Special Reports





David Cameron returned from the EU budget negotiations in Brussels earlier this month, with what he claimed was a victory. Not only had he succeeded in his aim of reducing the budget, but he had also, he claimed, demonstrated that his January speech on Europe, with its pledge to hold a referendum on British membership after the next general election, had not isolated Britain, as his critics charge, but had instead strengthened Britain's hand. After all, had we not worked closely with Germany, the most powerful EU member state, and did not that imply that the Germans, portrayed as intensely anxious to keep Britain in the Union to "balance" their relationship with France, would be sympathetic to the demands for change and reform that in due course Britain will present to Brussels? The reporting in much of the British press of Cameron's Brussels "triumph" spread this notion widely in the United Kingdom.

If Mr Cameron really believes this, he is more deeply mired in self-delusion than anybody had so far imagined. The budget "victory" was a German victory over France and the anti-austerity camp in the Union, not a British victory over Europe. To paint what happened as a Brussels concession to British pressure is a wilful distortion of the facts.

Germany, pursuing the policy of austerity, which it has been notably instrumental in imposing on other member states, saw no reason why the Brussels budget, although a small matter compared to vastly larger national budgets, should be exempt. The motives of Britain, or, to be more exact, of the Conservative government, were more mixed. It is also in the austerity camp, of course, but in addition must try to manage a constituency in its own ranks and among a portion of its traditional voters which is innately anti-European. To this constituency, anything which diminishes Brussels is welcome. Indeed, it could diminish to vanishing point if some of them had their way.

Although the Germans found Britain a useful, if not necessarily vital, ally on the budget, the anti-European dimension of the British position is anathema to them. They do not share it in the slightest degree and they will not pander to it now, or in the future.

The truth is that Cameron's Europe speech and the referendum pledge which was its centrepiece have set Britain on an extremely dangerous course which puts at risk our good relations with our European neighbours and the United States, could undermine our economy, and even contribute to the break-up of the United Kingdom.

It is not impossible that continual harping on the possibility that Britain, if its supposedly ‘just demands’ are not met, could leave the EU, will affect the coming Scottish referendum, raising the ultimate possibility of an independent Scotland in the EU, and an "independent" England outside of it.

However that may be, the chances of some kind of political and economic shipwreck have been increased by the Cameron speech. In the words of Opposition leader Ed Milliband, Britain could "sleepwalk" to the EU exit, and, if it should do so, the awakening would be rude indeed.

If Britain did stumble out of the union, the consequences would be dire. Manufacturing in Britain, especially if Japanese or American owned, would be damaged as firms whose main reason for being in the United Kingdom is to gain access to the European market, faced new costs and charges. They would reconsider their options: many might decide to move, or to scale down their operations. The City would also suffer, if to a lesser degree.

Britain's strategic relationship with the United States would be lessened. As Dr Robin Niblett. director of Chatham House, wrote in a recent paper, "Britain would have to fight its corner alone in Washington on trade and regulatory issues. And it would have to guard against becoming or being seen once again as a proxy of the United States at a time when the government is trying to chart a more distinctive course for British foreign policy." Perhaps most important, a British departure would turn the relationship with its neighbours from one still characterised by a residue of the gratitude and fraternal feeling experienced during the struggle against Nazism and the Cold War, into a very cold affair. A British exit would be seen by the rest of Europe as a rejection, understood as meaning that the British no longer wished to be part of the European project. Britain, for its part, might then belatedly realise that the Union has been for many years now, the framework that gives meaning to its national life. But by that time it would be on the outside looking in.

Milliband's metaphor is well chosen, because what is ultimately at issue here is that a wing of the Conservative party and a significant proportion of the British people are lost in a dream which has hardly any connection with the reality of British society today. In this dream, Britain has a strong economy, not a weak one, based on the one hand, on foreign owned firms here, because it gives them access to the EU market, and, on the other, on a damaged and still not properly regulated financial sector. In this dream Britain is still militarily powerful, in spite of its defeats in Iraq and Afghanistan and in spite of the running down of the armed forces to almost miniature proportions.

In this dream, Britain is held back from achieving its full potential by a mass of pointless regulations, most of them emanating from Brussels, Instead of being a society which, like other states of the EU, needs better regulation, most of it transnational, if it is to avoid disasters ranging from floods to financial crises and terrorist attacks, or in a more minor key, scandals like the ‘horseburger’ crisis now convulsing Europe.

In this dream, Britain is still very important to the United States, instead of being only modestly valued by Washington. In this dream, Britain is a white Anglo-Saxon society which has foolishly allowed all kinds of foreigners to come in and is even more foolishly going to allow more, many from the EU, to come in the future.

In this dream, Britain is constantly outmanoeuvred in the EU by states which do not like us and pay no attention to our interests, instead of being a country which gets its way on some issues and loses on others, like everybody else.

And, finally, some of the dreamers imagine a prosperous and happy future for a Britain which has left the EU but still maintains all the useful and beneficial links with Europe that it needs, Norway and Switzerland being often mentioned in this regard.

More suppose that Britain can renegotiate its membership to get rid of all the aspects of it that they do not like, often refusing to grasp the difference between issues covered by the principle of subsidiarity and more fundamental matters laid down in the treaty itself. Many persist in seeing the British relationship with Europe not as the complex multilateral affair it is, but in starkly bilateral terms: Britain v. Europe.

David Cameron is not a stupid man, and there is reason to suppose that he is, at bottom, relatively pro-European. But he must manage a party which although it has always contained a few Euro-enthusiasts, is only reluctantly European and whose right wing has never reconciled itself to membership of the EU or its predecessors. He is also trying, obviously, to outflank UKIP, which threatens to draw away his voters in a general election in which the Conservative Party's chances of victory have already been weakened, not only by austerity's failures, but by his coalition partner's refusal to endorse constituency boundary reforms. Hence the famous speech, aimed at reassuring that sceptical centre, appeasing that right wing, blunting the UKIP threat, and persuading our European partners to give way on a range of policies in order to keep us in.

Tactically, it may work for a while. But what a hostage to fortune the British prime minister has offered up! In essence David Cameron has constructed an elaborate trap for himself and his government. The speech, like a certain kind of doughnut, has a hole in the middle. The outer circle of confection consists of perfectly respectable and reasonable reflections on the usefulness of Europe, together with the unexceptionable argument that its institutions are in need of some degree of reform. Then there is the commitment to renegotiate with Britain's interests in mind. But to renegotiate what ?

Here there is a studied vagueness -- the hole in the doughnut, as it were. Mr Cameron does not say, with any clarity, what he is going to ask his European partners to agree to "give" Britain. The reasons are obvious enough.

If he were to fill that hole with detailed proposals that were sufficiently modest to stand a good chance of being accepted by other EU members, he would immediately be denounced by his own right wing and by UKIP for not asking for enough. If he were to fill that hole with more radical demands, he would be immediately told by his European partners, perhaps privately at first, but it would not stay private for long, that there is not ‘a snowball's chance in hell’ of getting his way.

Could he find enough wriggle room in a judicious mixture of realistic and unrealistic proposals to avert this? Maybe, but it is a very big maybe. Meanwhile, Britain loses friends in Europe every week by crass accusations like those directed at Romania and Bulgaria over emigration, or by crowing because London has allegedly put one over on M.Hollande on the budget. Europeans do not know what to marvel at more, Britain's vanity, its arrogance, or its ignorance.

The likelihood is that Cameron will carry on being vague for as long as he can because only in that way can he keep everyone halfway happy. But sooner or later the cat will have to come out of the bag. What is tactically advantageous now could then turn into a strategic disaster.

It could lose him the next election but, if he wins, he would then find himself faced with that riskiest of projects in modern Europe, a referendum on the future of the continent's political arrangements. Time after time, in country after country, such referenda have been lost or won only by a wafer thin majority.

In part, that is because electorates vote their discontents and relish an opportunity to put a spoke in the wheel of elites.

In part it is because Britain is of course not alone in its dreamworld.

In most European countries there is opposition to Europe, a wish that a different kind of national life was possible, and nostalgia for the past -- the cocktail that is Euroscepticism everywhere. The austerity policies that have hacked away at the prospects and the quality of life of ordinary people all over Europe have made it worse. But even if there is Euroscepticism everywhere, Britain is the worst case, and the referendum Cameron proposes is the most fundamental one of all: in or out!

Turning down a constitution or a treaty extension is one thing. Leaving is quite another. That is why it is a question that the wise politician, in any European country, does not ask. If the answer is No, then that is a disaster.
If it is Yes, that is another kind of disaster, because the majority is most unlikely to be overwhelming, and the precedent is then set for a periodic return to the issue, with all the uncertainties and stupidities that involves.