16 July 2013

UK Foreign Secretary speech on the European Union and its future

Foreign Secretary Hague said changes in the eurozone meant this was the most interesting and important time in European policy since the fall of the Berlin Wall. The decisions made in the next few years by the peoples of Europe and their leaders would set the continent's course for a generation.

Without the monetary and other policy flexibility afforded to us by the possession of our own currency the recession that followed the Great Bust of 2008 would have worse. The consequences of the sovereign-bank loop that have afflicted some eurozone countries would, if replicated in Britain, have been truly serious. As I used to put it years ago, we would have been the elephant in the rowing boat – if the elephant slips the rowing boat has quite a serious problem. The steps taken thus far towards deeper fiscal and economic integration in the eurozone, while they fall far short of fiscal and economic union, would certainly have proved democratically intolerable to the United Kingdom.

I don’t think there is anyone here who doubts the importance of the question of the European Union’s future, or of Britain’s relationship with it. It is an illusion to think that we are confined by our neighbourhood and that the world beyond it is of secondary importance and it is equally a mistake to think that any country can escape its neighbourhood.

Europe’s future now is more uncertain than at any time since the fall of the Berlin Wall and the decisions made in the next few years by the peoples of Europe and their leaders will set the continent’s course for a generation. The future state of the eurozone is not determined: the search for a settlement that combines democratic acceptability and economic workability goes on. It may take some time and it is right that it should: these are fateful decisions and an attempt to impose a complete settlement of the zone’s difficulties that did not work economically or proved democratically unsustainable would be more dangerous than dealing with the problems step by step.

We all know about the deep flaws in the eurozone’s design. Governments must be very careful in prescribing solutions for their neighbours that they do not mean to inflict on their own countries so I shall try not to, but the eurozone’s crisis has been made far worse by two other faults that affect the EU as a whole.

The first is some European countries’ lack of global competitiveness. The problem is in part domestic – some countries have failed to ensure that their citizens are equipped to keep up in the global race in education or have economies flexible enough to adapt. Of course, some countries, such as Sweden and Germany, are doing very well and we have lessons to learn from them.

The second flaw, the lack of proper democratic control, is deeper seated and has been even more harshly exposed by the eurozone crisis. Of all the European institutions it is the Council, accountable to national parliaments, that has taken the lead because when decisions about money are at stake it has predictably turned out that voters look to their national parliaments as the legitimate decision makers.

The core of the problem with the way the EU works is that as a system it is very good at centralising power from its Member States but very bad at letting go of power, at decentralising. Underlying this we have that famous phrase to conjure with, the ‘ever closer union of the peoples of Europe’. What was an understandable, even admirable aspiration after the Second World War is now seen as a justification for a process that has emptied parts of national democracy of its meaning and content.

And if this seems like a problem for a country like Britain outside the eurozone it is going to be even more of a problem if eurozone countries have to enter into deep fiscal and economic union, although that is not a foregone conclusion.

This is not a process that can go on without making the problem worse. To quote the Dutch Subsidiarity Review again, ‘the time of an “ever closer union” in every possible policy area is behind us … the Dutch people were, and still are, discontented with a Union that is continually expanding its scope, as if this were a goal in itself.’ And if all this is controversial in the Netherlands it is many times more so in Britain where the last Government’s astonishing act of arrogance – agreeing and bringing into law the Lisbon Treaty without consulting the voters in any way at all – did severe damage to the EU’s democratic legitimacy in this country.

Now some argue that the harm these faults of the European Union cause is so great, that reform is so hard to achieve Britain should simply leave. It is a legitimate point of view and in due course the British electorate should have the right to decide whether they agree with it in a referendum. But I believe that reforming the EU so that Britain wants to stay in it would be the best outcome for our country, and indeed for Europe. I believe that change is not only possible but that this Government has gone some way to proving that it is possible.

People said that Britain was now locked into eurozone bail outs, but we shut down the future use of that EU power, perhaps the first power ever returned from the EU to a Member State. People said we would never be able to cut the EU budget. But we got a cut in the budget. People said that the Common Fisheries Policy was unreformable, but we have achieved real reform. People said that the EU was irredeemably protectionist, but we have concluded free trade agreements with Korea and Singapore and launched the most ambitious free trade negotiations of them all with the United States. People said that the eurozone would inevitably caucus against us, but we secured rules on double-majority voting and non-discrimination that protect our interests in the most sensitive area of banking union.

This is the most interesting and important time in European policy since the fall of the Berlin Wall. The eurozone is changing and that means that the EU is in changing. The future shape of Europe will depend upon the choices Member States make in relation to that crisis and that future shape cannot yet be predicted with certainty. The status quo is not working to this country’s satisfaction or for the EU as a whole; the sustainability, economic and democratic, of the EU and the eurozone depends on successful reform of both. For all the difficulties the EU poses for this country and for national democracy its achievements, the advantages it brings for our national interest and its future potential mean the right course is clear: negotiation of reform based on the five principles set out by the Prime Minister’s speech in January – global competitiveness, flexibility, powers flowing back to Member States, democratic accountability and fairness between eurozone and non-eurozone – and then a decision on Britain’s EU membership in a referendum.

Full speech

© Crown Copyright