Tory win in UK election brings increased risk of EU exit

May 8, 2015
The results of exit polls are projected on to the side of Broadcasting House in central London

The results of exit polls are projected on to the side of Broadcasting House, the headquarters of the BBC, after voting closed in Britain’s general election, in central London, May 8, 2015. REUTERS/Eddie Keogh

David Cameron’s re-election as Britain’s prime minister increases the risk that the UK will quit the European Union. It is still not a probability. But the possibility will concern business. An exit would degrade Britain’s access to by far its largest market.

Cameron has promised to renegotiate Britain’s relationship with the EU and then hold an “In/Out” referendum on its membership by the end of 2017. The prime minister did well enough on May 7 to remove the need to renew his coalition with the pro-European Liberal Democrats. They were crushed.

Yet the Conservative leader may not have done well enough to ignore eurosceptics in his own party. These will try to push him to make impossible demands in the planned negotiation with the EU knowing that, if he then fails to get what he has asked for, it will be harder to argue that Britain should stay in the Union.

What’s more, the UK Independence Party, which wants to take Britain out of the EU, secured roughly one-in-eight of all votes – even though they ended up with hardly any parliamentarians because of the way the electoral system works.

One early skirmish will be over what question the British people are asked in the planned referendum. Eurosceptics may press for something like “do you want to leave the EU?” with the result that “Yes” meant “Out”, as was the case in last year’s Scottish independence referendum.

Being the “Yes” campaign would give the eurosceptics an edge in the coming battle. Without the Lib Dems pulling in the opposite direction, Cameron may concede them this advantage.

Another early skirmish will be over which aspects of Britain’s relationship with the EU Cameron will seek to renegotiate. So far he has been pretty vague.

The Conservative manifesto makes four pledges: to control migration from the EU by reforming welfare benefits; to reclaim unspecified powers from Brussels; to reform the system so national parliaments can work together to block EU legislation; and to end Britain’s commitment to “ever closer union” in Europe.

Whether or not these are feasible objectives will depend on the detail of what Cameron demands. One problem is that there will probably not be a change in the EU treaties before the UK’s referendum – unless, perhaps, Greece quits the euro zone and this triggers an emergency repair job to the bloc’s economic arrangements.

But if there isn’t a new treaty, Cameron will only be able to get diluted versions of what he has promised. Maybe he can get a commitment from other EU leaders to reform the phrase on “ever closer union” when and if there is a treaty change. Perhaps he can persuade the European Commission to abandon any legislation that half national parliaments propose.

The knottiest issue may be reform of benefits, both because immigration is a hot topic with the electorate and because Cameron has been fairly specific on his demands. Among other things, he wants to stop EU migrants gaining access to so-called in-work benefits until they have lived in the country for four years. While many other leaders are sympathetic, the particular plan may run foul of treaty commitments not to discriminate against EU citizens from other countries.

Cameron’s eurosceptics will presumably try to box him in on all these issues. It will be important that he maintains wiggle room.

A further question will be when the referendum actually occurs. Cameron has promised that it will be by the end of 2017 but said he would like it to be earlier if possible.

If there was a prospect of a new EU treaty, there would be a good reason for waiting until 2017. But, in the absence of that, Cameron would be best advised to go for an earlier vote.

This is partly because of the EU economic cycle. Euro zone economies are likely to grow this year as a result of the European Central Bank’s new massive money-printing operation. But the effects of the ECB’s quantitative easing will wear off and, with oil prices rising again, there’s no certainty that the euro zone will perform well from mid-2016 onwards. Cameron will find it harder to persuade the British people to stay in the EU if it looks like the UK is shackled to a corpse.

The EU political cycle is another reason to prefer an earlier referendum. In 2017, there is a general election in Germany and a presidential one in France.

Neither country will find it easy to agree to concessions to Britain close to its own elections. What’s more, Angela Merkel may not stand again as Germany’s chancellor. If she goes early, that could further complicate Cameron’s plans for renegotiating Britain’s relationship with the EU, as Merkel has been his most important ally.

It is far from certain that Cameron will be pulled hither and thither by his eurosceptic wing. After all, he will feel pumped up by an election victory, which is, in many ways, a vindication of his leadership. The prime minister may, therefore, have the courage to face down any rebels in his party.

In this regard, the fact that Cameron has promised not to stand for a third term as prime minister in 2020 could strengthen his hand. Although he will still need to hang on in power until then, he will presumably now focus on his long-term legacy – and he almost certainly doesn’t want to go down in history as the man who took Britain out of the EU.

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