UK: To be or not to be (part of the EU)?Jan 15th, 2012 | By David Grodzki | Tags: budget policy, Euro crisis, fiscal policy, integration, UK
One could feel a bit sorry for the British Prime minister David Cameron after last week’s EU summit. What 26 countries agreed to set up, is deemed as a pre-federation in the UK. Tighter economic and fiscal rules, more control over the budget of states and more integration – federalists will rejoice after what can be called a great step towards the creation of a Federation of States. Whereas Merkel and Sarkozy basked in the light of success, Cameron faced harsh criticism for the UK’s decision to “remain sovereign” and not sign up to the Franco-German “dictate”.
Cameron’s decision, however, is not entirely bad for the EU. Relations between the UK and the EU have never been a real love story and it should not come as a surprise as the country has once again decided to stand outside. The European currency has never been a favourite of the British, which cling to the pound, nor is the UK part of the Schengen agreement. Governments in London have seldom been in favour of further integration, instead of hoping that a widening of the EU would prevent too much integration.
Why this decision is good news for the EU
The UK’s decision to remain on the sidelines is therefore a blessing for the EU to some extent. Assuming that stronger integration in the field of economic, fiscal, financial and budgetary policy is possible without a new treaty, London’s decision will remove a major roadblock for all other member states. If the UK, similar to Schengen or the Euro, does not actively prevent an agreement, this will certainly strengthen Brussels and those participating in it. Even Denmark, the other eurosceptic with an opt-out, has decided that it will be better to suppor the general course the other countries have subscribed to.
It is good news also for all those states that currently do not yet share the common currency of the Eurozone, but have agreed to introduce it some time in the future. Countries like Poland or Hungary will be involved in all processes that have so far been discussed only among the Eurogroup. Closer cooperation in all the above-mentioned areas will ensure that the “invisible wall” surrounding the Eurozone will not become a reality that will eventually make it impossible for them to ever meet the criteria to introduce the Euro.
And here’s why not
However, just as always, there is also a downside and in this case, it is what might matter the most, namely the regulation of the financial sector. London continues to be Europe’s centre of commerce and finances and even though Paris or Frankfurt are slowly gaining importance, London is the EU’s banking and insurance capital. Any agreement to tighter rules or more control over the banking and insurance sector will, therefore, necessarily remain somewhat limited, if it cannot be applied to the fullest. In the worst case it remains likely that London will veto any attempts to curb transactions or introduce regulation that might diminish the importance of the City.
The question thus is how happy one should really be about the agreements made at the summit. So far every announcement was eventually followed by new summits to be followed by yet another one and little has actually happened to contain the crisis. The 26-1 decision also raises another question. If the UK is not happy to be in the EU and has no aspirations of ever becoming really Europeanised, and at the same time prevents other countries from the continuation of the European integration project, how long will it remain a EU member? Does it really make sense for London to remain in the EU, or should it leave the Union but instead be part of EFTA again? The country has always been mostly interested in securing access to the European market, and this can be achieved without actually being part of the Union. This would have certain disadvantages obviously, such as being unable to influence decisions made with regards to the internal market, however, at the same time it would spare London from all the troubles of implementing legislation it does not like.
One problem remains
If the UK decides to leave the EU many will cheer, some, including the current coalition partner of Cameron, the Liberal Democrats, but dropping out might have another unintended consequence. Certain parts of the UK, especially Scotland are more in favour of the EU than England itself, and with independence tendencies in the UK under way already, a European exit might also spell the end of the UK as we know it today.
The EU too will have to think about the consequences of a British exit. It will have to re-adjust not only the voting systems but will have to set its relationship with the UK on a new footing. So far no country has ever left the EU, there is no precedent nor plan how such an event should happen.
But should it happen? If the UK will not contribute to a stronger EU, maybe it should. The question who has more to lose is of yet unanswered, but only few small countries have managed to survive and strive in today’s globalized world. Would the UK be one of them? Personally, I don’t think so.
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