The government’s never-ending European problem
In the hours after the coalition was formed last May, a minister and a group of Tory MPs sat around a table in a parliamentary cafeteria discussing what it all meant. One new MP said to the minister that it was a pity that, in the course of the talks, the Tories had agreed to ‘park Europe for the next five years’. The minister, high on the Panglossian spirit of the early days of the coalition, reassured her that this was for the best. The party could devote its full attention to Europe when the economic situation was less pressing.
Yet almost 18 months on, Europe is taking up an ever-increasing amount of the government’s time. It turns out that, far from being ‘parked’, the European issue is speeding towards the coalition at an alarming pace.
The government’s most pressing problem is the crisis in the eurozone — George Osborne openly admits that nothing he can do would help the British economy so much as a resolution to the single currency’s problems.
To the government’s immense frustration, however, the eurozone seems incapable of dealing with its troubles. Getting all 17 countries into the right place at the right time is like herding cats. Even the intervention of the Americans, with their dire warnings about the global consequences of continued instability, has failed to produce action.
In an attempt to force the pace, George Osborne said three weeks ago that there were six weeks to save the euro. This precise deadline had a purpose. The Chancellor, ever the political strategist, knew that Nicolas Sarkozy wanted to use the G20 meeting in Cannes at the beginning of November as the unofficial launch of his re-election campaign. Osborne hoped he could force Sarkozy to tackle the issue head on. This strategy has had some success.
But Osborne now faces another problem. What if the eurozone misses the six-week deadline? The British view is that the eurozone needs to achieve three things by the start of next month: recapitalise its banks, increase the size of the European bailout fund to several trillion euros, and work out what to do about Greece. The eurozone countries are, according to British government sources, behind schedule on all three fronts.
Osborne is now involved in a never-ending diplomatic effort to push the eurozone countries towards a solution. Following last weekend’s meeting of G20 finance ministers, on Monday night the Chancellor dined with the German Finance Minister Wolfgang Schäuble at No. 11. It is a sign of the urgency of the situation that the Prime Minister dropped in while they were still chewing on their Welsh lamb.
On Saturday, Osborne will head to a meeting of European finance ministers. The next day, David Cameron will attend the European Council. These summits are the last chance for the eurozone countries to begin work if a deal is to be ready by the beginning of November.
France and Germany are closest to a resolution on putting more money into the banks. But even here, progress is slow. Sarkozy, aware of the political implications of bailing out the banks six months before a presidential election, wants this to be done at a pan-European level. Yet the phrase ‘pan-European’ now, understandably, makes the Germans feel anxiously for their wallets.
The French and the Germans differ sharply on what to do about Greece and the European bailout fund. The Germans, partly for domestic political reasons, are keen for a Greek default and a new treaty that would give the ‘Stability and Growth Pact’ legal force. The French are less keen on both of these options. The Germans also remain unequivocally opposed to using the European Central Bank to increase the size of the European bailout fund.
Compounding these problems is the fact that the markets have already anticipated a solution to these problems. As one official says: ‘The Germans are not yet in a position where they can deliver what the markets expect.’
Fortunately for Osborne, Labour hasn’t the stomach to take advantage of this situation to make political mischief. Labour could throw a grenade into the Tory camp if it suggested that the eurozone now needed to be broken up. But sources close to Ed Miliband are adamant that his party won’t do this. Indeed, it is clear that Miliband is not interested in the kind of alliances of convenience with Tory Eurosceptics that John Smith formed so effectively during the ratification of the Maastricht Treaty.
This marks a change in strategy since July when Labour joined with 32 Tory Eurosceptics to oppose any increase in Britain’s contributions to the International Monetary Fund. Then, Ed Balls, the shadow chancellor who has never played politics by Queensberry Rules, seemed keen on the idea of using Europe to cause parliamentary trouble for the coalition.
Even without support from the Labour front bench, Tory Eurosceptics are still capable of making their voices heard. Next Thursday’s vote on whether or not there should a referendum on EU membership will be a major test of Tory party discipline.
If the motion was simply about an In or Out vote, the Tory whips would probably have been able to limit the rebellion to 30 or 40 MPs. But the inclusion of a third option of negotiating a new relationship with the European Union based on ‘trade and co-operation’ has widened the motion’s appeal considerably. I understand that Graham Brady, the influential chairman of the 1922 Committee of Tory backbenchers, is minded to support it.
Several prominent members of the 2010 intake are also attracted to it. They argue that it is simply a logical extension of the Prime Minister and Foreign Secretary’s commitment that a Tory government would repatriate powers. If Cameron really does decide to whip against it, he could have a proper parliamentary scrap on his hands.
The European issue is now so big and pressing a feature of our national life, that the government cannot simply ‘park it’. To paraphrase Trotsky: the coalition may not be interested in Europe, but Europe is interested in it.
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