Opinion

Hugo Dixon

UK prepares for possible EU failure

Hugo Dixon
Jul 16, 2014 09:22 UTC

David Cameron looks to be preparing for the possibility that his plan to renegotiate Britain’s relationship with the European Union will fail. The UK prime minister would then campaign for the country to quit the EU in a referendum he plans to hold by 2017. That seems the best way to interpret his appointment of a eurosceptic foreign minister and the nomination of a little-known former lobbyist as Britain’s European commissioner.

This is not to say that Cameron wants to take Britain out of the EU – which would be a historical mistake. It is rather that he apparently thinks quitting could be an acceptable Plan B that would keep him in his job and his Conservative party reasonably united.

The British premier has never publicly said how he would campaign if he doesn’t manage to reform the EU and the country’s relationship with it. He used to dodge the question by saying he was confident of securing significant changes, while being fairly woolly about what reforms he was actually looking for.

But since last month’s fiasco when Cameron went out on a limb to block Jean-Claude Juncker’s appointment as president of the European Commission and failed, the calculations have changed a bit. The prime minister immediately warned that it would be harder to keep Britain in the EU, because it would be more difficult to reform it.

Now Cameron has appointed Philip Hammond as foreign secretary and nominated Jonathan Hill as Britain’s member of the Commission. Neither decision displays confidence in his Plan A of securing a good new deal with the EU and then campaigning to stay in.

Matteo Renzi is on a roll

Hugo Dixon
Jul 7, 2014 09:00 UTC

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

Matteo Renzi is on a roll. The Italian prime minister is a brilliant politician. His youthful dynamism has bought him time with his people, the markets and the European Union to carry out the immense job of reforming Italy. But he has yet to show he can execute. He now needs to, because even his time will run out.

Renzi has had a good four months in the job after he pushed aside his predecessor Enrico Letta. His emphatic victory in the European Parliament elections gave him a legitimacy that the murky manner of his ascension lacked.

EU would also be harmed by Brexit

Hugo Dixon
Jun 30, 2014 09:02 UTC

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

It is not just Britain which would be damaged if it quit the European Union. So would other members. Jean-Claude Juncker’s nomination as Commission president at last Friday’s summit increases the chance of Brexit – Britain’s exit from the EU. Leaders from all countries now need to work to limit the risk it happens.

David Cameron went out on a limb to block Juncker, and failed. The UK prime minister mishandled the diplomacy, notably by seemingly threatening to pull out of the EU if the former Luxembourg premier got the job.

Is Greece losing its reform drive?

Hugo Dixon
Jun 23, 2014 08:34 UTC

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own. 

Is Greece losing its reform drive? Prime Minister Antonis Samaras has stuck to a harsh fitness programme for two years. But just as it is bearing fruit, he has sidelined some reformers in a reshuffle. There is only one viable path to redemption for Athens: stick to the straight and narrow.

The Greek economy is not out of the woods yet, although the measures taken to balance public finances and restore the country’s competitiveness are having their effect.

Cameron’s cack-handedness risks Brexit

Hugo Dixon
Jun 16, 2014 08:57 UTC

David Cameron’s cack-handed European diplomacy risks leading Britain out of the European Union.

The latest example is the way the UK prime minister has mishandled his campaign against Jean-Claude Juncker becoming president of the European Commission, the EU’s executive arm. Cameron is right to try to block the former Luxembourg prime minister’s candidacy – both because Juncker is not the right person to reform the EU and because the way he is being promoted constitutes a power grab by the European Parliament. But the British prime minister’s tactics have actually made a Juncker presidency more likely.

If Cameron loses this particular battle, the chances of a Brexit – Britain’s exit from the EU – will shoot up. This is partly because Juncker himself will presumably not want to help the British prime minister with his plan to renegotiate the UK’s relationship with the EU. And if Cameron can’t secure many goodies from his renegotiation scheme, he won’t have much to show the electorate in a referendum he plans to hold on Britain’s membership in 2017. (This will only happen if he is still prime minister then, which is far from certain since there is a general election in 2015).

How to fix the UK’s housing mess

Hugo Dixon
May 19, 2014 09:56 UTC

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

The Achilles’ heel in Britain’s strong economic recovery is the mess in the housing market.

House prices are rising yet again – by 10.9 percent in the year to April, according to Nationwide. This raises the risk of yet another cycle of boom and bust, so much so that the Bank of England recently described rising house prices as the “brightest light” on its risk dashboard.

Scoxit could lead to Brexit

Hugo Dixon
May 12, 2014 08:55 UTC

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

If the Scots vote to leave the UK in September, that could trigger a chain reaction which leads to the rest of the UK quitting the European Union. This is a threat British pro-Europeans need to take seriously given that a Scottish independence vote is quite possible, though the chances are still less than 50 percent.

Were it not for the Scotland factor, the risk of a so-called Brexit – Britain’s exit from the EU – would be receding. A string of business leaders have in recent months come out and argued that the economy would be damaged if the UK lost full access to the EU’s single market.

Greek rebound is astonishing

Hugo Dixon
Apr 8, 2014 10:01 UTC

Greece is undergoing an astonishing financial rebound. Two years ago, the country looked like it was set for a messy default and exit from the euro. Now it is on the verge of returning to the bond market with the issue of 2 billion euros of five-year paper.

There are still political risks, and the real economy is only now starting to turn. But the financial recovery is impressive. The 10-year bond yield, which hit 30 percent after the debt restructuring of two years ago, is now 6.2 percent.

Two of the country’s big four banks – Piraeus and Alpha – have raised 3 billion euros of equity between them in recent weeks to reinforce their balance sheets after a stress test orchestrated by the central bank. Eurobank, another big lender, is planning to follow suit with a 3 billion euro issue later this month.

Spain’s recovery clouded by politics

Hugo Dixon
Apr 7, 2014 09:40 UTC

Spain’s recovery is clouded by politics. Mariano Rajoy has achieved a lot in the two years that he has been prime minister. Growth has finally returned; even unemployment is falling. But as Spain enters a new electoral cycle, the appetite for reform is waning. What’s more, there is a big question mark about what will happen after the next election, which has to be held by March 2016.

Rajoy cannot claim the lion’s share of the credit for Spain’s economic turnaround. That belongs to Mario Draghi, president of the European Central Bank, whose “do whatever it takes” speech in mid-2012 marked the beginning of the end of the euro crisis.

However, Rajoy’s centre-right government has doggedly pursued reform. Most important, it has liberalised the labour market and cleaned up the banks. As a result, competitiveness has been restored and exports are booming.

Labour has just shrunk Brexit risks

Hugo Dixon
Mar 12, 2014 10:24 UTC

The risks of a Brexit have just shrunk a lot. Ed Miliband, the UK’s leader of the opposition, has virtually ruled out a referendum on Britain’s European Union membership if he becomes prime minister in 2015. David Cameron’s Conservatives will need to win an overall majority in the next general election and then lose an In/Out vote to allow the UK to quit before 2020.

This is good news for business: a plebiscite, coming after a populist campaign, might easily produce the “wrong” result. An Out vote would put Britain at risk of losing full access to the EU’s single market, with which it conducts almost half its trade. It would also unleash a long period of uncertainty. Whoever is prime minister then will have to resign, likely to be replaced by a staunch eurosceptic who will then engage in acrimonious divorce talks with the rest of the EU. In the meantime, business would sit on its hands, and the economy suffer.

Meanwhile, Miliband’s priorities for reforming the EU – boosting competitiveness, tackling youth unemployment, completing the single market and decentralising power – are broadly pro-business.