Jan. 24 (Bloomberg) -- Prime Minister David Cameron’s much-hyped speech on the U.K.’s place in the European Union turned out to be both domestically astute and a gamble with Europe whose outcome is hard to predict.
At a stroke, it has defused the explosive Europe question that was tearing apart Cameron’s Conservative Party -- at least until the next U.K. parliamentary elections. It also ignited the issue for the opposition Labour Party, which must decide how to respond.
Yet the way in which Cameron secured those tactical gains for his party creates risk and uncertainty for the U.K. as a whole. Within five years, Scotland may leave the U.K. in one referendum, and what remains may leave the EU in another. The result, still unlikely but now possible, could be a diminished U.K. and a weakened Europe.
Speaking at Bloomberg LP’s European headquarters in London, Cameron promised first to renegotiate the terms of the U.K.’s membership in the EU, and then to hold a referendum by 2018 for Britons to choose whether to accept the new deal and remain members, or to pull out.
By any measure those are high stakes. Concern over what Cameron would say in his speech led both the U.S. administration and chief executives in the U.K. to warn him against quitting the EU. To his credit, Cameron made a strong case for membership, citing the trade, investment and other advantages that a middling economic power gains by belonging to a union of 27 nations (28 after Croatia joins in July).
Cameron inevitably based his address on the iconic speech that Margaret Thatcher gave in the Belgian city of Bruges in 1988. He made some of the same valid points, including that the U.K. has big goals within the EU -- to persuade other members to create an effective single market, for one, and to go on allowing new members to join, for another.
Much has happened since Thatcher’s time, though. As Cameron said, the euro-area crisis has pushed the 17 countries involved to integrate their fiscal and economic policies, even to take steps toward a banking union. He is right that the U.K. and other EU countries that have no intention of adopting the euro need to make sure the settlement works for them, too. The question is how.
Cameron proposed a wholesale renegotiation of the U.K.’s membership and a new two-speed EU structure to accommodate the change. That last idea has long been favored by EU enthusiasts, because it would allow the euro area to integrate tightly enough for the currency to survive, while other countries stand aside. This, as we have said before, would be healthy for all concerned.
The flaw in Cameron’s argument is that he can’t be sure of delivering any of his promises. His broad commitment to renegotiating U.K. membership may even prevent him from doing so, because other EU members may not agree. French Foreign Minister Laurent Fabius was quick to respond to the speech by saying that the U.K. can’t pick and choose a la carte from the EU, and that if it left he would simply “roll out the red carpet” for businesses to relocate from the U.K. to France.
Cameron is right, of course, that the EU needs to change to become more competitive, and with the right approach he may get German support. Many EU rules need to go: The working time directive, for example, is much hated by U.K. employers because it restricts the hours that employees work. Yet the odds are slim that a socialist government in France will agree to let the U.K. opt out of a rule that it sees as leveling the playing field -- no matter how absurd it seems in the age of competition with China.
Peter Mandelson, a former EU trade commissioner and one of the U.K.’s sharpest political minds, put it well, speaking on BBC television right after the speech. Cameron, he said, asked all the right questions, but to get the right answers he’ll need to make strong alliances and extend U.K. influence within the EU. Threatening to leave the bloc if the U.K. doesn’t get to tear up treaties it signed, in what would look to others like a giant act of buyer’s remorse, is unlikely to make that happen.
Instead, Cameron now has to come across to other European leaders as someone trying to improve the EU as a whole, not as a blackmailer trying to squeeze a special deal for the U.K. He needs to spend the next few years being a model European.
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