Cameron Takes Thatcher’s Gauntlet in 50 Years of EU Friction

Before he was elected prime minister in 2010, David Cameron presaged the latest breach in Britain’s fraught relationship with Europe.

Cameron announced his intention to abandon allies in the European Parliament including Germany’s Angela Merkel before being elected to lead the opposition Conservative Party in 2005. He sought partners with the same vision for a Europe with looser ties and formed a new group in 2009.

Now, as prime minister, he’s pitching for a fresh deal to repatriate some powers from the 27-nation European Union, picking up where his Conservative predecessor Margaret Thatcher left off in the 1980s. While insisting he wants the U.K. to remain in the bloc, Cameron unveiled plans yesterday to hold an in-or-out referendum on the country’s membership.

“He’s started us off down a road in the dark without a torch,” Drew Scott, professor of European Union studies at Edinburgh University, said after the speech. “Cameron has walked into redefining British foreign policy. He risks going places that Thatcher wouldn’t go.”

Cameron, 46, is yielding to pressure in his Tory party in a country that has always been divided over how closely to cooperate with the capitals across the English Channel.

Debt Crisis

Yet the results risk resonating more widely as European leaders try to put a lid on their debt crisis by forging closer ties on such matters as budgets and banks. More than half of British exports went to EU countries in 2011, the latest annual data available, and the government says more than 3 million U.K. jobs rely on trade with fellow members.

“The political nature of the project has never been taken on board,” said Simon Bulmer, professor of European politics at Sheffield University. “We went into it with a single market in mind, but which then didn’t exist.”

The FTSE All-Share Index rose 0.3 percent in London today and was barely changed yesterday. It’s up 8.8 percent over the past year, trailing Europe’s Stoxx 600 Index as the British economy slumped. The pound touched an 11-month low against the euro two days ago before strengthening 0.2 percent yesterday following a report showing a decline in jobless claims.

Chief executive officers including Peter Sands at British bank Standard Chartered Plc and Tidjane Thiam at Prudential Plc, the largest U.K. insurer by stock market value, said the country is better off inside the EU. John Nelson, chairman of Lloyd’s of London, the world’s oldest insurance market, said yesterday a referendum creates “uncertainty.”

‘Strong Minded’

Since staying out of the first six-member incarnation of the EU in 1957 that cemented peace between Germany and France, Britain has in turn tried to get more involved, only to be pushed back by a French president, and then rejected another Frenchman’s calls for deeper integration.

Its leading political parties have swapped sides. Labour, which 30 years ago split over Europe, now supports EU membership. The Conservatives, who took the U.K. into the union in 1973, divided over how far to pull back.

“I know that the United Kingdom is sometimes seen as an argumentative and rather strong-minded member of the family,” Cameron said in his speech at Bloomberg LP’s European headquarters in London. “It’s true that our geography has shaped our psychology. We can no more change this British sensibility than we can drain the English Channel.”

Let’s Integrate

German Foreign Minister Guido Westerwelle said after Cameron’s speech the EU needs “more, not less, integration.” France’s European affairs minister, Bernard Cazeneuve, said Britain risked access to the EU’s barrier-free market.

The U.K. first applied to join the European Economic Community in 1960 under Prime Minister Harold Macmillan, also a Conservative.

Applications were vetoed in 1963 and 1967 by French President Charles de Gaulle. In 1970, with de Gaulle out of office, Edward Heath, another Conservative premier, began negotiations, and on Jan. 1, 1973, Britain joined.

Labour won a majority in October 1974 having promised a referendum on membership, and in 1975 the plebiscite was held, with Prime Minister Harold Wilson arguing amid a divided Cabinet for a “Yes” vote.

Love, Hate

“It’s tempting to think that the Conservatives have gone from being ‘the party of Europe’ to the party that hates Europe over the last half century,” Tim Bale, professor of politics at Sussex University and author of “The Conservative Party: From Thatcher to Cameron,” said. “But, if truth be told there’s always been a strong streak of ambivalence about, and pockets of outright opposition to, British membership.”

Holding the referendum depends on the Conservatives winning a majority in the 2015 election, and it would take place in 2017, midway through the next parliament, Cameron said.

A YouGov Plc poll for the latest Sunday Times newspaper found 40 percent of respondents would vote to stay in the EU compared with 34 percent opting to leave. YouGov polled 1,912 adults on Jan. 17 and Jan. 18. Another pollster, Ipsos MORI, said EU membership was cited by 2 percent of people among the most important issues facing the country since 1974.

Meanwhile, Scotland will vote on independence in 2014, potentially disuniting the U.K. prior to a vote on disuniting the EU, with Cameron this time campaigning for the status quo. The latest opinion poll by TNS BMRB showed support for Scotland going it alone at 28 percent, the same as three months earlier, though with an increase in undecided voters.

Distractive Votes

“This is negative for the U.K. markets and economy as it serves as a distraction,” said Haig Bathgate, investment chief at wealth manager Turcan Connell in Edinburgh. “There are also some conflicts in terms of the message. On the one hand the pro-unionists are stating that Scotland would be better as part of the U.K., and on the other in many cases they state that we’d be better off out of Europe. What’s it to be?”

It’s too early to say what effect a change in the U.K.’s relationship with the EU would have on the economy, said James Mitchell, professor of government and public policy at Strathclyde University in Glasgow.

“It makes sense to take the opportunity of the EU in flux to try and win as much as possible,” Mitchell said. “However, it’s not easy to demand unilateral changes from within the EU.”

Britain has always seen itself as separate from mainland Europe, and not just because it’s an island.

Norman Conquest

People drive on the left, often talk about pounds and yards rather than kilograms and meters and their history books include keeping out the Spanish Armada and Nazi Germany. The last successful invasion was by the Normans in 1066.

“What we’ve seen over the last 12 months is a hardening of the policy that Europe isn’t the only show in town,” said Scott at Edinburgh University.

In a poor omen for Cameron’s referendum pledge, the two-to-one vote to stay in the EEC didn’t settle the fight within Labour, and by 1981 the party leadership had committed itself again to withdrawal. Neil Kinnock, who took over the leadership in 1983, dropped the pledge, though not before several leading members left and founded the Social Democratic Party, which later merged with the Liberals to form the party that’s now Cameron’s coalition partner.

Nick Clegg, leader of the Liberal Democrats, is opposed to leaving the EU and yesterday referred to “years and years of uncertainty” because of talks over the U.K.’s status.

In 1984, Thatcher told fellow European leaders that the U.K. should get a rebate from its budget contributions, to compensate for what she said was the unfairness of so much of the money being spent subsidizing farmers.

Bruges Speech

Four years later, she made a speech on the future of the bloc in Bruges, a text still referred to by members of her Conservative Party. She said while Britain should be in the community, the EEC shouldn’t encroach into areas of social policy. A string of rows with her cabinet about Britain’s place in Europe led to her resignation in 1990.

Her successor, John Major, signed the Maastricht Treaty, laying the foundations of the EU, in 1992. His government nearly fell in a series of rebellions from lawmakers who warned it would cede sovereignty to Brussels.

A Referendum Party, bankrolled by financier James Goldsmith and calling for a vote on exit, put up candidates in the 1997 general election without success.

The U.K. Independence Party, the current anti-EU group, polled 10 percent in a Jan. 20-21 survey of voting intentions by YouGov Plc, the same as Clegg’s Liberal Democrats.

Cameron’s Withdrawal

Relations with Europe improved under Tony Blair, Labour prime minister from 1997. Still, his plan to join the European single currency was blocked by Gordon Brown, then chancellor of the exchequer and later his replacement as premier.

Cameron withdrew the Conservatives from the European People’s Party grouping in the EU in 2009, setting up an alternative European Conservative and Reformists Group, which Clegg called “nutters, anti-semites, people who deny climate change exists and homophobes.”

“The biggest danger to the European Union comes not from those who advocate change, but from those who denounce new thinking as heresy,” Cameron said in his 38-minute speech yesterday. “In its long history, Europe has experience of heretics who turned out to have a point.”