The European Council/UK “Deal”

20 February 2016

Graham Bishop analyses the results of the renegotiation of the UK's EU membership, presented by PM David Cameron this morning, and concludes that "there is now no serious impediment to the people of the United Kingdom voting decisively to stay in the European Union."


Following the `deal’ yesterday, there is now no serious impediment to the people of the United Kingdom voting decisively to stay in the European Union.  With the new safeguards, the overwhelming onus is now on the `quitters’ to convince voters that they – the  quitters - have a detailed, viable set of policies which will give the people of the UK the continued certainty of a bright future which will be both secure and economically feasible. The EU has re-committed to creating a globally competitive economy – the best chance for a prosperous UK.

Many States made difficult compromises in agreeing this deal, so it would be understandable if there were not deep disappointment were the people of the UK to reject them in a Referendum.  Under Article 50 of the Lisbon Treaty, the remaining 27 would decide the exit terms they would offer to the UK. Yesterday’s deal specifies that if the UK leaves, “the set of arrangements… will cease to exist”. These arrangements are a set of promises to bend over backward to be nice to a much-valued - but rather awkward - friend. If the hand of friendship is rejected, then these arrangements could be read as the starting point for the exit terms – with potentially devastating consequences for the UK.

My comments[1] are those of an economist, so focus on the economic and financial aspects rather than the political implications. 


Section A: Economic Governance

Section B: Competitiveness

This entire section should be music to the ears of Prime Minister Cameron – and anyone else who wishes to see a modern and competitive (thus thriving) EU economy. Moreover, it is the essence of the manifesto which Commission President Juncker was elected to implement. “The European Council highlights the enormous value of the internal market as an area without frontiers within which goods, persons, services and capital move unhindered. This constitutes one of the Union's greatest achievements”.  This statement underlines why the EU attaches such importance to maintaining the freedom of movement that is implicit in the Schengen commitment.

Section D: Social Benefits and Free Movement

There is little for a financial market economist to say about this section except to note its economic insignificance.


[1]I will be presenting my new paper “IN and OUT relations” - The future of the Eurozone and its relations with non-members at a seminar organised by the Federal Trust on 25th February. 

© Graham Bishop