration to the UK. The EU has said that access to the Single Market is a package deal (i.e. there can be no Single Market a la Carte), and thus there can be no exception made for the free movement of labor.
At first glance, one may  think that these are mere starting positions for negotiations, and that some kind of compromise somewhere in between should be possible.  But the EU has a much stronger position than the UK’s, so it is much more likely that the UK will have to work within the framework set by the EU, not the other way around.

Lesson from the Greek Crisis
During the recent Greek crisis, Greek Prime Minister Tsipras assumed that the Eurogroup (the group of countries which have the Euro as their common currency) ,and the EU as a whole, could not afford to let Greece leave the Eurozone. This was based on his assumption that a Greek exit of the Eurozone (or a ‘Grexit’) will unleash a chain reaction that will put the whole Eurozone in crisis. The Greeks thus delayed agreement on a rescue package until the absolute last minute, in the belief that the EU will end up giving them the money they needed without extracting reform and austerity concessions from them.

During marathon talks on 12 – 13 July 2015, PM Tsipras. was shocked to realize that a Grexit was not that much of a worry to the EU. In fact, there were a number of countries (especially Malta and Slovakia) who wanted to throw Greece out of the Eurozone; and that other countries were open to the idea. Bailing out Greece was becoming too much of a burden for them. Also, public opinion throughout the Eurozone had turned against the Greeks, with a growing majority of people actually preferring Grexit.

Tsipras realized then that accepting the Eurogroup proposal was not the worst possible scenario. Getting expelled from the Eurogroup (and maybe the EU), and economic chaos, were much worse. Thus, he ended up  accepting most of the Eurogroup’s package.

The mistake the Greeks made was to assume that they had a stronger negotiating position than the EU; and that the EU would act as they wanted. Many of the UK’s ‘Leave’ campaigners make a similar mistake.

UK Position is Weak
The ‘Leave’ campaigners said that the UK has the stronger position when it comes to trade talks because it is a big trading partner of the EU. They even said that the EU needs a good deal more than the UK does.

They correctly point out tha the EU exports more to the UK than it imports from it (44% of UK exports are to the EU, while 53% .of its imports are from the EU). What they don’t fully realize is that the EU economy is about 9 times bigger than the UK’s; and that from the EU’s point of view, trade with the UK is only a small part of its overall trade (exports to the UK make up 6% to 7% of EU exports, and only 4% to 5% of its imports). If trade talks were to fail, it would be catastrophic for the UK, but merely an inconvenience for the EU.

The negotiations will  be done by 27 different EU countries, and this further weakens the UK’s position. All countries will have issues with certain parts of the deal, which all need to be addressed. Then, the fact that 11% of all UK imports is from Germany (bigger that its imports from the US, and a full fifth of its total imports from the EU), actually makes things worse for the UK; since it is only Germany which would be a bit worried if the UK bought less its products – only one country out of 27.

Once negotiations start, the parties have two years to come to an agreement. If there is no deal, the EU will just treat the UK like any other country.. This will be quite bad for the UK economy. So, it will be the UK that will be under pressure to make an agreement within two years.

Single Market Access
UK politicians keep talking about negotiating for ‘access to the Single Market’, That seems to be clear enough; but actually, it is not. There is a difference between being part of the Single Market and simply having access to it.  In principle, all countries in the world have access to the EU Single Market – in the sense that they can all trade with the EU, invest in companies within the EU, and have their citizens travel to the EU. Being part of the Single Market, however, entails a deeper involvement in it. It gives the EU countries advantages that non-members do not enjoy. These include the following:
1. Goods that cross internal EU borders will not be subject to tariffs, nor to administrative, technical or other non-tariff barriers. In effect, they will be treated in the same way as locally produced goods  .
2. Their companies could operate all throughout the EU, and be treated the same as local companies.
3. Their companies could hire personnel from all over the EU.
4. The EU negotiates trade agreements with other countries on behalf of all its members.
5. Their companies could bid for government contracts in all EU countries. Big companies, big non-profits and government institutions are required to be open to bids from  companies all over the EU.
6. Licenses to operate that are granted in any member country are valid all over the EU.
7. Diplomas and school credits from any member country are valid throughout the EU.
8. All EU citizens are able to participate in, and benefit from, social security, health and other programs that are open to host country citizens. EU students pay the same school fees as local students.

As part of the Single Market, the UK has become a base for many foreign companies that serve the EU market. This has made London a financial center and a center for internet technology. The UK is the manufacturing base for many foreign auto makers. UK-based service companies have a significant part of the EU market. The UK people and companies have benefitted greatly from being part of the EU Single Market.
This is why the UK wants to retain many of the advantages from being in the Single Market, while taking control of migration into the UK.

The Single Market, however, is an integral whole. It will be extremely difficult for the EU to agree to the UK’s desire to leave out the free movement of labor.  The poorer countries of the EU will not agree to this, especially since they don’t gain much from trade with the UK anyway.

A basic aspect of the Single Market is the body of laws that govern it. UK voters were told that Brexit meant that they would not follow EU laws anymore. But it is impossible to be part of the Single Market without following the laws that govern it.

Another important aspect of the Single Market is the financial contribution to maintaining it. EU countries will not agree to give the UK a free ride. If we take what Norway pays (which participates in the Single Market, but is not an EU member) as an indication, the UK would pay about 6 billion euros a year as administration cost for being part of the  Single Market. This is less than the present net UK contribution to the EUof 14 billion euros a year, but it is still something that many Brexit voters will not like.

If the UK wants to be part of the Single Market, it must:
– accept all the laws that govern the Single Market (including the free movement of labor);
– contribute financially to administering the Single Market.
These conditions would likely be politically unacceptable in the UK; so, it will not be possible for the country to remain within the Single Market. This leaves the UK with two main options.

Free Trade Plus
The more likely option is for the UK to negotiate a ‘Free Trade Agreement Plus’.

A Free Trade Agreement (one which provides for tariff-free trade) between the EU and the UK would be ‘relatively easy’ to make. The problem would be in the details (of course). One such detail would be fishing: if UK fishermen are no longer constrained by EU fishing quotas, other countries may push for a maximum import quota for UK fish, or for the exclusion of UK fishermen from EU waters. There are many such details that need to be hammered out.

The EU and UK could also agree on a transition period during which people and companies who currently enjoy Single Market privileges would continue to avail of them. For example, UK residents already in EU countries could continue to be covered by domestic health care and other social security programs during the transition period. EU citizens in the UK would enjoy similar benefits.

There could be additional agreements made on specific matters, such as:
1. Cross recognition of diplomas and school credits.
2. The free movement of labor for specific sectors (e.g. Internet Technology).
3. Agreements on specific product categories (e.g. for wines and spirits).

European Economic Area
Another option for the UK would be for it to immediately leave the EU with a transition period during which it will remain within the Single Market. This will mean that during this period UK laws will have to continue to be in harmony with the EU’s laws, and that the UK will contribute around 6 billion euros a year to the Single Market administration costs.
This arrangement will be similar to what Norway has with the EU; Norway is a member of the European Economic Area.

This arrangement will give the UK time to negotiate a longer-term deal with the EU, and to have trade talks with other countries. An added advantage of this option is that Scotland will not leave the UK, for as long as the UK stays within the Single Market.

The problem with this is that the Brexit advocates will complain that the UK is effectively not leaving the EU, since immigration will continue as before, and the UK can’t make its own laws on a host of economic issues.

The choice is PM May’s. Will she choose  to immediately negotiate for a Free Trade Agreement Plus; or will she choose the more careful route of temporary EEA status?

 

 

 

 

 

 

 

 

 

The 2-year Transition to Brexit

On 23 June, the people of the United Kingdom (UK) voted to leave the European Union (EU).  The UK and the EU will have two years to negotiate the terms of the separation. (The 2-year period will start when the UK officially informs the EU of its intention to leave; this may be sometime in September) During this period, the British will already feel some negative effects of Brexit (British Exit from the EU).
During the 2-year negotiating period, the UK will remain a full member of the EU, with all the privileges and responsibilities this entails.

The coming two years will not be uneventful, however.

Devaluation. In response to the Brexit vote, the British Pound fell from a rate of 1.50 to the dollar, to a low of 1.33 on 24 June. It may still go down a bit farther. Devaluation is supposed to decrease imports (as they become more expensive) and increase exports (as they become cheaper); but this effect takes 9 months to happen. Inflation is sticky upwards (i.e. prices tend to rise fast but fall very slowly if at all), so devaluation would mean that inflation will increase as a result of devaluation.

Immigration. The Brexit vote will probably have the effect of increasing, rather than decreasing immigration – at least during the 2-year period. EU nationals seeking to work and live in the UK may rush in before the UK actually leaves the EU. British pensioners would delay deciding whether to move to Spain and elsewhere in the EU until the rules for this (e.g. for health care insurance, residency permits, etc.) are clear.

Short Term Grants Only.  EU funding for research, study, small business support, urban renewal , and other projects will need to finish before the cut-off date. As a result, fewer and fewer projects will be supported as the deadline comes closer.

Freeze on Foreign Investments. While the new agreement between the UK and EU is being negotiated, foreign companies would be extremely hesitant to invest in the UK. Foreign Direct Investment will dry up.

Transfer of Operations. Businesses will start the process of transferring some of their operations to EU countries as early as during the negotiation period. For those whose EU headquarters are in London, these offices will be downsized into UK offices. For foreign companies which had set up manufacturing plants in the UK to access the EU market, they will simply set up new plants elsewhere in the EU and downsize their UK operations gradually.

Separation. Scotland will most probably hold a referendum on leaving the UK, so that it can remain in the EU. During the Brexit vote, 62% of Scots voted to Remain, and Remain won in all of its counties. The Scots are mad at England for dragging them out of the EU.
Northern Ireland, which also voted for Remain,  is considering the option of leaving the UK and joining the Republic of Ireland. This will be more difficult for them than for Scotland because the Ulster Unionists are vehemently against leaving the UK. However, if Northern Ireland is allowed to hold a referendum on whether it wants to leave the UK, a majority will vote to do so.
If Scotland (and maybe Northern Ireland) leave the UK, this will have negative economic and political effects on the rest of the UK.

Economic Uncertainty. Nobody knows what kind of deal the UK will finally forge with the EU, or what kinds of political changes will take place. This means that the British economy will be saddled by uncertainty for the next two years at least. This is bad  for the economy. Credit rating agencies have lowered the UK’s rating; making it more expensive for the UK government to borrow money.

And finally, there is Regrexit – Regret at the British Exit from the EU. The online petition calling for a second referendum will not get more than a debate in Parliament; it will not delay or overturn the referendum results.
The growing movement against Brexit will  influence the negotiations between the UK and the EU, by pushing to keep the UK inside the Single Market (including immigration of EU nationals). There could be quite heated public debate on this during the negotiations.

All the above are a list of bad things that will happen before the UK leaves the EU. When the UK finally leaves the EU,  things will get even worse.

Why the UK will vote to Leave the EU

On 23 June, the people of the United Kingdom (UK) will vote on whether their country stays in , or leaves, the European Union (EU). While most polls show that the votes for ‘Leave’ and ‘Stay’ are roughly tied; I think that the ‘Leave’ camp will get the majority of the votes.

I am not saying this because I agree with the ‘Leave’ campaign. In fact, I believe that Brexit will be bad for both the United Kingdom and the European Union. I couldn’t do anything about it, since I can’t vote in the referendum.

Let us look at some of the dynamics that will affect the Brexit (‘Bristish Exit from the EU’) vote.

Old versus Young
The overwhelming majority of the UK’s older citizens are inclined to vote to leave the EU. These people perceive the EU as gradually stripping their country of its sovereignty. At the same time, they do not feel or experience the advantages of increased travel possibilities, friendships throughout Europe, EU subsidies and grants, etc that EU membership brings.

On the other hand, the young generation has grown up with the UK in the EU. They travel, have many personal links in Europe, benefit from study grants or other EU programs, etc. They know that the EU could provide them with future jobs and opportunities.

The votes of these two groups should balance out. However, the older people are much more likely to vote, and are quite motivated to do so. The youth, in contrast, are less likely to vote. This is made worse by the referendum day falling in a time of college exams and the beginning of the summer vacation.

Feeling the Effects
Whichever way the UK votes, most of the effects will not be felt for some time. At least two years, in fact. This is because the UK will have at least two years to negotiate its exit from the European Union. Things will remain generally the same in this period.
One possible immediate effect would be the weakening of the British Pound if ‘Leave’ wins. This may lead to an increase in exports; as well as to more expensive imports.

When the UK finally leaves the EU (perhaps in 2019), the government will most likely restrict immigration. Fewer EU nationals will be allowed to move in and work in the UK; while fewer UK nationals will move in and work in other EU countries. What will be felt by more people is the lower level of immigration. For them, this will mean less congestion when availing of government services, and maybe lead to more jobs for UK nationals.
The decreased chance to live and  work in the EU will be felt by far less people..

On the longer term, Brexit will lead to a gradual transfer of companies to countries within the EU. Foreign companies which had built manufacturing plants or service hubs in the UK in order to serve the EU market will gradually shift operations to countries inside the EU. Big British companies will need to set up their Europe headquarters elsewhere; they may also shift some of their operations to within the EU. London’s role as a global financial center will diminish.

Scotland may decide to leave the UK because of the Brexit vote. There would be less trade, and increased cost of trade. There could be many other, mostly negative, effects.

UK citizens will anticipate the more immediate positive effects of Brexit; while discounting the possibility or the extent of the negative effects.  People are more likely to choose immediate gain over (bigger) future problems.

Managing Images
A big problem of the ‘Stay’ camp is that it does not promise anything – only a continuation of the present. The ‘Leave’ camp, on the other hand, promises a return of their country’s independence, less strain on the job market and social services due to immigration, and even a vision of a more powerful and prosperous country.

Efforts by the ‘Stay’ camp to show that a Brexit will cause an economic disaster have been met with accusations that they do not have confidence in the strength and vitality of their country and people. They then shifted tack to saying that Britain will still prosper outside the EU, but that it will prosper more within it. The result is that many people have gotten the idea that Brexit will not have long-term negative economic consequences.

The issue of sovereignty is a favorite of the ‘Leave’ campaign. They argue that the country has surrendered a big part of its sovereignty to the EU.  This is because the British parliament has had to pass a lot of laws to align with decisions made by the EU. The fact that the UK participates in making those decisions is discounted by saying that it has only one voice out of 28.  They create an image of the UK fighting against 27 others and losing; where in fact it is quite often in agreement with the majority.Also, when decisions are made in the European Parliament or even the European Council, the UK has a very big voice..
The ‘Leave’ campaign’s claim that Brexit will reduce immigration is brilliant. Most people have some (mostly minor) irritation due to recent immigrants (both from the EU, and elsewhere) – be it  longer queues for health services, scarcity of cheap housing, miscommunication with foreigners, etc.  And since cutting immigration is one promise a Brexit vote would most likely deliver; a lot of people will be more inclined to choose ‘Leave’.

The only way the ‘Stay’ campaign can win is if it manages to convince people that Brexit will lead to big economic problems and uncertainty. If enough uncertainty is generated, people will have a natural tendency to choose the status quo. Scare tactics worked to keep Scotland in the UK; it might be the only way to keep the UK in the EU.

 

 

 

 

A Brexit Timeline

On 23 June 2016, the people of the United Kingdom will vote in a referendum on whether their country should remain in, or leave, the European Union. If a majority votes to leave (or ‘Brexit’, for ‘British Exit from EU’), then the UK will indeed have to leave the EU.
This is one possible timeline for what would happen after the UK votes in favor of Brexit.

24 June to 31 December 2016
On 24 June, the referendum results are declared in the UK:
The UK Cabinet and Parliament decide that the country will indeed leave the European Union by 1 January 2017.

Negotiations between the UK and the EU are held.
They agree to maintain the free flow of goods and services between the UK and the EU; and to allow for visa-free travel between the UK and EU on the condition: that the UK will continue to adhere with EU product standards, financial and employment regulations; and that the UK makes a substantial annual contribution to the EU budget. The contribution would be similar with the arrangement the EU has with Norway (i.e. around Euro 100 per citizen), the UK will contribute Euro 7 billion/year (compared to its Euro 12 billion contribution at present)

The value of the British Pound will decline relative to the Euro.

The EU budget for 2017 and beyond is adjusted to compensate for he loss of the UK contribution by increasing country contributions from 1.23% of Gross National Income to 1.29%.

The UK opts to maintain agricultural subsidies at the same level as that of the EU’s CAP (Common Agricultural Policy), at least for a transition period of 3 years.

EU free trade talks with the US are suspended, because of the pending Brexit.

Foreign investments into the UK are greatly reduced during this period, due to uncertainty over the effect of the Brexit.

2017-2018
UK exports to the EU increases, as well as tourist arrivals, as a result of the Pound’s devaluation. Prices of all goods imported into the UK rise.

British companies are excluded from bidding for government contracts in the EU.
UK goods entering the EU are subjected to border contols, checking of documents and VAT payment.

The number of EU citizens working in the UK reduced by half (from 3 million to 1.5 million),  the number of UK citizens working in the EU are halved as well (from 1 million to 500 thousand)..
The UK continues to allow skilled workers to enter and work, but blocks the entry of unskilled workers. As a result, a lot of  unskilled jobs go to British citizens.
Wages for skilled workers from the EU rise because the Pound has devaluated relative to the Euro. At the same time, unskilled British workers get paid more because of the tighter labor market.

The people of the UK feel that their lives have gotten better as a result of the Brexit.

The UK holds early elections, the Conservatives win.

2019-2021
Foreign manufacturers (e.g. in the auto industry) do not establish new plants in the UK, but instead locate within the EU. Some plants in the UK are downsized.
Multinationals transfer their Europe headquarters from London to within the EU.
Many UK medium-sized service companies transfer to the EU, in order to be able to access the EU market.

The exodus of many companies and the restricted entry of foreign workers cause the UK real estate market to collapse.

UK inflation rises significantly higher than the EU’s 2% (due to higher cost of imported goods, less efficient production, etc).

UK reduces agricultural subsidies to farmers by half. Agricultural production, and exports to the EU, decrease.

The UK signs a free trade agreement with the US. The EU does not.

The UK feels significantly non-EU. The exodus of companies, cut in agricultural subsidies and production, etc are viewed as natural results of asserting sovereignty. (at least, this is what politicians tell the people).

2022-2024
The European Council (composed of the heads of all EU member countries) abolishes the need for unanimity for any of its decisions. Decisions that previously required unanimity will then be decided by qualified majority. This will greatly facilitate decision making.
The Eurogroup (the group of countries with the Euro currency) also decide to abolish the need for unanimity.
The European Parliament acquires the power to supervise the European Commission. The EP could now approve the nomination of individual Commission members, and could depose them by a vote of no-confidence.

UK trade with the EU declines.

The EU welcomes Turkey as a member. Accession talks with Ukraine begin.

Sweden and Denmark adopt the Euro.

EU establishes a Common Energy Policy, which reduces import prices for imported energy (especially from Russia), and coordinates alternative energy development.

EU Finance Ministry is established. The EUFM supervises the implementation of fiscal guidelines across the EU. Tax rates can only vary within limited ranges. Government expenditure.are allowed to vary only within limited ranges. (For example, a country could not have a disproportionately large military budget)
The EUFM issues EU Bonds. These will gradually replace bonds issued by national governments.

Frankfurt grows in importance as a financial center, rivalling London.

The exodus of foreign companies from the UK hurt Scotland the most within the UK; the Scots then pushes for another referendum on independence. In May 2022, the Scottish vote to leave the UK, starting on 1 January 2025.

Being outside the EU irritates the people of Northern Ireland. With the secession of Scotland, they have two EU countries as neighbors; meaning that there are border controls on both sides of their country. Then, the cut in agricultural subsidies hurts them. Both Protestants and Catholics want to secede from the UK and join the EU.

In Northern Ireland, people are inspired by the Scottish example, and demand to also have a referendum on independence.

EU integration accelerates; the UK starts to disintegrate.

2025-2027
The Euro is adopted throughout the whole EU. New members are required to adopt the Euro upon entry.

All EU countries are required to join the Shengen agreement on the free flow of persons.

Scotland becomes independent. It then applies for membership in the EU, and is accepted within a year.

Corsica and Catalonia secede from France and Spain respectively. They are accepted into the EU as new members. Cyprus reunites.

Northern Ireland becomes independent after majority of its citizens vote for it in a referendum. The country then forms a federation with the Republic of Ireland.

Moldova forms a federation with Romania, effectively joining the EU.

Ukraine and Serbia become members of the EU.  EU Accession talks with Bosnia, Iceland Norway, Montenegro, Kosovo, Macedonia and Georgia begin. Association agreements are signed by the EU with Belarus, Armenia, Albania and Azerbaijan.

The name ‘United Kingdom’ is dropped after the secession of Scotland and Northern Ireland. The country is renamed ‘England & Wales’.

The EU is growing to finally encompass all of Europe except for Russia and England & Wales.