Cameron's still a man without a European plan

As the European Union approaches the outer limits of its flexibility David Cameron is in danger of starting a negotiation he cannot quickly end, on eventual terms that satisfy no one.

FT.com

David Cameron is making three assumptions in seeking to change the basis of Britain's EU membership and then put this 'new settlement' to an in-out referendum. That our partners want Britain in at any price. That they will negotiate a new treaty in which Britain’s demands can be easily accommodated. And that the British government will be able to determine the timetable. All these assumptions are highly questionable.

First, what 'new settlement' are other member states likely to agree as the condition for Britain’s continued membership? Without doubt, nobody wants the UK to leave. Minus Britain, both the EU and Britain itself would be diminished in weight and global influence. Most member states value the influence of Britain’s outward-looking global instincts and networks, and they recognise the importance of the global financial hub we provide in the City of London.

But this will not mean accepting Britain at any cost, especially if it involves unpicking the rules of the single market. No doubt Britain could find allies for a range of measures that strengthen the EU’s accountability and competitiveness and reduce its regulatory burden. But the EU is approaching the outer limit of its flexible geometry, the patchwork quilt of different opt-ins and opt-outs enjoyed by member states across the EU’s activities. Britain already opts out of the single currency and the union’s cross border migration arrangements and is proposing to quit justice and policing, including the European arrest warrant. If Cameron were to seek exemption from employment and social policy regulation as well, while retaining the trade and investment privileges of the single market, others would say "sorry, with rights come obligations – you cannot treat the EU as a cafeteria service in which you arrive with your own tray and leave with what you want”.

What is Cameron’s answer to this? I do not see that he has leverage over other major players, notably Germany and France. In public these countries will be polite but for years to come their overriding priority will be fixing the eurozone and securing the single currency. Britain’s demand for legitimate protection of the position of member states outside the euro against discrimination is reasonable. But if a Cameron government were to say to them "we’ll only help you fix the euro if you agree to our opt out demands elsewhere”, I think there would be a very dusty reply.

What of a future treaty negotiation which could be used as the vehicle to agree Britain’s 'new settlement'?

At one stage a new treaty was planned to overhaul the eurozone’s governance – firewalls and stability mechanisms, fiscal co-ordination and transfers, banking union – but the idea has lost support. The markets’ seeming implacable demand for such clarity has abated since the ECB’s intervention calmed nerves. Market pressure might return and, with it, fresh talk of a treaty. But, for now, there is a preference for carrying out the necessary changes in stages, within existing treaties, rules and protocols, or by means of very tightly drawn new treaties which can be approved by parliaments rather than highly risky national referendums.

Cameron should look to the precedent offered by one of his predecessors, Labour premier Harold Wilson. When Wilson 're-negotiated' Britain’s accession to the European Community in 1974, he did so by finessing the agreement and not by re-opening the accession treaty itself. This, he knew, would be a bridge too far for other heads of government and Cameron will soon discover the case will be the same for him.

So, if the prime minister wins the next election and embarks on this venture, how will he bring it to a close? It will be very difficult to start negotiating at a time of his sole choosing, let alone conclude in any meaningful way at a time of his choice. Cameron may still be bargaining in five years from now, creating huge uncertainty for investors and their access to Europe’s single market.

And what of the subsequent British referendum he says will determine acceptance or not of his putative "new settlement”? Cameron might find himself in the worst of all worlds: starting a negotiation he cannot quickly end, on eventual terms that satisfy neither pro- nor anti-Europeans, with voters probably bored by the process and using the ballot to express their views on any number of unrelated issues. Whether you regard Cameron’s Europe gamble as a sincere attempt to reform and improve Europe or a cynical ploy to head off party opposition to his leadership, he does not seem to be a man with a plan.

Copyright the Financial Times 2013.