31 October 2012

Paul N Goldschmidt: Contradictions are deepening! Is Europe on the brink of disintegration?

While within EMU, a consensus seems at last to be surfacing concerning the urgency of implementing concrete measures, such as the “Banking Union” whose high level of financial and legal complexity renders it opaque to the majority of citizens, progress risks being impaired by the fallout of the forthcoming EU budgetary negotiations. These will undoubtedly constitute a major touchstone, crystallising the place of the UK within the Union and shaping durably the latter’s political orientations.

The support by a faction of the Labour party advocating the reduction in real terms of the EU budget, as proposed by the right wing of the Tory party, makes any “reasonable” compromise between European negotiators nearly impossible to achieve. Indeed, either an agreement a minima is reached which will hamstring for the seven years to come the interventions of the EU and kill any possibility of financing the “solidarity” needed to resolve the financial crisis, or the process of the inexorable withdrawal of the UK from the EU will be initiated, in the hope that it would allow the implementation of the roadmap proposed by President van Rompuy.

In the latter case, a serious political crisis would ensue, the consequences of which remain largely unknown. As was correctly pointed out by Philippe de Schoutheete in a recent speech at the Anglo-Belgian association in London, the great majority of Member States seems more inclined than ever before to contemplate such an outcome. It is however surprising that the spectre of the withdrawal of the UK from the EU seems less preoccupying than that of a Member of EMU, despite the fact that either would create a serious precedent and a risk of “contagion”. Have citizens already forgotten that political (ideological) confrontations are far more dangerous for world stability than a financial crisis, however severe it may be?

What is certain, however, is that such an occurrence would undoubtedly delay the implementation of the measures needed to resolve the financial crisis, creating risks of market turmoil that could prove, this time around, irreversible.

This catastrophic scenario could, however, be managed with a minimum of fallout if, in a show of uncommon political courage, the other EU Member States impose on the UK a clear choice between: either abandoning in due course all of the EU derogations (including the budget rebate and EMU opt out) from which it currently benefits, thus joining a Union that is irreversibly committed to a federal structure; or, alternatively, negotiating a “Treaty of Association”, foregoing any rights to have a say in the orientations and decisions of the Union.

However, in the present circumstances such an initiative has scant chances of arising because of internal tensions within individual Member States which are particularly noticeable in France. Indeed, within the framework of the debate on a “federal Europe”, French public opinion is far closer to the British views than to those of its continental partners. This is underscored by the recent positioning of most of the leaders across the whole political spectrum; only Jean-Louis Borloo, in an attempt to differentiate his new party and establish his credentials, has taken the risk of defending a clearly federalist agenda. One can therefore easily imagine that France will succumb to the temptation of finding an inadequate compromise with the UK for, among others, the following three reasons:

• Firstly, the UK is a very useful counterweight in the struggle for influence between France and Germany which is becoming more apparent every day.
• Second, France shares military interests with the UK, including the possession of nuclear weapons.
• Thirdly, France would find it increasingly difficult to justify its Security Council seat (rather than ceding it to the EU) if the UK were no longer part of the EU.

It is, nevertheless quite clear that without the firm and consensual impetus of the Franco-German tandem, which implies a profound change in French public opinion largely opposed to transfers of sovereignty and loss of prestige, the encouraging dynamics initiated at the recent Brussels summit is likely to flounder. Should this occur, the uncertainties surrounding the future of the single currency, which is economically sound but structurally imperfect, will surface once again, putting into jeopardy not only its survival but that of the EU itself.

Paul N Goldschmidt, Director, European Commission (ret); Member of the Advisory Board of the Thomas More Institute

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© Paul Goldschmidt