Flagging enthusiasm

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Britain's Unsolvable Problem With Europe

Clive Crook is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was chief Washington commentator for the Financial Times, a correspondent and editor for the Economist and a senior editor at the Atlantic. He previously served as an official in the British finance ministry and the Government Economic Service.
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Should Britain stay in the European Union or go? Between now and the referendum on June 23, the two campaigns will press their respective arguments with total conviction. These displays of certitude are phony. The choice is a closer call than either side will admit.

For one thing, the eventual outcome won't be ordained by what Britain decides on the day. Whether it's stay or go, everything depends on how events subsequently unfold. The U.K.'s decision is enormously consequential not because it will settle things, but because it offers two completely different sets of challenges -- a finely balanced choice between two extremely demanding futures.

Will Britain Leave the EU?

Suppose Britain votes to quit. What would success then require? The list of tasks is crushing. First, the government would have to negotiate a friendly divorce -- one that left most or all of the single-market freedoms in place (thus avoiding a damaging economic shock) while restoring some useful measure of political sovereignty (thus justifying the whole endeavor).

Now, this ambition isn't foolish on its face, as many Stay supporters seem to think. To some of them, the very idea of self-government is mostly a delusion. A middle-sized country like Britain, they say, would have no more actually useful sovereignty outside the EU than it does inside -- indeed it might have less, because there's strength in numbers. Outside the union, Britain's government would still be constrained by the forces of geopolitics and economics, and it would have fewer friends: Sovereignty, in effect, is a myth.

This view, surprisingly popular in elite circles, is nonsense. Does Canada have more actually useful sovereignty than, say, California? Of course. When Canada writes its laws, it's constrained by economics, geopolitics and heaven knows what else, but it's still in charge of writing its laws. Where trade-offs must be struck, Canada chooses how to strike them. And notice, if you will, that Canada's choices are distinctive: It doesn't look like America. There's an obvious difference of kind, not just of degree, between Canada's ability to govern itself and California's. Sovereignty is not a myth.

Moreover, on the face of it, there's no reason you couldn't combine single-market freedoms with more national sovereignty than the EU's members now have. Deep economic integration didn't require a single currency, a European Parliament and least of all a European Court of Justice (a supreme court of the EU). If Europe wanted to, it could in fact agree to a friendly divorce, preserving most of the union's mutual single-market benefits but letting Britain step aside from the political project.

Yet Europe won't do that.

Eroding national sovereignty is one of the EU's declared purposes -- its manifest destiny, if you will. Europe's other governments won't help Britain prove the viability of more economic integration combined with less political integration. The split wouldn't be friendly, and Europe is in a position to make Britain pay.

Campaigners for exit say this wouldn't happen. It would be in Europe's interest, they argue, to bind the U.K. into the single market so far as it could: Europe would be harming itself by shutting out the U.K. Commitments under the rules of the World Trade Organization would limit the scope for retaliation in any case.

They're right about where Europe's economic interests would lie,  but that isn't the point. Some EU governments would be happy to harm themselves slightly to hurt Britain a lot -- you know, pour encourager les autres. (Odd that euro-skeptics, of all people, should rest their case on the friendship and fair-mindedness of other EU governments.) As for WTO commitments, access under Europe's single-market rules goes much further. The U.K. has a lot to lose if the EU decided to be unaccommodating, and I'm betting the EU would. 

Arranging a divorce on advantageous terms with an embittered spouse would be tough -- but that's only the first item on the list. The U.K. would also need to negotiate new trade agreements with all its non-EU partners, an enormous undertaking. It would need to rethink its military and security alliances, at a time of heightened anxiety over Russia and the Middle East.

Above all, it would have to cope with the domestic political consequences. Cameron would struggle to survive as prime minister. Scotland would demand another referendum on independence. There'd be pressure to restrict immigration and/or raise import barriers in retaliation against an unfriendly EU. (Yes, EU commitments sometimes bind members to act in their own best interests: Now and then, sovereignty is the power to do stupid things, and you're better off with less.)

Making a success of exit would not be impossible, but with a list like this to contend with, the odds are against.

Does this mean Britain should stay? As a matter of fact, I'm not sure it does. Making a success of not exiting would also be difficult. I'd say the odds are against that too.

The unavoidable problem if the U.K. stays is that the country is profoundly out of sympathy with the desire of many other European governments to continue deepening their ties. To make a success of remaining in the EU as currently constituted, Britain would either have to change its attitude to closer political integration or deflect the other governments from that goal. Either of those tasks will be as hard as arranging a friendly split.

As far as the first goes, British attitudes aren't going to change. Note that the Stay campaigners don't talk much about Brits getting more comfortable with political union and coming in the fullness of time to think of themselves as Europeans first. That's good tactics on their part: Britain's instinctive euro-skepticism won't dissolve in the foreseeable future, and the country isn't interested in being told otherwise.

Instead the Stay campaigners say the recession and popular disenchantment with the EU (by no means confined to the U.K.) have checked the project's momentum toward closer union. They also point to the opt-outs the U.K. already has, most notably on the euro. And they argue that if Britain stays, it will have a big say in Europe's future direction. For all these reasons, they argue, Brits have no need to worry.

I want to believe this but I think it's wrong. Britain won't have a big say. It's one country in a union of 28 and counting. Momentum toward closer union is built into the system and will soon resume. Decisive and deliberate action would be necessary to put the EU on a different track. There's no sign of it.

Europe's economy has been flattened and is refusing to bounce back. In many countries, outrageously high unemployment is tolerated and is beginning to look permanent. The calamitous decision to create the single currency without the necessary fiscal underpinnings has made things much, much worse. Anti-EU parties are on the rise almost everywhere. Look around and the need for far-reaching reform is self-evident. It isn't happening.

Note by the way that in the recent negotiation, Cameron called for change not as an enemy of the EU but as an ally, whose political purpose is to unite his party and the country around continued EU membership. Yet his EU partners, patience wearing thin, gave ground grudgingly. They see the changes they agreed to as concessions, not helpful innovations. They regard Cameron, his country, and their perpetual demands for reform as an infernal nuisance.

The EU resists real reform partly because that would require treaty changes, which in some countries would then require popular ratification. People across the union are unhappy with Europe, so any such endorsement may not be forthcoming, making it rash to consult them in the first place. This is how democracy works in Europe. The EU has over-reached, yet it's incapable of fixing the error. 

Granting that Europe is bad at recognizing and dealing with its problems, the Stay campaigners still aren't too worried. They have their opt-outs, and what's so bad about the status quo? The answer is, it's unsustainable. Without deliberate action of the kind the EU can't muster, the drift to closer political integration will continue.

In some areas and for most of the union's members, closer political integration is actually necessary. Members of the euro area urgently need to develop a form of limited fiscal union, otherwise the single currency will continue to hold them back. But the main force pushing further integration is institutional self-interest. The union has created powerful bodies -- its parliament, executive and supreme court -- with a huge vested interest in expanding their anti-democratic competences under cover of the union's malformed constitution. In the existing treaties, they already have everything they need to do that.

Despite Britain's opt-outs, the worst kind of further political integration is therefore all too likely. As seen from the U.K., the prospect is endless creeping diminution of the country's ability to govern itself, with consent neither asked for nor given. If the U.K. does vote to stay, I'm confident of one thing. Its chronic discontent -- a state of mind that comes easily to the British -- will only get worse.

If a friendly divorce was feasible, and if the other short-term risks weren't so great, I'd vote to quit. I'd recommend the relationship Canada has with the U.S. over the one that Britain has with Europe, if that choice was available. But I fear it's too late. For all the reasons I've mentioned, Britain lacks a better alternative, and is stuck with a loveless marriage. There might be things it can do to make the prospect less bleak -- a subject I'll come back to -- but it won't ever feel it belongs.

Sad, but there you are. Britain chose to get hitched a long time ago, and some decisions just have to be lived with.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Clive Crook at ccrook5@bloomberg.net

To contact the editor responsible for this story:
James Gibney at jgibney5@bloomberg.net