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‘Best of both worlds’? Britain’s future in the EU

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At a European Council summit on the 18 and 19 February, David Cameron got agreement from the 27 other EU member states on reforms that will be introduced if the UK votes to remain in the EU. After the negotiations, Cameron declared that the new settlement gives the United Kingdom a special status in the European Union. According to him, this special status gives us the ‘best of both worlds’. The UK will take part in the bits of Europe that are beneficial to the UK, whilst being out of the parts of Europe that do not work for the UK. Whilst the agreement has gained some important concessions for the UK, there’s a real risk that the UK will be subordinated to the needs of the Eurozone.

The Renegotiation

The agreement secured at the Council covers four main areas: economic governance, sovereignty, competitiveness, and welfare and free movement. The first two are the basis for the ‘best of both worlds’ claim. The most important provisions within these two areas are:

Economic governance: According to the UK government, the agreement safeguards the interests of countries, like the UK, which are inside the single market but outside the euro. Countries outside the Eurozone will not be discriminated against, have to adopt Eurozone decisions, nor participate in Eurozone bailouts. In addition, it’s now recognized that the EU is a multi-currency area, and all members should be treated equally regardless of their currency. If there are fears that changes in Eurozone policy might negatively impact the UK, it can request a Council meeting to discuss concerns and proposals. However, the UK cannot veto or delay urgent Eurozone decisions.

Sovereignty: Most importantly, it’s recognized for the first time that the UK is not committed to further political integration into the EU. According to the UK government, this shows that the EU is compatible with different levels of integration and it doesn’t compel members to aim for a common destination. In addition, national parliaments can combine to block EU legislative proposals.[1]

Not quite the ‘best of both worlds’

The agreement recognises two quite different visions for the EU. A Eurozone which seeks closer political and economic union, and non-Eurozone countries, like the UK, that seek to safeguard their current economic and political competences. Whether these two visions can live together peacefully is yet to be seen. But in order to avoid tension, it seems likely that the UK will be pushed to the sidelines.

One of the biggest fears going into the negotiation was the possibility for the 19-member Eurozone to discriminate against non-euro nations like Britain. Since late 2014, the Eurozone has constituted a qualified majority that, in theory, could impose EU legislation on non-Eurozone members.[2] This fear, echoed by George Osborne, has been compounded by many examples where British interests have been overlooked. For example, in 2015 an EU-wide bailout fund provided bridging loans to Greece, despite an agreement in 2010 that the fund would no longer be used for Eurozone bailouts. The current voting rules allowed the Eurozone to push this through against the wishes of non-Eurozone countries like the UK. Other contentious issues have included the bankers’ bonus cap and a proposed financial transactions tax.

The safeguards in the agreement don’t offer sufficient protection for the UK  against Eurozone caucusing. Indeed, whilst the agreement does recognize that two members, the UK and Denmark, have a different currency, all other current and future members are obligated to adopt the euro. As they join, the Eurozone will become larger, thereby increasing their power in EU decision-making. Most importantly, in a bid to save the euro, the Eurozone will have become more politically and economically integrated, becoming more of a single bloc with a single point of view. This integration is seen to be extremely important and urgent, and has been given renewed vigour by the 5 Presidents’ Report. Legislation that helps this integration has become vital to Eurozone members, and the Eurozone may have to use its voting majority to force through legislation that negatively impacts the UK in order to preserve the euro.

If such legislation does materialize, the ‘safeguard mechanism’ is not strong enough to protect the UK’s interests. The mechanism allows the UK to refer any breach of the agreement provisions on economic governance to the Council, where it will be discussed amongst finance ministers. The UK can request the issue be escalated to the European Council, but the President of the Council makes the final decision on this referral. This process doesn’t give the UK any veto rights and, as a result, this process doesn’t stop Eurozone caucusing. The Eurozone could continue to proceed with legislation acting via qualified majority in the Council.

The UK’s ability to oppose such legislation is further curtailed by the inability for any UK citizen to become the president of the European Commission – the only institution that can propose EU laws. Any applicant must be from a member state that is part of the Schengen Agreement and the Eurozone.[3] According to Cameron, the UK’s new found special status would help it lead in Europe. But it’s difficult to take this claim seriously when the UK has to adopt legislation proposed by a Commission that no UK citizen can preside over.

Conclusion: Whilst the agreement has gained some important concessions for the UK, it doesn’t keep the UK out of the parts of the EU that aren’t beneficial. The Eurozone still has some influence over EU legislation that Britain has to adopt, and this influence could grow considerably as its membership expands. In addition, some EU legislation may not take the UK’s interests sufficiently into account as the Eurozone places political and economic integration at the top of its agenda. The UK’s ability to oppose this legislation is not strong enough.

  • Christian Stensrud – EU Research Fellow

 


Notes

[1] 55% of EU countries’ national parliaments must vote against a future EU law to block it.

[2] The Lisbon Treaty introduced new voting rules that came into effect on 1 November 2014. They effectively grant Eurozone nations an in-built majority in the Council of Ministers. A qualified majority in the Council must include at least 55% of member states (at least 16 out of 28) representing at least 65% of the EU’s total population. The Eurozone consists of 19 nations and 67% of total EU population. However, any member state can still request that a Council decision be adopted via the old voting rules, established in the Treaty of Nice, up until 1 April 2017.

[3] This criteria suggests that, when it was created, it was assumed that all member states would integrate in the same manner, becoming members of Schengen and the Eurozone.

 

Photo: Crown Copyright

Credit: Tom Evans