Michael J. Geary lectures in the history of European integration at Maastricht University in the Netherlands. Kevin A. Lees is an associate with Latham and Watkins LLP in Washington.
"David Cameron’s decision to veto changes to the existing EU treaties at last week’s European Council summit in Brussels generated a wealth of newspaper headlines and once again put the spotlight on that troubled relationship. Although the initial preference in Paris and Berlin was to reach an agreement among all 27 member states, French President Nicolas Sarkozy had made it clear he was prepared to conclude a new fiscal compact with the 17 eurozone countries. The result of the summit is far from certain and success is far from guaranteed.
In fact, agreement on closer budgetary alignment without both further fiscal union and monetary easing guarantees nothing. Moreover, not even Germany respected the existing 3% budget rule during the flush 2000s, so there’s no reason that markets will trust the same nations to keep to those targets now, especially facing the headwinds of reduced GDP growth forecasts. As with all previous EU treaty revisions and negotiations, the devil is in the details – furthermore, it remains unclear how an intergovernmental treaty will work in practice alongside existing EU frameworks.
If the fiscal compact is agreed by early next year, then the summit may be seen as an important step forward in the integration process, perhaps even an historic leap towards ‘an ever closer union’ (unless the agreed budgetary targets place so much pressure on growth that they destroy the euro).
At first glance, the outcome indicates more power, not less, for the Council of Ministers, at the expense of the Commission and, therefore, the summit could be an important victory for those pushing for ‘less Europe’, like France (to a degree, the UK’s veto can be seen as a boost to Sarkozy at German Chancellor Angela Merkel’s expense and a mischievous nudge in Franco-German unity).
Yet in many ways, the European Council meeting finalised many of the ‘leftovers’ from the Maastricht Treaty when, nearly 20 years ago, community leaders negotiated a treaty that kept fiscal sovereignty in the hands of national governments. Anglo-Saxons had argued that a single currency would never work without the fiscal and tax authority of a single state.
Even if their scepticism now seems wise in retrospect, they nonetheless failed at the time to prevent its creation. So at last week's summit, staring down the possibility of a continentwide sovereign debt crisis, the majority of EU leaders agreed to greater convergence in their economic and fiscal policies, all of which implies a significant loss of national sovereignty.
However, much of the media focus from the summit was on Britain’s use of the veto preventing the EU from making changes to the Lisbon Treaty. Many commentators were surprised, shocked even that Prime Minister David Cameron would press the ‘nuclear button’.
Yet, the real surprise was that it took so long for a British prime minister to take this step. There was a palpable sense of inevitability about London’s move. The history of Britain’s relations with the EU and the integration project is littered with examples that highlight how the British veto is only the latest chapter in a story that’s unlikely to end happily ever after.
The relationship was always troubled, even prior to the UK’s accession. Denied membership of the then-EEC twice during the 1960s by French President Charles de Gaulle, Britain finally gained entry in 1973 after 18 months of protracted enlargement negotiations.
Once in, and after Labour’s Harold Wilson succeeded the pro-European Edward Heath as prime minister, Britain pursued a very erratic, non-communautaire Europe policy. One year after membership, Wilson sought to renegotiate the original deal and in 1975 held a referendum on whether Britain would remain in the European Community, a sure way to antagonise its new partners.
Britain’s relationship with the EEC deteriorated further after Margaret Thatcher entered 10 Downing Street in 1979. The new prime minister was determined to tackle what she viewed as excesses associated with Community spending, especially in regard to the Common Agricultural Policy.
After years of bickering with other Common Market leaders, such as [West] German Chancellor Helmut Kohl and French President François Mitterrand, Britain secured a permanent budgetary rebate at the European Council summit in 1984.
Nonetheless, Thatcher continued to clash with Commission President Jacques Delors throughout the 1980s over his attempts to further the integration process at the expense of national sovereignty. Her famous ‘No, No, No’ speech significantly contributed to her downfall in 1990.
Her successor, John Major, had an equally troubled relationship with the EU and the direction it took after the Maastricht Treaty entered into force in 1993. With memories still recent of the painful 1992 sterling crisis that led to the UK’s withdrawal from the European Exchange Rate Mechanism, Major opted out of economic and monetary union.
Later in that decade, Labour Chancellor of the Exchequer Gordon Brown set down five conditions that would have to be met before Britain could consider abandoning the pound, one of the last relics of British Empire. With his five-test policy, Brown, whose first major act in a decade at No. 11 was to deliver monetary independence to the Bank of England, virtually guaranteed that UK would not soon transfer monetary policymaking to the European Central Bank.
By the 1990s, a two-tier EU was already emerging, which became an enshrined reality by the early 2000s when it became clear that Britain had not only firmly opted out of not just the single currency, but also rejected the Schengen Agreement on the removal of border controls within the EU and had scoffed at a Europe-wide foreign policy.
For decades referred to as the ‘reluctant European’, British ministers have sat uncomfortably around the EU table as an increasing number of decisions have been taken by qualified majority voting, leaving British policymakers with less leverage in Brussels than ever.
Meanwhile, while at home, the Conservative party is more eurosceptic than ever, more than a decade after then-leader William Hague ran on a “Save the Pound” platform and with a surging UK Independence Party nipping at its heels.
Deeper integration, even in an effort to save the euro and forestall a financial crisis that could leave the UK in deep recession, was always going to spook Cameron’s Tory backbenchers. After having avoided the straightjacket of a one-size-fits-all monetary policy, no British prime minister could reasonably accede sovereignty over fiscal policy as well. His decision to use the veto therefore should be viewed as the latest continuation of Britain’s troubled relationship with European integration.
Ideally, Britain wants a European-wide free trade area without the supranational institutional apparatus, something it proposed during the 1950s. Yet, this is not where the EU is heading unless the euro implodes. If Europe were to survive the economic crisis of the breakup of the single currency, it would send the European project careering back decades, ironically to a result much closer to what Britain has always wanted.
What now for Britain’s EU policy: continuity or rupture? Neither Cameron nor his more pro-Europe deputy prime minister Nick Clegg desires a complete break with the EU. Such a rupture would not be in Britain’s economic or political interests and talk of Britain’s withdrawal from the EU is certainly premature.
Much will depend on the outcome of negotiations on the fiscal compact between the other 26 member states and the crucially important reaction from bond markets. Some EU governments, after closer inspection of the Franco-German plan, might decide to remain outside although this currently appears unlikely.
After all, accepting rules and breaking them at a later stage is par for the course within the EU. Cameron might happily settle for an uneasy continuity given the intergovernmental nature of the proposed deal. After all, the pain of any financial crisis stemming from the euro’s implosion will be shared across the continent (or the globe) without prejudice to euro membership.
Cameron must also hope that his veto will be enough to quell the backbench revolt without forcing him to hold a referendum on membership, the result of which would almost certainly lead to a serious rupture. Viewed in that light, Cameron’s veto was a much more statesmanlike option than allowing the eurosceptics to open the Pandora’s box of a referendum."