How Britain could win EU reform
Angela Merkelâ€™s visit to London last week has been viewed by many as a snub to David Cameronâ€™s aim to reform the European Union. But it all depends on what one means by reform.
The British prime minister last yearÂ promisedÂ a referendum on the UKâ€™s membership of the EU by the end ofÂ 2017. HeÂ vowedÂ to renegotiate Britainâ€™s relationship with Europe in the meantime â€“ the idea being that, on the back of such reforms, he would be able to persuade a sceptical electorate to vote to stay in.
If Cameron focuses on subjecting the EUâ€™s treaties to open-heart surgery, he will be disappointed. But if he puts his energy into makingÂ the blocÂ more competitive – something that would be hugely beneficial for Britain – the prize of reform may well be within his grasp.
That much was clear from the GermanÂ chancellorâ€™sÂ day-trip. She disappointed some British eurosceptics by arguing against â€śfundamental reform of the European architecture.â€ť She does wantÂ revisionsÂ to prevent another euro crisis. But, for her, treaty change should be â€ślimited and targeted.â€ť
Whatâ€™s more, Merkel is only one voice among 28 leaders, albeit the most powerful. Every single country has to agree treaty changes. This means that trying to revamp the treaties to suit the desires ofÂ BritishÂ eurosceptics has zero chance of success.
If the treaties are reopened, of course, Britain should have its wish list. But, at most, it will be able to secure changes such as giving national parliaments a greater say in Europe-wide legislation. Cameron will waste his political capital if he makes this his priority.
A better approach is to work with Merkel and other leaders to set a clear agenda for what they want the EU to achieve over the next five years, as the German leader proposed. AfterÂ elections to theÂ European Parliament in May, the leaders and the parliamentarians will have to agree who will run the European Commission from the start of 2015. They should also agree what it should do – and what it should not do.
The priority should be toÂ make Europe more competitive.Â This has several elements. Top of the list should be to complete the single market. At present, there are few barriers to trade in goods, but many to the trade in services. Although services account for over 70 percent of the EU economy, they are often not efficiently provided â€“ one of the main reasons Europe lags America.
Other measures should include: agreeing ambitious free trade deals with other parts of the world, especially the United States, Japan and China; cutting red tape; and helping capital markets play a bigger role in financing the European economy.
At the same time, the next Commission must stopÂ interferingÂ in things best left to national governments. Not only do proposals such as itsÂ - thankfully abandoned -Â plan last year to ban olive oil jugs in restaurants get up the noses of national politicians; they absorb a lot of energy that could be better used on things that really matter.
A full-blown competitiveness agenda would certainly be ambitious. But it is achievable because it goes with the zeitgeist. There is widespread acceptance thatÂ the continentÂ needs to pull its socks up. Otherwise, it wonâ€™t just be left with high youth unemployment in so-called peripheral countries; it will languish as other parts of the world grow faster.
Merkel gave many indications of being open to, or even keen on, such an agenda on her trip to London. She spoke out in favour of renewing the EU to make it stronger and more competitive. She said it must further dismantle barriers to trade, especially with the United States. She advocated cutting red tape.
The German leader even spoke favourably of the City, saying: â€śLondon is very important for the European single capital market and thus for the economies of all European countries.â€ť
Cameron should view these remarks as a golden opportunity to put forward concrete plans to help capital markets grow as a source of finance and so fill the gap being left as European banks shrink. He should also secure Merkelâ€™s agreement to make a new push to complete the single market in services – something she has yet to commit herself to.
Meanwhile,Â the chancellorÂ was strong on the need to stop theÂ CommissionÂ meddling. She said it â€śmust only regulate matters which cannot be adequately regulated by the member states themselves.â€ť
Itâ€™s not just Germany that is keen on such ideas. The Netherlands is pushing a similar agenda and other countries are open to elements of it too. So the opportunity is there.
The British government is a coalition between Cameronâ€™s Conservatives and the pro-European Liberal Democrats. The latter cannot agree to the radical plans forÂ treaty changeÂ being advocated by some Conservative eurosceptics. Hence, Cameronâ€™s plan to wait until after theÂ 2015Â general election – which he hopes, somewhat implausibly, to win on his own – to push these ideas.
But the prime minister probably can get the LibDems to agree to a competitiveness agenda. And the time to push it is now. After all, the mandate for the newÂ CommissionÂ will be set in the next 10 months. If he waits until after the next election, he will have missed the boat.