Monday 12 December 2011

Post-Veto Politics

Britain has lost influence and friends in the EU due to the veto, but it doesn't mean that the UK won't get another chance to sit around the negotiating table because the new fiscal compact is far from a done deal.

Isolated Britain

First of all, how Britain has isolated itself needs to be recognised. When it comes to treaty renegotiation, Britain has a bad hand to play. Though the Tory right have talked up the crisis as an opportunity to renegotiate the UK's EU position and the possibility of leading a group of non-Eurozone countries. Both ideas are - and have proven themselves to be - ridiculous. The crisis makes it more likely that governments under pressure will try to circumvent an obstructive Britain in the rush to save the Euro than waste time opening up non-Euro areas of the Treaties. Most of the non-Eurozone countries either see themselves as future Eurozone members (most of them are legally obliged to eventually join), or see buying into the deal as a cheap way of ensuring influence (it has no affect on non-Eurozone members after all.

Second, though Britain wasn't arguing for major renegotiation of the treaties (e.g. on social policy powers), the UK's demands weren't as reasonable as they are now being presented. Under the present Treaties there is already a veto on introducing measures such as a financial transaction tax, so Cameron's veto doesn't add any extra protection in this area. On other financial regulations (decided by qualified majority voting, but in practice never previously passed without UK consent) we need to be clear that the UK was asking for special treatment of the financial services compared to other parts of the internal market. Why should financial services be treated differently and not any of the countless other economic interests of the other 26 Member States? Ironically France ending up standing up for the integrity of the internal market against Britain! In any case, Britain's demands could have probably been accomodated in practice during the normal legislative negotiations rather than tampering with the internal market as a concept.

It's not hard to see why the UK found itself without support for its position at the summit.

The New Fiscal Compact

Though Britain has damaged its own interests and alliances, it could try to repair them and it could find itself at the negotiating table again soon. The new fiscal compact only focuses on fiscal discipline, and doesn't touch on the role of the ECB or on the possibility of Eurobonds. Reassuring Germany over discipline without a trade-off on fiscal solidarity makes the deal harder to sell, and it could still fail. Some elements of solidarity might emerge over the course of negotiations between now and March (we all know that more happens in a week than in a year for the EU in this crisis).

Still, if the deal collapses, the Eurozone might need to reform the EU institutions (democratic legitimacy might re-emerge as an issue: after all, it's the aim of Merkel's CDU to mae the Commission President a directly elected office), and therefore an all-EU treaty change with the UK participating. It might even be the case that another treaty change is needed since the current deal doesn't do enough to help solve the crisis. This would still not be a good opportunity to renegotiate the UK-EU relationship to a great extent - if anything the Eurozone governments would be more panicked and willing to use any means necessary to save the Eurozone, and the international pressure on the UK not to block a deal would be huge - but it would provide a means of restoring influence and relationships within the EU for Britain. We'll see if it gets this second chance.


  1. I agree. The proposed "fiscal compact" really needs the involvement of the EU institutions. That way we (citizens of Europe) have non-political oversight. News is tho' (le Monde) that Ireland might try to get the UK back to the table to rescue the failed, unanimous treaty change. I'm not holding my breath. (but I am ensuring my cash account is solid!!)

  2. Actually, I'd like more EU Institutional involvement so there can be more political oversight - by the EP, etc. After all, economics is highly political, and fiscal policies shouldn't be rigidly wedded to a single economic approach.