By Gabriela Baczynska
BRUSSELS (Reuters) - Britain's exit from the EU is reshaping the balance of power in Europe, removing one of the bloc's two big military powers and one of the top contributors to its budget. Britain has been an outspoken supporter of free trade, close ties with the United States and a tough sanctions policy toward Russia. Here are some issues:
DEFENSE, SECURITY, INTERNATIONAL AFFAIRS
Britain and France, the EU's two nuclear armed U.N. Security Council permanent members, have long been by far the bloc's leading military powers. Britain was also the bloc's only member of the "Five Eyes" intelligence sharing group, giving it privileged access to the output of U.S. spies. To contain the damage from Britain's exit, the bloc is keen to keep London in a tight security and defense relationship in the future.
The departure of a traditional proponent of trans-Atlantic ties will leave more say to Paris, which has greater ambitions for the integration of European defense.
Britain has been a key backer of sanctions against Russia over Ukraine, with the most important economic ones now in place only until the end of July. Other Russia hawks, including Sweden, Poland and the Baltic states, will see their hand weakened in discussions with peers such as Italy, Hungary and Cyprus that are keen to resume business ties with Moscow.
ECONOMIC LIBERALISM & TRADE
Britain and the EU will find themselves in separate trade talks with the United States and China, which will change the negotiating leverage of the world's most important trade relationships.
Within the EU, the free-traders' lobby will be weakened, leaving the Netherlands at the helm of a group that also includes Ireland, Sweden, Denmark and other smaller states.
With Germany seen leaning more toward a traditional French model of a strong state role, Britain will be an absence in discussions about industrial policy, vetting foreign investment, state aid to industry and creating national champions.
MACRON IN THE DRIVING SEAT
Without Britain, the Franco-German "engine" of the union becomes more important. But as Angela Merkel nears the end of her long tenure as the Germany chancellor, French President Emmanuel Macron could get a bigger say in EU affairs.
Macron wants to reform the EU and deepen its integration, creating a rift with newer eastern EU members such as Poland, which had seen euro-sceptic Britain as an ally.
The eastern members want to compete within the EU through lower prices and reject French proposals to harmonize more rules. They support expanding the bloc into the Balkans, which Macron has resisted, and they strongly back NATO as a bulwark against Russia, while Macron called the alliance "brain dead".
The EU is entering a period of horse-trading over its budget for 2021-27 and the departure of Britain leaves a gaping hole. Other net contributors do not want to pay more, while recipients do not want to give up aid.
Britain was by far the largest EU state outside the euro zone, meaning the other eight countries that have kept national currencies lose their most important ally when their interests diverge from those of states that use the euro.
(Reporting by Gabriela Baczynska, Michel Rose, Andreas Rinke, John Chalmers, Writing by Gabriela Baczynska; Editing by John Chalmers and Peter Graff)