The looming divorce between the UK and the European Union will take at least five to 10 years to complete and will be far more complicated than the UK government expects, a former member of the executive board of the European Central Bank told the annual Inrev conference in Berlin on Tuesday.
The Brexit negotiations were formally commenced on 29 March when UK prime minister Theresa May triggered Article 50, official notification of the UK's intention to part ways with the EU.
But talks on the actual Brexit alone will take two years at least, former Bundesbank president and ECB board member Jürgen Stark (pictured) said during his keynote presentation. 'A new round of negotiations on a new relationship between the UK and Europe still only start after that. It won't be part of the first two years,' he predicted.
Moreover, the UK is at a disadvantage in the negotiations due to its lack of expertise, he added. 'The expertise on this resides more on the side of Europe…Maybe the UK underestimated the complexity of the process.'
The jury is still out on whether it will be a hard or a soft Brexit, but Stark noted that other options were also on the table including a hard minus or a soft plus Brexit. 'It could also be something in between.'
The EU will change
Asked whether the EU would look and feel the same without the UK as a member, Stark said transformation was inevitable. 'The European Union will no doubt change. But I do not expect other countries to follow.'
He added that as far as economic and monetary policy is concerned, the UK is closer to Germany than France. 'Germany has many friends in Europe, but in terms of economic policy France is not an ally. The UK may not necessarily be our friend, but on this front it is our ally.'
Turning to fears about the rise of populist parties in upcoming general elections in countries such as France and Germany, Stark said the signal from the recent Dutch elections – where the PVV populist party did not win the most seats as many had feared - was telling. ‘Even if Marie le Pen makes it through the first round in France, she won't win in the second round. I don't see this as a risk.'
Italy is a weak spot
Asked whether Italy can remain in the eurozone given its huge debt problems and bleak performance, Stark conceded that the country is 'a weak spot'.
‘Italy seems to be ungovernable. There does not appear to be a real will for reforms and no political incentive to work in this direction. It is a weak spot, also because of its size. It is not Greece, or Ireland or Portugal or even a combination of these countries. It is a large economy.’
The current situation is not sustainable, Stark added. ‘It’s only sustainable because of the ongoing ECB interventions. I don’t know whether other countries have the political strength or the will to support it in the future.’
Italy’s constantly changing government is not helping the situation, he added. Since the second world war, Italy has had 60 different governments which amounts to a new government almost every year. Stark described the period ruled by Berlusconi as a ‘lost decade’. ‘I don’t have an answer, and the Italians don’t either.’
