Cameron’s European Strategy is Unrealistic and Very, Very Dangerous

We all know the drill on the United Kingdom’s membership of the European Union. If David Cameron manages to scrape home a second term as prime minister, he will start a two-year negotiation to get better terms for the UK.

Having got a comprehensive deal of reforms to repatriate powers in key sensitive areas back to member states he will put the new deal to the British electorate in a referendum which he will throw his weight behind. Really? Perhaps no one has been looking at what has being going on with Greece’s attempts to renegotiate the terms of its €240 billion bailout.

After being repeatedly rebuffed by Brussels, Berlin and other European capitals, the race to sort out a deal for Greece is going to come down to the wire on 12 May and a default and a Greek exit cannot be ruled out.

Of course Greece is different from the UK. Athens is having to negotiate with bodies to whom it owes money while the UK is a net funder of the EU. But the similarities are quite worrying. Both Greece and the UK want a unilateral renegotiation of the terms of membership – the EU in the UK’s case and the eurozone for Greece.

- A year ago Cameron set out his multi-pronged demands which are worth listing to get a measure of what he wants to put in the table:

- No to ever-closer union with powers flowing away from Brussels, not always to it

- Businesses liberated from red tape and benefiting from the strength of the EU’s own market

- Police forces and justice systems able to protect British citizens, unencumbered by unnecessary interference from the European institutions, including the European Court Human Rights (ECHR)

- Free movement to take up work, not free benefits

- Support for the continued enlargement of the EU to new members but with new mechanisms in place to prevent vast migrations across the Continent

- National parliaments able to work together to block unwanted European legislation.

The first two are purely bland blandishments and set out vague ambitions that few will have a problem with. But then the list gets tricky: powers to opt out of the ECHR — a key demand for the Tory hard-right — will not get a good audience.

There is not much sign that other EU states want a repatriation of powers

But the real deal breaker, an end to the free movement of people across EU boundaries, was one of the basic freedoms enshrined in the 1957 Treaty of Rome.

There is not much sign that other EU states want a repatriation of powers and Angela Merkel, the Chancellor of Germany, who has taken the hard-ball line in Greece, has made clear that the principle of free movement is “non-negotiable”.

Harold Wilson succeeded in pulling off a similar trick to the one Cameron may attempt. Wilson pledged in his February 1974 manifesto to renegotiate the terms of the UK’s 1973 accession to the EEC, and then consult the people on whether Britain should stay in the EEC on the new terms.

Even though this resulted mostly in token concessions to Britain — greater imports of New Zealand butter being chief among them — Wilson won the poll with a majority of two to one.

But hardline Tories and any UKIP MPs that win a seats in the 7 May poll are unlikely to fall for this a second time. That will make any package that Cameron comes up with hard to sell to his own troops, let alone the country. The problem for the Prime Minister is that he has gambled on achieving changes to the treaty, something that the 1974 negotiators ruled out and something that the major Continental capitals will not consider. In short, Cameron will struggle to “do a Wilson”.

The big question will be what happens if he secures some concessions but not a new treaty. Will he campaign for the UK staying in Europe in the teeth of opposition from his own right-wingers? Or will he switch sides and push for Brexit?

Business leaders have been consistent that they want to stay within the EU trading block to avoid damage to sales, employment and investment, particularly at a time when the UK current account is in record deficit. Meanwhile the Lord Mayor of London has warned that a British exit from the European Union could prompt an exodus of leading foreign banks.

This whole farrago will cause huge uncertainty for companies and financial markets just as they are having to absorb the prospect of a protracted negotiation to form a new government after 7 May.

Against this backdrop it is hard to see how Britain’s exit from the EU could be anything other than traumatic. There is little more than a week before the election and the last thing the UK needs is a new government jeopardising the country's most important economic relationship.

Phil is an economics journalist and author of Brilliant Economics and Great Economists

More about the author

About the author

Phil has run Clarity Economics, a London-based consultancy, since 2007 and, before that, was Economics Correspondent at The Independent.

Phil won feature writer of the year Work Foundation Work World media awards in 2009, and was commended by the Royal Statistical Society in 2007.

He is the author of Brilliant Economics and The Great Economists.

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