Mark my words: December 9th 2011 will be seen by history as the day Europe changed. The refusal by David Cameron to allow the UK to join the Franco-German tax and budget plan has changed the political future of both Britain and the wider continent.
The full ramifications will not be known for some time, but what is certain is that the future will be very different now for both sides.
There are two questions to ask. First, how did it all come to this? And second, what does this mean for the future of the UK and Europe?
As to how it happened, the Economist has published an eminently credible article which well reveals what went on behind those closed doors on Thursday night.
In essence, the Germans arrived at the summit with a plan to redraw the treaty between the EU member states to push forward fiscal integration, and introduce penalties designed to prevent Greek/Italian-style profligacy in the future.
But the majority of the room disagreed with Dr Merkel in this, and instead pushed for a “quick and dirty fix” dreamed up by Herman van Rompuy, the president of the European Council and former Belgian Prime Minister. The fix was dreamed up by lawyers working for Mr Van Rompuy. They said that a legal device, known as “Protocol 12″, would allow the 27 leaders of the EU to agree most of the new rules and mechanisms for fiscal union in the euro zone by a simple, unanimous decision among themselves.
In other words, the EU leaders decided to push ahead with fiscal union without bothering to consult their electorates. Democracy in the EU took another step backwards.
But into this stepped David Cameron. It appears he decided at this point to push forward the list of British demands. The full list appear on the Economist article, but in general they were around the way decisions are made by the EU and also some measures to protect the City – a bigger financial institution than in the rest of Europe combined – from Franco-German efforts to diminish it in favour of Paris and Frankfurt.
Unfortunately, it seems that the other EU leaders did not agree with Cameron. Instead, and thankfully for the peoples of Europe, the van Rumpuy plan was destroyed in the ensuing debates and an agreement made to create a new treaty, as the Germans had initially wanted.
It is this new treaty – calling for more integrated fiscal union between the member states – that the British have rejected. Other European leaders will now have the task of persuading their fellow national politicians to agree that this is the right way to go.
But why did other non-Euro countries not follow the UK’s lead? The answer may be because of the way Cameron handled his demands, by bringing them to the table without having secured widespread support beforehand.
In addition, David Aaronovitch (the Times journalist) argues, the Conservatives’ withdrawal from the main centre-right party, the EPP, has left them semi-isolated in Europe on a day to day level, so making it harder for any deal to be made full-stop.
In my opinion though, the main reason was that the European leaders were too scared of France and Germany to rock the boat. Continental economies are far more integrated with each other than with the UK, and in the case of numerous Eastern European nations like Poland and the Czech Republic, almost an extended arm of the German industrial base. It would have been political and economic suicide for them to have clashed so publically with France and Germany.
To this needs to be added the fact that Sarkozy has been planning on removing the UK from the European core for some time. A friend of mine who has known Sarkozy for most of his life (his father is a political contact of the President) told me some years ago that the Elysee Palace’s main political ambition was to reduce Anglo-Saxon interest in the world, particularly Europe.
This is a view backed up by our Government’s view of the situation. There are reliable signs of heavy Downing Street briefing over at the Daily Telegraph, where the well-connected Ben Brogan is reporting that it was all the fault of the French, who crammed the text on the summit table so full of impossible demands that the British had no choice but to walk away. He writes:
The events of the past 12 hours have exposed a truth that many chose to ignore, namely that in its relentless pursuit of its national interest, France’s strategic objective has been to drive the UK to the margins – if not out of the EU – and to destroy the City. The French narrative of the crisis is that it is all an Anglo-Saxon creation, and we must be punished for it. The failings of the euro so obvious to us are not recognised by the French. The British view is that packing the treaty proposals full of changes that Britain could never conceivably accept was a ploy to force us into a veto, and so into the departure lounge. Or here’s another way of putting from inside the machine: “The French are out to screw us,” one source tells me. “Despite all the jollity, the fact is that Sarko doesn’t gives a s*** about us. It’s all bull***. They have their view that the Anglo-Saxon model is a disaster and was responsible for the crisis.”
So what does this mean for Britain and Europe?
First of all, a two-speed Europe is now a reality. The Eurozone will attempt to press ahead with further integration, with the UK on the sidelines. In theory.
In practice, it is a strong possibility that one, two or maybe more Governments of Europe will block the new treaty. Even if this block is not permanent – witness the way the EU has forced member states to keep revisiting previous treaty issues until everything is pushed through, such as the Irish no to the Lisbon agreement a few years ago – it is likely that the economies of Europe cannot wait that long. Economic meltdown is a very real, and very close, reality.
My personal view is that the UK is “as isolated as somebody who refused to join the Titanic just before it sailed”, as Terry Smith of City firm Tullett Prebon commented last week.
Even if the treaty is passed quickly and fiscal union steps taken, the fact remains that the core-premise of an integrated Europe is flawed. I strongly believe that stable European fiscal union will not be achieved without political union, and that is impossible in a continent so divided by language, history and culture. Populists in countries such as Greece and Spain will look at any further leadership by Germany as an attempt by Berlin to cement their domination of the continent, and will use this as political leverage in elections.
The UK may well be isolated from some decision making in the short term, but there are enough (behind the scenes) enemies of Franco-German domination of the EU that we will not be cut off from everything for long.
The UK domestic scene though will still be affected though.
The move will play an important part in the arguments surrounding the Scottish succession referendum. Supporters of a divided Union will use Cameron’s move to further their cause, saying that it weakens the country and an independent Scotland is needed to repair ties to the EU. In turn, Scottish eurosceptics will no doubt propose that succession would mean further control by the EU,
Looking ahead to the UK general election in 2015, the Liberal Democrats are caught between a rock and a hard place. With 49% of their members thinking Cameron did the right thing, Clegg et al need to be careful not to overplay their anti-Tory hand. But at the same time, their europhile nature is one of their unique selling points. Striking the right balance is going to be hard if they are not to lose all credibility.
As for Labour, the silence of Ed Miliband has been very noticeable. As the Scotsman newspaper notes, Labour’s claim he should have worried less about his rebellious back-benchers and sought a deal in Europe lacks credibility, first because the official opposition will not say what they would have done were they in power, and second, because even if the Prime Minister had spent last week touring every European capital it seems unlikely he could have avoided taking the stand he did, faced with the determination by Merkel and Sarkozy to proceed with their plan.
Overall, this has been a momentous week for Europe and the UK. New directions will be taken and new battles fought over the coming months. But I feel that overall, the European dream is still dead in the water. But at least they won’t be taking Britain down with them.