Britain in and out of the EU

On the agenda of the Economic and Finance Ministers Council, the Ecofin, which is to take place in Brussels tomorrow there are two ground-breaking items. First on it is the Single Supervision Mechanism (SSM) for the EU banking industry, meant to audit and supervise over the 200 “systemic” banks of the Eurozone, under the guidance of the European Central Bank. Then if needed the SSM will extend its coverage on all Eurozone banks and on the banks of other willing EU members not participating today in the single currency. Third item in this agenda is the Economic Governance of the EU with its so-called “Two-Pack” (SOC) regulations. This last two-pack is the old six-pack regulations aiming to further strengthen economic governance in the euro area, especially through pre-emptive country surveillance of national budgets. Brussels will actually approve government budgets before they are introduced in national Parliaments. This Ecofin agenda was drafted by the Irish Presidency of the EU Council. Less national sovereignty Both those two EU projects are conceived to tightly bind together initially the 17 Eurozone member states’ economies and later on every other EU member, willing to accept the same bondage and probably also participate in the single currency. Mind you the two initiatives are set to cover and control the most important policy instruments in every modern economy, namely the government budget and the banking industry. It goes without saying that in both those fronts the surveillance and decision-making bodies will be controlled by the central Eurozone countries Germany and France, which between them share the political power behind any of these initiatives. The French economy however is in a very difficult position on both those accounts, with large state budget deficits and acute recapitalisation needs of its major banks. As a result Germany will appear soon as the champion on both fronts and Berlin’s will, will prevail in crucial decisions. Nicolas Sarkozy already didn’t mind much about it. In short the entire idea of an economically tightly bonded Eurozone, may very easily lead to a Eurozone under the complete control of Germany. Then the passage from economy to politics will come easily and the Germanic clubs of power will compete to prevail all over the Old Continent. The role of Britain Here enters Britain. David Cameron, the British Prime Minister has opted out from both those “new EU projects” and tried to take with him some other EU countries. Sweden, Denmark and the Czech Republic, also outside Eurozone, are watching warily all those new things in the Union. London however is not Stockholm or Prague. Britain has always plaid a very distinct role in European affairs for centuries. Its geographical position, being separated from the mainland Europe by the sea has created a special role for London in European politics. Not to mention the last two World Wars the outcome of which is largely credited to London, the British government has always a pan-European audience. Many central European countries, like Poland, the Czech Republic and Hungary but also western European nations like the Dutch, the Danes and the Swedish have very deep references to Britain. Being all of them in a rather good, independent and self-sustainable economic path intentionally avoided participating in the Eurozone, except of Holland. They all are in a quite different position from the easy-going Mediterranean nations, who don’t seem to have now any other option than to follow Germany in everything Berlin dictates. In such an environment the initiative of David Cameron to start his country’s new European strategy with a speech in The Hague was following an old British tradition. Unfortunately he had to postpone it. Margaret Thatcher and Winston Churchill had done the same in their time. They both had started new European strategies with a speech on the mainland. The British referendum Of course things are not that simple. Britain itself is caught in an internal Catch 22 discussion about a referendum for the country’s position in or out of EU. A faction of Tory deputies and party dignitaries propose an outright exit from the EU, asking for a proclamation of a referendum right now. Probably they are not sure themselves whose interests serve with this policy. In any case they believe such a policy will give them absolute majority in the next legislative election. On the other side of the fence British industry, or whatever is left of the once mighty English manufacturing, is strongly opposing an exit or even a re-bargaining of the EU-UK relation fearing their sales on the mainland will be undercut. The Labour Party shares completely these policy lines. In any case Cameron seems to do the right thing, not adopting either position. He proposes a referendum alright but after the next general election and at the same time says he supports Britain’s position within the EU, but on a new relationship. Obviously he does not have in mind only Britain. A lot of European affairs analysts comment that Cameron doesn’t even himself know what he wants from this new relation with the EU. They are totally wrong. Cameron knows very-well what Britain should do in view of those two new Berlin’s initiatives to place Eurozone under German supervision and later on, control. His problem is with what means Britain can mitigate the kind of bondage Berlin plans for the Eurozone and later on for the entire EU. London has to maintain at any cost its role in European affairs by keeping alive ties with a number of traditional friendly countries. Of course in this kind of strategic play the sides are not standardised for ever and the means and the goals are continuously adapted to realities. Berlin can accept a smaller controlling stake in Eurozone and Britain may gain a more privileged position in the EU. The US and the rest of the world will not only be looking into these developments but will try to influence the game towards their own interests.