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Friday, June 08, 2012

The UK should throw its weight behind a Europe based on sound money

In today's Telegraph, we argue:
Whatever the future of the single currency – and the entire European project – it will largely be decided in Berlin. The most important relationship for David Cameron is therefore with the German Chancellor, Angela Merkel. But there is a risk that the Prime Minister will miss a vital chance to cement a new Anglo-German deal on the future of the European Union.
For years, the UK’s European diplomacy has been defined by its relations with the Élysée, but the eurozone crisis has demonstrated that Germany now stands alone as Europe’s leader, however reluctantly. Despite there being a great deal of cultural and political overlap, however, the basic problem is that Britain does not really understand Germany, and vice versa. Britain perceives itself as a seafaring country of traders, Germany as a continental land of engineers.
Much like the UK, Germany is undertaking a highly charged internal debate about its place in Europe. For the first time, the twin pillars of Germany’s extraordinarily successful post-war settlement are in conflict: its commitment to Europe, and its belief in sound money and stable budgets. Whatever the outcome of this debate, it will have a defining impact on the future of the EU.
The UK, however, risks ending up on the wrong side of the debate. To the great annoyance of Berlin, Cameron and George Osborne have developed a fondness for calling on the eurozone to move towards fiscal union, including eurobonds, and for the ECB to effectively start the printing presses. Britain has a right to voice its opinion – a full-scale crisis would have implications well beyond the eurozone – but its advice is misguided.
Eurobonds and cheap money create huge incentives for more spending, which is exactly what the Coalition is arguing against at home, and feel awfully like solving a debt crisis with more debt. Cameron has also stressed that “Europe’s lack of competitiveness remains its Achilles’ heel”. But, as Merkel has rightly countered, eurobonds do nothing to address this. If anything, allowing countries to piggyback on Germany’s credit rating takes away pressure for the vital reforms that many of these countries need.
After having spent a decade in opposition calling for a more dynamic European economy and a slimmed-down, more democratic EU, the Conservative leadership’s cocktail of Eurosceptic fiscal federalism is not only intellectually inconsistent but, in the key debate about the future of the EU, needlessly aligns the UK with European federalists and socialists such as François Hollande.

At the same time, it locks Britain into a weak negotiation position over future EU treaty changes – which will be needed if the eurozone is going to move to fiscal union – as Britain can hardly block the same treaty change that it has effectively argued for.

Instead of prejudging the eurozone’s future, Britain should spend all its political capital on convincing Merkel that Europe as a whole needs to move in the direction of free trade and structural reform. This means that, instead of talking about “digital government” as Cameron and Merkel did yesterday, Cameron should have said the following: “I will support the Chancellor’s vision for a Europe based on responsible spending, sound money, liberal cross-border trade and respect for the rule of law. Like the Chancellor, I believe that Europe must learn how to live within its means and reform itself if it is going to remain a vibrant economic actor on the world stage. But just as Germany will need to seek the right conditions to be comfortable with its new position in Europe, so must Britain. Since we cannot join the euro, Britain will need a different – and more flexible – set of arrangements under EU law than euro members. This is the only way to reconcile continued EU membership with UK public opinion.”

In the end, this would benefit Germany, Britain and Europe as a whole.

5 comments:

Rik said...

In the first place great piece of work.

Looking at the UK strategic targets in relation to Europe:
-it has to move into other directions as well (Europe at best is low growth) growth should come mainly from trade with EMs; Commonwealth, aspiring 3rd world), etc.;
-in Europe it will have to focuss on creating a for the homefront acceptable situation (which means less Europe) any other option is simply longer term unrealistic (voters will simply push it through in an election or a referendum otherwise. One way or another this will be on the agenda and on the top of it for a long time to come). Same as paying for Europe in the EZ's North or austerity (in its South) it will at some stage be decided in the ballotbox.
-The Meds have brought themselves in a horrible situation they are under nearly any realistic scenario doomed to become a Zombie-region at leat for a few decades to come. They are now where large parts of China are as well only not at 400 USD monthly wages. The Meds are simply long term totally uncompetitive. Imho much worse than the say 30% difference the EU works with.
From there it is wise to gamble on Germany and Co (more competitive and anyway culturally more close). France is simply teaming up with the loosers (betting on the wrong horse).

France is probably the most logical partner on security issues in Europe (allthough not really reliable), but the next decade at least will be about the economy. The UKs priority is imho not to save the world it is to get its economy going again (basically find a new businessmodel as overeliance on services seems risky, at best new work should be found to compensate for the decline in that sector (and mainly the financial part thereof).

So Cameron, as usual, has as you write his priorities wrong. Also the combination: 'we want less Europe but others (even against their will) should have more Europe', simply sounds silly, selfish, and to be honest, simply stupid. And might leave him ending up a) in the paying camp and b) strategically on the EU reneg in the wrong camp.

Rik said...

In the first place great piece of work.

Looking at the UK strategic targets in relation to Europe:
-it has to move into other directions as well (Europe at best is low growth) growth should come mainly from trade with EMs; Commonwealth, aspiring 3rd world), etc.;
-in Europe it will have to focuss on creating a for the homefront acceptable situation (which means less Europe) any other option is simply longer term unrealistic (voters will simply push it through in an election or a referendum otherwise. One way or another this will be on the agenda and on the top of it for a long time to come). Same as paying for Europe in the EZ's North or austerity (in its South) it will at some stage be decided in the ballotbox.
-The Meds have brought themselves in a horrible situation they are under nearly any realistic scenario doomed to become a Zombie-region at leat for a few decades to come. They are now where large parts of China are as well only not at 400 USD monthly wages. The Meds are simply long term totally uncompetitive. Imho much worse than the say 30% difference the EU works with.
From there it is wise to gamble on Germany and Co (more competitive and anyway culturally more close). France is simply teaming up with the loosers (betting on the wrong horse).

France is probably the most logical partner on security issues in Europe (allthough not really reliable), but the next decade at least will be about the economy. The UKs priority is imho not to save the world it is to get its economy going again (basically find a new businessmodel as overeliance on services seems risky, at best new work should be found to compensate for the decline in that sector (and mainly the financial part thereof).

So Cameron, as usual, has as you write his priorities wrong. Also the combination: 'we want less Europe but others (even against their will) should have more Europe', simply sounds silly, selfish, and to be honest, simply stupid. And might leave him ending up a) in the paying camp and b) strategically on the EU reneg in the wrong camp.

christina Speight said...

(Rik seems to be a double posting???)

The article is fine as far as it goes but just dodges the central issue like most others, including our own PM, that "bear with little brain"! . The central fact is that tinkering with the symptoms of a disease does not cure it. The disease is the Euro and for any form of stability in Europe including Britain the Euro has to go. After that by all means talk sound money to Germany and practice it ourselves.

As long as the Euro is there no eurozone country will sort out its problems - they will always run to Mummy for help - and money. It's daft and if Cameron once again talks of rescuing the euro he won't last as long as that currency!

Denis Cooper said...

No, Britain should not align itself with Germany.

For the British the safest course always lies in seeking to form a coalition to oppose the power which is trying to dominate the continent, and at this point in history that power is Germany.

Rollo said...

The UK should thow its weight behind the UK. The EU is a sinking ship, however long it takes to disintegrate, and we need to cut loose from it.