UK and Germany present united front in favour of EU reform

In a major coup for David Cameron, Chancellor George Osborne has penned a joint op-ed in the FT with his German opposite number Wolfgang Schäuble. Both argue for the need for EU reform (including services liberalisation) and for safeguards for non-eurozone states in the face of further eurozone integration - all areas of potential consensus we flagged up in our recent 'Anglo-German bargain' briefing.

On the acceptance of the different needs of non-euro and euro members, and therefore the need for safeguards, they say:

“As the euro area continues to integrate, it is important that countries outside the euro area are not at a systematic disadvantage in the EU. So future EU reform and treaty change must include reform of the governance framework to put euro area integration on a sound legal basis, and guarantee fairness for those EU countries inside the single market but outside the single currency.”

Getting explicit German support for this view and providing a united front on this issue is an important step forward for the UK and for Cameron's EU reform agenda. While Germany has previously hinted at willingness to support the UK on this issue, this is certainly a step up. It also brings Cameron closer to ticking off one of the key targets he recently put forward in what was probably the most important article nobody spotted. Open Europe has long argued that safeguards against further eurozone integration are crucial and that they will play a key role in determining the new set up and balance of the EU.

That being said, the UK government should not be complacent about where it now stands in terms of its reform agenda. While this represents progress, there is some way to go. This provides an important opportunity and a good base for the UK to begin testing specific reform proposals on other EU governments and electorates. After all, while Germany is the largest and possibly the most important partner to get on board, the UK also needs to convince the rest of the EU. While teaming up with Germany should broadly help on this front there is one constraint - not everyone buys into Germany's vision of the new eurozone with significant central oversight and limited share of liabilities. However, as the banking union shows, Germany has so far been adept at influencing the construction of new eurozone structures in its own image.

Possibly a more surprising inclusion is the joint support for services liberalisation, of which they say:

“We must complete the EU’s single market, especially in services, open up to international markets and conclude reforms to the euro area.”

Again, we've been advocating this for some time - we estimate that it could be worth up to €294bn for the EU's economy. Traditionally, Germany has been one of the staunchest obstacles to such service liberalisation, due to its many protected professions. As such gaining its public support is another big coup for Cameron and a positive step for the EU economy.

One final interesting point is noted by the FT:

"Mr Schäuble told Bruges’s College of Europe on Thursday that he wanted negotiations on a revised treaty to start straight after the European Parliament elections in May."

This is equally as important as all of the above for Cameron given that some of the biggest doubts around his push for EU reform and referendum have been on the time-frame of the negotiations. There is clear hope that discussions around treaty changes will begin in earnest after the elections (although in an ideal world they would have been part of an open and transparent debate within the elections). 

Overall the approach isn't perfect - it still speaks of a two-speed Europe, suggesting all member states are heading in the same direction, which is not the case - but it is a big step and an important one for Cameron. It is now vital that he seizes this opportunity to push a wider EU reform agenda.