Opportunity for Britain amid European uncertainty

British Prime Minister David Cameron at the European Union summit in Brussels on 9 December 2011 Image copyright Reuters
Image caption British Prime Minister David Cameron may yet find support in Europe if closer economic union fails to deliver

Last week, the French paper Le Monde opined that there was a logic behind the British setting themselves apart from the movement towards economic and budgetary integration.

"Because they never believed in it," said the editorial. "They do not believe in the European idea. They are strangers to the project."

Later, the German magazine Der Spiegel would use the headline "Bye Bye Britain". It was echoed in the French paper Liberation with "Europe, the British secession". In Italy, La Repubblica wrote of "Europe, the pact without London".

The voices on Europe's streets were perhaps best summed up by Jean-Michel Jarillot from Paris who said: "They (the British) haven't wanted to be in the European Union for a long time now. They were never fully part of it so, if they leave, they are closer to the Americans than Europeans".

The most dismissive aside came from German Chancellor Angela Merkel when she said: "I really don't believe that David Cameron was even with us at the negotiating table".

Divide in the road

It is the view of many Europeans that history divides us. General de Gaulle always thought so. He once said: "In short, the nature and structure and economic context of England differ profoundly from those of the other states of Europe".

Quentin Peel, writing in Monday's Financial Times, quotes a German official who said that when it comes to Europe "our countries are on two different planets". In Germany, the instinctive answer to a crisis is "more Europe"; in Britain, the answer is "less Europe".

To many Europeans, "standing alone" is to be feared and rejected. In Britain, it is a stance that is seen as having served the country well.

If it is to be divorce, then it is a break-up long foreseen and expected. The next president of the European Parliament, Martin Schulz, doubted that "the UK will remain in the EU long term".

We have reached a divide in the road.

Almost certainly, with the same remorseless logic that drove Europe's leaders to embrace fiscal union, so political union lies ahead. Britain will want nothing to do with it.

There is also, too, a driving logic to the British position. If we are to be condemned to the margins, why stay at all?

We are not there yet.

As the UK's Europe Minister, David Lidington, said: "If you look at the summit conclusions, you'll find very ambitious language there about strengthening the single market, cutting the amount of red tape and regulation on small businesses, on expanding external trade".

All of those are British themes, and the British have allies for a less-regulated Europe, but the eurozone crisis is pulling Britain and Europe in different directions.

However, the crisis holds out opportunities for Britain, too - and its European vision.

Years of austerity

The future of the euro is far from secure.

Last Friday's "fiscal pact" on tax and spending had little to say about the short-term crisis. It was largely a retread of the failed Growth and Stability Pact.

What remains uncertain is what would happen if Italy or Spain, or both countries, needed a rescue.

There are still not the resources in place to calm investors.

Sure, the leaders agreed to lend up to 200bn euros to the IMF to be diverted back to struggling eurozone countries.

They also brought forward the date when the permanent rescue mission, the European Stability Mechanism (ESM), will be up and running. But it remains unclear what funds it has, and where they will come from.

We still do not know how aggressive the European Central Bank will be in buying bonds, and so lowering the borrowing costs of troubled countries.

The path chosen - made in Germany - is for budgetary discipline in the long-term and austerity in the short term.

Countries like Greece, Italy, Portugal and Spain may well find themselves locked in a cycle of decline.

The debt mountains continue to increase. There is almost no growth. The economic gulf between those countries and Germany widens.

The structural reforms, like loosening labour laws, will take years to have impact.

It is far from clear whether many of Europe's people will be prepared to take the German medicine, which involves years of austerity.

In short, German leadership may face a challenge.

Great uncertainty

Across Europe, there are fears that Germany is becoming too powerful and Britain could yet be seen as a counterbalance to Germany's growing influence.

As Simon Tilford, from the Centre of European Reform, pointed out, with debt brakes being written into national constitutions, austerity is being "hard-wired" into the framework of the EU.

Already Francois Hollande, the main challenger to President Nicolas Sarkozy in France's presidential elections next year, has said he would renegotiate last week's deal.

"Without economic growth," he said, "we will achieve none of the targets on deficit reduction."

Closer economic union is the rallying cry, but if it fails to deliver Britain may appear less isolated.

Then there is the issue of democracy.

No country has yet voted for fiscal union. Handing over powers over national budgets, tax and spending is no small step.

Holding politicians to account for taxes raised and money spent is one of the features that defines a democratic country.

The leaders who signed up to closer budgetary and economic union last week did it out of fear; that without such a step the eurozone might collapse. A disaster too awful to contemplate.

At some stage, they will have to sell this giving away of sovereignty to their parliaments and people. To the question "Who do I hold accountable for the budget?", they will have to provide an answer.

There is growing instability in Europe. Austerity measures, which will only bite harder, are widely resented.

Greece and Italy do not have democratic governments. In Athens, European officials are in the ministries. Greece is, in all but name, an EU protectorate and fuels the almost-daily demonstrations. Sooner rather than later, Italy will want to return to democracy.

It is a period of great uncertainty, and therein lies opportunity for Britain.

The British insist they are not anti-European. It is just that their European vision is different.

They do not believe in a highly-regulated, centrally-planned bureaucracy They do not believe in a United States of Europe. There is no evidence of popular support for such a dream.

Identity is still tied into the nation state. The British treasure most the single market and a loose affiliation of nation states.

Degrees of influence

It is also true that the lessons of globalisation and the emerging new powers like China and India may be on their side.

In Brussels, it is often argued that only a united Europe can have influence and a place at the top table in such a new world.

It is, of course, a self-serving argument. It is used to justify closer integration. It is also arguably untrue.

In the past two or three years no country has seen its influence expand more than Turkey. Why? It has a strong economy and does not flinch from asserting its influence. No-one would ever say of Canada, a country of 35 million, that it has no voice unless it is part of the United States.

Indeed the irony is that, as Europe obsesses about its role on the world stage, its share of world GDP continues to decline.

Europe is trying to assert itself on the world stage without realising that influence grows out of economic strength.

Germany is the example. Officials have seized on globalisation to justify the dream of closer integration, yet globalisation is eating away at the West's competitive advantage.

The answer may lie in nimble, highly-adaptive, flexible nation states rather than blocs. Britain has an argument.

Here again is the French view as expressed by Le Monde: "There is nothing to be sorry for in what happened in Brussels. An ambiguity has been removed. At heart the British, who joined what was then the EEC in 1973, have only ever been interested in one thing - the single market. The rest of the European project leaves them indifferent, if not hostile."

If down the road separation occurs, then Britain needs to boldly sketch out its vision for Europe. It may yet find it can attract refugees from the eurozone to its banner.