Thursday, 16 May 2013

The EU and Britain

The EU

The EU is in crisis.  Scrub that, the EU is in crises.  It is currently undergoing at least four different crises simultaneously:

1.     An economic growth crisis
2.     A debt crisis
3.     A crisis of purpose
4.     A democratic crisis

Others will probably add to this list.  These are lousy times for the EU.

The first two will probably sort themselves out, sooner or later (my money is on later).  Their significance is mainly as mood music for the other two.  When times are good, the public won’t care very much whether legislation has a true mandate or whether the EU has a clear way forward.  But when times are bad, the public mood will turn sour and every aspect will be examined in minute detail.  This is what is happening now.

So for me, the two important crises are the crisis of purpose and the democratic crisis.  Let’s take these in order.

Crisis of purpose

Since its foundation in the 1950s, the EU has had overlapping purposes of varying degrees of salience at varying times:

1.     To foster peaceful co-operation between its member states
2.     To act as a bulwark against Communism
3.     To help its poorer members become more economically developed
4.     To develop economic prosperity for its members
5.     To project European presence and set European standards for a wider world

In the immediate post-war generation, peaceful co-operation was incredibly important.  Continental Europe had seen three wars between Germany and France in 75 years, and the continent had been devastated.  But time has passed, and it is now nearly 70 years since the end of the Second World War.  Only the very oldest European citizens remember the war, and the thought of war between member EU states (certainly in the west) is barely conceivable.  In the hierarchy of wants of international politics, peace is now taken as read. 

The Berlin Wall fell nearly 25 years ago.  Whatever the EU is for now, it is not against Communism.

The EU has historically done well at helping its poorer member states become more economically developed.  But the economic growth crisis and the debt crisis have put these achievements in jeopardy.  Greece, Hungary, Italy, Spain, Portugal, Ireland and Cyprus would not regard the EU as offering them much on this front at present.  So the two economic crises feed into the crisis of purpose.

And so they do with the fourth purpose.  For nearly 60 years, the EU has encouraged much greater trade between its member states – mostly successfully.  But at a time when economic growth in member states is weak, non-existent or worse, that purpose looks thin.

What this means is that in practice, most EU citizens can see only one aspect of the EU functioning at present, which is the projection of the EU presence onto a wider world.  This is not healthy for any institution, because the public will reasonably conclude that the prime beneficiaries of the EU are the politicians and the bureaucrats. 

This in turn leads onto...

The democratic crisis

The EU is an unwieldy beast, owing to its topsy-like development.  That’s not that unusual – many national states grew in a similar way (and quite a few of them had revolutions to establish the boundaries between different competing interests).  But different decisions in the EU require agreement between member states in different proportions, votes of the EU Parliament of different proportions or combinations of the two.  We have never been given a clear underlying principle as to when the EU should decide to intervene or through what mechanism – because there is none.

As a result, a lot of decisions get taken in the EU without any clear public backing for the mechanism under which they are taken.  At a domestic level, voters are used to the idea that they might not support the current government but that government has a mandate for doing what it is doing.  Citizens do not identify particularly at an EU-wide level, particularly when decisions are made that conflict with national priorities.

This has always been a problem for the EU, but is especially a problem at a time when voters don’t see many tangible benefits from the EU.


So far, I have mentioned Britain only once – in the title.  This is quite deliberate.  In Britain, far too much time is expended on considering Britain’s problems with the EU, when the big story at the moment is the EU’s problems.  And Britain’s optimal relationship with a successful EU would be a very different proposition from Britain’s optimal relationship with a struggling EU.

Britain has always had a different view of the varying purposes of the EU that I listed above from other member states.  It was never devastated by war in the way that France and Germany had been, because it was never invaded.  Britain was always more outward-looking than other member states, owing in large part to its history of Empire.  It was fiercely anti-Communist when this was relevant, and approved of helping poorer European countries (it still does) but this was a second order aim for it.

Britain was always in it primarily for the money – though it was happy to project European presence onto a wider world if that helped Britain remain relevant and influential.  So while the EU was prospering, it was able to put up with the empire-building regulation that came out of Brussels.  It was part of the tariff for admission for access to a more deeply integrated community.  The four fundamental freedoms were of great importance to Britain.

But the EU is now stalled economically.  Britain also is flatlining.  Does Britain continue to benefit from the EU or could it do better elsewhere? 

The answer to this question does not lie in Britain.  The answer lies in where the EU would be heading with or without Britain.

Without Britain, the EU would almost certainly become more protectionist.  One of the main voices in favour of free trade would have been removed from the EU.  The EU would become more French-influenced and more southern.  It would be more explicitly anti-banker and anti-City.  Whether or not we maintained some form of free trade arrangement with the EU (within the EEA, EFTA or entirely freestanding, and I expect we would), the scope of that arrangement would probably not be as great as it otherwise would be, and we could expect to see soft barriers put in Britain’s way.  These barriers would be especially strong in the area of services, which is particularly unfortunate given that the services sector of Britain’s economy is its strongest suit.

So we should definitely stay in?  Not so fast.  We need to consider where the EU would be heading with Britain.  And the direction of travel at present is also alarming.  The Eurozone has been integrating rapidly in the last couple of years – it has had no choice – and is going to need to do more.  With the continuing need for fiscal transfers between Eurozone member states, there is going to be a need for more enforceable financial discipline.  This in turn is likely to lead to more integration of taxation.  The financial transaction tax is likely to be only the start.  The Eurozone states will – unless the matter is addressed vigorously right now – inevitably pre-decide matters among themselves, leaving those outside to scrabble to form a blocking minority.  Progress without the Eurozone bloc would be impossible.  Britain would only ever be a brake in future.

Worse, Britain has lost a lot of influence within the EU in recent years.  Other EU member states are now ignoring past conventions of not overriding member states in areas where they are pre-eminent, at least so far as Britain’s financial services industry is concerned.  This is in large part Britain’s own fault, but the rest of the EU is also being shortsighted.  If they want to keep Britain as a member, they have to reach a stable accommodation with Britain which allows Britain to opt out of many aspects of developing EU law far more easily than it can do at present. 

And there’s the key word: if.  Other EU member states have not really engaged with the question whether they want Britain to remain in the EU.  They have got very used to tantrums from London, and have quite enough other problems to be getting on with without worrying about how the world looks from across the Channel.

But the problem is not confined to Britain.  Other non-Eurozone countries will be looking for similar protection against Eurozone dominance.  So whether the EU likes it or not, it is going to have to decide how to accommodate those member states who do not wish to or cannot join the Eurozone.  It is hardly as if they are all supplicants.  Sweden and Denmark are in a very different position from Hungary and Romania.

This goes right the way back to my original point about the EU’s crises, and in particular its crisis of purpose.  What is the EU there for?  The EU needs to revitalise the concepts of peaceful co-operation and developing economic prosperity for its members: all of its members.  If it wants to develop a European-wide demos, it needs to make sure that it works on a European-wide basis, rather than for a few preferred member states.  The concept of subsidiarity needs to be revisited with much more intellectual rigour – and then observed strictly.  That might be enshrined in law by retreating in quite a few areas from the idea of Qualified Majority Voting back to voting by unanimity.  This would result in less law, but law that was not vigorously opposed at national level.  If we want the EU to have the moral as well as the legal authority to intervene in member states, it must intervene more judiciously.

Is the EU capable of such change?  Candidly, I doubt it.  But it needs to be tried.  What if that fails?  Much depends on how it fails. 

Britain could have joined the intellectual leadership of the EU if it could resist the temptation on every occasion to throw rocks at the other member states.  But there are too many otherwise-sensible British people whose pupils dilate and throw back their heads to howl, the moment the full moon of the EU appears from behind the clouds.

So I find myself, rather to my surprise, believing that David Cameron has got essentially the right policy on the next stage with the EU, though I should stress that I don’t believe that he’s got to that position by careful consideration of the geopolitical concerns but purely through (largely misconceived) attempts at internal party management.  But sometimes people can do the right thing for the wrong reasons.



Morris Dancer said...

Very interesting read, Mr. Antifrank.

You'll be unsurprised to hear that I disagree with your pro-EU stance, however. You're right that people don't identify as 'Europeans' (in a citizenship sense) because there is, as Cameron said, no EU demos.

It's unsustainably undemocratic, meddling, bureaucratic and, as you said, integration will only increase. I firmly believe the incompatible nature of eurozone economies will mean that its destruction is inevitable, and the sooner the better (because the longer it is prolonged the deeper the integration will have become and the more difficult and painful untangling the monster's tentacles from nation-states will be).

You also didn't mention the funding impact of the UK leaving the EU. We contribute a very significant sum, and by leaving the EU would either have to cut its cloth (ha) or the funding requirements of other countries would have to be hiked. Countries which formerly were net beneficiaries might find themselves breaking even or even contributing to the EU.

Financier said...

Antifrank - Thank you.

First T have to declare an interest as I have had the experience of chairing a EU trade committee for five years - and not as an employee of the EU.

You have missed two important other aspects of the EU.

1. Financial fraud is endemic and when accounts continually are not signed off and have to be clarified, then something is seriously wrong and it is apparent that vested interests within the EU are not keen on putting this right.

2. The bureaucracy in Brussels is now running the EU for its own motives and not for the purposes of its membership. It requires an ever growing budget and does not seek to put in place economies that its members are having to endure.

Thus before anything else happens the EU bureaucrats need to show what economies can be made e.g. eliminate meetings at Strasbourg, rein back salaries, pensions and expenses for employees and MEPs to that of a EU members average. Also to actually eliminate fraud to a very minimum.

Also not to propose policy that has not been passed by the Council of Ministers and the MEPs by at least a 75% majority.

Currently I do not see any hope for EU reform, but I do see a split between the northern and southern states breaking away.

Also the EU is years from more political and economic union and that would not get past the UK electorate.

Toms said...

Excellent. Needs more thought on my part.

You say Britain has been in it for gain. Yes. That can also include savings in money and lives by not having wars between one country or another as has been going on in Europe for centuries. War between western Eu countries may seem a remote possibility these days: maybe we should ask why.

Eu abounds with a surfeit of overpaid self justifying bureaucrats, and sometimes just downright silliness. Why not we jump in and support the EU 100 percent for a change and help set things right? And we might also learn a few tricks to apply at home.

DavidL said...

The key to our future in the EU is the euro. If the euro bloc hang together (and they have been more determined than I expected so far) it will be necessary for them to integrate their markets, fiscal policies, tax rates and general governance in a way that was not necesssary or contemplated in the Single Market.

If they do that we will eventually have to leave or get some sort of associate status.

If countries were to drop out of the euro, on the other hand, the EU would have to be a lot more flexible in its form and outlook. That is an EU we would be able to live with from the inside.

At the moment the euro hanging together and us leaving looks the best bet.

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Nigel said...

Excellent analysis - although I think you missed something essential here:

"At a domestic level, voters are used to the idea that they might not support the current government but that government has a mandate for doing what it is doing. Citizens do not identify particularly at an EU-wide level, particularly when decisions are made that conflict with national priorities..."

In the minds of the electorate, one of the most important underpinnings of democratic legitimacy is the ability to throw out an unpopular administration, lock, stock and barrel, at the end of its term.
That possibility has simply never existed as far as the EU is concerned.

A "mandate" is a pretty fuzzy concept for any polity, and how far it might extend is a matter of perennial controversy. Without the ability to "throw the bastards out", there is no basis for democratic accountability.

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