The prime minister’s and his EU colleagues’ proclaimed purpose at the EU summit on Thursday was to save the euro and the eurozone. There was already broad agreement on how to achieve this. The plan was however torpedoed, for no discernible reason, by the UK’s veto. For this extraordinary blunder Britain will pay a high price. By his recklessness, and his shameful failure to stand up to the swivel-eyed europhobes in his own party, Mr Cameron has destroyed Britain’s ability to influence developments in Europe that will profoundly affect every part of our economy; the best hope of recovery for the eurozone; our relations with our closest friends and potential allies in the EU; and any respect that Britain may have enjoyed in Washington and elsewhere in the world as an active and influential member of the European Union, the biggest player in world trade and a second-tier global superpower. Britain relegated to the sidelines of Europe is of precious little interest to anyone. Our amateurish diplomacy has made us a laughing-stock to our critics and a source of bewilderment to our friends.
There’s no need to repeat here the most obvious paradoxes in these events. These have been extensively discussed in the media since the news of the disaster broke on Friday morning – how Cameron’s demands, crudely presented as his price for not vetoing what the rest of the EU wanted, were suddenly tabled in the early hours of the morning in Brussels on a take-it-or-leave-it basis, without the smallest attempt to forge alliances in advance to ensure that they would receive at least some support; how our 26 EU partners were totally baffled by the apparent irrelevance and technical nature of our demands, for which they were completely unprepared – our diplomats were forbidden to distribute the texts in advance for fear of leaks; how our veto achieves no possible purpose in promoting UK interests, since the remaining 26 EU members will go ahead anyway with an inter-governmental pact outside the Lisbon Treaty to forge a eurozone fiscal union, but the UK will now be excluded from the crucial meetings at which the terms of the pact will be hammered out; how LibDem ministers had succeeded in whittling down the UK demands to what they hoped were potentially negotiable, but were appalled to learn at 4am on Friday that because those demands had been virtually ignored, gaining support from not a single EU partner, the prime minister had actually carried out his self-harm threat to veto the eurozone rescue plan as an EU operation; how the UK veto does precisely nothing to protect the interests of the City of London, but actually weakens the scope for protecting those interests in the coming months and perhaps years.
However, a few features of this sorry saga have not perhaps had the attention they deserve. For example, —
- Most of the EU, including the German Chancellor, Angela Merkel, wanted a new EU treaty amendment to the Lisbon Treaty to provide for a new régime for the eurozone, imposing fiscal discipline enforceable by the EU’s institutions, including the European Court. A minority, including the French President Sarkozy, would have preferred an inter-governmental pact outside the Lisbon Treaty, to avoid conferring new powers over member states on the EU Commission and other EU organs; but in a series of informal meetings in the days preceding the summit – meetings from which Britain was excluded because Cameron had pulled the UK Conservative party out of the powerful centre-right European Peoples’ Party grouping in deference to the views of his party Europhobes — Sarkozy had eventually yielded to Mrs Merkel’s pressures and had agreed to go along with a formal amendment to Lisbon. Assuming that Cameron and his Conservative colleagues (but probably not the coalition LibDems) would also have preferred the new measures to be installed outside the Lisbon treaties and the EU’s institutions, there should have been scope for a French-British alliance to press for this procedure against the preference of the Germans. But because of UK failure to participate in the preliminary conversations before the summit, the opportunity for this potential collaboration was passed up. The UK veto enabled Sarkozy to get what he wanted while enabling him to blame Britain for wrecking the plan in the form preferred by Germany, to which Sarkozy had reluctantly agreed.
- Cameron didn’t veto a new EU treaty. There was not at this stage any treaty to veto: it remained to be negotiated. What Britain vetoed early on Friday was the proposal to set up the new eurozone fiscal union and embody its rules in a new EU treaty. This forces the rest of the EU, all 26 members, to proceed instead by way of an intergovernmental pact outside the EU treaties. Britain is threatening to prevent the use of EU resources – the participation of the Commission, the European Central Bank or the European Court of Justice, and their extensive facilities, for the negotiation and establishment of the new eurozone agreement. If Britain succeeds in this, it will hugely complicate the task of setting up the new fiscal union and establishing its enforcement powers and procedures. It also greatly reduces the international credibility of the plans for the new régime and market confidence in its chances of success in staving off the collapse of the single currency. Is that really what Britain wants? How does it advance UK interests to make the rescue of the eurozone more difficult?
- Cameron’s demands for ‘safeguards’ to protect the interests of the City, as the price of Britain refraining from vetoing the eurozone rescue plan in an EU treaty, had no direct bearing on that plan. The main demand was for a UK veto over future EU decisions (‘directives’) affecting the regulation of national financial institutions, directives which under existing EU law are decided by qualified majority voting and thus not subject to a veto. Cameron was demanding a change in existing EU law, not protection against some hypothetical new provision in the proposed eurozone rescue treaty. The idea that the 26 other EU governments could be bounced into such a change in existing EU law, irrelevant to the eurozone rescue plan, without prior notice and at 2.30 in the morning, purely to avoid a UK veto of what everyone in the room, ostensibly including Cameron, was there to do, was frankly fatuous. It was a bizarre attempt at blackmail, in which the blackmailer, failing to get what he wanted by threatening his 26 victims with a blunderbuss, demonstrated that he had not been bluffing by pulling the trigger – and shooting himself in the foot.
- It has been widely assumed that the protection of City interests demanded by Cameron was intended to prevent the EU from imposing stricter regulation of the UK’s financial institutions than that proposed by the British government. In fact in several respects, including the relationship between banks’ capitalisation and their loan liabilities, the regulatory measures proposed for UK financial institutions by the British government are stricter and more onerous than anything proposed by the EU.
- The banking crisis, credit crunch, sovereign debt crisis and threat of euro collapse are all attributable in large part to failings in regulation of financial institutions throughout the western world up to 2008. That failure is in turn mainly attributable to the impossibility of any one government imposing stricter regulation than others, because of the globalised character of international capital, which can easily move its resources to whichever country has the lightest regulation. Thus effective regulation can only be exercised by international agreement. Long before 2008 Gordon Brown had sought to interest the Americans and our EU partners in the possibility of tightening bank regulation on an international basis, but had failed to elicit any response. Now everyone recognises the need for international collaboration to impose tighter regulation on an international basis if it is to be effective in averting future crises; hence the moves for EU-wide regulations currently in preparation. Cameron’s demand that these should be made subject to the veto of any one EU government is thus calculated to undermine the effectiveness of one of the most important weapons in the global armoury against future financial crises. No wonder he found no takers in Brussels at 2.30am on Friday morning.
- Tory media and parliamentary spokespersons since Friday, seeking to represent the Cameron veto as a triumph of the British bulldog approach to international diplomacy, have sought to imply, whether in deliberate obfuscation or out of ignorance, that the veto was necessary to prevent the EU from imposing a financial transaction tax (aka Robin Hood or Tobin tax) which would disadvantage the City of London more expensively than any other EU country’s interests, because of the disproportionately large size of the UK’s financial sector. In fact this is wholly irrelevant to the eurozone rescue plan and the proposed new euro fiscal union which were the subject of the summit. Taxes may be imposed by the EU on member states only on the basis of unanimity: so we already have a veto over any proposal to impose a financial transaction tax on us, or on anyone else.
- Defenders of the Cameron veto have also tried to imply that the strict and enforceable disciplines intended to be imposed on eurozone members would also be imposed on any EU countries outside the eurozone if they signed up in Brussels last week to the proposal for a eurozone fiscal union. This is simply not true. It is however true that new rules for fiscal discipline binding on 17 eurozone members of the EU and supported by at least six of the others (and possibly by all nine of the others, excluding Britain) will inevitably have a powerful indirect effect on all future EU policy and decisions. When the 23, or probably 26, EU members participating in the negotiation of the new eurozone fiscal union and its rules have acquired the habit of consulting and collaborating with each other for that purpose, nothing will stop them agreeing together on other EU matters. The exclusion of Britain, and only Britain, from this vitally important operation is bound to result in Britain increasingly being presented in future with faits accomplis, done deals already discussed and agreed in other forums from which Mr Cameron has recklessly excluded himself and his country.
- Apologists for that veto have argued variously that if Cameron had agreed to participate in drawing up a new treaty creating a eurozone fiscal union with enforceable rules, he would have been forced to approve the resulting treaty but unable to get it through the House of Commons. Alternatively, it is asserted, even if he managed to get it approved by parliament, he would not be able to avoid a referendum on it in which it would almost certainly be rejected, given the generally eurosceptic mood of the country and the power of the populist tabloids. In fact, however, neither proposition holds water. Cameron would have no difficulty in securing parliamentary approval for an EU treaty that would be supported by virtually all Labour and LibDem MPs as well as a respectable number of Conservatives. Having to rely on Labour and LibDem votes for a treaty to which he had signed up would be represented as a humiliation, but so what? Was it really worth incurring the resentment of virtually the whole of Europe and the silencing of Britain’s voice in the EU for the indefinite future just to avoid a momentary embarrassment in the House of Commons? As for a referendum, none would have been necessary, since the new treaty would not have entailed any transfer of powers from Westminster to Brussels, Britain not being a eurozone member. The head-banging Europhobes would have screamed blue murder if deprived of a referendum, but they are already doing that anyway, egged on by the eurosceptic action of the the prime minister and scenting the seductive prospect of a referendum, not just on a new treaty, but on UK membership of the EU — which they might actually win.
Such is the price we are all having to pay for a prime minister who lacks the cojones to face down his europhobic followers in parliament and the press. Indeed, whether they are truly his ‘followers’ is a moot point. Which are the followers and which the leader — Bill Cash? Those who meekly tiptoe behind the focus groups, the opinion polls and the prejudices of foreign newspaper proprietors, instead of either leading or ignoring them, are liable to end up in a quicksand. The missing ingedient in our present discontents is clear, cogent and determined leadership. The besetting sin of our present political ‘leaders’ is cowardice. Ed Miliband, are you listening?