Britain and Europe

Not playing their games

The awkward relationship between Britain and the rest of Europe may be about to get a lot worse

Mar 31st 2010 | From The Economist print edition

THIS newspaper recently conducted an unscientific survey of around two dozen Berliners who might be described as Germany’s elite. The various politicians, bureaucrats and businesspeople disagreed about many subjects. But on one thing they were firm. The election of a Conservative government in Britain would be a disaster. Their contempt for the Tories as “myopic, ignorant little Englanders” was matched only by their fear that David Cameron’s party was hellbent on destroying the European Union.

This emotion is common in Europe nowadays. It may be misplaced, but it is not without foundation. In Britain’s political spectrum the Liberal Democrats are the keenest Europeans, even wishing to join Europe’s single currency, the euro. Labour in power has had a more ambivalent attitude: Tony Blair in 1997 talked of putting Britain at the heart of Europe, but reluctantly stood aside from the euro in 1998, while Gordon Brown has tended to lecture Europeans for their supposedly faulty economic policies (quite unlike his own, of course). But the Tories are far more hostile. They opposed the Lisbon treaty and its previous incarnation, the EU constitution (as did this newspaper). And last year they pulled out of the main centre-right political group, the European People’s Party (EPP), because of its federalist ambitions.

In November 2009, when it became clear that Lisbon would be ratified before a British election, Mr Cameron set out a new policy on Europe (see article). Many of his proposals, his advisers promise, will have only domestic consequences; indeed, some will be similar to measures in, for example, Germany and Ireland. But the devil is in the details, and there is plenty of scope in these for explosive clashes with other EU countries.

Moreover, all the signs are that the new intake of backbench Tories will be bursting for a row over Europe. Back in the years of Margaret Thatcher and John Major, the Conservative Party was divided on the subject, but now it is largely united—in Euroscepticism. Almost the only divide is between those who dislike the EU but think it would be better to stay in, and those who would prefer to leave. According to a survey last July by ConservativeHome, a website, over 40% of prospective Tory candidates favour either a “fundamental” renegotiation of Britain’s EU membership or outright withdrawal. The strength of backbench opinion makes a Tory bust-up with the EU a lot more likely.

The devil and the deep blue sea

Why is the Tory party so Eurosceptic? One answer is that it reflects public opinion. So the real question should be why so many of the British (and more specifically, the English) are so hostile to the European project. Eurobarometer polls consistently put Britain at or near the bottom of the heap in answers to such questions as whether EU membership is a good thing or how much trust people have in the EU institutions (see chart). The explanation for such views is to be found partly in the country’s geography and history, partly in its experience as a member and partly in ignorance and prejudice.

Geography and history do much to explain British reservations. “Our Island Story”, a popular children’s history book of a century ago, speaks volumes by its very title. Britons’ experience of the second world war as their “finest hour” contrasts starkly with that of almost all other Europeans. Churchill told de Gaulle in 1944 that, faced with a choice between the continent and le grand large (ie, the transatlantic relationship), the British would always choose the second. That remark played its part in de Gaulle’s veto almost 20 years later of Britain’s first membership application for what is now the EU.

History resonates still. It is clear from Michael Charlton’s “The Price of Victory” (1983) that British politicians and officials never had any intention of joining the nascent moves towards a European union in the 1950s. Mrs Thatcher (as she then was) spoke for many when, just over ten years after her 1988 speech in Bruges attacking a potential European superstate, she told a meeting of Scottish Tories that “in my lifetime all our problems have come from mainland Europe, and all the solutions have come from the English-speaking nations across the world.”

Hard experience has left scars, too. The biggest reason why British governments in the 1960s sought belatedly to join the then European Economic Community was their feeling that a dynamic Europe was outperforming Britain economically. Yet 1973, when Britain eventually got in, was coincidentally also the very year in which Europe lost its relative dynamism—and thus a lot of its attraction.

This was compounded by the emergence of what became known as the British budget problem. The European budget was (and is) relatively small, but it would have been hard to design it in a way more calculated to disadvantage Britain. Most of the spending went on farm subsidies under the common agricultural policy (CAP); much of the revenue came from customs duties and farm-import levies. With a small farming industry and a lot of imports, Britain was bound to lose out. Indeed, from the moment of joining, Britain was on course to become the biggest net contributor to the budget despite being one of the club’s poorest members.

Even before Mrs Thatcher came to power in 1979, rows over the budget had become a theme of Britain’s presence in Brussels. She promptly spent five years wielding her handbag, before prising out of her colleagues a permanent budget rebate at the Fontainebleau summit in 1984. But Britain remained the biggest net budget contributor after Germany. Money matters. Strikingly, hostility to the European project has increased markedly in several other countries (Sweden, Austria and now even France) that have subsequently become big net contributors.

The long saga of sterling and Europe has also been unhelpful. No sooner had British entry been agreed in 1972 than sterling entered the “snake”, a forerunner of the exchange-rate mechanism, only to fall out ignominiously just six weeks later: an eerie foretaste of Britain’s later membership of, and expulsion from, the European Exchange-Rate Mechanism (ERM) in the early 1990s. Both experiences have left British governments of either party deeply suspicious of any EU currency schemes.

On top of budget and currency concerns has come near-perpetual institutional change. Almost since the Italian EEC presidency called an “inter-governmental conference” against Mrs Thatcher’s wishes in June 1985, part of the EU agenda has been about negotiating or ratifying new treaties. Mrs Thatcher came to believe that she had been tricked into accepting the Single European Act in 1987. Mr Major accepted the Maastricht treaty five years later only after securing opt-outs from the single currency and the social chapter.

The Amsterdam summit in 1997 introduced Mr Blair to the niceties of EU treaty-making, and was followed soon afterwards by the ghastly four-night negotiation of the Nice treaty in 2000. And then came the constitutional treaty, drawn up by a convention chaired by a former French president, Valéry Giscard d’Estaing; when this was rejected in referendums in France and the Netherlands, it mutated into the Lisbon treaty instead.

The average Eurosceptic in Britain has acquired an impression of constant rule changes that always increase the power of EU institutions. This reinforces their existing prejudices, such as the belief that what Britain joined in 1973, and what Britons voted yes to in 1975, was in essence a free-trade area that only later transmogrified into a putative political union. True, the British government did not exactly spell things out (its white paper in 1971 said there was no question of losing essential sovereignty), but the European project, with its promise of ever-closer union, always had an overtly political dimension.

Making things worse is a profound ignorance of what the EU does and how it works. The mistaken belief that the EU is responsible for as much as 80% of all legislation in Europe (it is no more than 50%), and a lack of understanding of the role of national governments, including Britain’s, in passing EU laws, have fostered the belief that an unaccountable and undemocratic machine in Brussels is somehow usurping the ancient role of Parliament. The media reinforce this belief, especially such Eurosceptic newspapers as the Sun and the Daily Mail (neither of which troubles to keep a staff correspondent in Brussels).

Ignorance of how the EU works is, of course, to be found right across the continent. But it is deeper in Britain. Charles Grant, director of the Centre for European Reform, a London-based think-tank, notes that Britain is unusual in that “people can get to the top in the media, business and the City without knowing anything at all about the European Union.” Such knowledge can, he suggests, even be a career obstacle. The contrast between Westminster and Whitehall is telling. Parliament is full of people who are proud to have little or no understanding of the EU. Civil servants, on the other hand, quickly discern that the EU impinges on many of their activities—and soon learn how it functions.

When ignorance is not bliss

This is the background that the Tories, if elected in May, will inherit. It is one that chimes with their deepest instincts. That might seem to make it easier for Mr Cameron to achieve his seemingly modest objectives in the EU, as other countries will not want to increase Eurosceptic sentiment in Britain by obdurately refusing to negotiate. Yet a strong Eurosceptic presence on the backbenches might also make life much more difficult for a Tory government with a small majority. In any case, it is always hard in a 27-member union to get your way without compromise—the more so since many EU countries are fed up with Britain and, especially, with the Tories.

Many senior Conservatives hope, probably vainly, for a more harmonious relationship. In his interview with The Economist this week, Mr Cameron again made clear that he was not anxious to engineer an early row with Europe (see article). William Hague, the shadow foreign secretary, concedes that “the EU has moved in a positive direction” and also promises that, given the long list of other problems that will face a new Conservative government, “we will not add to the list a huge confrontation with our EU partners.”

He also defends Mr Cameron’s decision to leave the EPP, saying that the group’s relationship with Britain’s Tories was never satisfactory. He even argues that, far from losing influence, the Tories may have gained some through committee chairmanships that have gone to the new European Conservatives and Reformists group, which links the Tories with various oddballs, mostly from eastern Europe.

Yet this is tendentious. The mistake over leaving the EPP was not that the Tories have had to switch their seating arrangements in the European Parliament (although the party has always underestimated the significance of that body in EU lawmaking). Nor was it that the Tories are now tarred by association with some apparent extremists, notably from Latvia.

The real problem is that a majority of EU heads of government, including Germany’s Angela Merkel and France’s Nicolas Sarkozy, as well as José Manuel Barroso, president of the European Commission, belong to the EPP. This group now holds regular meetings ahead of all EU summits. When it came to choosing a new president of the European Council last November, it was the EPP that pushed Belgium’s unknown prime minister, Herman Van Rompuy. Because of his walk-out from the EPP (which infuriated Mrs Merkel, in particular), Mr Cameron as prime minister would be excluded from such discussions.

His exclusion will also make it tougher for him to achieve his EU goals. Two things will make these especially tricky. One is that any general opt-outs from social policy or from the charter of fundamental rights would require treaty change. But after the long struggle to ratify Lisbon, most EU countries are allergic to any suggestion of a new treaty in the near future. The second is that the Tories have no obvious bargaining chips that they can play to sway their EU colleagues, who will be reluctant to concede any further opt-outs to a Britain that many consider to be already far too semi-detached from EU policies.

Mr Hague and his team talk of using the imminent Croatian accession treaty, or perhaps the next round of EU budget negotiations in 2011-12, to secure their goals. Yet neither looks too promising. Britain has always been a strong believer in expanding the EU, partly in hopes of making it looser. But that makes any Tory threat to veto Croatia’s accession in furtherance of unrelated British demands far less credible. Mr Major had to back down in 1994 when he tried to secure his preferred voting system by temporarily blocking the entry of Austria, Finland and Sweden. As for the budget, the main demand of all other 26 countries will be to scrap the British budget rebate won by Mrs Thatcher. That makes it tactically tricky for Britain to use the budget to gain the other demands it wants to make of the EU—unless the Tories were to consider trading the Thatcher rebate for a social-policy opt-out, but this would be hard to sell politically and the price might not be worth paying anyway.

A better course is to move beyond an obsession with winning general opt-outs and aim at smaller, more achievable goals for which it is possible to find allies: for example, on the social-policy front, entrenching an exemption from the EU’s working-time directive. Several other countries also support this, so Mr Cameron should gain a sympathetic hearing.

Financial regulation is another possibility. It has long been accepted in the EU that, where a country has a “vital national interest” at stake—as Britain clearly has in financial services—it is unwise and perhaps even wrong to outvote it by a qualified majority. In the past this language was used to support what is known to Eurocrats as the Luxembourg compromise, which Britain and a few others have since interpreted as tantamount to granting countries an informal national veto.

This could be an early test for an incoming Tory government, because the first meeting of EU finance ministers after the election will consider a draft directive to regulate hedge funds and private-equity firms in the EU, of which 80% are based in Britain. The directive has already been heavily amended to suit the British, but the outgoing Labour government still had enough doubts about it to secure a postponement of the debate. An incoming Tory one will share such doubts in spades.

It is in areas such as these that the Tories should focus their energies. The EU operates through elaborate compromises and careful coalition-building, both of which come naturally to many other governments but seem outlandish to Britain’s politicians used to Westminster. Like so many predecessors, a new Tory government may find that it takes time to learn how to play this Brussels game. And, although Mr Hague insists that “the Conservative Party is now quite mature about Europe”, it may take time to educate its own backbenchers, too. A rough ride is in prospect.