Ten myths about Cameron’s EU veto

Over on the Spectator's Coffee House blog, we set out ten myths about Cameron's veto. This is the post:

The EU veto that Cameron pulled in the early hours of Thursday morning has been widely misunderstood on all sides. Here are the ten most common myths:

1. Because of Cameron’s veto, Britain lost a seat at the negotiating table. Not true. The UK was never itself going to take part in the Merkozy pact (and potentially be subject to EU sanctions), and therefore not in the monthly, parallel EU meetings that will begin in January, either. Even if he had approved the Treaty changes, Cameron still would not have had a seat at the table. Wider political challenges aside, the veto didn’t change anything structurally in terms of UK influence.

2. Cameron’s veto created a two-tier Europe. A two-tier (or, rather, multi-tier) Europe was a consequence of the formation of the euro, which would inevitably force its members closer together. Cameron’s veto was a reflection of a multi-tier Europe, not the cause of it.

3. The UK is now completely isolated. Define isolated. Yes, Cameron expended a lot of political capital and frustrated many EU leaders — and he could have done some things differently, including sequenced his demands in a smarter way. But as Fraser pointed out earlier, the UK remains an open economy plugged into the global network. And given the state of the euro Britain is — as Terry Smith of brokerage firm Tullett Prebon told the BBC — ‘as isolated as someone left on the dock in Southampton as the Titanic sailed away.’

4. Cameron used his veto to protect a ‘tiny part of our economy’. This claim slipped into the BBC’s Stephanie Flanders’ reports on Friday and is incorrect. Financial services accounted for a £35bn trade surplus last year — one of the few sectors that generated a surplus, as well almost 2 million jobs and it contributed £54bn in taxes.

5. Merkel got what she wanted. This claim was also part of most broadcast reports and is equally untrue. Merkel got something, but, as Spiegel noted, she also ‘paid a high cost’ — compromising on ECJ budget powers and private sector involvement in future bailouts, for example — without achieving a lasting solution to the crisis. As yesterday’s FT Deutschland put it, ‘The next rescue summit is guaranteed to come.’

6. The UK is alone in expressing reservations about Merkozy’s deal. Cameron was clearly all alone on the veto, but others are far from enthusiastic about what’s on offer. Part of the deal hit the wall in the Finnish Parliament, while the Swedish opposition parties are opposed to Sweden signing up, meaning that the deal may not make it through the Riksdag. Håkan Juholt, the leader of the Social Democrats, said, ‘The Swedish people rejected the single currency in a referendum and we have to respect that. We have no intention of becoming members through the backdoor.’

7. The UK asked for ‘special exemptions’. Whether or not he asked for the right things, Cameron did not demand UK-specific ‘opt outs’ from regulations, but for the reinstatement of general vetoes over transfers of power to the EU’s financial supervisors and a guarantee that business and trading activities won’t be pushed inside the eurozone through regulation. The closest he got to an opt-out was a proposal to exempt certain types of businesses that only operate in one country from certain aspects of EU regulation.

8. Cameron went to Europe to protect greedy bankers. One of his demands was to be able to impose stricter rules on banks (capital requirements) in order to avoid future taxpayer-backed bailouts of bankers.

9. The 17+ can easily use the EU institutions to enforce their decisions, making Cameron’s veto pointless. ECJ case law clearly states that an ad hoc group of countries can use the EU institutions but only subject to an agreement by all EU member states sharing and paying for the institutions. This means that the UK still has a veto. Some EU leaders are now set on manipulating EU law to get around the UK veto (we’ve been here before). It’s not easy, but they may succeed. However, to criticise Cameron for this is to blame someone for losing in poker because the rules changed mid-way through the game.

To be fair, there have also been some misconceptions among those who would defend Cameron:

10. The veto was about blocking the financial transaction tax and specific financial regulations. Not quite. Cameron already had a separate veto over the FTT, and the Treaty changes were merely about tightening the eurozone’s budget rules (from which the UK already has an opt-out). The veto was always a lever to push for safeguards against the UK being sidelined on key economic issues (i.e. financial regulation) in future as the eurozone integrated further. It was not a protective measure in itself.

So leaving misconceptions and domestic politics aside, did Cameron ‘trip over his own red line’ by spending a veto without actually getting any specific safeguards in return? There is a risk. But the truth is that it all depends on what happens next. As dramatic as Cameron’s veto may seem now, I suspect it is merely one of many acts.