27 March 2014

George Osborne & Wolfgang Schäuble: Protect Britain's interests in a two-speed Europe

Since the crisis, both countries have introduced measures to ensure the financial sector never again jeopardises our public finances. But we must also acknowledge the risks. Some countries, such as the UK, still have to undertake substantial fiscal adjustments to ensure the future sustainability of public finances. Others must keep up the pace of structural reforms to boost growth and provide for ageing populations. Germany has undertaken significant measures for reform, but there is no room for complacency.

Each country in Europe needs to make reforms at the national level. For many countries that means consolidating public finances; supporting business and investing in infrastructure; and freeing up labour markets to create jobs. But we also need action at the European level. We must complete the EU’s single market, especially in services, open up to international markets and conclude reforms to the euro area.

The UK fully recognises the progress made so far in responding to the crisis, and it supports the case for further steps forward. But as the euro area continues to integrate, it is important that countries outside the euro area are not at a systematic disadvantage in the EU. So future EU reform and treaty change must include reform of the governance framework to put euro area integration on a sound legal basis, and guarantee fairness for those EU countries inside the single market but outside the single currency.

Some suggest that reforming the EU is impossible. We have already proved them wrong. Last year saw the first ever real-terms cut to the EU budget. Together, we are proposing a programme for cutting red tape in Europe that already has the support of 12 other Member States and the European Parliament. We consequently approach European reform with optimism. Reform supports recovery. Looking ahead, we can create a flexible and outward-looking EU. One where EU action fully respects the principles of subsidiarity and proportionality, avoiding unnecessary interference. One that builds on its existing values of democracy and the rule of law. And one that serves as an example to its neighbours.

No one should assume that European decline is inevitable. It is in our hands to build our future success. And the UK and Germany are committed to making that happen.

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Open Europe comment

Getting explicit German support for this view and providing a united front on this issue is an important step forward for the UK and for Cameron's EU reform agenda. While Germany has previously hinted at willingness to support the UK on this issue, this is certainly a step up. It also brings Cameron closer to ticking off one of the key targets he recently put forward in what was probably the most important article nobody spotted. Open Europe has long argued that safeguards against further eurozone integration are crucial and that they will play a key role in determining the new set up and balance of the EU.

That being said, the UK government should not be complacent about where it now stands in terms of its reform agenda. While this represents progress, there is some way to go. This provides an important opportunity and a good base for the UK to begin testing specific reform proposals on other EU governments and electorates. After all, while Germany is the largest and possibly the most important partner to get on board, the UK also needs to convince the rest of the EU. While teaming up with Germany should broadly help on this front there is one constraint - not everyone buys into Germany's vision of the new eurozone with significant central oversight and limited share of liabilities. However, as the banking union shows, Germany has so far been adept at influencing the construction of new eurozone structures in its own image.

Overall the approach isn't perfect - it still speaks of a two-speed Europe, suggesting all Member States are heading in the same direction, which is not the case - but it is a big step and an important one for Cameron. It is now vital that he seizes this opportunity to push a wider EU reform agenda.

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TheCityUK comment

TheCityUK welcomes the article in the Financial Times by UK Chancellor George Osborne and German Finance Minister Wolfgang Schäuble on the need to account for the interests of Euro area ‘outs’ when setting the EU reform agenda.

It is firmly in the UK’s interests to see proper governance mechanisms to enhance financial stability in EU countries using the single currency and participating in Banking Union. At the same time, the integrity of the Single Market amongst the 28 member states must be preserved absolutely.

TheCityUK and its members support the UK’s continued membership of the EU, which we believe is fundamental to the competitiveness of UK financial and related professional services and growth of the wider economy. We also believe that the EU can be made to work better.

TheCityUK welcomes the support from the UK Chancellor and the German Finance Minister to introduce a programme for cutting red tape, putting public finances on a sustainable path and implementing necessary structural reforms. We believe that the primary focus of the next mandate should be to promote jobs and growth in Europe and enhance the competitiveness of European businesses in global markets.

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See also: Schäuble revives push for eurozone integration

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