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Friday, 16 December 2011

The UK Position with the EU: at the table or on the menu?

A quip made by several sound-biters...ie if you ain't at the negotiating table then you may find that your national interests may be jeopardised through your absence at the table. But is this really the case?

The EU Summit was supposed to  be another of the last-ditch efforts in the battle to save the Euro.  In reality the modality of the EU structures and inter-government co-ordination involving 27 national states is a slow iterative process, so this summit was one more to what will now become a monthly affair.  Lovely.

The UK’s veto in Brussels suggests a failure of negotiation strategy and preparation rather than a sea-change in the UK’s relationship with the rest of the EU. Of course Mr Cameron’s position – like former Tory leaders – is more tenuous than was the case for the Blair-Brown years of Labour rule. 

David Cameron has come back to London having been outvoted 26-1 on a Treaty change that
would have in effect led, on paper, to a yet-to-be-defined greater fiscal co-ordination for Eurozoners – of which the UK is not a part. Since this doesn’t really effect the UK and given the vague nature of the proposals to which other equally zealous EU sovereigns outside the Eurozone – Sweden and Denmark and the new central European states like Poland and the Czech Republic  – all of who signed up, the UK stance smacks of bad politics. Not least since both the PM and his chancellor have been egging the Eurozone toward greater fiscal co-ordination and having “bazooka” fire-power.

Or does it?

The British PM will successfully manage the domestic politics that could have been a minefield for him. Sign-up and his 100-strong  backbenchers would have been baying for blood – he’s their Alpha-man now. 

Big plus.

Pre-Summit talk of a possible referendum is now dead. Another banana skin avoided.

The Lib-Dems coalition? A marital argument but no divorce. 

And just days into the week following the Brussels summit we already see that many other countries are already having second thoughts…either due to their own domestic political constraints or simply due to the enormous difficulty – nay impossibility – of effecting true fiscal co-ordination through loss of national sovereignty. The Swedes, Dutch, the Irish and the Czechs have been first off the blocks  but its not clear if the Hungarians with their odd-ball nationalistic macroeconomic and banking policies or the Slovaks will really buy into this. 

And whilst the “PIGS” – Portgual, Italy, Geece and Spain – are nominally going along with the process one wonders what will happen when the bail-out and liquidity support stems or when the current crop of in-essence short-term technocratic governments face a backlash for the austerity being forced. 

In retrospect, the UK PM could come out of this rather well once the noise dies down. Yes he and  his EU-friendly deputy PM and leader of the Lib-Dems will work the phones to other EU capitals to repair fences. He will also now be seen in the EU as the man with “cojones” and could in time act as a standard-bearer for a number of other countries – both outside the Eurozone 17 – and perhaps some within it. 

On the economic front, the Chancellor may well have been singing in the  bath…as was said to be the case when his Tory predecessor supposedly did so when the pound left the EMS in the 90s. Why?

Like it or not, the government’s economic blueprint of austerity and budget cuts has prioritised retaining the UK’s triple-A rating. With the EU countries on a negative watch, the US having already suffered the S&P downgrade, of the G7 this will leave Canada and the UK. 

The pound  has been gaining in the last week and the wall of sovereign wealth and global asset funds will, once the dust has settled, see the UK as a better safer bet than the Euro - and with a rise in its "flight to safety" status.

With the French elite preparing its public in the last 10 days for a loss of its triple-A rating, the UK PM could well come out of the situation in a much better position.

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