A 6-1 defeat is not a draw

October 26, 2011

Michael Gove trying to laugh off Monday’s rebellion by 81 backbenchers sounds like a United supporter arguing that 6-1 was more or less a draw. For all the excuses, he can’t hide the fact that the government’s position is full of contradictions.

On the one hand, the PM has added his voice to the chorus calling for the euro zone to turn itself into a monetary-and-fiscal union, a proposal which certainly goes with the grain of the crisis. The idea has the support of the Americans and would probably be warmly welcomed in Asia too. In fact, it has great appeal everywhere except in the euro zone itself, where the main protagonists themselves have got a severe attack of cold feet.

And no wonder – they are being asked to accept what amounts to full economic integration: a huge decision taken more or less on the hoof, in the space of a few weeks, whereas they are only too well aware that it took the best part of a decade of consultation, summits and referenda to overcome the opposition to monetary union – and in the end their victory really was almost a draw.

However, fiscal integration is by no means a done deal, nor is it remotely certain that fiscal integration will solve the immediate problem, given that the crisis has already reached France and is directly threatening Germany’s own creditworthiness. But if such far-reaching changes are afoot within the euro zone, you would expect the government to be putting forward a clear vision of where it sees Britain fitting into the new architecture, rather than merely providing unsolicited advice which is bound to be both ignored and resented.

If fiscal integration does go ahead, it will confirm the two-tier model of Europe, with an inner core of countries run by a single government controlling all aspects of macroeconomic policy (and most of microeconomic policy too), and an outer tier consisting of… of what exactly?

This is a real opportunity for Britain to reshape its place in Europe, as the largest of a bloc of countries mostly on the periphery that are part of the single market, but which retain full economic sovereignty – control not only of their own monetary and fiscal policies, and their own currencies (and hence interest rates), but also of their own tax rates and their own regulatory authorities too.

Notice this is not a total retreat into a customs union. Apart from the fact that there is more – though not a lot more – to the EU than economics, it would still allow free movement of capital and, more controversially, of labour. Ending the latter would no doubt be popular, but stupid for a number of reasons. In the first place, most of the problems arising out of immigration are associated with arrivals from outside Europe. Secondly, in reality it is almost impossible to stop immigrants arriving, legally or illegally, even from outside Europe, let alone from, say, Poland or Slovakia. Thirdly, on purely pragmatic grounds, if we are ever to get what we want in Europe, we need all the support we can muster – and the Eastern Europeans will be far less supportive if we slam the door in their faces.

This is all very broad brush, of course. There are thousands of details still to be worked out – and debated publicly, you would think. Michael Gove claimed yesterday that the Government has the strategic objective of repatriating powers from Brussels, most importantly on labour market regulation, but when asked how we could achieve this objective, he would only say that we needed to hold our cards close to our chest – in other words, we should trust the government to do what is best for Britain in the no-longer-smoke-filled rooms where decisions are made in Brussels.

The backbenchers who rebelled last night were saying either that they no longer trust this government to fight our corner, or that they think it will help if British negotiators – and their interlocutors – know that we are willing to pull out of the EU altogether if we cannot get an acceptable deal.

We can be sure this rebellion will get nowhere, just like all previous rebellions on Europe. The whole circus was itself very European: initial enthusiasm for more open government (hence e-petitions), followed by horror at the outcome, which is then completely ignored. The backbenchers have simply put down a marker, but I very much doubt whether Monday’s defeat, however humiliating for the Prime Minister, will make much difference to anything. It was a crushing defeat for the govt, but the balance of power has not shifted. This is not football, after all.

 

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