The news today is dominated by the story of how David Cameron supposedly exercised a veto to prevent Britain becoming involved in the German proposed treaty to set up a fiscal union.

Media reporting is wrong.  What happened was far more significant.  Cameron did not wield a veto.  Had he wielded a veto there would be no new treaty.  Instead there will be a new treaty only Britain will not be involved in it.

This is so extraordinary that I can only assume that what happened is that Cameron sought to wield a veto but was told by the others that if he did his veto would be simply ignored.  In other words Britain’s veto was overriden by the other EU states.  To disguise Britain’s humiliation Cameron is presenting what happened as his decision even though it was one that was forced on him. 

In other words Britain has to all intents and purposes been expelled from the inner councils of the EU.  Whatever happens next it is difficult to believe that the other member states will ever let it back.  Even if Britain were to elect a pro Europe Labour government it is doubtful that the other EU states would trust Britain’s long term commitment to Europe and the EU sufficiently ever to let it back.  Given that this is so one has to wonder for how much longer Britain will remain a member of the EU.

This is all pretty momentous and its implications for Britain, Europe and the world will take some time to think out.  I would however make just a  few preliminary points.

1. The new EU treaty will not create a fiscal union.  As I said in an earlier post, it merely re asserts the old Maastricht criteria in a far more stringent form.  EU states are now given deadlines to bring their debt to GDP levels down to 60% and will supposedly be obliged to limit their budget deficits over the lifetime of an economic cycle to just 0.5% of GDP.  All this is to be administered by the European Commission and enforced by the European Court of Justice.

Various commentators have correctly pointed out that this will impose unprecedented and indefinite austerity on Europe.  No commentator has so far pointed out that what is being proposed is actually impossible.  There is no possibility that the targets will be met.  Italy has been running a primary budget surplus for years and yet its debt to GDP level is still 120%.  How can it bring it down to 60% in anything like the kind of time frame that is being talked about?  Yet that by law is what Italy is now be obliged to do.  The same point can be made about all other EU states.

One has to wonder whether those involved in drawing up these targets have any idea what they are doing.  What they are doing is planting a bomb under the European project.  Not only will what is proposed fail but it also entirely fails to address or indeed show any understanding of the eurozone crisis, which is a banking not a sovereign debt crisis.  At the same time by using laws and treaties to impose targets that cannot be met the European leaders are ensuring that those laws and treaties will be broken.  Given that the EU system is ultimately no more than a web of laws and treaties creating arrangements that are bound to fail and which will result in those laws and treaties being broken all but guarantees that this web will unravel.  The people of Europe will in the meantime have to pay the price.

2. Cameron has presented his attempted use of the veto as intended to protect the financial community based in the City of London.  This is untrue.  There is nothing in the treaty that would have threatened the financial community of the City of London in any serious way.  The real reason for Cameron’s opposition is that he knows that the government and his leadership would not survive the inevitable backlash from euroskeptics.  

3. I have always known that there was a possibility that Britain might leave or be ejected from the EU.  The one thing I never expected is that it might happen under a government with Liberal Democrat ministers.  Unless they now act that is the position the Liberal Democrats might now find themselves in.



  1. There goes another pole of the allegedly multipolar world. I remember Anne Applebaum laughing gloatingly about the once-upon-a-time musing that the EU might stand up a multinational military force; having a crushingly large and powerful military that can force its nation’s will on others is very important to conservatives, and they are exceedingly proud of it. Well, now the EU will have to abandon dreams of having anything in common except a staggering debt load.

    So now the only possibilities for alternative poles to America – despite its own massive debt load, will be China and whatever sort of Eurasian Union Vladimir Putin is able to cobble together. At least this should end the yearning of Ukraine to join the EU.

    • I suspected it would happen well before these ideas started growing in popularity, but for all that I’ll miss the EU if it really goes.

      It does good things in pressuring countries to improve their legal and judicial systems, and isn’t anywhere near as mercenary and ham-fisted about it as the US or coalitions of Western states.

      I hope the borders at least will remain open.

      • I agree with you. I used to be a very strong supporter of the EU for precisely the reason you say and in my guts I still am or would like to be. Unfortunately in the 1990s it all turned to madness. One day I will write about it. In the meantime I am sorry for the people who are going to suffer.

  2. “There is nothing in the treaty that would have threatened the financial community of the City of London in any serious way”

    While this new treaty had nothing to do with the City of London directly, there is a whole raft of stupid and dangerous legislation that threatens to be imposed by QMV in the near future, and done so under the guise of fixing the crisis. So I would direct all to section 2.2 of the following document:

    In order to fend off this imminent ‘attack’ on our free-wheeling anglo-saxon model of capitalism (irony alert), Cameron took the opportunity on thursday night for the following:

    • Any transfer of power from a national regulator to an EU regulator on financial services would be subject to a veto.

    • Banks should face a higher capital requirement.

    • The European Banking Authority should remain in London. There were suggestions that it might be consolidated in the European Security and Markets Authority in Paris.

    • The European Central Bank be rebuffed in its attempts to rule that euro-denominated transactions take place within the eurozone.

    France and Germany said no, so we said you must go on about your rescue without us, in order that EU machinery is not used by a caucus vote marshalled by an envious France against the interests of the city.

    That there is £50b/year in tax revenue and HMG would like to keep collecting it!

    • None of these proposals seems to me to threaten the City in any serious way. In any event the proposed treaty has nothing to do with them and staying outside the new treaty will not prevent them or prevent Britain from being affected by them. All of these proposals can be implemented by the European Council by qualified majority voting and imposed on Britain whilst it remains a member of the EU.

  3. I have been observing the EU institutions for twenty years. In Brussels there is complete gloom about the situation

  4. I have heard a story whose truth I do not know but which I pass on that on Thursday night when he tried to wield the veto Cameron told the other heads of government that since he had vetoed the treaties there was nothing further to discuss, the summit was over and they should leave the building. Supposedly he was heard in silence and the meeting then went on. Later Cameron said that the European Commission could not administer the new arrangements without British agreement. Barroso the Commission President blew the raspberry to that. What is beyond doubt is that Cameron tried to form an anti treaty group with Sweden, Hungary and the Czech Republic only to have all three defect to the other side on the following day.

    All this of course has its comic side but this should not fool one to the underlying tragedy. The EU has set in motion a process which if taken to its logical conclusion must result in the ejection from the EU of its second biggest member state and one which moreover has played an absolutely central role in European history. All this is happening in order to implement changes that are unachievable but which will cause great hardship to many people whilst threatening the very existence of the EU.

  5. I know this is an old post, but I was browsing through it after being linked to your post on the Pussy Riot case via Karlin’s Da Russophile blog.

    Ultimately it might be better for the EU if Britain did leave. British opinion is generally anti-EU (though many are actually pro-EU) and the benefits of integration are usually ignored or downplayed while various politicians will use the “blame Brussels” card to good effect for political mileage. In that kind of poisonous atmosphere it is little wonder that the behaviour I’ve seen exhibited even during a BBC interview of some of the EU bureaucracy showed a marked difference between the British members (who seemed to be bordering on lunacy) and everyone else when it came to fairly non-important issue of raising the profile of what the EU does (the British members interviewed were, as expected, quite hostile to the idea).

    Rather than having the British government and British press nagging over everything (even things which they have opted out of and for which they have ZERO say such as the euro), it might be better if Britain took up the same kind of relationship Norway has – then the UK will be out of the euro (much to the relief of many British citizens probably), the UK will still have access to the Single Market and the British government can no longer nag about the issues since they will either simply accept new European legislation related to the Single Market or have to exit those arrangements and close themselves off from the Single Market entirely. But at that point the politicians would be better able to ignore the rabid press and it’s anti-EU slant (which would still likely occur even after Britain left the EU) and the resulting effect it has on public opinion and thus their electoral fortunes.

    Integration requires willing members. If a member becomes unwilling then they should be free to leave to discover if they really ARE better off without integration or to get reminded of the actual benefits of the process.

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