Mr. Fabian Zuleeg:

Perhaps earlier, and some people are saying 2016. That is not a timescale that works particularly well in Europe. We would have major difficulties in doing anything significant in that kind of timescale. Admittedly, one could produce certain declarations emphasising certain issues but we should not forget that if this touches on some of the fundamental legal provisions of the European Union, there could well be court cases, or a legal challenge to some of the reforms. With regard to freedom of movement of people, for example, it would depend on what is exactly is in the package.

There is a more fundamental issue to be considered regarding any reform package. What is happening in the United Kingdom at present is not simply about the content itself but also about who makes decisions on particular issues. That is far more difficult to address. I do agree that with issues such as the abuse of social security, be it a real issue or not, one can find European compromises. What one cannot do is give the right to make decisions about EU mobility back to the national level. The moment one does that, one is setting the treaty aside, which is not possible. This is very much going to be the political debate in the United Kingdom. It is not about the detail of the kinds of reforms that are emerging but about the fact that the United Kingdom cannot independently make decisions on the free movement of EU citizens because it is an EU competence. This is a far more difficult matter to address.

How concerned is the rest of Europe? I still believe we are in circumstances in which most people in Europe believe the exit cannot happen because they cannot seriously believe the United Kingdom would vote for it. If I were to be very unkind, I would say this is wishful thinking. It is a case of saying we are not going to think about it because it is not allowed to happen. I do not envisage any serious consideration anywhere. I am very glad that the committee is engaging in this process because it is high time that many more places, including the EU institutions, started to think seriously about the possibilities. At present, this is not happening.

This is of concern also because I have very much noticed on the EU side that the mood has changed. It is changed in two very different ways, both of which are important. First, the eurozone crisis dominates everything so whatever happens with Brexit is secondary to the euro crisis. If five or six years ago there had been a debate on Brexit as we are having now, it would have been the biggest issue on the European agenda, without a doubt. Now, without a doubt, it is not. Therefore, the question of what needs to be done to fix the problems with EMU comes first. If the United Kingdom is seen as a hindrance to that process, it has an implication in terms of how people regard Brexit.

The second point is that, for the first time, people can imagine having the United Kingdom outside the Union. It is very much because of the negotiation tactic of the UK Government. Imagining the exit was a taboo a few years ago, at which time one would not even consider the possibility. Now, I hear increasingly often the statement that if the United Kingdom is not going to be constructive or try to find compromise at European level, the Union might be better off at some point without it. I am not saying this is a majority view but this is the first time I am actually hearing views of this kind, which represents quite a sea change in how Brussels thinks about this.

On the question of the timescale if it comes to Brexit, it is impossible to predict. The difficulty would very much be on the UK side. Domestically in the United Kingdom, an enormous number of legal changes would be required. Independent regulators would have to be set up, in addition to competition authorities. There are a number of these institutions already but they have different legal functions. One would have to change a vast part of the legal system within the United Kingdom or, in essence, accept all the EU law without further scrutiny, which seems to defeat the purpose of Brexit at little. The pressure would very much be on the United Kingdom and UK Government to deliver Brexit. I do not believe a UK Government could negotiate an arrangement and go back to the people to ask for another vote. It will be final and there would be an expectation that the process would happen in a reasonable timescale. It would be a matter of deciding what reasonable meant at that point.

I will address a few of the specific points on the austerity debate. It will not have much of an impact, predominantly because it is a eurozone debate. The United Kingdom is not involved in decision making at that kind of level. I agree on the general point but, ultimately, it will not make much difference.

I do not believe TTIP will make so much difference. Other trends are having a much greater impact on the likelihood of TTIP happening. The attitude in Germany towards TTIP is far more important to TTIP than whether the United Kingdom is inside the European Union. The importance of the UK voice in some of these areas is overestimated in the United Kingdom.

With regard to the question on the impact of a UK exit on Ireland's economy and tourism, it is impossible to predict if one does not know what kind of regime will exist in terms of exchanges. The key point is that I would expect relatively little to change in terms of trade, especially in terms of manufactured trade. Most of the latter is WTO related rather than EU related. It could have an impact on services, and on investment in particular. The far greater longer-term impact would be on investment.

On the budget, I hope I have covered everything. I ask members to revert to me if there is something missing. Brexit would be opening a can of worms with regard to the budget. We noted the difficulties we had negotiating the long-term budget of the European Union the last time around. It was not solely down to the United Kingdom.

It played a prominent role in there but it was a much more fundamental conflict between some countries who believed the budget should increase and those who believed it should decrease. There were different spending and political priorities. The immediate effect of a Brexit whenever that would happen would be to reopen that debate. One would need to renegotiate the entire multi-annual financial framework. That comes second only to treaty change as a nightmare scenario in Brussels. We would have a major problem trying to find a compromise between the 27 countries. I would expect that any compromise would have to be along the lines of some of the net payers paying a bit more and some of the net recipients receiving a bit less. At the margin, it could turn some net recipients into net payers because of the arithmetic involved. All of that would need to be negotiated and it would be a very difficult negotiation.

The additional difficulty here would be that there is now a mechanism for dealing with a breakdown in negotiations but the mechanism for a breakdown in EU budget negotiations relies on continuing the previous budgets. You cannot do that if a major net player is missing so you could have a complete breakdown in the budget negotiations which would be very detrimental to the functioning of the EU but it is possible.