January 9, 2013 7:13 pm

Lost illusions on Europe

Britain needs to adopt a hard-headed approach founded on the national interest – and hold a referendum

The United Kingdom has long been a reluctant European. From the moment of accession to the then European Economic Community, four decades ago, its membership has been marked by misguided assumptions and missed opportunities.

The UK’s troubled relationship is a matter of culture, geography and history. Britain is a post-imperial power with an affinity to other English-speaking countries, especially the US. Mutual incomprehension between the UK and Europe comes down to a basic difference in outlook: while the UK sees membership of the club in economic terms, France and Germany, the co-founders, see the European Union as a political project forged from the ashes of the second world war.

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These divisions have hardened in the wake of the eurozone crisis. Europe’s response, though initially faltering, has since stripped away the illusion that the Continental notion of an “ever closer union” is a figment of fevered imaginations in Brussels. Faced with the euro’s collapse, the case for a more integrated economic government is now received wisdom in all European capitals, including London.

The second post-crisis development, whether intended or not, is the resurgence of Germany as the dominant actor in Europe. Germany’s rise has reached a point where other members dare not block its fiscal and economic policy prescriptions, for fear that the Berliner Republik will not stand behind the rescue of the eurozone.

For the foreseeable future, therefore, the EU will be divided not only between those inside and outside the eurozone “core”; but also between an area of strong northern European creditors led by Germany and one of weak southern European debtors including Cyprus, Greece, Italy, Portugal and Spain.

This is the geopolitical backdrop to David Cameron’s well-trailed speech on Europe. The delayed delivery bears testimony to the complex issues at stake.

This newspaper has always argued in favour of Britain’s membership of the EU, and we continue to believe it is central to the national interest. Our reasons go beyond a purely economic calculation of cost and benefit. They have to do with Britain’s place in the world. Membership gives the UK influence over the biggest global market. It helps to keep the US relationship special. It amplifies the UK’s sway in a world where economic power is shifting eastward.

The benefits stretch across national frontiers. Thanks to the single market, the British can live, work, travel and study freely across Europe. Enlargement of the EU southward and eastward has consolidated democracy in Spain, Portugal and Greece and created a zone of peace and prosperity in former communist central and eastern Europe. Nonetheless, today’s EU is vastly different from the one the UK joined in 1973, or indeed the one Britons voted to stay in when they were last given a chance to express their views in a referendum in 1975.

The reforms that the EU is contemplating to shore up the single currency project, such as banking union and a separate eurozone budget, will change it further, profoundly and irrevocably. They would create a new, tightly integrated core that the UK might never want to join, and which might ultimately exert a dominant influence on parts of the EU that the British most value, such as the single market.

So what should Mr Cameron now do and, as important, not do? The prime minister must first adopt a hard-headed approach built on the national interest. Evidently, he has to take account of the eurosceptic mood on the backbenches of the Conservative party, but he should not be stampeded. He should avoid confusing the protection of existing rights with the future repatriation of powers. Above all, he should speak for country not party.

Equally, he should lead in the EU, as Margaret Thatcher did on the single market and enlargement. The UK is an awkward customer, but it is a valued member of the European club. It can – and must – seek allies. The British can press the case for dynamic pro-business reforms as it did from the birth of the single market. The financial crisis has weakened the pro-business camp, but it will re-emerge, especially if the EU is serious about tackling its low growth.

The British should also champion the European Commission as the indispensable referee enforcing the rules of the single market and leading on trade policy. Here there is a natural alliance with Germany, which remains solidly against any steps that, in the name of strengthening the eurozone, would undermine the single market.

There are also things Mr Cameron absolutely should not do. He has insisted the price of deeper integration must be a loosening of ties between Britain and its EU partners. His speech may well attempt to spell out the new terms of engagement. But he should not raise false hopes that other members will agree to allow the UK to participate in the single market without accepting its fundamental rules and principles. Equally, threatening to veto treaty changes essential for safeguarding the euro will be seen as blackmail. The result is likely to be a calamitous breakdown in relations.

Finally, Mr Cameron should not allow his fellow citizens to indulge in fantasy. It makes no sense for the UK to seek a status akin to that of Norway or Switzerland. Both countries have to accept the rules of the club, while exercising no voice in making them. For the UK, this position would be intolerable. It would surely lead to departure.

The national interest may well dictate that Mr Cameron – or a future government – codifies the relationship between the UK and a new bloc led by Germany and France. This should be put to a referendum on the basis of “in or out”. But until Mr Cameron knows the terms of the new eurozone deal, he should clarify the basic principles at stake – and hold his nerve.

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