EU politics
Some points that Labour MPs might make in the EU referendum debate in the Commons today:
First, why now?
Many of the Treaties that define the UK’s relationship with the EU were signed by Conservative PMs, e.g. Maastricht Treaty. We didn’t have referendums when these Treaties were signed. Are Conservatives now saying that we should have done? And should now retrospectively do so?
The priority for all MPs and MEPs should now be economic recovery. Almost everything else is a distraction. Resolving the euro-zone crisis would significantly improve the economic prospects of the EU and the UK. This is, therefore, a more pressing issue for debate than whether or not the UK should have a referendum on EU membership.
Second, how do Conservatives propose that the euro-zone crisis be resolved and how would this impact the UK’s relationship with the EU?
The UK’s interests here are: That the euro-zone members find a durable solution to their crisis, while properly allocating responsibility within this solution to EU and euro-zone members and ensuring that the benefits of EU membership continue to be enjoyed by non-euro EU members.
What matters, therefore is: encouraging and supporting euro-zone members to find a durable solution; requiring that euro-zone members properly face up to whatever responsibilities are created for them in this solution; and guaranteeing that this solution does not forego the benefits of EU membership enjoyed by the UK. We, for example, must insist on UK access to and involvement in shaping a deepened single market, even in the context of further consolidation amongst the euro-zone members.
Third, do Conservatives not accept that we should return to this debate on an EU referendum in the UK after these pressing and profound issues with the euro-zone have been properly and fully addressed?
We should be focusing all of our energies on resolving these issues in a durable manner, which protects the UK’s interests, as a non-euro EU member, both in the near and longer-term. It may be that these solutions necessitate changes that are constitutionally significant to the UK. In which case, a referendum would be entirely appropriate. But we are a long way from resolving the euro-zone crisis. Until we get to this stage, all debate about the EU amounts to shuffling deckchairs on the Titanic.
Fourth, why can the Conservatives not work constructively to resolve the euro-zone crisis, instead of re-hashing debates of the 1980s and 1990s?
Let’s return to the here and now, as this could not have more serious questions to answer. These are questions that will impact the incomes and wellbeing of all British citizens. It ill behoves any elected representative to create distractions to the resolution of these questions.
When these questions are resolved, with the euro-zone crisis behind us and the UK’s interests protected, if this resolution has necessitated a constitutionally significant change in the UK’s relationship with the EU, let us then return to this debate on a UK referendum on EU membership.
I had this on Labour Uncut in August.
People make their own history, as Karl Marx knew and Angela Merkel and Barack Obama cannot deny, but under circumstances existing already, given and transmitted from the past. Over hundreds of years America has evolved to a fiercely divided, uncompromising polis wedded to a system demanding compromise. Over decades Europe has achieved monetary union. Thousands of years of history hang over its fiscal consummation, which is required to avoid collapse and further calamity. The tradition of all dead generations weighs like a nightmare on the brains of the living.
One of the ironies of Marx is that communism was supposedly inevitable, but his tombstone declares that the point is to change the world, not interpret it. What’s to change if history’s terminus is already determined? What was the point of agitating publications like the Communist Manifesto if we were all, in spite of ourselves, destined for communism?
Such publications imply that Marx himself may not have seen communism as quite the iron certainty that rigid interpretations of his writing suggest. But one of the divisions between Marxism and much of the rest of the left concerns the extent to which we are prisoners of history. Parties such Labour predicate themselves on an assumption that the institutions of advanced capitalist democracies can be moulded to serve socially just ends. Ed Miliband’s father, of course, like other Marxists, thought this naive.
Recent economic events seem to vindicate Ralph Miliband. Political leadership seems oxymoronic when our nominal leaders appear only witnesses to events that they can barely fathom, let alone command. (In the non-economic sphere, our Tuscan prime minister is similarly bemused by the revenge of the lumpenproletariat). Nothing has happened to undermine James Carville’s famous wish to come back as the bond market and intimidate everybody. It’s these markets that are in the box seat and our political leaders that are cowered.
What they demand are credible plans from governments to repay their creditors. This isn’t unreasonable. I expect you’d want to see credible repayment plans before you leant non-trivial amounts of money. The governments of the third and fourth largest economies in the eurozone, Italy and Spain, seem increasingly unable to produce such plans. The downgrade of the USA, though unjustified, speaks to a similar lack of confidence in America’s ability to manage its debts.
While events seem to lead towards the largest country in the world that still professes to be communist, China, being an ever more dominant geo-political force, the Marxists should not be too triumphant. The markets are, of course, as powerful as James Carville’s wildest dream and Ralph Miliband’s bleakest nightmare. But they do not remain beyond the capacity of political leaders to have them becalmed. That is if political leaders do what it says on their tin; lead.
This doesn’t mean interpreting opinion polls as immovable. Germany, for example, could swing behind the full steps required to save the euro if Merkel articulated them well enough. It means seeing your electorate as intelligent beings capable of being won over by the force of your argument and your actions. Merkel and Obama can still do this. But only if they stop being intimidated not only by the bond markets but also by opinion polls, their political opponents and their own inevitable failure to hold in their minds every relevant fact and figure.
As the Irish leader, Enda Kenny, has said the answer from Merkel, whether the question is bailouts or debt restructuring, is always no – until it is yes. We all know the big question hanging over all of this: will the single currency underwrite the debts of all of its members? These debts would be eminently manageable under such an arrangement; so long as the political will to enact such an arrangement can be found. It is for Merkel to find this will. If she cannot, then she should say so speedily. The longer she delays the worse the fallout when she confirms her inability to rise to her historic purpose.
In spite of the tea party and the fractious nature of US politics, things are more straight-forward for Obama. He has no unprecedented, continent-wide institution building project to contemplate as a matter of existential necessity. His outlook would suddenly look much rosier if he could only say yes, we did achieve growth rates in 2011 equal to the hardly spectacular rates of 2010.
Can the US really not grow at 2.8 per cent this year? Can unemployment really not be significantly reduced from the historic high of 9.2 per cent? While markets fret over the ability of governments to manage their debts, they are also increasingly worried that the US cannot do better on growth and unemployment. Surely if the social democratic faith in the power of government is justified then Obama can prove them wrong?
Merkel and Obama can rise to their challenges or we succumb to capitalism’s latest crisis. These crises will not, however, give way to something as pleasant as Marx envisaged communism to be. It will be something with much more of a Chinese flavour.
Anatole Kaletsky wrote in the Times earlier in the week that: “In short, last week’s proposals were not so much an attempt to solve the euro crisis as an effort to exploit it to advance the eurofederalist agenda that had been stalled for years.”
Reports today suggest that a growing number of Tory Ministers are sanguine about the possibility of the UK leaving the EU and a leading figure on the right of the party, Tim Montgomerie, called for the ministerial sacking of Ken Clarke, the biggest roadblock to a stronger Conservative line on Europe.
The advancement of the eurofederalist agenda, combined both with a hardening of Tory attitudes towards the EU and the possibility of further sovereign bailouts within the eurozone, means that Europe could become much politically hotter in the UK and drive a significant wedge between the parties of government. Labour shouldn’t wait for this to happen to decide what we think about the EU. Bland calls for us to “work with our neighbours” are unlikely to cut the mustard.
We should accept that members of the eurozone are likely to further integrate to secure the long-term viability of their currency. We should demand, however, that eurofederalists be open about their agenda and work towards whatever kind of EU can best enable the UK, which is likely to retain its own currency and monetary policy for the foreseeable future, to best adapt to the rise of Asia.
This rise is the key fact of our age. The EU is capable of helping the UK adapt to this fact. However, a multi-speed Europe seems increasingly likely and what is best for the EU should not be conflated with what is best for the eurozone.
I wrote this for Labour Uncut a few weeks ago.
Labour modernisers have been largely pro-European since Neil Kinnock made them so. The role of the EU in advancing Labour’s goals has often, however, been vaguely defined. As UK relations with the EU head towards various crunches, this seems likely to be inadequate.
The issues that are most important to people will determine the next general election: the economy, jobs and public services. Nonetheless, debate about the EU is going to get hotter. As this happens, the connections between EU policy and the things that people care most about are likely to become more apparent.
Most immediately, the European Union bill, over the short to medium term the euro-zone crisis and the longer term need for the UK to adapt to the rise of Asia could all bring UK/EU relations to the boil. The first of these pressure-points diminishes UK influence in the EU at the same time as the second poses not only an existential crisis to a currency to which we don’t belong, but a union to which we do and our largest trading partners.
Either disintegration of the euro/EU or consolidation of the euro as both a fiscal and monetary union seem more likely outcomes of this crisis than perpetuation of the status quo. Either way, British business has only just begun the adaptation that it must undergo to prosper in a world whose centre of gravity lies ever more firmly to the east.
Liberal Democrat MEP, Andrew Duff writes of the European Union bill, which is being taken through Parliament by the government of which his party is a part: “The blunt truth is that if this bill becomes law, no future EU treaty revision will be possible if the UK remains a full member of the Union.” This could yet create serious splits within and between the two parties of government, which Labour should encourage by robustly opposing the bill and reaching out to pro-European Lib Dems and Tories (who may have died off in the Commons but still exist in the Lords).
At some stage in the management of the euro-zone crisis, irrespective of what finance ministers may insist, haircuts for bondholders and state debt restructuring seem virtually inevitable. Because some euro-zone members are too over extended; the bailout facilities available to them too finite (the largesse of even the IMF must know some limits); and the austerity that follows these bailouts too terrible (the wretchedness of all of Ireland is increased for the sake of sparing bondholders any pain, as Fine Gael, the likely winners of the national election expected in March, argue).
While she may be concerned with German interests, rather than troubled by the austerity misery that seems set to extend beyond Greece and Ireland, Angela Merkel appears to understand this. It was market recognition of this understanding, and fears of Germany imposing haircuts on Irish bondholders, that weakened the Irish such that they had to accept a bailout and austerity. An attempt will have to be made to confront the necessity for haircuts while minimising the fever of market reactions to this confrontation.
If German politicians wish to minimise their fiscal transfers to the rest of the euro-zone, their officials may be discretely working on the details of such an attempt. French leaders appear increasingly sanguine about the consummation of such a fiscal union and much greater co-ordination of economic policy by members of the euro. To Germans this may seem like France trying use German money to pick French “winners”, which could make any fireworks between the Tories and the Liberal Democrats appear relatively tame.
Undoubtedly, economic turbulence will persist in the euro-zone until some massive political choices are faced. The UK must act responsibly and avoid gloating. The short to medium term interest of the UK is minimisation of this turbulence and our longer term interest is in whatever kind of Europe best enables us to adapt to our Asian age. This means, if Germany is as determined to keep the euro together as it claims, encouraging Germany to face the full consequences of this, which probably requires both a convincing plan for haircuts and an enduring framework of some kind for fiscal transfers within the euro-zone.
It is easy for George Osborne to say that Ireland will be the only euro-zone member to be bailed out by the UK – a position that will come under considerable pressure as the turbulence endures and which won’t be strictly true once the IMF are in Portugal. But it is harder for him to engage with Germany on the steps that ought to be taken, as they would probably necessitate treaty change and, under the European Union bill, according to Duff, an end of full EU membership for the UK.
While defending UK membership of the EU, Labour should demand an EU best equipped to enable us to adapt to Asia’s rise. As Asia gets more serious about curbing carbon emissions, for example, we should be selling them the green manufacture that enables this. However, innovation in green manufacture will be undermined so long the EU-ETS remains as ineffective as it is in establishing a carbon price. Labour should seek to provide the leadership to change this and have the EU focus more intently upon areas such as this where it really can add value. Rather than devoting its energies to less controversial policy areas in which the added value of the EU is much less clear.
I noticed a trend flicking through the FT last month. I think the particular copy of the FT that I flicked through was published on 19 September. I noticed the following:
Emerging market targeted M&A volume is up by more than two-thirds to $575.7bn this year, while European volume has risen by barely 20 percent to $550.2bn. The latest Global Financial Centres Index (GFCI) not only finds that New York has closed in on London as the world’s leading financial centre but that Hong Kong has markedly closed in on both cities since March 2009. Beijing’s attempts to internationalise the use of the renminbi and rival the US dollar (to say nothing of the euro or pound) have taken a significant step forward through the purchase by Malaysia’s central bank of renminbi-denominated bonds for its reserves.
Perhaps, it is no surprise, therefore, that Wolfgang Münchau commented, “we are observing a loss in Europe’s global influence … Wherever you look in the EU, politicians have become more assertive in blaming minorities and immigrants, other governments and, of course, ‘Brussels’ … The problem is not so much that Europe might become irrelevant, but that Europe’s relative decline is going to both noisy and nasty.”
The world is changing. But it never helps anyone to be noisy and nasty, least of all Europe in a changing world.
