A British pawn in Europe's game

Did Germany and France actively want Britain out of the way? Regardless, their debt summit manoeuvrings provided the perfect cover for a lack of progress.

What a glorious distraction, what a splendid sideshow! What had been announced as the summit to finally solve the euro crisis became a face-off between Britain and the continent.

After David Cameron had banged Margaret Thatcher’s handbag on the negotiating table, metaphorically speaking, nobody was talking about eurobonds, big bazookas or lenders of last resort any more. Instead, observers were wondering what Cameron’s ‘no’ to a new EU treaty meant for Britain, Europe and Britain in Europe.

But perhaps that was precisely the result that Merkel and Sarkozy desired? Maybe David Cameron did not jump from the European Union cliff as much as he was pushed over the edge? Judging by the British prime minister’s performance in the House of Commons on Monday, there are good reasons to believe that he had been comprehensively outmanoeuvred by continental leaders.

It was former Labour cabinet minister Frank Field MP who triggered a most revealing answer from the prime minister after Cameron’s statement to parliament. Field’s question was short and cheeky: "At what stage in the negotiations did the prime minister realise that France and Germany would do their best for us not to sign – and as this is a period of Christmas cheer could he give us an undiplomatic reply?”

Cameron was so puzzled by this that he not only started to stutter but he even called Field his "honourable friend”. Despite Field’s constant flirtations with the Tory party this was a first-class blunder. As a matter of fact, Cameron then preferred not to answer Field’s question and pretended that EU negotiations had always been conducted with the goal of finding an agreement between all 27 member states.

Really?

Anyone with a modest sense of political realism knows that national interests within the EU are carefully guarded. France protects its farmers and winegrowers against reforms of the Common Agricultural Policy with as much verve as Germany defends its car manufacturers against stricter environmental regulations from Brussels. Without any doubt, a full blown EU attack on farm subsidies or the car industry would trigger French and German vetoes.

Merkel and Sarkozy could not have been under any illusions that Cameron would pave the road towards curbing the power and profitability of the City of London. Finance is the only major industry left in post-modern Britain. Besides, anything that weakens London’s position would automatically be a promotion of its closest European rivals in Paris and Frankfurt. Cameron agreeing to such moves would have been akin to Merkel signing a treaty to outlaw cars larger than a Fiat Cinquecento: not very likely.

So the real question remains as to why Merkel and Sarkozy went ahead with their plans without even considering Cameron’s moderate requests for safeguards for the City of London. Either they really did not care about Britain being part of a final agreement, or they actively wanted to push Britain out of the way.

It is plausible to suspect that Merkozy actively aimed to isolate Britain at the summit. In terms of their basic economic philosophies, Germany is certainly closer to Britain than it is to France. Britain and Germany are, at least in principle, more committed to open markets and free trade than France with its dirigiste history. Even in terms of its Trans-Atlantic orientation, Germany rather resembles Britain more than France. So it is no wonder that the French would not be too unhappy about separating Germany from Britain.

Germany, on the other hand, wanted to impose its stricter budget rules on the whole of the EU. However, the Germans knew that if that had to be achieved via a unanimously agreed treaty change, the ratification process would be long and cumbersome. There was even the possibility that some countries might vote it down in referenda. Democracy had often impeded many ambitious EU projects in the past, so it was only rational not to try it again.

The best way to circumnavigate such a treaty change was a multilateral agreement outside existing EU treaty law – and this was made possible, even required, by the British veto. Though there remain doubts about the legality of such a procedure, it remains an elegant way of suspending the usual requirements of decision-making in the EU. Voil, mission accomplished by driving Cameron into a eurosceptic corner.

But there is an even bigger argument as to why Cameron’s veto was most welcome to Merkozy. In the days following the summit, hardly anyone still talked about the substance of the measures agreed by the remaining 26 EU member states. What had been the most pressing issue before the summit, saving the euro, now paled in comparison with the issue of continuing British membership of the EU.

As far as distractions go, this new subplot provided perfect cover for the actual crisis. And it was much needed because in terms of substance the summit did not achieve much.

The new fiscal rules, euphemistically sold as ‘fiscal union’, are hardly tougher than the old and irrelevant Stability and Growth Pact. Whether they will eventually be implemented is as uncertain as their detailed contents, which is to be finalised at another summit next March.

The European bailout fund EFSF is meant to be leveraged and deployed soon – but that does not make it any more likely that the EFSF will also be able to raise the necessary capital. Pulling forward the permanent rescue mechanism ESM by one year and letting it operate in parallel with the EFSF creates more problems than it solves. For a start, eurozone finance ministers now have to raise extra funds to transfer them to the ESM next year – good luck. And the idea of euro system central banks lending to the IMF so that the IMF can lend it back to European governments is as half-baked as it sounds.

So what better could have happened to Merkozy than Cameron providing cover for their patchwork crisis management by throwing a tantrum and leaving the scene? Whether they had intended it or not, Britain’s public isolation worked wonders for both the German and the French government in pushing their own positions.

Perhaps it is dawning on Cameron that he had been moved like a pawn on a chessboard by his continental friends. His insistence to act in Britain’s national interest mainly served to promote the interests of France and Germany. Power politics does not get more ironic than this.

Dr Oliver Marc Hartwich is a Research Fellow at the Centre for Independent Studies.

Related Articles