Written by Griffin O'Rourke | 29 December 2011
Posted in Comment - Politics

 Photography: Crown Copyright

Remember the day: 8^th December 2011. It was the day Britain effectively severed its ties with Europe. We have always been on the edge of the continent, physically but also diplomatically thanks to the shaping of the Eurozone, but the day Prime Minister Cameron used his veto on EU treaty changes was the day when the die was definitively cast on Britain’s place amongst the European bloc.

I don’t buy the notion that this was a “pander” to the 1922 Committee of Tory Eurosceptics. This suggests David Cameron, George Osborne and most of the cabinet were all for fiscal union and Britain conceding more powers to Brussels. This doesn’t make sense. For a leadership that quotes Hobbes, Locke and Smith and worship at the table of American neo-liberalism there is no desire to go the opposite way.

I have heard some people saying that this is not the endgame many have portrayed it to be. Nick Clegg said he was “bitterly disappointed” with how negotiations went but remains positive that the Sarkozy handshake snub was just a silly bit of posturing. Angela Merkel has said that she was “disappointed that the UK could not join us on this journey” but that we are not frozen out of Europe.

Although Cameron has stuck out alone on this one particular issue, the EU Commission, which decides economic policy, is but just one constituent of the tripartite body that is the EU.  Not only can Cameron choose to come back into the fold later on in these current negotiations – not least when an ‘accord’, as it is likely to become, may well need full EU approval – but Britain will have to be involved in the European Parliament and the courts.

Furthermore, it appears Britain is not alone in having major reservations about the current EU treaty changes. The Swedish and Hungarian governments were waiting on referendums for their participation but these have moved in recent weeks toward outright stances against. The Czech and Irish governments are moving in a similar direction.

Yet there is every indication of finality about Cameron’s publicity stunt that makes it different from other statements of discontent. A finality that shouts, “It’s your mess, you deal with it”, at Sarkozy and Merkel, the engineers behind a possible fiscal union within the Eurozone. This Conservative Government, which by all intents and purposes it is, has always been urosceptic and we can substitute the “financial safeguards” rhetoric for “repatriation of powers” at every turn; something other newspapers have chosen to do.

Whilst I disagree with the decision to stonewall in Brussels, I can full well understand the decision. There is no appetite amongst the British public to continue integration with Europe. A recent Ipsos Mori poll showed 51% of people surveyed wanted to leave the EU altogether. Such euroscepticism hasn’t been seen since the time of Thatcher. Of course, we did move in a different direction from Maastricht onwards, but I cannot envisage a similar scenario emerging this time.

British business, or more correctly the City of London, sees Europe as damaged goods and wants to spread its assets elsewhere. Too much money is tied up in ailing European economies. RBS, 80 per cent owned by the taxpayer, has over £50 billion tied-up in Italian governmental debt. If Mediterranean nations were to default on payments, the Eurozone to go down in flames, leaving British banks part of the collateral. Even a change in market confidence can see billions wiped off FTSE 100 share values.

It was therefore entirely natural for Cameron and Osborne to protect the interests of the City, whose financial services comprise 12 per cent of British GDP, as it is defending national interests by symbiosis.

However, just in that previous statement I am making a huge assumption: that Britain values the City as paramount above all interests. It also presupposes that the economic significance of the City will only increase as the British economy reorients itself in preparation for a new future; facing away from Europe and toward new markets.

Mr Cameron has already talked about Britain as the “new Switzerland”, with all the economic benefits of being outside the EU but in the sphere of European commerce. It could also be a “new Norway”, subject to all the EU currents but without any powers to influence them. Other sources have said it could be even worse than that, with Norway having fossil fuel resources to export that Britain doesn’t and therefore we would have no bargaining chip.

Interestingly, the British economy is already even more service oriented than the countries it aspires to be like. The Swiss financial services sector is less important to its respective economy (11.5 per cent of GDP) than the City of London to Britain.

The Swiss agricultural sector (3.8 per cent) is far more powerful than that in Britain (1.8 per cent), whilst Norway presents an even more disparate comparison (45 per cent of GDP in industry/52 per cent in services sector, to Britain’s 21 per cent in industry, 76 per cent in services).

If the Conservatives want to reorient our economy, therefore, they should be far more supportive of British industry, rather than acting in an opposite manner by signing railway contracts with German manufacturers like Siemens. Then Transport Secretary Phillip Hammond, said “we were forced into this position by the last government”, but that card is already looking quite tatty from its numerous usages.

If Britain wants to become recession proof – although the financial services gurus have argued that a ‘doom cycle’ is actually a necessary process – then the economy needs to become more diverse. It’s reassuring to know, then, that the government has decided against investing in green technology; of which this country is a world leader. Caroline Lucas and the Green Party will have a field day if that policy continues. Ed Balls has already raised the question in his addresses to George Osborne.

The other big problem, as well as economic structure, is the target markets. If Europe is to be ignored, to whom can Britain sell? It is not just the case that the Eurozone presents around 50 percent of our total export market, we run huge trade deficits with all prospective target markets like the US, China and India. Even with the Eurozone exports Economy Watch still puts Britain’s trade deficit at £4 billion a month (as of June 2011). Turning these around is a slow process that requires a lot of careful work between the government and private industry.

Supermarket giant Tesco has faced a serious kickback in China after spending millions trying to convince Chinese shoppers to try a British brand and change their shopping habits. Our biggest exporter is BAE Systems – but how many missile-carrying aircraft can the Saudi government want? I’m sure the loss of Colonel Gaddafi was a huge blow to Britain’s export market, not that Cameron was thinking about that in his neo-conservative crusade.

As the saying goes, it takes years to make friends and minutes to lose them. With this government now determined to metaphorically break away from Europe, we should not expect any favours from over the Channel. So whilst the majority of Britons may be gloating as the Sun prints Churchill’s “V for Victory” salute the reality is that isolating ourselves from our biggest market is quite possibly the most disastrous move made since that made by Anthony Eden to move into Suez in 1956.

What we may have to hope is that the bluster from Monsieur Sarkozy, Jose Manuel Barroso and just about every other EU politician is just that, because if the Eurozone wanted to exact just desserts on Britain it could quite easily. The City may feel protected for now but the EU Commission, without British consent - thanks to this new accord, could bolster the European Central Bank (ECB) or recapitalise other banks with the money British people have invested, private or public. This, on top of other measures to sever ties with British firms, would prove devastating.

Now, of course, this is all just hypothesis and I am sure that protectionists or eurosceptics will challenge this analysis as scaremongering itself. Yet there is very little reason to expect the economic picture to drastically improve. Recently the Office for Budget Responsibility (OBR) confirmed that growth in the last quarter was 0.6 per cent compared to their (twice) downgraded forecast of 0.5 per cent. Well that sounds like great reason to pop the cork on the bubbly at 11 Downing Street.

We seem to be clinging on the edge of the precipice at the moment. Unemployment is at its highest rate since 1993, the Treasury is now borrowing more money than even before and predictions show another seven years of austerity. It was therefore crazy to start putting the noses of our closest friends out of joint. Merry Christmas one and all.

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