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John Bull's Britain: Paddling towards European isolation

By Adam Hug. Source: Huffington Post UK

The decision of the UK government at Thursday's summit actions to block Eurozone attempts to stabilize itself through EU structures has rightly been described as a potential watershed in the country's troubled relationship with Brussels. The implications of the Prime Minister's actions have been much chewed over in the media and by commentators (including myself) on Twitter over recent days. However there are a few things that need to be made clear in this maelstrom of a debate:

  • Firstly the future of the City was not on the table in Brussels until David Cameron put it there. The decision to make financial regulation the issue on which the UK government would seek to make a stand seems only to have crystallised in the days immediately prior to the summit. Before this attempts were being made to see if other member states might accept a repatriation of powers in employment and social law (the old social chapter), a longstanding Conservative Party demand (and coalition agreement point) flatly rejected by the other governments. This was an engineered crisis to allow the Prime Minster to return home with something to show to his backbenchers that he had not missed the opportunity provided by the Eurozone's desire for treaty change to extract a price for the UK's cooperation. It is conceivable that had some of the UK's negotiating points been put forward with greater subtlety and time, fellow member states may have been willing to agree to keep the show on the road. As it was they felt bounced into changing long-standing arrangements on matters that were nothing to do with the issue at hand - the existential economic crisis facing the Eurozone - and decided to call the Prime Minister's bluff.
  • Through this exercise in (failed) brinkmanship the Prime Minister has on balance made it more rather than less likely that new financial sector changes that he does not agree with will come to pass. Under previous EU arrangements a potential financial transactions tax (FTT) would have required UK agreement, as unanimity would have been required for it to go ahead. It is indeed true that any new arrangement for Eurozone fiscal coordination would have increased the risk of caucusing, which may have in turn under pressure from President Sarkozy changed the dynamics of the financial regulation debate within the EU that in practice had been moved forward unanimously until now (even in areas covered by Qualified Majority Voting-QMV). However following the new 'Eurozone plus' arrangements the future is less certain, and there is now a somewhat greater possibility that the 26 might choose to introduce such an FTT amongst themselves than would have been possible under existing structures with the British veto. In the other areas which the UK tried to have changed from QMV to unanimity such as the scope and location of European supervisory bodies that exist under current EU frameworks, the diplomatic deterioration makes it more rather than less likely that that the UK position will get outvoted in future.
  • If these events are to presage a final rupture between the UK and the EU, there needs to be some clarity over what Britain's options for going it alone actually are. European Economic Area members (EEA) members Norway, Liechtenstein and Iceland have full access to the single market for goods, services, capital and labour (including freedom of movement) and as such have to accept EU regulations on these areas wholesale, without the ability to influence their constructions (with the exceptions of agriculture and fisheries). Switzerland (a member of the EFTA but not the EEA) has access to some areas of the single market as a result of negotiating bilateral agreements, where access has been balanced by corresponding regulatory convergence. Having at first cited Norway as a potential example of a country succeeding outside the UK, pro-withdrawal Eurosceptics are now more commonly using Switzerland as their potential alternative model, balking at the practicalities of the Norwegian experience of 'fax diplomacy'. Notwithstanding differences in the two countries' GDP per head and the structures of their economies, the UK's demographic and economic size means that its presence has a much more significant impact on the operation of the single market. The UK should not assume it could pick and choose the elements of the single market and its regulations that it wanted à la carte from the EU. A doomsday scenario of a bitter divorce where no bilateral agreement was reached would inflict even greater damage on both sides, but the failsafe provided by the WTO would provide greater comfort to continental goods exporters than the UK's services sector.

Much newsprint has been devoted to the Prime Minister's sudden transformation from Neville Chamberlain to Winston Churchill in the eyes of Eurosceptics. However the national stereotype more fitting for the current position would be John Bull, not Churchill - the isolationist little-Englander rather than internationalist Briton (LSE's Simon Hix has already pointed to the potential constitutional implications if UK isolationism buttresses the SNP's case for Scottish independence). The next few weeks and months will prove critical for Britain's future. It is essential that those who believe that the UK has a role on the world stage, built as it is on the unique ability to knit together European, American, Commonwealth and global perspectives, to push the country back from the precipice and recommit to pragmatic discussions with our EU partners so that the European pillar of British influence is retained. Now is not the time to play political games that seek to embarrass the coalition for short-term gain, the economic and strategic risks for Britain's future are too great.

A version of this article is available on the Huffington Post UK site at http://www.huffingtonpost.co.uk/adam-hug/john-bulls-britain-paddling-towards-euro-isolation_b_1145585.html