I want to briefly reiterate the theme of an October post on Britain’s role in Europe because of a speech the Prime Minister David Cameron made earlier today. Cameron, in a major speech in London, promised that if his party wins the next general election, he will put Britain’s EU membership up for a vote by the electorate. In truth, Cameron delivered a vigorous defense of Britain’s membership but with the caveat that much needs to be changed to make Europe more democratic and more accountable.
This has been coming for some time, largely because of the threat “more Europe” means to British national sovereignty and Britain as a financial centre. As I wrote in October when asking, “as the EU moves toward fiscal union, will Britain be forced out?:
I wrote a fairly upbeat piece on the European sovereign debt crisis for gold members. The overall gist here is that fiscal union is now coming. And while it remains to be seen who will be a part of that union, the implication is, as German Chancellor Angela Merkel likes to put, “more Europe, not less”. We see the ‘more Europe’ solidarity in the monetisation of debt by the ECB and in the proto-banking union agreement that Merkel and French President Hollande have cobbled together overnight. And markets are responding. Italian debt, in particular, has shown a big response with 10-year yields down from a 6%-handle to a 4%-handle. The Italians were able to get away 18 billion euros in government debt in the second single largest offering in history. That tells you the policies supporting ‘more Europe’ are having an effect.
But this is a big problem for the British where euroscepticism is high. Robert Peston has written a piece on the BBC website that talks about this from the banking angle. His comments suggest that Britain will be incrasingly on the outside looking in unless it cedes a lot of national sovereignty and opts to allow the EU apparatus to take on a bigger role in domestic affairs. Moreover, Peston and others in Britain see banking union as a backdoor attack on Britain’s role as a financial centre. They fear Frankfurt’s desire to co-opt this role and believe that banking mutualisation will work to Britain’s detriment as a banking centre.
The question for the Brits in the future will then be a political one more than an economic one: how much of their national sovereignty are they willing to cede to Europe? When thinking about the integrity of the EU, I believe this is the big question going forward aside from Greece’s future in the euro zone. Europe is moving full speed ahead toward a sort of United States of Europe model and some people will not support this.
Cameron’s own party is where the most eurosceptic voices in Britain are. And so he was forced to give this euroscepticism a full hearing despite his own desire for Britain to remain fully within the European fold. I don’t know where this is leading, but it certainly can’t help but marginalise Britain within the EU. Europe has serious work ahead not only to keep the euro zone intact. It also has a long road ahead if wants the EU itself to remain intact.
Source: The Irish Times
Update: 800ET – Wolfgang Munchau makes an important addition to this debate in a German-language article in Spiegel. He is a europhile but he has also become a bit of a euro pessimist of late. He believes that Britain will eventually leave the EU, largely because it has underestimated the importance of the single currency. He now lives in Britain again after a long time – and it already feels like it’s not a part of the EU: different news, opt-outs on Schengen, Banking Union, the Fiscal Compact and on and on. The bottom line for him is that the support of the single currency does indeed require ‘more Europe’ and not just for members of the euro zone, but also for the EU as a whole. And this has out Britain’s idiosyncratic opt-out political tact at odds with the continuing success of the European Union.
Definitely do read on Google Translate if you can.
Update: 830ET – Now Nigel Farage, leader of the UK Independence Party has come out with a few thoughts on Mr. Cameron’s speech on Sky News. And he echoes much of what I say here about the rationale for the speech. Farage’s party is a major reason that David Cameron has come out with his EU referendum proposal because UKIP are stealing conservative votes from Cameron. The UKIP has a clear anti-European voice that resonates with much of the conservative base. To thwart them, Cameron has thrown the eurosceptics a bone, in the hopes he could consolidate his political base afterwards. But make no mistake, as Frage notes, Cameron’s speech was pro-European, as I said above. The gist of the move is that Cameron recognises the political reality of rising euroscepticism and wants to head it off. The referendum is his way of doing so. Cameron himself remains pro-European.
Source: You Tube