Originally published on 2012/01/15

One could feel a bit sorry for the Brit­ish Prime min­is­ter David Cameron after last week’s EU sum­mit. What 26 coun­tries agreed to set up, is deemed as a pre-federation in the UK.  Tighter eco­nomic and fiscal rules, more con­trol over the budget of states and more integ­ra­tion – fed­er­al­ists will rejoice after what can be called a great step towards the cre­ation of a Fed­er­a­tion of States. Whereas Merkel and Sarkozy basked in the light of suc­cess, Cameron faced harsh cri­ti­cism for the UK’s decision to “remain sov­er­eign” and not sign up to the Franco-German “dictate”.

Cameron’s decision, how­ever, is not entirely bad for the EU. Rela­tions between the UK and the EU have never been a real love story and it should not come as a sur­prise as the  coun­try has once again decided to stand out­side. The European cur­rency has never been a favour­ite of the Brit­ish, which cling to the pound, nor is the UK part of the Schen­gen agree­ment. Gov­ern­ments in Lon­don have sel­dom been in favour of fur­ther integ­ra­tion, instead of  hop­ing that a widen­ing of the EU would pre­vent too much integration.

Why this decision is good news for the EU

The UK’s decision to remain on the side­lines is there­fore a bless­ing for the EU to some extent.  Assum­ing that stronger integ­ra­tion in the field of eco­nomic, fiscal, fin­an­cial and budget­ary policy is pos­sible without a new treaty, London’s decision will remove a major road­b­lock for all other mem­ber states. If the UK, sim­ilar to Schen­gen or the Euro, does not act­ively pre­vent an agree­ment, this will cer­tainly strengthen Brus­sels and those par­ti­cip­at­ing in it. Even Den­mark, the other euro­scep­tic with an opt-out, has decided that it will be bet­ter to  sup­por the gen­eral course the other coun­tries have sub­scribed to.

It is good news also for all those states that cur­rently do not yet share the com­mon cur­rency of the Euro­zone, but have agreed to intro­duce it some time in the future. Coun­tries like Poland or Hun­gary will be involved in all pro­cesses that have so far been dis­cussed only among the Eurogroup. Closer cooper­a­tion in all the above-mentioned areas will ensure that the “invis­ible wall” sur­round­ing the Euro­zone will not become a real­ity that will even­tu­ally make it impossible for them to ever meet the cri­teria to intro­duce the Euro.

And here’s why not

How­ever, just as always, there is also a down­side and in this case, it is  what might mat­ter the most, namely the reg­u­la­tion of the fin­an­cial sec­tor. Lon­don con­tin­ues to be Europe’s centre of com­merce and fin­ances and even though Paris or Frank­furt are slowly gain­ing import­ance, Lon­don is the EU’s bank­ing and insur­ance cap­ital. Any agree­ment to tighter rules or more con­trol over the bank­ing and insur­ance sec­tor will, there­fore, neces­sar­ily remain some­what lim­ited, if it can­not be applied to the fullest. In the worst case it remains likely that Lon­don will veto any attempts to curb trans­ac­tions or intro­duce reg­u­la­tion that might dimin­ish the import­ance of the City.

The ques­tion thus is how happy one should really be about the agree­ments made at the sum­mit. So far every announce­ment was even­tu­ally fol­lowed by new sum­mits to be fol­lowed by yet another one and little has actu­ally happened to con­tain the crisis. The 26-1 decision also raises another ques­tion. If the UK is not happy to be in the EU and has no aspir­a­tions of ever becom­ing really European­ised, and at the same time pre­vents other coun­tries from the con­tinu­ation of the European integ­ra­tion pro­ject, how long will it remain a EU mem­ber? Does it really make sense for Lon­don to remain in the EU, or should it leave the Union but instead be part of EFTA again? The coun­try has always been mostly inter­ested in secur­ing access to the European mar­ket, and this can be achieved without actu­ally being part of the Union. This would have cer­tain dis­ad­vant­ages obvi­ously, such as being unable to influ­ence decisions made with regards to the internal mar­ket, how­ever, at the same time it would spare Lon­don from all the troubles of imple­ment­ing legis­la­tion it does not like.

One prob­lem remains

If the UK decides to leave the EU many will cheer, some, includ­ing the cur­rent coali­tion part­ner of Cameron, the Lib­eral Demo­crats,  but drop­ping out might have another unin­ten­ded con­sequence. Cer­tain parts of the UK, espe­cially Scot­land are more in favour of the EU than Eng­land itself, and with inde­pend­ence tend­en­cies in the UK under way already, a European exit might also spell the end of the UK as we know it today.

The EU too will have to think about the con­sequences of a Brit­ish exit. It will have to re-adjust not only the vot­ing sys­tems but will have to set its rela­tion­ship with the UK on a new foot­ing. So far no coun­try has ever left the EU, there is no pre­ced­ent nor plan how such an event should happen.

But should it hap­pen? If the UK will not con­trib­ute to a stronger EU, maybe it should. The ques­tion who has more to lose is of yet unanswered, but only few small coun­tries have man­aged to sur­vive and strive in today’s glob­al­ized world. Would the UK be one of them? Per­son­ally, I don’t think so.

Featured photo: Union Jack by Karen Arnold

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