Trading something for nothing?

Over on Conservative Home, we take a look at the alleged deal between Angela Merkel and David Cameron (with emphasis on alleged).

We argue:

It has become clear, over the past few months, that German Chancellor Angela Merkel wants to reopen the EU Treaties in order to beef up the rules on eurozone economic governance, giving the EU institutions, including possibly the European Court of Justice, the power to impose and enforce semi-automatic sanctions when euro states break the budget rules. There’s no concrete proposal for Treaty change yet on the table, but the Germans will most certainly want to seek a “limited” change to the EU Treaties without the need for referenda across Europe.

Irrespective of the merits of the proposals, with German money necessary to keep the eurozone show on the road, you can understand why Merkel feels the need to take some sort of action. 'Never again' is the implicit lead theme. But where does all of this leave Britain?

Last week, David Cameron, who has the power to veto Merkel’s demands as they require unanimous consent, flew to Berlin, presumably to tell the German Chancellor what he wants. Both the German and British press had a field day with the alleged tensions between the two countries. German tabloid Bild – the most widely read paper in Europe – led the pack asking, “What is Britain still doing in the EU anyway?”

Vey little was given away at the post-meeting press conference, but we know that Cameron has some established objectives in ongoing EU negotiations: ensuring that decisions on the EU’s single market are agreed by all 27 members (an aim which Merkel broadly agrees with) and insulating the City of London from intrusive EU laws (a no-go for Merkel). An objective, entailed in the Coalition agreement, to revise the EU’s draconian working time rules is also now being revisited with reports suggesting that Cameron may be set to agree a Treaty change in return for just that. The reports are still pretty speculative but if they contain any truth, Cameron risks repeating the mistakes of past prime ministers who have consistently underplayed the UK’s hand in Europe (think of Tony Blair’s decision to give up a huge chunk of the UK’s EU budget rebate in return for broken promises of reform to the Common Agricultural Policy).

Here’s why: re-negotiating the Working Time Directive (WTD) – the EU law regulating working hours – would certainly be a worthy aim. But the problem is that, unlike Treaty negotiations, where the UK has a veto, the WTD is decided by qualified majority voting amongst EU minsters and subject to so called co-decision with the European Parliament, giving MEPs the opportunity to get in on the act with a whole range of demands of their own. Not only does this mean that the final outcome of EU negotiations is out of both Merkel’s and Cameron’s hands, it could even result in an even worse outcome than we have already. You don’t have to look too far back in time for evidence showing why such a strategy would be a major gamble. In 2008, the last time the WTD was up for renegotiation, in an attempt to resolve the very same problems caused by the ECJ’s rulings, MEPs voted to scrap the opt-out from the 48-hour working week. The Labour government, who pointed out that losing the opt-out would cost the UK economy billions, was forced to fight tooth and nail to keep the exemption. Meanwhile, the rulings on rest periods and ‘on-call’ time were left completely unaddressed, despite the fact that several member states in addition to the UK were seeking to overturn them.

Cameron would therefore be trading a UK veto – and spend plenty of political capital – in return for little more than the vague hope of a reformed WTD, changes that he should be pushing for anyway.

So what are the options for Cameron ahead of the key EU summit on December 9^th, when Merkel, aided by EU President Herman Van Rompuy, will begin her quest for a limited Treaty change? As Open Europe research has shown, there are potentially major gains to be won from repatriating EU social and employment law, including the WTD. But admittedly, it would be difficult to achieve a comprehensive repatriation through the limited Treaty change that Merkel now is pushing for.

A better objective for the December talks is some sort of safeguard to protect the UK from harmful EU financial regulation. It is true, that if Britain over-reaches, Berlin may seek an arrangement which involves only the 17 euro members, leaving Cameron without veto and leverage. But the Germans are actually very keen to get things done at the level of all 27 member states for a whole range of reasons and it would be foolish for Cameron to fold prematurely. In a report to be published next week, Open Europe will set out what such financial safeguards could look like, and how they can be achieved, so watch this space.