17 February 2014

VP Reding: The UK and the EU – inevitably drifting apart?

The hard facts: it is in the UK's national interest to remain part of the EU

“The City would most definitely lose its unhindered access to the single market in the case of an exit. Because EU Member States would obviously have no interest in supporting what would then be an offshore financial centre competing with their own financial firms. And companies from third countries would find London a much less attractive location to do business, since it would no longer be a gateway to the EU's single market."

Ms Reding also warned that other Member States could work together to undermine London’s very large financial services sector, pointing out: “If the UK were to leave the EU, it would no longer be able to influence EU regulation. It would have to live with the rules decided on by the EU countries – and these countries, some of them with little or no financial services industry of their own, have very little incentive to take the City’s needs into account.”

She continued: "Some eurosceptics argue that the UK would be leaner and meaner on the outside, rid of all that alleged red tape imposed by the EU. After Britain's exit, access to the EU Single Market would be negotiated, this time at an advantage. Focus could shift to trade with other parts of the world. Maybe the Commonwealth could be revived. So many ideas, so many lazy assumptions that are more often than not “fatally flawed”, to use the words of the think tank, the Centre for European Reform. First, to get access to the Single Market, you have to apply its rules. Just ask the Norwegians. It’s difficult to see why the other Member States would grant the UK unfettered access to their markets without requiring it to apply the EU’s rules.  The equation would be simple – the more EU rules you apply, the more access to its market you will get. Second, the share of the UK’s trade with the rest of the world is rising precisely because it is a member of the EU. That the UK is trading more with non-European countries is testament to the effectiveness of the EU's trade policy in opening new markets for EU exports. The UK alone would not have the clout.  And as for the Commonwealth, it represents only 8 per cent of the UK's trade."

Drifting apart: the eurozone integrates as the UK shuffles away

Ms Reding warned about the effect of increasing euroscepticism in British politics: “In spite of the strong business case for UK membership of the EU, there is a clear sense, not just that the UK is semi-detached, but that it is drifting away". "I have made my position clear", she said: "The four freedoms enshrined in the EU Treaties come as a package. You either enjoy all of them – or none. Those who benefit from the free flow of capital, goods and services must also accept that our citizens are free to move in the EU to travel, study and work. And the rules allow Member States to fight abuse of this right."

A separation is avoidable: finding the right link between the Single Market and the Single Currency

"And this will require two preconditions", Ms Reding said. "First, the UK should accept that it is in its interest to allow the eurozone members to do what it takes to strengthen the euro. This was not immediately clear to British politicians. The UK opposed the proposed Fiscal Compact, forcing the remaining Member States to proceed on an inter-government basis to save the single currency. Since then, the tone and the policies have changed. The Chancellor has said very clearly that a stable euro on the UK's doorstep is good for growth and jobs in the UK.

Second, the eurozone members must acknowledge the need to find solutions where their interests are different from those of the Member States who do not share the single currency. Otherwise, they risk pushing the UK out of the EU before it decides of its own accord, as it might, to jump.

Striking this balance has so far not proven easy. That might explain why the views of the European Court of Justice are in high demand. Take the lawsuits against EU rules curbing bonuses and against plans by some Member States to introduce a financial transaction tax.  

Obviously, it is neither in the UK's interest nor in that of the other Member States to negotiate their relationships through court cases. And there are signs that when the two sides are willing to find solutions, progress is possible."

Conclusion: a debate that lives up to British standards

"The debate in this country about the UK's place in the EU is distorted. All that talk about opt-outs, renegotiations and referenda distracts from the real issue. Finding more solutions like the ones I have described is what we should all be focusing our energy and creativity on.

Unfortunately, the debate is distracting from the real challenge in the relationship between the UK and the EU. And it is even inflicting wider damage by holding back our Union as a whole. We don't need this. What we need are great ideas and solid arguments about how we can strengthen the EU and make it more competitive on the world stage. What we need is to push for valuable policies: creating a real single market in services, strengthening small and medium sized enterprises, boosting free trade with other parts of the world.

The UK could make a real difference here, and this is one of the reasons why I would argue that the EU is stronger with the UK in it. Indeed, it is one of the reasons why I want it to stay in – and why I also want to say to you: if this country decides one day to be part of a stronger integration, you know where to find us. The door is open, and there is a seat at the table for you.

Right now, however, we have a problem:  the potentially constructive and forward-looking arguments are overshadowed by the negative debate on the relationship between the UK and the EU.

The solution? ... We need to replace the current debate which leads to uncertainty for business and holds-off investment with constructive proposals that bring about certainty, investment and progress. This would be beneficial for both the UK and the EU

The British can still do what comes naturally to them and debate their way out of this. They have every right, and even a duty, to be critical, to scrutinise and to question. But whatever they do, I just hope they do it in true British style."

Full speech

A UK Foreign Office source said: "While Commissioner Reding recognises the needs of euro-outs and the global race, there's no understanding that the EU's deep flaws need putting right, for example leaving more issues to national governments and the lack of democratic accountability. Nothing's more damaging to the EU than failing to accept that it needs to deal with problems like free movement abuse." "Only a tiny minority across Europe back her call for a United States of Europe but she's entitled to her view, however few share it. The prime minister, however, is confronting those problems by seeking to make the EU work better for all and giving the British people a choice on the EU: in or out."

Further reporting © The Guardian

Britain’s desire to repatriate powers from Brussels is likely to meet resistance from other EU member states, the secretary general of the European Commission, Catherine Day, has said. Speaking on 18 February at a breakfast briefing organised by European Movement Ireland and accountancy group BDO in Brussels, the European Commission’s top civil servant said that while it was too early to anticipate the outcome of the debate, there was no appetite for treaty change among Member States. “It is the position of the British government that they want to repatriate competencies. That , to my knowledge, is not the position of any of the other Member States. They want to discuss what’s done at European level, what’s done at national level, how it’s done, but they are very clear in saying they are not talking about repatriating competencies.”

While Ms Day warned against pre-empting the decision, she suggested that a change in the economic climate over the next few years could change the tenor of the debate. “When the European economy is stronger, when it’s clear that the euro is a strong currency, I think that can also colour the mood at the time when those decisions will have to be taken.” Britain’s pledge to renegotiate its relationship with the EU was identified by Ms Day as one of the three main challenges facing the next commission and parliament. The economic challenge and migration will also mark the new administration’s five-year mandate, she said.

Further reporting © Irish Times

© European Commission