Of Cakes and Their Consumption – Reflections on the UK’s Position within the EU

When the UK Prime Minister David Cameron visits Chancellor Merkel in Berlin on November 18th, the handshakes and smiles will be as warm as usual. But the usual diplomatic protocol masks the fact that the United Kingdom has been growing ever more marginalised within the European Union. As William Paterson and I argued back in 2010 following the UK general election, there was a risk of a rift opening up between the UK and Germany over Europe. At the time, it seemed possible that this might be avoided through a refocusing on growth and the internal market, but the depth, breadth and duration of the euro zone crisis have opened up old lines of conflict over sovereignty versus deeper integration.

So what has gone wrong? First, the UK is issuing near-constant exhortations (or should that be demands?) for the euro zone to put its house in order; after all, with half its trade going to the EU, there is little prospect of the UK’s ailing recovery gathering pace once more while the euro zone remains locked in crisis. Yet at the same time, the government has flatly refused to contribute British taxpayers’ money to either the EFSF or the ESM directly. While this may be understandable from a domestic political perspective (after all what would the Daily Mail say?), it cuts little ice with other EU member-states, especially Germany, who are ultimately underwriting the massive bailout loans needed. With the UK seeking to ‘have its cake and eat it, too’, it is surely no surprise that President Sarkozy very publicly lost his temper with David Cameron at the EU crisis summit in October.

Second, there have been persistent rumblings, including by Cameron himself, about the desirability of a ‘repatriation’ of powers from Brussels; indeed, the possibility of further treaty reform is seen as an ideal opportunity by the Conservatives to push this issue forward. Again, other EU member-states remain unimpressed. On top of all this, the House of Commons voted on 24 October 2011 on a public petition for a referendum on Britain’s membership of the EU. Although the motion was easily defeated due to the opposition voting with the government, it prompted 81 members (or half) of the Tory backbenches to rebel. Together, such events make something of a mockery of the government’s standard claim that the UK remains at the heart of the EU.

Of course, the attempt to ‘have it both ways’ reflects a long-established aspect in British European policy, which goes back to the Treaty of Rome – the UK has traditionally not wanted further integration, but neither does it want other countries to gain an advantage from integrating themselves. Thus, the UK countered the establishment of the EEC in 1957 with the formation of EFTA – until it realised that the latter was very much a second-rate organisation and it decided to defect to the former. The UK long argued resolutely in favour of unanimity as the method of voting in the Council of Ministers, because it would make it easier to block unwelcome proposals from other member states. And as many in the old Western European EU member-states will testify, the UK was such a strong proponent of enlargement in 2004/7 precisely because it knew that the inevitable change in the dynamics of the EU associated with this would dilute moves towards further integration. As ever, we need only to look to Yes Minister, the highly-regarded BBC series from the late 1970s, to see the essential truth in this perspective. In one episode, Sir Humphrey Appleby, the Permanent Secretary, explains the UK’s support of EEC enlargement to his Minister thus: “the more members it [the EEC] has, the more arguments it can stir up, the more futile and impotent it becomes”. When the Minister chides Sir Humphrey for his cynicism, he responds, with characteristic hauteur, “We call it diplomacy, Minister.”

But the indications are gathering that this well-trodden path of British diplomacy in Europe, in tandem with the relentless pursuit of short-term interests, has not only had its day, but is even becoming counterproductive. Already in 1994, the CDU/CSU published a proposal for a ‘two-speed’ European Union (the so-called Schäuble-Lamers paper), with a core of members pursuing greater integration and a looser periphery of other states. Hardly surprising, therefore, that the central idea of this paper was reflected in the CDU’s new proposals for deeper integration among the members of the euro zone, which were agreed at its Leipzig party congress this week.

So structurally, Britain is already practically destined to be relegated to the periphery of the EU. But more than that, there has been a distinct change in tone within the German political elite when it comes to the UK. Whereas in the past, German politicians were at pains to appeal to the UK, those days are gone. Already in September 2011, the former Chancellor Gerhard Schröder (SPD) gave an interview with Der Spiegel, in which he was quite blunt about the UK’s role in Europe. It is worth quoting what he said verbatim (my translation):

Schröder: … In any case, it’s not the new member-states who are causing the real problems.

SPIEGEL: Then who?

Schröder: The biggest problems are created by Britain. Britain is not in the Euro. But the British always want to be involved in decision-making regarding a common economic area. The two things just do not go together. And secondly, the British have been extremely reluctant about any kind of further integration, and that is putting it very diplomatically.

SPIEGEL: You mean that they simply blocked any proposals to this effect?

Schröder: Exactly

Moreover, earlier this week, Volker Kauder, the influential leader of the CDU/CSU parliamentary party in the Bundestag, delivered a pugnacious speech at the CDU’s Leipzig congress. In it, he singled out the UK for especial criticism, pointing out that, as a member of the EU, the British DID bear direct responsibility for the euro zone’s success. In the context of Germany’s proposals for a tax on financial transactions (vigorously opposed by the City of London), he declared (again, my translation) “Only looking out for your own interests and not being prepared to contribute at all – that cannot be the message that we allow the British to get away with.”

These are not fringe politicians, and such public statements give an indication of the extent to which Germany has arguably lost patience with the UK and is no longer prepared to make any significant allowances for its particular historical position within the EU. In turn, that has major implications for the future: there are tricky negotiations around the corner regarding the next multi-annual financial perspective, and it is currently difficult to identify member-states lining up willing to defend the UK’s continuing budget rebate. But on other issues, too, which really matter to the UK – liberalisation of energy markets, implementation of the single market, CAP reform and, most importantly, the necessary treaty reform which will accompany any deepening integration within the euro zone – it will be others defining the agenda, not the British government.

At the end of October 2011, the Deputy Prime Minister Nick Clegg wrote in the Observer that “Being shoved to the margins, or retreating there voluntarily, would be economic suicide”. Unfortunately, it looks increasingly as if that is precisely where the UK is already