Brexit Stokes Feuds on Future of Europe

The European Union reacted to the shock of Brexit with a show of unity, but deep divisions quickly resurfaced about the path ahead -- whether to seek "more Europe" or less.

Pushing for closer integration are EU chiefs such as Commission chief Jean-Claude Juncker, France and many southern member states, as well as European Social Democrats hoping for more pro-growth policies and less fiscal discipline.

The other camp, which wants EU national leaders to keep greater control of European affairs, groups German Chancellor Angela Merkel with her conservative allies and many eastern European leaders.

They believe Brexit shows that fed-up European citizens want to repatriate powers from distant, out-of-touch Brussels to the nation state and view EU federalists like Juncker as part of the problem.

The common threat of growing euroskepticism has left all EU leaders scrambling for answers, said analyst Rosa Balfour of think-tank the German Marshall Fund of the United States.

"It's not just Britain that is weakened, it's also Europe," she said. "It's very clear that what happened in Britain could happen in many members states.

"Everybody agrees we need more growth and jobs. The question is, who is in the driving seat? That's where you get this division of more Europe or less Europe."

- 'Poor people vote 'out' -

The question of how to fix the moribund European economy, create jobs and win back people's trust broadly divides the EU's north and south, but also the political left and right.

The German and French foreign ministers, Frank-Walter Steinmeier and Jean-Marc Ayrault, both of the center-left, in a paper after Britain's June 23 referendum urged "further steps toward a political union in Europe" with a future joint budget.

European Parliament president Martin Schulz, also of Germany's Social Democrats (SPD), has demanded that the European Commission become "a real European government", overseen by the legislature and answerable to voters.

Merkel's SPD Vice Chancellor Sigmar Gabriel -- who is eying her job after 2017 elections -- has blamed austerity for exacerbating suffering in Europe and said Brexit showed that "poor people vote 'out'."

That is the view in France and Italy, which want more flexibility on EU budget rules to boost investment, growth and employment.

In Germany -- the effective EU paymaster whose relative political weight is only set to grow after Brexit -- Merkel and her conservatives can be expected to fight such costly ideas.

For Merkel, Britain has been a key ally in the fight against both EU red tape and loose fiscal policies, and in favor of policies that make the bloc a strong global economic player.

In her latest weekly video address, she said Europe must become "the most competitive and knowledge-based continent in the world."

While Merkel has urged giving Britain time, and may even quietly hope Brexit will not happen, Juncker, French President Francois Hollande and Italy's Matteo Renzi have urged Britain to speed up divorce proceedings.

- 'Fundamental conflict' -

Germany's Finance Minister Wolfgang Schaeuble, a trusted Merkel lieutenant, on Sunday argued that the EU must put lofty visions on hold and quickly resolve pressing issues to regain people's trust.

"This is not a time for grand visions," said the 73-year-old veteran minister, long a passionate proponent of the European project.

"In principle, I am a supporter of deeper integration," he said. "But this is not the time. At a time of growing demagoguery and deep euroskepticism, Europe cannot just carry on as before."

He also cautioned against "reviving the false idea that, with new debt, you can create growth on credit".

A faultline therefore runs through Merkel's cabinet and divides Germany and France, the supposed twin engines of Europe.

"While all sides publicly profess unity, behind the scenes a fundamental conflict has broken out about the direction the continent should take," said German news weekly Die Zeit, adding that the key issue is where to "draw the boundary between the market and the state."

"The French camp -- backed by Italy, the European Commission and most German Social Democrats -- wants to seize the opportunity to turn the eurozone, step by step, into a closer political union in which a lot of money will be transferred."

Given these tensions, and the fact both Hollande and Merkel face elections next year, no major progress can be expected anytime soon, said Jean-Dominique Giuliani, head of think-tank the Schumann Foundation.

"There are no real ideas on the table," he said. "I fear that nothing will happen, that's the problem."