Tag Archives: Eurozone

Of cakes and their consumption – reflections on the UK’s position within the EU

Among the general maelstrom that is the crisis in the Eurozone, one of the most fascinating things to observe has been the United Kingdom’s ever more apparent marginalisation within the European Union. Put differently, the recent actions of the Conservative-Liberal Democrat government have won it few friends within the EU.

On the one hand, the UK is issuing near-constant exhortations (or should that be demands?) for the Eurozone to put its house in order; after all, with half our trade going to the EU, there is little prospect of our ailing recovery gathering pace once more while the Eurozone remains locked in crisis. Yet at the same time, the Government has flatly refused to contribute to commit British taxpayers money to either the EFSF or the ESM. While this may be understandable from a domestic political perspective (after all what would the Daily Mail say?), it cuts little ice with other EU member-states, especially Germany, who are ultimately underwriting the massive bailout loans needed. Indeed, it’s rather akin to the UK ‘having its cake and eating it’. Is it therefore really surprising that President Sarkozy lost his temper with David Cameron at the EU crisis summit in October?

On the other hand, persistent rumblings about the desirability of a ‘repatriation’ of powers from Brussels, combined with the recent parliamentary vote on whether a referendum should be held on EU membership, which produced the biggest Tory rebellion for some twenty years, makes the claim that the UK remains at the heart of the EU look frankly risible.

Of course, the attempt to ‘have it both ways’ reflects a long-established in British European policy, which goes back to the Treaty of Rome – the UK does not want further integration, but neither does it want other countries to gain an advantage from integrating themselves. Thus, the UK countered the establishment of the EEC in 1957 with the formation of EFTA – until it realised that the latter was very much a second-rate organisation and it decided to defect to the former. The UK long argued in favour of unanimity as the method of voting in the Council of Ministers – because it would make it easier to block unwelcome proposals from other member states. And as many in the old western European EU member-states will testify, the UK was such a strong proponent of enlargement in 2004/7 precisely because it knew that the inevitable change in the dynamics of the EU associated with this would dilute moves towards further integration. As ever, the essential truth of this view is confirmed by none other than Sir Humphrey Appleby, who explains the UK’s support of enlargement in Yes Minister thus: “the more members it [the EEC] has, the more arguments it can stir up, the more futile and impotent it becomes”. When Jim Hacker chides Sir Humphrey for his cynicism, he responds, with characteristic nonchalance, “We call it diplomacy, Minister”.

But the indications are gathering that this well-trodden path of British diplomacy in Europe, together with the relentless pursuit of short-term interests, has had its day; indeed, it is now becoming counterproductive. Already in 1994, the German CDU/CSU published a proposal for a ‘two-speed’ European Union (the so-called Schäuble-Lamers paper), with a core of members pursuing greater integration and a looser periphery of other states. Hardly surprising, therefore, that the central idea of this paper was reflected in the CDU’s new proposals for deeper integration among the members of the Eurozone, which were agreed at its Leipzig party congress this week.

So Britain will already structurally be on the periphery; but more than that, there has been a distinct change in tone within the German political elite when it comes to the UK. Whereas in the past, German politicians were at pains to appeal to the UK, those days are gone. Already back in September 2011, the former Chancellor Gerhard Schröder (SPD) gave an interview with Der Spiegel, in which he was quite blunt about the UK’s role in Europe. It is worth quoting what he said verbatim (my translation):

Schröder: … In any case, it’s not the new member-states who are causing the real problems.

SPIEGEL: Then who?

Schröder: The biggest problems are created by Britain. Britain is not in the Euro. But the British always want to be involved in decision-making regarding a common economic area. The two things just do not go together. And secondly, the British have been extremely reluctant about any kind of further integration, and that is putting it very diplomatically.

SPIEGEL: You mean that they simply blocked any proposals to this effect?

Schröder: Exactly.

And only this week, Volker Kauder, the influential leader of the CDU/CSU parliamentary party in the Bundestag delivered a pugnacious speech at the CDU’s Leipzig congress. In it, he singled out the UK for especial criticism, pointing out that, as a member of the EU, the British DID bear direct responsibility for the Eurozone’s success. And in the context of Germany’s proposals for a tax on financial transaction (vigorously opposed by the City), he declared (again, my translation) “Only looking out for your own interests and not being prepared to contribute at all – that cannot be the message that we allow the British to get away with”.

These are not fringe politicians, and such public statements give an indication that Germany has probably lost patience with the UK and is no longer prepared to make any significant allowances for its particular historical position within the EU. That of course has major implications for the future: there are tricky negotiations around the corner regarding the next EU budget, and it is difficult to see countries lining up willing to defend the UK’s budget rebate. But on other issues too which really matter to the UK – liberalisation of energy markets, implementation of the single market, CAP reform – it will be others defining the agenda, not the British Government.

At the end of October 2011, the Deputy Prime Minister Nick Clegg wrote in the Observer that “Being shoved to the margins, or retreating there voluntarily, would be economic suicide”. Unfortunately, it looks increasingly as if that is precisely where we are already.