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Friday, July 06, 2012

Why Germany just got more nervous about the prospect of the UK leaving the EU

Following last week's EU summit, we were struck by how the ambush by France, Italy and Spain demonstrated in practice how a closely integrated eurozone could work in the future, with Germany internally outnumbered by the 'Club Med' contingent. In a letter to the FT, we argue that:
“At last week’s summit, German Chancellor Angela Merkel may have got a taste of what an EU without Britain would be like. Backed into a corner and with her list of allies growing thin, she was forced to give way to the Mediterranean bloc – Italy, Spain and France – over direct recapitalisation of eurozone banks. Quite aside from the specific item up for negotiation, it illustrates the dangers for Berlin should Britain be pushed out of the EU altogether." 
"As Europe goes through a highly unpredictable – and testing – phase, Germany needs the UK inside the EU tent to balance the more protectionist southern bloc, and to uphold a rules-based system where goods and services can be traded freely across borders. It is therefore in Germany’s interest to support new terms of EU membership for Britain, which will be needed to reconcile British public opinion with continued commitment to the EU."
Over on the Guardian's Comment is Free, we develop this theme a bit further, arguing that: 
"Proportionally, Germany has far fewer friends inside the eurozone than in the EU as a whole, with the bloc's centre of gravity skewed by the more protectionist and high-spending southern states...Therefore, Germany has a very strong interest in keeping as many decisions as possible at the level of 27 member states."
"This means that, if push comes to shove, the Germans may prove more susceptible to UK arguments for revised membership terms than it is willing to admit publicly. A common response from EU-reform sceptics to any suggestion that the UK should seek a more flexible relationship with Europe is that other member states would never allow it, but this has never been credibly tested." 
"It won't be easy, but arguably, the Germans have more to fear from being left isolated within the eurozone than they do from a new bargain with Britain. If the choice is between the UK leaving or getting some EU powers back, Berlin may – after a lot of posturing, negotiation and bickering – go for the latter for fear of being left bowling alone in Europe. That is to say, that Britain has more leverage in Europe than it may think. Germany needs Britain and vice versa. No one likes being without friends."
Mr. Cameron, the ball is in your court...


Steve Green said...

Germany does indeed need the UK inside the tent at the moment for the lines you argue. But the key long term outcome of last weeks summit was the rejection by Hollande for steps towards a political union. Banking union yes, growth pact yes, emu yes but not the most important step: political union. And the UK will not support Germany's correct call for a political union. The long term threat to the EU now rests with France overcoming its outdated insistence on sovereignity.. putting it into the UK camp!

Rik said...

Germany should bring decisionmaking back to the good old:
'Money talks and PIIGS walk'.

Things have clearly already moved into that direction. And imho are likely to move further. If Northern states move to blackmail tactics (in the Italy/Spain fashion) the South will simply have to agree.

Last time it probably had a lot to do with the fact that Merkel urgently needed the growth pact for domestic reasons.

Imho the main reason why Germany needs the UK and eg Eastern Europe is that are the more economic vibrant parts of Europe. Anyway, even without 'Southern growth drags', probably the world's region with the lowest growth potential.
The South looks to be the new 1990 Latin America.
In a possible transferunion-EU you should stay away as far as possible and have as little as possible links, with states that have 'potential nett transfer receiver (and a huge one)', written all over them.

Somebody however has to communicate to the UK that: it is not useful to shout 'fiscal union' from the roof and 'they will have be nice to Merkel' as well (bring boxes of chocolates, she looks like she likes them).
And to Germany that the UK if nothing changes beforehand will have a referendum on the EU that will likely kill the UK's membership unless the issue is properly solved beforehand.
Basically both look to be ripe for these messages.

Idris Francis said...

Those - like Open Europe I am afraid - who continue to claim that there is a half-way house which the British people would accept, are either fooling themselves or trying to fool us.

As Ruth Lea said recently (and I have been saying for much longer) such a proposition is delusional and those who propose it are now becoming the worst obstacle to our departure.

Further, in the context of your article, the idea that Britain could at one and the same time become semi-detached enough to satisfy its people - ie trade but not politics, and most certainly not being ruled by Berlin, but still have enough influence over its affairs as to provide the balance of power that Germany needs, is extraordinary!

We are told quite often that not being in the euro we should shut up - how long do you think the PIIG countries would put up with Germany winning all the votes only by means of British semi-detached votes?

Open Europe's tactics for keeping the euro and the EU afloat are becoming as unrealistic and indeed risible as those of the self-selecting, self-styled EU elite

Anonymous said...

I agree with Idris Francis and Mrs Thatcher that the EU "is unreformable". Its collapse will hreald a Europe of Circles more representative of the collective interests of sovereign democracies than an unelected bureaucracy. The UK will not be the only beneficiary of such a restructuring.

ES1 said...

An interesting new slant. I think things may turn out like this

Pauo said...

Unfortunately we have a man at our helm who is blocked at every which way he turns. i,e, Mr Cleg. Unless Mr Cameron has enough backbone to call an election now, things will only get worse. The people of this country want out of the EU altogether. As for the few who are trying to brain-wash us into thinking we would be worse off out of the EU. I say to them, this country has shood the test of time and if we produce good quality goods at a fair price the UE states will continue to buy and so will all our Commonwealth states. We do not need Germany, who at the moment are pulling all the strings. Fortunately for the UK, Germany do need us. Now isn't that a turn-up for the books.

Anonymous said...

Why is Open Europe so determined that the UK should stay within the walls of the volker kerker known as the EUSSR?

christina Speight said...

Anonymous - Could we not have a name of some kind please - everybody could post as anonymous and confusion would reign

The question of leaving the EU is not quite as straightforward as you seem to think. In my guts I want to leave but realise that is a downside too. Just read the Telegraph's weekend feature (Sat?) on Norway. "Is Norway's EU example really an option for Britain?
July 8 2012 | Harriet Alexander.

Norway's exports to the EIU pay import duties - eg their gravadlax has a 14% uplift for example. It's not all gravy! There are umpeen problems like this. On balance it is right for them but not quite as clear for us.

Anonymous said...

The demand for additional funding of 2.1 billion Euros from Britain, while Merkel awards Germany a rebate and France is given a prize for collaborating are the final nail in the coffin of the Euro-fantasy which was forced on all of us without consultation. The only countries to benefit from the con are the eastern bloc countries who have never experienced political freedom and so don't miss it - and recieve funding from us. Just why, in the name of all sanity, would we, a country independent for a thousand years, and rich - want to finance countries which flood us with immigrants, and undermine democracy? I look forward with great excitement to our freedom from the EUSSR monster.