The mood continues to darken on the Euro-front: reports that Spain is preparing to ask for a bail-out for its banks at the weekend, news from Italy that industrial production is down almost 10% in the last year, and the Greek economy cratering in ways too numerous to list here.
Little wonder that Germany’s Chancellor Merkel yesterday told David Cameron and the attending press corps that the Eurozone is ready to deploy all the tools at its disposal, and press on with further integration.
It was Cameron’s attitude that was interesting. He was fully supportive of the Eurozone doing whatever it takes, up to and including full fiscal union, and yet lurking in the background there was the threat of the UK veto being wielded once again if we don’t get what we want.
That position was barely tenable back at the summit in Brussels last December: “yes, you’re doing what we think you ought to be doing, but we’re going to block it anyway”. To try such a stunt again would be beyond obtuse; it would be absurd.
There seems to be a hole at the heart of British policy in this crisis. London knows what it doesn’t want, but it doesn’t seem to know, or doesn’t dare say, what it does want.
Yesterday David Cameron explicitly endorsed the formation of a ‘two-speed’ Europe, which is the biggest change in British policy towards Europe since we joined in 1973. In the past we have worked tirelessly to secure opt-outs and exceptions without ever becoming semi-detached or giving up our seat at the negotiating table. This is all about to change.
Maybe it’s just an acceptance of reality: a Euro collapse would devastate the UK economy; if the only way to avoid a collapse is a great leap forward to economic integration among the 17, then it’s in our interests for it to happen; but we want no part of it.
The logical consequence is therefore a two-speed Europe, but what is missing is any vision or plan as to what Britain’s new role would be. Is this just step one on a road to complete departure? Do we nurse hopes of becoming the leader of the ‘outs’? How do we make it acceptable to the rest that the UK enjoys all the benefits of the single-market with none of the obligations of membership of a fiscal union?
Most of all, how does the City of London maintain its position as the financial centre of the EU from outside a unified Eurozone? There may be a ton of work being done in the Foreign Office to answer all these questions, but there’s precious little evidence so far.
Yesterday all we heard from the Prime Minister was the slightly schizophrenic “the Eurozone needs an giant plan for a fiscal and banking union to save the single currency” while in the the next breath “I always think that Europe works better when we grow together, rather than impose giant plans from above”.
So it’s ‘Yes to banking union, but we want no part of it and if we don’t get the protections we want for London we’ll veto it’, and ‘yes to fiscal union, but if it jeopardises in anyway our position within the single-market we’ll veto that too’. This is not a position that is winning either respect or friends in other EU capitals.
There remain opportunities for Britain in all this. It the Euro survives, we will be by far the biggest of many ‘outs’. There is an opportunity to lead. If the Euro doesn’t survive, there will have to be an urgent debate on how the EU recovers, and what sort of union it becomes. That would be a tremendous opportunity for us to help rebuild Europe more in our own image. But, unless our only response is to be ‘I told you so’, it would be good to have a plan ready.