Bad Time to Play Call My Bluff
Niblett, Robin, The World Today
Britain should engage with a multi-tier Europe, argues Robin Niblett
In recent weeks, the European Central Bank has committed to stem the run on vulnerable EU sovereign debt, Germany's Constitutional Court has approved German participation in the EU's new bailout fund and Dutch voters have rejected Eurosceptic parties in their parliamentary election. These events have added momentum to the possibility that eurozone members will establish some sort of fiscal union within the next year or two.
For its part, the British Government is in the early stages of an audit of the impact of all EU legislation on Britain. This study, it has been argued, will provide the ammunition for Britain to negotiate a repatriation of certain EU powers in return for British acquiescence in the establishment of the fiscal union under a formal EU treaty.
There are two problems with this approach. First, other EU members have little interest in allowing Britain to repatriate powers in the sorts of areas that Conservatives are seeking. They fear this could open a Pandora's box of similar requests from other members. Just as important, the majority of other EU member states are about to tie their economic fates more closely together than ever before. This is hardly the moment to hand Britain further commercial advantages.
Euro members already resent the fact that Britain was able to let the pound devalue at the start of the financial crisis, making its exports to eurozone members that much cheaper.
Britain, with new opt-outs on working time regulations and other labour laws - which are top of the list for Conservatives - but with continuing unfettered access to the single market, could suck jobs and investment away from its EU partners. And new safeguards for the British financial services sector could concentrate EU financial services further in London.
EU members might conclude that it would be better to call Britain's bluff. They could refuse to negotiate a compromise, open the door to a British referendum and, if a recent Chatham House/YouGov survey were to be proved accurate, accept the likely British popular decision to leave the EU. Britain would then find itself still inside the EU's single market, but excluded from designing the rules that would determine its access to that market.
For some EU members, this would be a positive outcome - Britain may become a relatively less attractive destination for foreign investment; and London could lose some if its appeal for European banks, which might build an alternative EU financial centre. Pressure to open up the EU services market, resisted by France among others, would decline. …