#$tw.

Patrick Watson is an old friend of mine and one of the top editors at Mauldin Economics. Here’s a great read from him that I recommend for everyone interested in the EU. 

BY PATRICK WATSON

The Mother of Parliaments just got an earful from the public it ostensibly serves. The UK’s Brexit referendum passed easily.

Now, someone has to make it happen.

It won’t be Prime Minister David Cameron. Having led the losing side, he sensibly—and honorably, I must add—said he would resign.

Strictly speaking, the referendum was only advisory. But, the government can’t ignore it. The rest of Europe certainly isn’t. Brussels EU bureaucrats instantly snarled in derision, demanding the UK move quickly.

Then something unexpected happened.

EU foreign ministers backpedal

Foreign ministers from the six original European Union members (Belgium, France, Germany, Italy, Luxembourg, and the Netherlands) issued a joint statement in response, complete with a weekend photo opportunity. They obviously wanted to make a point. What was it?

You can read it yourself. Here’s the key phrase: “We shall also recognize different levels of ambition amongst Member States when it comes to the project of European integration.”

This is new. The EU’s party line had been that everyone sought an “ever-closer union.” But there’s more.

“We are aware that discontent with the functioning of the EU as it is today is manifest in parts of our societies… We have to focus our common efforts on those challenges which can only be addressed by common European answers, while leaving other tasks to national or regional levels.”

If this were a poker game, that statement would mean “I fold.”

Enforcing “common European answers” is the EU’s main purpose. Now its six original members are giving that up. Why? Because UK voters said no, that’s why.

Europe still needs the UK

The leading EU powers know the Brexit vote emboldens other restive members. Their only hope is to change from an “ever-closer” union to a “call us when you need us” union.

Core EU nations have their own challenges, too.

Germany must have free trade with the UK. Italy’s banks are teetering and could collapse (read more about Germany’s invisible crisis in Mauldin Economics’ free report). France is… well, it’s France.

No matter what they say, the reality is these nations can’t afford to rudely dismiss the UK from their club. The British side has the upper hand.

We’ll see a lot of strutting and posturing in the coming months as everyone jockeys for position in the new order. But make no mistake: a new order is coming. What will it look like?

Tough times ahead

Many envision a stripped-down European free trade area whose member nations govern their own internal affairs.

I’m not sure that plan is feasible.

Free trade, as it’s now defined, is more than just the absence of tariffs. It has come to mean uniformity on patents, copyrights, occupational licensing, immigration, environmental laws, and all manner of other public policies. That’s why TPP and other recent trade deals are so complex.

I don’t see any way to construct a European “free trade” zone that doesn’t also leave the EU meddling in local affairs.

It’s a sticky wicket, as the Brits like to say.

Sorting this out will take years. Meanwhile, the global economy is getting no better and could get worse. Financial markets hate the lingering uncertainty.

We were entering a rough road even before Brexit obliterated the pavement. Now the only choice is to slow way down.

Free Special Report: How Brexit Will Affect the UK, Europe, and the US

Britain’s vote to leave the EU sent shockwaves throughout the world, plunging markets into chaos and Europe into an existential quagmire.