Here we go again.
The decision on whether or not Britain should embrace the euro is much more than an economic one. It is an existential choice which will decide Britain’s geo-strategic position for years to come. Are we to remain semi-detached from the enlarged European Union, or will we be a leading member of it? Will we become as comfortable sharing some of our sovereignty within the EU as we have been for years doing the same within Nato?
Whichever side of the argument you are on, these issues are as big as they come in politics. They deserve to be openly debated, with the Government giving a clear lead. Fat chance. Once again the euro is treated as a private matter to be resolved between Downing Street’s neighbours — a wink from No 10 provokes a nod from next door. From time to time Peter Mandelson, whose career is in many respects an exotic consequence of the relationship between the Prime Minister and his Chancellor, is summoned to divine — who better? — what their real motives and purposes may be.
Does it all matter? The economic arguments are crucial, but it is easy to distort them. Opponents crowed, for example, when the euro weakened against the pound, as if this was evidence of failure. Now the euro is at an historic high, and they are curiously silent. That is wiser. I think that the pros and cons both tend to be exaggerated, but on balance — which won’t surprise anyone — the arguments in favour of entry have the edge, and become more substantial with the passage of time.
What is so insulting to everyone’s intelligence is the way this economic debate is conducted by the Treasury. First, the notion that Gordon Brown’s “five tests” represent absolute economic truth, unsullied and Olympian, is drivel. They represent merely the institutionalisation of the Chancellor’s veto over the Prime Minister’s hopes and the country’s interest. There is much talk of sovereignty. Whatever happened to the sovereignty of No 10 and of the Cabinet?
Secondly, the Treasury, true to form over almost 50 years, behaves as though the rest of Europe’s economy is not yet worthy of us. One day we may be ready to take the plunge — but only when Europe has managed to replicate our own economic miracle. And if we do deign to join their euro, we expect our poor partners to be pathetically grateful.
The truth is that, despite its superior employment policies and regulatory environment (a legacy of the Thatcher and Major years) Britain remains well down the EU economic league table. The OECD’s latest figures show that only four of the 12 euro countries are poorer than Britain in terms of GDP per head. Nine of them have higher productivity levels. There is certainly no rush to copy the British rail system nor the logic of importing nurses while exporting patients.
Even the UK’s impressive employment record does not put it in the top bracket: four eurozone countries have fewer jobless than Britain and elsewhere the picture is improving. Average eurozone unemployment has fallen substantially since the euro’s launch, from 10.2 per cent in 1998 to 8.7 per cent now. The UK is hit, like everyone else, by the global downturn — with rising borrowing and depressed business confidence. So a little modesty about the great British economic model would not go amiss. There is not much to be said for talking like Sir Alex Ferguson on speed when you’re not managing a Manchester United economy.
The decision to stay out of the euro is not cost-free. It is likely to affect competitiveness, trade and inward investment. The rest of the world is watching. Last year, I made a lengthy presentation to the Japanese Prime Minister, Junichiro Koizumi on EU-Japan relations. His first question? “When will Britain join the euro?”
By delaying, we continue to exclude ourselves from key decisions about the eurozone’s future — reform of the European Central Bank, for example, and the regulation of Europe’s financial markets. As in the past, we will enjoy all the independence and sovereignty that goes with choosing not to take part in decisions intimately affecting our future.
This raises the question of our broader influence in Europe, a concept rather curiously rubbished by many in the sceptic and phobic camps. How is it that we make so much of securing (historically much exaggerated) influence in Washington, yet regard the notion of real influence on our own doorstep with derision?
The British Government’s vision of Europe finds many echoes among our partners. But that support — be it for more rigorous assessment of what really needs to be done at the European level and what should be decided nationally; for more democratic accountability and a larger role for national parliaments; or for more deregulation and market opening — is hollowed out by a deep suspicion of our motives. So long as we hang back from full and unequivocal EU membership, how can we convince them that, for all our patronising prevarication, deep down we are mad about Europe?
The Major Government, struggling to survive on a wafer-thin majority, was regularly attacked by Tony Blair for its alleged weakness on Europe. What then are his European friends to make of Mr Blair’s handling of this question on the back of two unassailable majorities? How can they accept his good faith when his procrastination serves only to embolden those in Britain who treat the European enterprise with contempt? What price Mr Blair’s leadership on global issues when he cannot get his own way even with his next-door neighbour?
Great damage is done to a brave and accomplished Prime Minister and to his vision of Britain’s destiny when he seems more ready to take risks to accomplish the goals of an American President than he is to secure his own.
The author is an EU Commissioner
