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Friday, June 08, 2012

Referendum confusion: Is Cameron protecting Britain from British plans for a eurozone superstate?

The eurozone crisis alone is complicated enough. Add in UK domestic politics and calls for a referendum on EU membership, and this stuff becomes maddening.

Today's Europe coverage in the UK press was a wonderful cocktail of a euro Armageddon, EU-UK relations and a huge dose of British domestic politics.

The Telegraph reported that:
"The Prime Minister dismissed as 'nonsense' a suggestion from Angela Merkel, the German chancellor, that the European Union should eventually have a single national identity and described as 'nonsense' the idea of loyalty to a common European flag."
It also noted that Merkel said yesterday, “We need more Europe, a budget union, and we need a political union first and foremost”, which led the paper to proclaim that "David Cameron promises to 'protect' Britain from German plans for a eurozone superstate with common banking and political systems".

But is that really what's going on here? It's true that both Cameron and Osborne have floated the idea of "safeguards" if the eurozone presses ahead with a banking union and further integration. But here's the thing: Germany's default position remains strongly anti-fiscal burden sharing, meaning that Merkel's 'budget union' is still based on exporting German fiscal discipline to the eurozone-level by introducing stronger budget oversight and enforcement mechanisms - only then could some form of debt mutualisation be considered. A German-led superstate still seems years off - if it ever will be agreed (no matter how much other parts of the eurozone or markets might like to see it right now).

In contrast, David Cameron last month called for a bigger bailout fund, shared eurozone bonds and a more active monetary policy from the ECB - in other words, the eurozone quickly moving to "joint and several liabilities" with stronger states indefinitely underwriting weaker ones. That would really be a German-led super state.

So, who's plans are Cameron and Osborne really trying to 'safeguard' themselves against? Of course, Cameron is right to stay well clear and seek safeguards in return for nodding through treaty changes designed to achieve a fiscal or a banking union, for example for UK financial services. But this discussion leaves the impression that Cameron is actually seeking safeguards against his own plans for eurozone integration. Not necessarily a contradiction, but not a good starting point for future negotiations over EU treaty changes either.

There's also a second confusion: an EU referendum.

In response to questions about the impact on Britain of more eurozone integration, Osborne yesterday told the BBC Today Programme that:
“I think what the public are concerned about, the British people would be concerned about, would be if there was any transfer of power...A reshaped relationship with Europe would imply, would involve, a transfer of sovereignty or powers from the UK to Brussels.” 
In reality, Osborne merely re-stated what's in the 'referendum lock', i.e. a substantial transfer of powers to the EU will, by law, trigger a public vote. But the context is confusing. In all likelihood any eurozone focused treaty change would not legally and constitutionally impact the UK enough to trigger a referendum. Furthermore, the government's talk of safeguards suggests that, if none are present, the UK would veto any treaty change before it actually gets to a referendum. So a referendum still looks unlikely, at least on the back of the eurozone crisis.

Osborne and Cameron are in an unenviable position - the eurozone crisis threatens to send Britain into a deeper recession, and remains a fundamental threat not only to the UK economy but also now to the Conservatives' 2015 election prospects. Tory backbenchers and UKIP are both breathing down the necks of the Conservative leadership over an EU referendum. All factors considered, Osborne and Cameron are doing a decent job balancing all these interests.

At the same time though, as we hint at in today's Telegraph, the UK government could end up in a rather strange position by sending all these political hares running at the same time. Is it going to veto the same Treaty changes (to establish a fiscal / banking union) that it is now effectively calling for? If it's deemed that these treaty changes de facto transfer powers away from the UK - i.e. by shifting the institutional balance of power towards the eurozone at the UK's expense - will it then also call a referendum on those treaty changes? What would the question be?

This may all work out both in the polls at home and in talks in Europe. But given the unrealistic expectations it raises - and how very difficult it will be to square all these various factors - it may well come back to haunt the Tory leadership, at home as well as abroad.


Rik said...

A remark like: 'it is up to the people of the EZ to decide how they want to shape their monetary union' would have been more appropriate.
That will happen anyway as this will drag on for certainly a decade and will ultimately be decided by the voters themselves (or at least those of important countries in the decisionmaking process). There are simply everywhere at least 2 or 3 elections in the period mentioned all with the Euro on top of the agenda.
Like we have seen with Greece at the end of the day there will be a referendum or a normal election with this as topic.

Talking people into decisions they simply donot like:
a) makes things at the end not easier (again see Greece); and
b) make you look like an undemocratic ...... (to be filled in as desired).
With for Cameron as well
c) European voters simply donot care anyway what Cameron thinks.

Same with the EU-referendum in the UK. Cameron has basically 2 options.
a) use it himself. Hold a referendum and streamline the process and very likely will be seen as somebody that really made a difference for his own country (and get re-elected).
b) be seen as an undemocratic elitist ...... (fill in the same word as above) and have to face the referendum anyway (only deferring it slightly).
Deferring btw is simply negative for the UK in this situation likely a situation will occur that he should be able to reneg the UKs position in the UK. He should take his chances when these arise, not when he is ready (as that way nothing would happen and he will be kicked out of office the next election, unless Labour messes things up (not to be excluded)).

Sheona said...

Whatever Merkel's plans for fiscal union, political union, etc, these will take years to come to fruition. Yet again the lady is completely ignoring the tsunami of Greek debt and the fact that Spain needs money today. This is why the eurozone is in such a mess.

Johne.payne1@btinternet.com said...

It about time we all talked more about the future. Any party or politician backing Europe is, in fact, saying the British people must eventually give Sovereignty to Brussels. Everyone seems to talk of each crisis as it comes along and in so doing miss the big argument, and we creep slowly along a predicted path.

There is no point of remaining a full member of the EU unless it is our wish to eventually give all our Sovereignty to Europe.

I make a clear prediction. If the EU, by hook or by crook, gets through their current financial crisis, Britain will be the last to come under financial attack. During that period the Government will have their referendum, when the people will be blackmailed towards joining. (As is happening in Greece).

Somehow we need to get away from just attacking day-to-day events, that just suits the EU Commission.

John E. Payne

Anonymous said...

Call for action: closer collaboration by European leaders as the continent struggles to overcome its debt crisis?

With the financial crisis raging, the German government is willing to deploy the tools at hand whenever needed to bolster the euro region, she told reporters at a joint press conference with the British Prime, David Cameron. German Chancellor Angela Merkel was meeting with her British counterpart David Cameron in Berlin, Thursday.

“In view of the current difficulties, it’s important to emphasize that we have created the instruments of support in the euro zone, that Germany is ready to work with these instruments whenever that is necessary and that this is an expression of our firm desire to keep the euro area stable,” the chancellor said. Merkel didn’t outline to which tools she was referring.

With Spain struggling to avoid a bailout and Greece at risk of exiting the euro, Cameron and President Barack Obama called on Europe’s leaders yesterday for an “immediate” plan to resolve the crisis. Merkel has stepped up her opposition to debt sharing in the euro region and rejects proposals that Spain’s banks be allowed direct access to the euro bailout funds.

Speaking earlier, Merkel said that she supports a two-speed European Union, with a core group in the euro pressing ahead with deeper integration and the U.K. among others relegated to Europe’s margins. Her comments underscore her differences with Cameron as he presses for more aggressive action by euro countries to counter the financial crisis.

“Those in a monetary union will have to move closer together,” is Merkels intention. “We have to be open. We always have to make it possible for everyone” to join. “But we must not stop because one or the other doesn’t want to come along just yet.”

Europe is already moving at different speeds, that's a fact, citing the Schengen agreement that abolished border controls between some European countries and the monetary union that excludes the U.K. and Denmark. “This will be intensified,” Merkel said. “We need more Europe, we need not only a monetary union, but we also need a so-called fiscal union, in other words more joint budget policy. And we need most of all a political union, that means we need to gradually give competencies to Europe and give Europe control.”

Ceding more control to Brussels is anathema to many lawmakers in Cameron’s Conservative Party, more than a quarter of whom defied the government in October and voted in favor of a referendum on continuing British membership of the EU.

“All countries across Europe can help by offering the right advice and the right steps forward to the euro-zone countries,” Cameron demanded in Oslo today before leaving for Berlin. “Clearly the first priority is to stabilize the financial situation. That means recapitalization of banks, it means building of firewalls, it means reassuring markets.”

EU President Herman van Rompuy is drafting proposals on a “fiscal union” that will be discussed by European leaders at a Brussels summit on June 28-29. Merkel said leaders will consider a plan to transform the EU into a political union. Still, a breakthrough can’t be achieved at just one summit, she said.
The United States and Great Britain are now calling for an immediate plan for the ailing euro zone - this confirmed a spokeswoman for the Downing Street on Wednesday in London. U.S. President Barack Obama and British Prime Minister David Cameron had discussed the issue during a telephone conversation late on Tuesday evening.

Speaking with Cameron, the chancellor reiterated the need to push for deeper cooperation in Europe to staunch the crisis, saying that “we have common interests for all of Europe.”

There is agreement in the following point: “We (all) want solid budgets and we (all) want growth.” she said. And there are particularly large differences for the issue of introducing Euro-bonds. It remains questionable whether this is sufficient.

Sandro Valecchi, Analyst

Rik said...

Imho Cameron and Osborne have simply made a mess of it. And Cameron more than Osborne (the UK economy is a mess but would realistically have been a mess under any government).
It is clear and has long already been clear that the UK population as a whole, but especially the Tories' side of it, want less Europe.
Cameron should have found a way to integrate that in his policies, which was and is imho not too difficult to do.

Try to reneg the position of the UK in the EU (with likely a few followers in smaller countries as no outsider really want to get in the 'paying for the EZ bail out' camp.
Probably the easiest way is a considerably more limited membership (and subsequently contribution).

He could do that by simply vetoing all change because of the 'referendum-danger'.
And very soon everybody would realize that an EU without an UK naturally obstructing any change is much better than the present situation with a permanent veto.
If necessary simply make it a referendum with as question exactly what you would like to be the outcome and as alternative continiuing and/or more Brussels.
Economically the freetrade-zone would remain intact. The rest is basically creating more red tape and an extra layer of government (with a lot of costs involved) anyway. So simply has probably more cons than pros. Looking at the position of comparble non-EZ members they are probably better off especially with a collapsing EZ.

Result. Really would have done what his potential voters wanted. Now he is simply playing the anti-democrat in the best EU tradition which will likely cost him next election.

He could win a next election if:
- he gets the economy in order. Totally unrealistic no UK government would be able to do that (basics are extemly poor and room to manoeuvre is very limited for structural measures and anyway measures will need some time and likley first make things worse), but the sitting government is usually punished for it anyway.
-smooth running government. No way he is moving from on scandal to another. Simply doesnot look able to keep the garbage out of the papers.
-leaves the EU reneg.
None of those, Cameron's strongest point is Labour being extremely poor as well.

The EU reneg therefor imho the only realistic point he could win a next election on.

Rollo said...

We know that Cameron is a blatant liar when it comes to European matters. Remember his 'cast iron pledge'? Remember also Clegg taking his team out of the commons because he could not have an 'in out referendum'? These two jokers could not be trusted an inch. Look at Cameron's tough talk before meeting Merkel, and his heart-warming snog with her when he got there.

Average Englishman said...

Cameron's position on Europe seems muddled to say the least. In any event, I do not see how he can make a meaningful contribution whilst trying to walk a tightrope between his coalition partners who want 'more Europe' and the majority of his own party and the electorate who want 'less Europe'.
He must decide what his principles are and stick to them; continuing to fudge and lecture at the same time will not do and as one contributor to this blog has stated recently, just muddling through each problem as it arises only leads us inevitable over the years deeper and deeper into the non-democratic EU mire.
I suggest that we all just take notice of what he does and not what he says as frankly, I do not trust him as far as I could throw him; in the same way that I do not trust any UK politicians much any more after super-spinner Tony B. Liar and Clegg's disgraceful school fees u-turn.
If all 'Dave' is interested in is winning the next election I agree with Rik; he should get Eurosceptic fast because if he doesn't, a resurgent Labour party combined with an ever stronger UKIP will give him no hope at all.

Will Podmore said...

"Osborne and Cameron are doing a decent job".
No. Britain's interest would be best served by leaving the EU, to which Cameron and Osborne (and Clegg and Milibnad) are committed.
The euro is killing its members, apart from Germany.

A recent ComRes opinion poll found that 61 per cent of voters would vote to leave the EU. A Populus poll for the Times recorded that 80 per cent of respondents would like a referendum on the EU.
So, which parliamentary party will win the election by being the first to promise a referendum?

Syriza’s leader Alexis Tsipras says he wants Greece to stay in the euro, but will not support more cuts. That is a bit like wanting to stay on the rack, but not wanting the pain. The euro means poverty, it means destruction. Greece should get out of the euro, default, devalue and then rebuild, as Argentina did.

Rollo said...

That was an unfortunate phrase: "must decide what his principles are". He has none, just like Clegg. His aim is position and power: he will say whatever he thinks will get him this, to whatever audioence he has. When the audience changes, so will he.

Rik said...

So you know what you have to make him think.