David Cameron will finally make his long heralded speech on renegotiating Britain’s relationship with the European Union (EU) on Friday. He is in a pretty pickle.
There was an intense debate in the ruling class 20 years ago over whether Britain should join the European single currency agreed on in the Treaty of Maastricht in 1991 and finally launched in 1999.
In the event, Britain didn’t join the euro—mainly because of manoeuvres by Gordon Brown as New Labour chancellor. It was therefore able to enjoy the best of both worlds.
The City of London became the eurozone’s main financial centre, scooping up 40 percent of euro-denominated transactions. But Britain was not part of the increasingly dysfunctional monetary union.
The crisis has changed all this. Cameron is caught in a vice between two forces. The eurozone crisis has forced greater integration on its participants. Cameron’s “veto” in December 2011 didn’t stop the other member states signing up to a new fiscal treaty at the insistence of Germany and France. This imposes centralised surveillance of their taxation, spending, and borrowing.
And there is more on the way. The basis of a eurozone banking union was agreed on before Christmas. In the event, concessions were made to the City’s interests. But Christian Noyer, head of the French central bank, attacked London’s dominance of trade in the euro. He declared, “Most of the euro business should be done inside the euro area.”
Britain risks being perched uncomfortably on the edge of a much more integrated eurozone whose decisions will affect it, but over which it has no say. Enter the second force squeezing Cameron, the eurosceptics on the Tory back benches.
They don’t like Cameron, hate the coalition with the Liberal Democrats and are scared of losing more support to Ukip. They are also much more anti-EU than their heroine Margaret Thatcher.
The Guardian reports that William Hague and his advisers took a look at her famously anti-European Bruges speech of 1988. They concluded, “Were Cameron to deliver such a ‘pinko and pro-European’ speech, … at least 25 anti-EU Conservative MPs would walk out of the party.”
Cameron’s cunning plan is to use the negotiations aimed at changing EU treaties in order to allow greater integration to transfer powers conceded to Brussels back to London.
But EU leaders have warned Britain that they won’t play ball. German chancellor Angela Merkel has apparently blown cold on the idea of a new treaty because of French opposition.
So Cameron runs the risk of holding a referendum with his own right wing and Ukip demanding he backs an exit from the EU. The opinion polls suggest they would have a lot of support.
Now the pro-European Tory old guard have started to weigh in, led by Michael Heseltine and Kenneth Clarke. They have little base within the contemporary Tory party but a lot of backing from leading business figures.
During the 1990s, big business in Britain was split over whether or not to join the euro. But the issue now is whether to stay in the EU altogether. I’d be very surprised if many top bosses would want to get out.
A poll by the British Chamber of Commerce found that nearly half of the small firms surveyed wanted a looser relationship with the EU, but only one in eight supported exit.
Washington has also delivered a public warning to Cameron. Philip Gordon, assistant secretary of state for European affairs, said last week, “We welcome an outward-looking EU with Britain in it”.
It’s interesting that the Tory right, which normally flaunts its Atlanticism, were furious, telling the US to “butt out” of British politics.
Since 1960 the British ruling class has sought to maintain a global role by sticking close to both the US and what is now the EU.
The crisis is driving Cameron into a gamble. If it goes wrong it could cost not just Britain’s EU membership but also the vaunted “special relationship” with Washington.