European Affairs

Putting this latest turn of events into perspective will help clarify the import of recent events. Ever since becoming a member in 1973 of what was then the European Economic Community, In the context of a national attitude fed by a self-conscious feeling of superiority mixed with an acute sense of insecurity. Britain’s relationship with Europe has been fraught by uneasiness and ambiguity, with London often facing a dilemma: one impulse was to stand aside but that risked being stranded on the margins of the EU. Against this background, it was natural for David Cameron to want to downplay this relationship on becoming Prime Minister in May 2010. His priorities were tackling his country’s deficit and implementing his Big Society agenda. He counted on being able to ignore “Europe” without consequence and he intentionally tried to keep this domestically divisive topic on the sidelines – until the euro crisis escalated to the point where it tops all EU agenda. Even though London shunned membership in the euro, Cameron came under acute pressure in recent weeks to take a stand on the eurozone problems as a whole. While he wanted to help end the financial turmoil in Europe, he understood that the likely fix would involve moves toward a closer fiscal union among the eurozone members – in effect, the emergence of new caucus that excluded Britain and would inevitably reduce its say (and the voice of the City in London) in future economic decision-making in Europe.

But his margin of action on Europe remained wafer-thin throughout, with his leadership caught between his junior coalition partners, the pro-European Liberal Democrats, and his own Euro-skeptic dominated Conservative party. Following a difficult summer – marked by the phone-hacking scandal and urban riots – Cameron opted for a gamble that could have grave consequences for him, for Britain and for Europe. The pre-summit negotiating process remains slightly murky, but there seem to have been crossed wires between London and Berlin about how special a treatment could be accorded to Britain. In the showdown, Cameron said that Britain wanted a veto over any future EU-wide financial rules – insisting on maintaining the rule of unanimity rather than accept a move to qualified majority voting on such issues. Many view his attitude as excessive: Britain has never been out-voted on such matters in the past. But Cameron decided he could accept nothing less, only to see the other EU member states proceed to move forward without Britain at all.

Such a dramatic move could hardly have been forecast when considering how passive and ambiguous Cameron’s European policy had been since he became head of the Conservative party in 2005. Granted, during the campaign for leadership, he strove to come across as a strong euro skeptic, signaling to Tory traditionalists that he was on their side in the battle against Brussels' increasing influence over British political life. In the following years, he certainly continued to pursue steps that expressed a lukewarm attitude towards the EU. In 2006, he withdrew British Conservative Members of the European Parliament (MEPs) from the European People’s Party group because the latter supported a “federalist” (ie more integrated) approach to the EU. This step annoyed his fellow conservatives on the continent, notably Germany’s Angela Merkel and France’s Nicolas Sarkozy.

During the 2010 election campaign, his platform re-iterated the party’s opposition to federalism, pledged never to adopt the euro and, above all, promised never to ratify a European Treaty without a referendum as had happened over the Lisbon treaty. Once in power, the coalition passed the European Union Act, which required a British national referendum on ratification of any amendment to the EU Treaties. Cameron also blocked a number of steps that aimed to bolster a common European foreign policy. Aside from stopping the formation of a permanent military headquarters for the limited actions envisaged under the European Security and Defense Policy, Britain has also consistently blocked the issue of joint statements by the EU in international organizations – ninety-six statements of them in all, according to the European External Action Service Secretary General, Pierre Vimont.

But, these Euro-skeptic measures were also accompanied by an equal number of often discrete and pragmatic steps taken by Cameron towards Brussels. He kept the “fast stream” scheme that helps get British civil servants placed in EU institutions. He brought two very pro-European Liberal Democrats into his coalition government, Nick Clegg and Chris Huhne. He has maintained a policy of committing loans to an Irish bailout (despite Ireland’s membership in the eurozone). Britain has not objected European defense cooperation as long as it took place on an inter-governmental basis: Britain and France signed a defense cooperation treaty in November 2010, and both states collaborated closely during the Libyan operations. This record is reflected in the fact that this year a number of Conservatives started questioned the Prime Minister’s euro-skeptic credentials.

Overall, however, Cameron’s recent gamble seemed unlikely considering how passive his European policy has been. Necessity, along with tactical political party reasons, essentially dictated his willingness to put Europe on the sidelines. For one thing, his governing partners the Liberal Democrats led by Clegg, view the EU favorably so it made little sense for Cameron to bring up questions that were bound to be divisive for his coalition. Their coalition agreement, unsurprisingly, said little about the subject beyond imprecise commitments such as “we will examine the balance of the EU’s existing competences.” Looking at strong conservatives in his own Tory party, Cameron – who together with Foreign Secretary William Hague and Chancellor of the Exchequer George Osborne – are all “children of the Thatcher era but they all served their political apprenticeships under John Major” who remember clearly how Major’s battles with the euro skeptics within his own party premiership had severely undermined his premiership. They were intent on avoiding the same mistakes.

Cameron also had to deal with more urgent priorities, starting with the very poor state of the British economy. When he came to office, the country faced a record deficit of 11.4 percent of gross domestic product. His coalition quickly outlined a drastic austerity package slashing governmental department budgets by 20 percent by 2015. He announced a radical agenda of change around his buzzword, Big Society -- a package of proposals to cut back on local and national governments and replace them with “power (and obligations) to the people” by encouraging them to volunteer their efforts to replace community services.

Initially, as pointed out by analyst Roderick Parkes, this stand-off approach brought benefits for Britain vis-a-vis its continental partners. In his view, Cameron’s disengagement from the EU was initially viewed as the British equivalent to the constructive engagement demanded of everyone else, ie that if the British premier was keeping his country on the sidelines, his fellow European leaders felt his stance was intended to prevent the UK from unleashing its destructive urges on the EU. They should support this effort rather than stretch their luck. Far from punishing Britain for its detachment, other governments therefore reward it.” Thus, for most of his first 18 months in office, Cameron could afford to push Europe to the sidelines. He firmly believed that Britain’s economy was better served by staying outside of the eurozone and did not view calls for closer economic union as threatening.

That aloof position and its assumptions were blown apart by the all-out agonies in the eurozone. As the crisis deepened during the autumn, Cameron sought to react pragmatically,. Failure to help save the euro, he told Parliament, would increase the risks of contagion to Britain: “when your neighbor’s house is on fire, your first instinct should be to help him put out the flame.” This view, he felt, strengthened Britain’s case in insisting that non-eurozone members be included in any final settlement on new measures going forward.

But Cameron’s new European activism did not sit well domestically and alarmed Britain’s main EU partners. During an EU summit on October 23 on the crisis, French President Nicolas Sarkozy bluntly told Cameron: “you have lost a good opportunity to shut up,” before adding: “we [eurozone-17] are sick of you criticising us and telling us what to do. You say you hate the euro and now you want to interfere in our meetings.”

On the home front, the Prime Minister’s advisers woke up to the negative consequences that could emerge from the aftermath of the crisis. Indeed, the potential for greater caucusing, for more regular meetings alone on the part of the eurozone members created the specter of a united voting bloc that could push through decisions in a way that would undermine Britain’s influence. British worries centered especially on the City, London’s financial center, as other partners pushed for a tax on financial transactions across the EU. London opposed the measure because, unless applied globally, the City would be penalized and lose its competitive edge vis-à-vis other global financial centers like New York or Hong Kong that have no comparable market players in continental Europe.

Cameron’s problems in his own party broke into the public domain when euro-skeptic Tory parliamentarians used the mounting Eurozone crisis as an opportunity to stall any further European integration. In September, Conservative Member of Parliament David Nuttall handed over a petition to Downing Street calling for a referendum on the EU, with the 100,000 required signatures for a House of Commons debate. The petition led to a motion from Nuttall that called for a referendum by May 2013 that would lay out three options for the voters: “keeping the status quo, leaving the EU or reforming the terms of the UK's membership of the European Union.” The motion was easily defeated in parliament (the leaders of the Labour opposition and of the Liberal Democrats asked their members to vote against it), but the episode was a major embarrassment for the Prime Minister. He imposed a “three-line whip” – meaning that any dissident would face party discipline – but 81 Conservative MPs voted in favor and a further 15 abstained, meaning than more than half of the Conservative backbenchers (meaning non-Cabinet Conservative members of Parliament) refused to support the government on Europe.

The referendum vote highlighted three major dividing lines. First, it confirmed a clear gap between parliament and the people: all three major parties called to defeat the motion for a referendum on the issue, polling showed 70 percent of the public as wanting a national vote on Britain’s EU membership. (In the tabulation, withdrawal was favored by 49 percent of respondents with only 40 percent preferring to stay in.) Second, it underlined the tense relations between Cameron and his parliamentary party and his problems managing relations with his backbenchers, who often complain about his aloof leadership. In particular, it underscores the lack of trust he commands on Europe. His promises to repatriate powers from Brussels are met with skepticism among Conservatives: many of them believe that their leaders are “sell-outs and hypocrites” on EU issues and therefore always want to avoid popular votes that would repudiate the government’s line on European integration.

Finally, the failed motion predictably brought to the surface the tensions within the governing coalition. Liberal Democrat leader Clegg, who is Deputy Prime Minister, roundly criticized the euro skeptics, warned that their policies would “give up our place at the European top table,” and “that being shoved to the margins, or retreating there voluntarily, would be economic suicide.” Cameron faced a politically perilous balancing act, trying to resist further EU integration but also preventing any further isolation of Britain in the process. The package agreed on by the EU on 27 October helped stabilize the situation, but France and Germany continued to push for a more comprehensive solution to impose tougher budget discipline. But Cameron had some hearing for his line in the EU. London found initial support from the Netherlands, Italy, Luxembourg, Sweden and the Czech Republic when it came to opposing the idea of imposing taxes on financial transactions. On November 18, Cameron also tried to reach a deal on treaty changes with his German counterpart Angela Merkel that could satisfy both sides. He came away thinking that he could assent to narrow amendments that would only apply to the 17 eurozone members (ie not including Britain) but would have to be agreed by all 27 member-states – in effect, giving Britain considerable say over controversial future changes. The best public reconstruction of this pre-summit back-channel diplomacy concludes that false assumptions underpinned British strategy on the issue.

In reality, the gap between Britain and Germany, increasingly the leading power in EU matters, remained too stark. On November 14, Merkel and Cameron both gave speeches that offered strikingly differing visions of Europe. The British Prime Minister spoke of governments’ clawing power back from Brussels and of an EU that needed “the flexibility of a network, not the rigidity of a bloc.” The German chancellor called for the same EU to be deepened step by step and seemed to be campaigning for a core Europe composed of the eurozone members.

Then tension between Britain and its partners unsurprisingly came to a head during the EU summit on 9 December. After long talks, Cameron vetoed the Franco-German plan for EU-wide treaty changes after his insistence on a protocol allowing London to opt out of proposed taxation on financial services was denied. While Britain chose isolation, its partners moved ahead. The Eurozone members, along with Denmark, Poland, Bulgaria, Romania, Latvia, Lithuania, agreed to sign an inter-governmental pact that would include far tougher budget rules. Hungary, the Czech Republic and Sweden also expressed a desire to sign up to the pact once they received parliamentary approval.

It will take time before the full consequences of this summit become clear. In the short-term, Cameron’s gamble will certainly exacerbate existing tensions with his coalition partners, the Liberal Democrats, but it is not clear how damaging that move will be. It is not either clear whether the summit’s measures will prove sufficient to put an end to the Eurozone’s predicaments, and commentators like Simon Tilford are fearful that this could be yet another missed opportunity. But there is no doubt that Cameron’s veto marked an extraordinary moment in the tumultuous history between Britain and EU, and one that could mark the beginning of a divorce. A widely read piece of political fiction – that could become a reality – offers a scenario from the Economist’s Britain-watcher on how Britain could “not leave but fall out of the European Union.

For the moment, the fall-out from the fateful summit has been marked by vituperous eruptions of recriminations from both sides of the Channel. British conspiracy theorists accuse France of piloting a long-drawn-out plot to form an inner core of EU member states that will ultimately oust Britain from the EU. In the official and unofficial commentariat in Paris, a strong theme (quietly shared in Berlin) depicts the British government of putting "the City" (ie Britain's role in global financial markets) above the solidarity required for EU-style capitalism.

Behind the scenes and now in public, there have been reassuring noises from both London and Paris about the Britain’s unshakeable membership in the EU. This seems likely. But who would have foreseen a year ago the political dynamic that today prevails in the EU in the wake of the Lisbon Treaty.

By Garret Martin, Editor at Large of European Affairs