If you are in favour of the UK remaining a Member State of the European Union, this week’s summit was a disaster. If you want Britain to leave the EU there are some reasons to rejoice. It’s that simple.
The agreement is that the 17 Member States of the Eurozone, plus 6 others (Bulgaria, Denmark, Latvia, Lithuania, Poland, Romania) will conclude between them a Treaty outside the formal EU structures in order to guarantee the long term stability of the Eurozone. Czech Republic, Hungary and Sweden may eventually join too. This gives Angela Merkel and Nicolas Sarkozy precisely what they wanted, albeit with some additional legal complexity in terms of how this will work with the EU institutions.
David Cameron achieved nothing he supposedly set out to achieve. His proposal – to add a Protocol to a new Treaty that would change the decision making processes for how legislation of financial services (i.e. the City of London) is agreed at EU level – was rejected by the Member States of the Eurozone [document explaining the contents of that here]. Opposition was strong enough to mean that a Treaty among the 17+6 was preferable, and Cameron was aware of this threat.
There are a number of facts to note.
A reformed Treaty applying to all 27 Member States would not have had any impact on regulation of the financial services industry, neither positive nor negative – fiscal rules for government spending are not the same as regulation of the banking industry.
Second, the agreement for a Treaty for the Eurozone+6 means the decision making processes for passing financial services legislation remain the same as they always were. So nothing that Cameron has achieved over the last few days has protected the City of London at all. This is a failure to achieve his stated objectives.
Failure of the negotiations may actually have been Cameron’s real objective all along, to demonstrate increasing isolation of the UK from the European Union and to appease the EU-phobes on his backbenches and in the press. Yet the result, and the manner in which Cameron approached the negotiations, will have a profound impact for the UK in the short and medium term.
Short term, Cameron has expended the last reserves of good will he had among other EU leaders. Traditional allies such as Denmark and Poland did not stand with him, while the inflammatory language used by both Cameron and Sarkozy post-summit has stoked tensions further.
Medium term the danger for the UK is that the 17+6 caucus against the UK; a summit is not a one-shot game, but one meeting as part of a long series. By playing all of his cards now – and not achieving his objective to protect the City – Cameron will have even less leverage over that issue, and indeed any issue, at summits in the future.
To reiterate, Cameron achieved nothing to protect the City, but managed to sideline the UK. I defy anyone who wants Britain to remain a Member State of the European Union to find a way to frame this as a good thing. If you want the UK to be isolated or to push the UK towards exiting the European Union then there is reason to celebrate.
Beyond the negotiating position of the UK, is the agreement struck by the 17+6 actually any good? As Sony Kapoor has pointed out here (PDF), it may sort out the longer term problems of the Eurozone, but it does not deal with the problems of debt burdens and bond yields in the short term. Secondly, by enshrining in law a commitment to balanced budgets, rigid fiscal discipline and automatic penalties, this represents nothing short of a Eurozone austerity pact. With stuttering growth and rising unemployment, it is highly doubtful this is the economic recipe Europe needs.