LONDON –The
toughest challenge in politics right now is resolving the tension between the
best long-term policy and the best short-term politics. Nowhere is this tension
clearer than in Britain’s
debate over Europe.
The reason for this resurgent
skepticism and hostility toward the EU is not hard to fathom. Europe
is in crisis. The euro’s design flaw – an economic union motivated by politics
but expressed in economics – has become manifest. Structural changes to
economies that experienced a sharp fall in interest rates when they joined a
Germany-dominated currency bloc now must be made quickly, in crisis, and
without the luxury of devaluation.
The pain that this policy is causing
has been revealed in protests across the continent and in the bitter impact on
many struggling families, the young, and the elderly. The foundation of the
pro-Europe case was partly the promise of ever upward prosperity. At present
that promise is severely in question.
So Europe’s
flagship policy is listing dangerously. To save it, I believe, requires a kind
of “Grand Bargain” approach, rather than incremental steps, with Germany
agreeing, effectively, to some form of mutualization of debt, while the debtor
countries carry out profound structural reforms, and the ECB stands fully
behind the bargain. There are some signs that this may happen. Even if it does,
Europe will suffer for some time to come.
The truth is that much of the
criticism leveled at Europe is justified and is shown to
be justified now.
So the public’s attitude toward Europe
is explicable and understandable. Add to this the fight over the EU budget.
While such rows are, frankly, absolutely routine – and inevitable in Europe’s
current economic circumstances, in which all countries, including Britain,
will vigorously defend their interests – they nonetheless reinforce the sense
of European malaise.
The short-term politics is clear:
being anti-Europe is today popular. But leadership is not about conceding to
short-terms politics. It is about managing short-term politics in the pursuit
of the right long-term policy.
“Europe is in crisis,
therefore leave” may win a majority in an opinion poll. But, in the leap to
“therefore” lies a chasm of error. I believe that such a policy would be
politically debilitating, economically damaging, and hugely destructive for Britain’s
true long-term interests. Our country faces a real and present danger by edging
toward exit. The correct policy is to engage with Europe, to make it clear that
Britain intends to be a strong participant in debates about Europe’s future, to
build alliances, and to shape an outcome that is consistent with the right way
forward, not just for Britain but for Europe as a whole.
In fact, the rationale for Europe
today is stronger, not weaker, than it was 66 years ago, when the project
began. But it is different. Back then, the rationale was peace; today, it is
power. Back then, it was about a continent ravaged by a war in which Germany
was the aggressor and Britain
the victor; today, it is about a world in which global geo-politics is
undergoing its most profound change in centuries.
Power is shifting from West to East. China
has a population that is three times larger than that of the EU and an economy
that will eventually be the world’s largest. India
has more than a billion people. Indonesia’s
population is three times that of the largest European country, and a host of
countries – including Russia,
Brazil, Mexico,
Vietnam, the Philippines,
and Egypt –
have more people today than any EU member state.
This is crucial, because, as
technology and capital become globally mobile, a realignment of GDP and
population will occur: the larger a country’s population, the bigger its
economy. The United States
remains extraordinarily strong, with its military easily the world’s largest
and best equipped, but its status as the world’s only superpower will become
untenable.
That is the big picture. The case for
the EU today is that member countries, including Britain,
need its heft in order to leverage power in economics, trade, defense, and
foreign policy, as well as to address global challenges like climate change.
The EU gives Britain
a weight collectively that it lacks on its own.
It really is that simple. I admire the
idealism of Europe’s early founders, but the rationale
for Europe today has nothing to do with idealism. It is
brutal Realpolitik. In a world in which China
and India both
have populations 20 times that of the United
Kingdom, Britain
needs the EU in order to pursue its national interest effectively. With it, we
count for more; without it, we count for less.
So the real question should not be whether
the EU, but what type of EU. And here there is no doubt that Europe
needs fundamental, far-reaching reform. Many of these reforms – for example,
that of the social model – are precisely what the UK
has been arguing for. Some, it should be pointed out, are being made. Spain’s
labor costs have declined substantially since the crisis began. Italy
has grasped crucially important reforms in areas like pensions. Greece
has cut spending by a larger amount, relative to GDP, than any country in Europe
since World War II.
Other reforms – especially political
reforms – will be hotly contested. The UK
takes a more nation-state view of the EU; others defend a federalist concept.
Some reforms are now certain to follow
from the euro crisis, like enhanced fiscal cooperation among the eurozone
members and a banking union.
Thus, over the next 2-3 years, there
is bound to be a vast, churning debate about Europe’s
future, irrespective of what happens to the euro. If it survives, big changes
will happen; if it breaks up – and I hope it does not – the consequences for Europe
and its institutions will be dramatic.
This is not a one-way debate. It never
is. It doesn’t take a political genius to work out that, as strong as Europe’s
Franco-German motor is, it is not always sparking in synch. Europe
embodies differences between north and south; large and small; and those who
favor a more conservative fiscal approach and those who favor a more lax one.
Differences also abound on a range of topics from defense to labor market
reform. As Britain
has just discovered in the EU budget debate, it can make powerful allies.
Indeed, when it comes to the future
shape of Europe – economically, socially, and
politically – there is not a pre-destined consensus. There is, instead, a
tumult of debate, discussion, and dissension.
This is the worst conceivable moment
for Britain to
start talking about leaving. That would mean quitting the field just as the
game starts, and marginalizing ourselves at the very moment when we should be
at the center of things.
Instead, Britain
should be building alliances and, more than that, originating ideas, not just
responding to them. The truth about Europe’s public
opinion is that when Britain
argues its case about Europe in Europe,
its proposals turn out to be far more popular than those advanced by many
others. But when Britain
makes a case against Europe, it deprives itself of the
credibility to win the arguments that matter.
The essential concept of a balance
between integration and the nation-state is widely shared. Most people in Europe
would support an approach by the EU’s leaders that focuses on clear outcomes in
specific areas, along with changes to the eurozone. This agenda would include
completion of the single market to create jobs; a common defense policy in an
era in which national budgets cannot meet global ambitions; energy and the
environment, where the gains, financial and otherwise, of cooperation could be
enormous; the fight against illegal immigration and organized crime; and art,
culture, and higher education, where Europe is struggling to match the US.
An approach that asks first what we
want Europe to do, and then lets us design mechanisms to
do it, would draw support across the continent. Right now, when most EU
institutions and member states are rightly concerned with the euro crisis, the
field is wide open for the UK
to seize the initiative, rather than waiting passively to consider an agenda
set by others.
It is in Europe’s
interest that the proposals for the single supervisory mechanism for banks, the
integrated financial and fiscal framework, and the integrated economic
framework are correct. But it is also in Britain’s
interest. Considering what might happen next year, let alone in the next 50
years, is it not in Britain’s
interest to influence this debate too?
If the strategic rationale for Europe
remains strong, then it cannot be in Britain’s
interest to be marginal to the debate about its future or indifferent to the
outcome.
But if we British want to participate,
we do so not just as Brits, but also as Europeans. That, of course, depends on Britain
recognizing not just the strategic rationale for Europe,
but Britain’s
strategic interest in being part of it.
Here it is no longer good enough for
us pro-Europeans to claim that only atavistic Little Englanders make the case
for leaving, or to pretend that, outside the EU, Britain
would collapse or disintegrate.
Britain
could have a future outside of Europe. The
question is whether it should – whether leaving would be sensible in
terms of Britain’s
long-term interests. Nor should we exaggerate the economic impact of leaving. I
can imagine how Britain
could create an economy that operates effectively in the global market. But,
just as we should not exaggerate the consequences of a British exit, so those
in favor of this course should not understate them.
Let us first demolish one delusion,
namely that Britain
could be like Norway
or Switzerland.
Norway has a
population of around 4.9 million and a GDP of $485.8 billion. It also has a
sovereign wealth fund currently valued at over $600 billion and set to rise to $1 trillion by 2020, owing
to vast reserves of oil and gas. If the United
Kingdom, with a GDP of $2.4 trillion, had a
wealth fund of roughly $3 trillion, all of the arguments would change. But it
doesn’t. And no serious case can be made that Britain
could become like Switzerland,
a unique case politically and economically.
That is not to say that Britain
could not develop its own unique brand. But Europe
accounts for 50% of British trade, and Britain’s
social systems, though different in detail, still broadly similar in principle
to those in Europe. Given this, those who say that Britain
should have its own unique position outside of Europe
should at least spell out the economic and social policies that would need to
be implemented to create such a future.
Britain
outside the EU would face three major disadvantages. First, it would lose its
global leadership role. There should be no illusions about this. Britain’s
EU membership affects how it is seen by the world in general and its allies in
particular. Any US
President I know would regard Britain’s
exit as folly. The idea that it would then seek new relationships with the
likes of China
and India is
fanciful. Of course, the bilateral relationship with both is strong, offering
great trading opportunities. But neither country would ever subordinate its
relationship with Europe to a relationship with a
non-European Britain.
British trade with India
depends hugely on Europe negotiating the free-trade
agreement – Germany
currently exports more than twice what Britain
does to India
and China, and France
(and even Italy)
exports more to India.
Second, despite Britain’s
close economic links to Europe, leaving the EU would
exclude it from the decision-making process determining the rules of the single
market. British companies know this; so do global companies that use the UK
as a European base. When we in government looked closely at the risks to London
as a financial center from being outside the euro, we concluded that there was
no compelling case that it could damage us. But we were never in any doubt that
being out of Europe altogether was a completely
different matter.
Yes, special arrangements can be
negotiated, but each must be negotiated individually. And, for the record, Norway
is a major net contributor to the EU budget – the price of its negotiation,
despite not being a member. I doubt that other European countries would allow Britain
to operate like some offshore center at the edge of Europe,
free from Europe’s responsibilities but participating
fully in its opportunities. Any country within Europe
could say no, and no would therefore be the likely answer. We should think long
and hard before we put ourselves in that position.
Finally, Britain would lose the
opportunity for cooperation and added strength on issues that it cares about:
climate change and the environment; trade negotiations; foreign policy, where
sometimes it suits us to have European and not just US support; and bilateral
disputes, where, as was seen recently with Argentina, Europe’s solidarity
counts. Britain
would cut itself out of future developments in Europe at
a time when countries around the world are seizing the opportunities offered by
regional integration. From the Association of Southeast Asian Nations – now
with roughly 600 million people and looking to get a single market underway –
to the African Union and South America’s MERCOSUR and
UNASUR, countries everywhere are coming together in regional blocs. Will Britain
drift away from the one on its doorstep?
The reason this case has to be made
now is integral to understanding how political decision-making works. Sometimes
decisions are taken at a moment in time, expressly and obviously. But political
decisions can also be taken by a process of effluxion that begins with an
attitude, turns into a series of tactical steps driven by the attitude, and then
results in a decision that is strategic in effect but almost imperceptible at
any one moment. That is the risk now.
Let us be very clear, too, about
“renegotiating the terms of membership,” the refuge of those who want to leave
but want to persuade people that it really is just an adjustment of the
relationship. When, in the course of the “adjustment,” the going gets very
rough (as it will), they will say, “Well, it’s a pity, but now it seems that
adjustment is not enough.”
If Britain focuses over the next few
years not on how it can help Europe recover and prosper, but rather on how it
can change its own relationship with Europe, there should be no doubt about the
temper and frame of mind that our current partners will bring to that
negotiation. There will be varying degrees of politeness. But they will not
thank us and will not accommodate us. So Britain
must not go down this path unless it is prepared to follow it all the way to
the exit.
There is a lesson from history. In
1946, when Europe was debating its first tentative steps
toward integration, Winston Churchill gave his famous speech calling for a United States of Europe. But it
is important to note that he was passionately in favor of France
and Germany
coming together to found this new Europe, which he
believed was the route to peace after the horrors of war. He wished the
enterprise well; but he did not intend that Britain
would be part of it. So it wasn’t.
But Britain
spent the next two decades and more trying to join it; and when, eventually, it
did, many of the rules and much of the institutional infrastructure were
already set in stone. I have no doubt that if we could have foreseen the future
in 1946, we would have wanted to be in Europe from the
beginning.
Europe’s
current turmoil will produce a new settlement probably as momentous as any
since that moment 66 years ago. Britain
should not make the same mistake twice. This time, whatever the challenges, we
should put our shoulders to the wheel and be part of the collective effort to
make Europe strong and effective once more.
Europe is a
destiny that Britain
will never embrace easily. But doing so is essential to remaining a world
power, politically and economically. It would be a monumental error of
statesmanship to turn our back on Europe and abandon a
crucial position of power and influence in the twenty-first century.
This article is adapted from a
speech on Europe and the United
Kingdom.