(Dave: Fail. Epic Fail.)
I don't normally blog here on European issues, as it's a very specialist element of international law. However, PM Cameron's decision not to participate with the new EU Treaty to help save the euro at 4am on Friday means that I'll break with this rule. It's basically out of a real sense of confusion and disgust that I'm scribbling these lines.
First, Britain hasn't "vetoed" anything. Britain is simply excluded from the Treaty the 26 other states of the EU will conclude, and therefore Britain will have no say (and less influence) on the outcome. Given that this could include single market decisions and financial services regulation - that Cameron was claiming to be protecting - this could rapidly get us to the position that the decisions he was seeking to influence get made without the UK's input, as they're subject to codecision under QMV at 27 but if 26 of the 27 states have already decided, then it's a done deal. UK influence = Zero.
Second, as a result of this, there is no reason for international banks wanting to operate in Europe who can relocate to Frankfurt or Paris not to do so, as Britain's influence in financial services regulation in Europe is now effectively zero - and will be for a decade or more. This will be a slow process, but to the extent to which influence on the regulatory regime helps decide where you base your activities, then this is inevitable.
Third, the outcome of the ECJ case on non-discrimination in the eurozone that the UK has launched will not be known for several years. In the absence of provisional measures, there could be de jure bars as well as the de facto barriers that have existed for those outside the single currency since it's inception. Not good for the single market, and not good for those outside the euro.
(Britain's future EU role?)
Fourth, there is no clarity on the domestic political front that this will silence the Tory "Eurosceptics" - in reality Europhobes - and avoid their demands for a Referendum on the UK's relationship to the rest of the EU. This is a manifestation of Cameron's weakness inside the Tory party - remember he was the guy who couldn't defeat Gordon Brown in the midst of an economic debacle of his opponents making. In essence, any such Referendum would be the In/Out Referendum that UKIP wants and which many pro-Europeans fear, as they expect to lose it, leading to the British withdrawal from the EU. This would be about the most short-sighted economic decision imaginable, but the pro-Europeans bear a heavy share of responsibility - including Blair - for not making the case to Britons for why the EU matters to them - and in their hip pocket.
Fifth, the Europhobes / UKIPers keep banging on about Britain withdrawing from the EU and then having a free-trade agreement with the EU as the EEA states (Iceland, Liechtenstein, Norway) and Switzerland (under different rules) do. Unfortunately, those advocating this position seem to miss the point that the reason that the EEA states get to access the single market is that they have to apply the acquis in all areas except agriculture and fisheries, and have no way of influencing the rules. Given that agriculture and fisheries in the UK makes up less than 2% of the economy, even if this deal were possible, it's a completely absurd notion, as you want to be having a say in making the rules. You do save the net costs of the EU budget, however - say £15bn p.a (less than half the £44bn the UK will spend on debt interest).
Sixth, if EEA Plus is a beguiling chimera, then Cameron has achieved something even worse: paying the net budgetary cost of full EU membership whilst having very little more clout than the other EEA states - the UK has a veto in those areas that the Lisbon Treaty requires unanimity at 27 for, but if the other 26 are going to agree amongst themselves, and a decision doesn't directly contradict existing legislation at EU-27 level, then the UK's vetoes are meaningless. Legal challenges will keep the ECJ happily busy, though.
Seventh, two things about the Council that seem to have been missed in the noise. First, Croatia will join in 2013 - well done Croatia, a small piece of good news. But bad news for the UK as new members will be expected to join the group of 26 - and indeed why would any new members want to join the Brits in second-class EU membership? Second, the Council meeting was designed to save the euro - and it hasn't provided the mechanisms to do so.
Finally, what the hell was Nick Clegg - a former European Commission bureaucrat, former Member of the European Parliament, and leader of our beloved Liberal Democrats, Britain's most pro-European party - doing? Clegg must have been aware of all of the above, and yet he endorsed Cameron's approach. Remarkable, (and remarkably stupid) given that he recognizes the damage that a two-speed Europe poses to the UK.
So what do we make of this? Firstly, it's too early to make definitive predictions... however, here we go:
- The UK shouldn't have walked out - you stay and negotiate until there is a text on the table - which there doesn't appear to have been;
- The coalition will survive as the LibDems face electoral oblivion if they go to the polls now, so coalition politics will struggle on to 2015 (when the LibDems may still face electoral oblivion);
- The new Treaty at 26 is due to be finished by March 2012 - remarkably quickly; but they also need to get it approved, and this should involve referenda in the Netherlands and Ireland that aren't obviously straightforward, so the Treaty may or may not even happen;
- If the international financial services sector based in London make clear to the British Government that they're likely to decamp to the Eurozone then it could be time for the most epic (and humiliating) of U-turns for the UK to rejoin the Treaty at 26 (naturally on much worse terms than if the UK had stayed in in the first place).
A triumph all round then. Let's hope the Europhobes and UKIPers enjoy their "triumph"; schadenfreude-induced-by-payback will suck.