Thoughts on David Cameron’s speech about Europe

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On November 10 David Cameron delivered a speech on his government’s demands for reforming the European Union and for repositioning the United Kingdom’s role in it. The Prime Minister’s thesis is a qualified “yes” for continued UK membership in the EU. From his perspective, European integration has proceeded without addressing some of its inherent flaws. The result is a state of affairs that delivers suboptimal results in four key areas of policy: (1) the single market and the euro, (2) regulation and business, (3) national sovereignty and the EU’s commitment to ever closer union, and (4) migration and abuses to the freedom of movement and establishment.

In the present article we examine Mr. Cameron’s most salient points. All of the Prime Minister’s quotes herein are taken from the full transcript of his speech, as provided by the official website of the UK government.

The euro will remain a bloc

David Cameron:

Above all, [the EU] needs, as I said at Bloomberg, to operate with the flexibility of a network, not the rigidity of a bloc. Never forget that the European Union now comprises 28 ancient nations of Europe. That very diversity is Europe’s greatest strength. Britain says let’s celebrate that fact. Let’s acknowledge that the answer to every problem is not always more Europe. Sometimes it is less Europe. Let’s accept that one size does not fit all.

The juxtaposition between a network and a bloc is a sound one, for it captures the difference in degree between various stages of inter-state integration. Historically the European integration process has evolved from a network to a bloc model, with the first European Communities giving way to the European Union with its Economic and Monetary Union (EMU).

With regard to the EMU, it should be noted that it encompasses all of the EU Member States, as it represents the third and final stage in economic integration culminating in the adoption of the euro. This is the rule. To it there are a couple of exceptions, the opt-outs from the euro offered to the United Kingdom and Denmark. Notwithstanding these derogations from the principle, the euro is the official currency of the EU, with every Member State being obliged to adopt it. To that end the distinction between euro and non-euro countries has to account for a subtle yet crucial point: (i) the non-euro countries that have to adopt the euro but still do not satisfy the criteria for doing so, and (ii) the countries that are exempt from adopting it.

The EMU is a bloc in the sense that it is becoming a federated state. What many commentators seem to ignore is that the euro crisis has contributed to a far-reaching redesign of the single currency’s institutional framework. Prior to the crisis, fiscal policy and bank supervision were perceived as unassailable national competences. That is no longer the case.

On the fiscal front, there exist a set of Community regulations, the two-pack and six-pack, which substantiate the economic governance of the EMU, by making Member States coordinate with one another and with the European level on the formulation of their fiscal stance and economic policy.

On the banking front, the Single Supervisory Mechanism as well as the Single Resolution Mechanism have provided the European Central Bank with the necessary instruments for performing micro- and macro- prudential operations. To these a common deposit guarantee scheme will be introduced, concluding the process of establishing a banking union.

Adding to such reforms we may note a couple of treaties outside—albeit in line with—the Community acquis, namely the Fiscal Compact and the ESM Treaty. The former has reinforced the legal framework pertaining to fiscal policy, while the latter has established the European Stability Mechanism as the fiscal backstop of the EMU.

None of these changes precludes the option of making further improvements to the EMU architecture. The gist however is that one ought not underestimate the political capital invested in the euro as well as the ultimate telos of EMU: the political unification of its Member States. What this means in practice is that the realisation of the “network” cannot be generalised into an ultimate devolution of the status quo.

The euro will not return to its pre-crisis form, nor will European integration be rolled back to a pre-Maastricht stage. The best chance Mr. Cameron has is for the UK’s formal opt-out from the euro to be broadened in scope, to include such provisions as an explicit commitment to his country’s monetary sovereignty as well as an exemption from certain aspects of the economic governance of the EMU.

Given though how the Prime Minister repeatedly alluded to the notion of “economic security”, one would expect that the reform of the EMU, as envisaged in the Five President’s report, would ease some of the UK’s concerns on issues of stability and competitiveness. What remains to be determined is whether there can be clear delineations on the issues of economic governance. Though tricky, this is a resolvable issue, as it already has a precedent.

As for Mr. Cameron’s claim on acknowledging the fact that sometimes we need less Europe, a federalist such as the present author would point out that this is exactly what subsidiarity is about. European decisions should be the last resort, reserved for those cases where the issue at hand is broader in scope than a national government’s capacity to act. Perhaps there is scope for specifying this principle in the Treaties. European integration is not necessarily about “more Europe”, while the solution to every challenge is not to transfer more power to the supranational level. That is a misunderstanding, amplified by the rhetoric of certain pro-Europeans who conflate form (European integration) with substance (transnational federal republic). In this respect, the reform of the EU is, perhaps inadvertently, in line with a federalist call for making the supranational level fully democratic while placing a constitutional check on its centralising tendencies.

Concerning the valid reference to Europe’s ancient nations, we need not neglect the fact that the United Kingdom itself offers a compelling case of a certain “nation of nations”. In terms of international standing the UK is a single nation state, with one seat in international organisations such as the United Nations, and with one spot in the European Union. In terms of its inner composition, the United Kingdom of Great Britain and Northern Ireland consists of four nations: England, Scotland, Wales, and Northern Ireland (each has their own national team in e.g. football). There is no reason why such benign pluralism cannot be broadened to a European level on the basis of a constitutional agreement between the historical nations of Europe. “United in diversity”, the EU’s motto, implies both civic unity on the international order and plurality inside Europe. Unity is not about uniformity or homogeneity. It should only pertain to a unified international personality underpinned by a common constitutional arrangement.

National parliaments and EU law-making

David Cameron:

It is national parliaments, which are, and will remain, the main source of real democratic legitimacy and accountability in the EU. It is to the British Parliament that I must account on the EU budget negotiations, or on the safeguarding of our place in the single market. Those are the parliaments which instil respect – even fear – into national leaders. So it is time to give these national parliaments a greater say over EU law-making.

What the Prime Minister is describing is a phenomenon I refer to as “sovereignty mismatch”, namely the fact that a range of European rules apply to the system at-large while the virtuous cycle of legitimacy and accountability remains mostly limited to the national level.

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David Cameron’s idea seems to be to substantially amend an existing mechanism for the role of national parliaments in European law-making. There is a legal basis of the sort in Article 12 of the Treaty on European Union as well as in its Protocol No. 1 “On the role of National Parliaments in the European Union”. While there may be reason to doubt the sufficiency of the effective legal basis, what does exist in the Treaty provides for a good starting point for future negotiations.

Given Europe’s sovereignty mismatch, and assuming it will not be addressed directly, it is reasonable to think that national parliaments can be provided with more effective tools for the purposes of improving the rule-making capacity of the EU. To avoid abuses, an exhaustive list of criteria should be introduced, focused on the principle on subsidiarity. Such a mechanism’s provisions need to be narrowly interpreted yet sufficient for the given purpose, as it seems impractical to have them became the default for every area of policy, especially on issues pertaining to the single market.

What appears more likely, and perhaps more preferable given the fact that the EMU will remain a bloc, is a formalised participation of national parliaments in the accountability of a possible European Finance Minister, who will be the political figurehead of economic governance in the EMU as well as the person controlling the rudimentary fiscal capacity of the supranational level (which will probably be part of a new European Treasury).

To generalise the idea, every institutional arrangement that stands at the intersection between the national and the supranational levels can benefit from the active and meaningful involvement of national parliaments.

Overview of Cameron’s four objectives

In his speech, David Cameron recapitulates on his four objectives. We examine them one by one.

Objective 1: protect the single market for Britain and others outside the Eurozone. What I mean by that is a set of binding principles that guarantee fairness between Euro and non-Euro countries.

The only real “non-Euro countries” are the UK and Denmark. The latter’s outlook is not as clear as the former’s. If we may use the Fiscal Compact as a reference point, a treaty that was signed by Denmark but not the UK, it seems that the Danish are willing to maintain closer links to the EMU, or at least remain synchronised with reforms taking place within the euro area. All other EU Member States are legally bound to be part of the single currency.

For the reference to “non-Euro countries” to mean something other than “UK and perhaps Denmark” there need to be new provisions in place that will remove the commitment of non-euro countries to join the single currency. That seems a long shot though. Mr. Cameron will likely not be able to achieve such a far-reaching goal. A more realistic option is for the UK’s formal opt-out to be expanded in scope. That would constitute a derogation from the euro’s rule, not a new rule for two classes of Member States.

Objective 2: write competitiveness into the DNA of the whole European Union. And this includes cutting the total burden on business.

This is too vague an objective. Every pro-market government can agree to it. It also is not clear how a deeper integration of the EMU contradicts the idea of a free[-er] market. While on the topic, one needs to bear in mind that a free market, including an “unfettered” one, can only be instituted as such within a framework of rules and cultural norms, be they codified in law or not (e.g. private property rights). Even Murray Rothbard’s anarchocapitalism—the theory of a market emancipated from the burdens of a state—presupposes a specific brand of ethics manifesting in a certain law code (such as in his Ethics of Liberty).

To that end, and utopian politics/economics notwithstanding, the “total burden on business” can only mean that a specific set of regulations from the supranational level should be reduced, while regulations coming from the UK should be prioritised. Besides, Mr. Cameron is in favour of Europe’s single market, an otherwise expanded array of laws. One may then speculate that he refers to such pieces of legislation as those that extend beyond the traditional understanding of the common market as an area without customs, tariffs, and other impediments to cross-border trade. Fundamental and civil rights, environmental standards, consumer protection, and the like, are probably outside that narrow understanding of the common market and, therefore, may stand as a “burden on business”.

Objective 3: exempt Britain from an ‘ever closer union’ and bolster national parliaments. Not through warm words but through legally binding and irreversible changes.

The notion of “ever closer union” is not defined anywhere. There is no qualitative value attached to it. It may mean anything between a federal republic or a coalition of national interests centred on the common market and perhaps a closer coordination on security and foreign policy. This commitment amounts to nothing specific in terms of the outlook of European integration. Still, it can be interpreted as a drive for continued cooperation on all areas of policy beyond those already harmonised. It is this possibility that makes Mr. Cameron adamant on the need for legally binding provisions.

As the Prime Minister understands, he will never be able to convince others to proceed with an outright deletion of this phrase. There is a difference between (i) granting a further set of exemptions to a given Member State and (ii) generalising the exemption into the new norm. While intense negotiations will take place, other European leaders have little to lose from expanding the UK’s opt-out from the euro to also be a derogation from “ever closer union”. The justification could be that the final stage of EMU, the euro, is an instance—or the realisation—of ever closer union and, given that the UK is exempt from that, it is, by extension, not bound to pursue any further step in the given direction of deeper and broader integration, as that is discerned from the policy response to the euro crisis and as it is envisaged in the Five Presidents’ report on completing the EMU.

The tricky part in broadening the scope of the UK opt-out is on drawing its exact limits concerning the areas of policy it will encompass. Diplomats will not be discussing the hidden meaning of a certain phrase. They will be engaging in a process of deliberation for the purpose of finding a middle ground between conflicting views on a range of issues, including those most important to the UK and its partners: the euro, migration, and the primacy of European law. While one would expect from the rest of Europe to offer something in exchange for continued UK membership in the EU, other European leaders will be very careful not to set a dangerous precedent for “reverse integration”.

And objective 4: tackle abuses of the right to free movement, and enable us to control migration from the European Union, in line with our manifesto.

This is a sensitive issue for countries that have many of their own citizens live in the UK. It will not be easy, if indeed possible, for Mr. Cameron to achieve an outright repatriation of powers on the control of internal borders. The freedom of movement and the concomitant freedom of establishment are fundamental to the European integration process. They form part of the rights that substantiate European citizenship.

What needs to be determined is the exact data on the cases of abuse. Once the facts are analysed, everyone will be in a better position to think of ways to deter abusers. The political response has to be proportional to the issue at hand. No European leader would be against the idea of correcting the incentives structure of a certain system. What they would be concerned with, and rightly so, is with sweeping generalisations on the impact of migration or blanket statements for introducing arbitrary discriminatory criteria among European citizens.

A grounded set of demands

Mr. Cameron’s objective is not as extreme as certain commentators would like to suggest. Notwithstanding some of the remarks that were meant for an internal audience, the Prime Minister has provided a rather small set of demands in exchange for offering his qualified “yes” for continued UK membership in the EU.

Though everything will be determined through the negotiations, a safe estimate is that the UK’s formal opt-out from the euro will be broadened in scope to encompass the notion of “ever closer union” as well as some closely related issues on future integration.

Whatever the case, it is highly unlikely that the European integration process will be rolled back solely for the purposes of satisfying the UK government. There is too much political capital invested in the euro, while a clear direction is set on the formation of an economic government for the EMU. The rest of Europe will eventually be heading towards a political union of sorts. Mr. Cameron’s best bet is to achieve a special relationship between the UK and this emerging political entity.

Finally, the Prime Minister has described the people of the UK as “rigorously practical” and as “natural debunkers”. It would indeed be a lamentable waste of talent to have such people on the margins of European politics, more or less excluded from the crucial decisions that will inevitably shape the future of the European Union and their own.