03 March 2014

Simon Nixon: UK problem out of Merkel's hands

Writing for the WSJ, Nixon says that Cameron's instinct may be to leave his options open, keeping the world guessing where he stands. But Merkel's recent visit to the UK has now made that more difficult.

If this debate had become fuzzy, that is largely Mr Cameron's doing. It has been more than a year since he made his speech setting out his strategy of renegotiation of British membership followed by a referendum, yet still no one in Berlin, Brussels—or in London for that matter—is much wiser as to what he wants from this renegotiation.

He has made few concrete demands nor set out a clear reform agenda. The strategy remains a "work in progress", according to someone familiar with the process. The only certainty is that Mr Cameron's renegotiation will require a change to the EU treaties. But why he wants the treaties changed remains obscure.

The only change to which Mr Cameron is unambiguously committed is to remove the reference to "ever closer union of the peoples" from the preamble to the treaties—a totemic issue for hard-core eurosceptic lawmakers in Mr Cameron's Conservative Party but hardly a matter of any practical relevance to the working of the EU.

Still, if Mr Cameron's treaty change demands are modest, a deal probably could be done, as Ms. Merkel acknowledged last week. The problem is that many in Mr Cameron's party have very clear ideas on the changes they want—and they are anything but modest. Many want wholesale repatriation of existing EU powers, including on employment rules, restrictions on freedom of movement within the EU, and veto rights for national parliaments. Mr Cameron has often given the impression he shares these goals.

But for many EU countries, these are red-line issues since they would involve fundamental changes to the institutional basis of the EU and would likely trigger potential destabilising referendums in multiple countries. That is something that eurozone members in particular are determined to avoid.

Ironically, one of the biggest obstacles to deepening of the services market is Germany. Indeed, many in Europe would prefer to see the UK use its considerable political capital in Europe to push Germany to agree to ambitious service-sector reform rather than squander it in pursuit of economically irrelevant and possibly unachievable treaty changes.

But can Mr Cameron sell a programme that consisted of substantial economic measures but only minimal institutional reforms to his increasingly sceptical party? One problem is that such a deal could be categorised as "more Europe" when he has already promised his party he will repatriate powers. Indeed, Mr Cameron is bound to come under intense pressure to take an even tougher line on the EU following elections to the European Parliament in May, in which polls suggest his party will haemorrhage support to the United Kingdom Independence Party, which is campaigning for the UK to leave the EU.

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