03 October 2011

Philip Stephens: Britain’s eurosceptics are right to call for a referendum

The euro’s travails are held as vindication of the (Conservative) party’s long-standing opposition to the single currency – and as confirmation that the enterprise was a plot to rob proud nations of their sovereignty. (Foreign Secretary) William Hague, the champion of a save-the-pound campaign a decade ago, once described monetary union as a burning house without any fire exits.

The mood... is that Mr Hague should go further. Britain should seize the opportunity at least to renegotiate the terms of its EU membership. The crisis, the argument runs, has given (Prime Minister) Mr Cameron leverage. He should use his veto over treaty changes to extract opt-outs on everything from social to fisheries policy. The House of Commons should offer the people a referendum on EU membership.

The chancellor (George Osborne) has been urging his continental counterparts to rush into a fiscal union in order to shore up the euro. The dissonance of a British minister exhorting France and Germany to take a great integrationist leap while Britain stands aside has not escaped Mr Osborne’s colleagues. As it happens, there is a precedent. Winston Churchill was a powerful advocate of a united states of Europe– as long as Britain did not join.

Mr Osborne understands that if the single currency were to succumb to Mr Hague’s metaphorical blaze, Britain would not escape the flames. Sovereign defaults in the eurozone could freeze the financial system everywhere, and demand still more government money to prop up Britain’s banks. The coalition’s deficit reduction strategy would be derailed by the slide into a recession. Britain, as much as France or Germany, needs the euro to succeed.

Britain, though, has already taken one significant step back. By staying out of the 23-strong euro-plus group of European leaders, Mr Cameron has given up a place at the table in shaping the single market. If and when the eurozone stabilises, Britain may find itself outside most economic decision making.

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