Former PM of Italy: Brexit could create a two tier Europe

In an ideal world, says Enrico Letta, former prime minister of Italy, Brexit would create a two tier Europe. But we don’t live in an ideal world.


Enrico Letta: Brexit could spark a "grand agreement" and create a two-tier Europe
(Image credit: 2016 Anadolu Agency)

Over the past few months I've interviewed a wide range of experts, including diplomats, academics and senior civil servants, for one of MoneyWeek's sister publications, asking them about their views on Brexit. However, recently I spoke to someone who has direct experience of leading, rather than just administering, a country.

Professor Enrico Letta was the last prime minister of Italy, leading a grand coalition from 2013 to 2014. He is currently dean of the Paris School of International Affairs (PSIA) at Sciences Po,one of the top universities in Europe and the training ground for senior French and European civil servants.

Letta is reluctant to make any definitive predictions. But, like other people we've talked to, he admits to being baffled by the internal battles that seem to be going on inside Downing Street. In particular, he notes that the foreign secretary, Boris Johnson, and Theresa May seem to have radically different ideas about the type of Brexit they want (I interviewed Letta before the Conservative party conference). This makes it impossible to know what the British government wants; something that will need to be resolved before we start proper exit negotiations with Europe.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

However, Letta is certain that when Britain does make up its mind and begin to talk to the rest of Europe, it won't find a lot of sympathy for the idea of keeping unrestricted access to the single market while winning concessions on a range of areas. Specifically, Letta warns that we "should not underestimate the role that the European Parliament will play". Not only has it insisted that any deal must win its approval, but has appointed several negotiators to fight its corner in any talks. Significantly, it has chosen ones who are strong supporters of European integration, and are unlikely to put this at risk by making too many concessions.If the European Parliament is going to take a hard line, the individual national governments are unlikely to be any softer. This is because domestic politics will also force national governments to refuse concessions. Letta thinks that each of the three main candidates Nicolas Sarkozy, Alain Jupp and Franois Hollande are likely to take similar attitudes to the UK. Additionally, Germany, Spain and Holland are also likely to go to the polls over the next year. However, Letta is confident that whichever way December's vote on constitutional reform goes, there will not be early elections in Italy.

In terms of specific issue, Letta thinks that freedom of movement will be at the "core of discussions" and that it will be "very hard" for the UK to get concessions on this issue, without losing access to the single market. The City of London is likely to be first in the firing line, with cities such as Paris, Frankfurt and Amsterdam "looking for opportunities to take business from London". In his view, the best that the City can expect is "fragmented, partial access" to the continent and only after "several years of tough negotiations".

So what is the most likely outcome? In an ideal world, Letta thinks that Brexit could be an opportunity "for a grand agreement" that created "a two-tier Europe that had the eurozone at the core, with the non-eurozone and EEA countries around the side [Sarkozy recently floated a similar idea of a new treaty]. However, Letta thinks that the current political climate makes this completely impossible. In any case, any arrangement would involve freedom of movement. As a result, Britain is likely to end up with a much looser "a la carte" deal with only partial access for goods and services.

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri