The UK after the EU summit

I am happy to have left the UK just in time before the UK leaves the EU.

It’s a bit rich to accuse him of incompetence for the veto of a treaty that you readily admit would be a disaster. Having your cake etc.

Dont know, if dismantling the welfare state is the objective he could just support the Treaty, which seems to have that as his only rationalization possible outside the “we will bring prosperity by cutting!” mantra.

Of course, he may reject having Brussels enact the cuts and not be seen as the one with the scissors?

I don’t agree that the 26 can do all that much to us with QMV, and I think that the “if you’re not at the table you’re on the menu” line was also made in the 1990s about EMU itself and hasn’t been borne out.

For one thing, there is very much a limit to what the 26 could do even if they were a unified bloc. They can’t pass taxes and they can’t do anything that prejudices our rights under the Single European Market. They can do all sorts of things with financial regulation (ironically, the main effect of this and one of the main things David Cameron was going into bat for, is that it might end up being impossible to implement the ICBC’s ring-fencing proposals), but actually the City is the classic industrial cluster that just continues to organise itself around regulatory change.

For another, as I put it on Twitter the other day, passing this accord doesn’t mean that Germany is going to start producing olive oil. All the old rivalries and tensions still exist within the block of 26 under the new agreement. Germany will still block with us on agriculture, France on energy and defence, etc etc.

I think that this might have been my perfect outcome – Cameron adopts my preferred policy, but nevertheless comes home looking a dick and the coalition fatally weakened. I am slightly worried, however, that nearly everyone else whose opinion I rate analyses it differently.

Sebastian: The real argument is that this doubling down doesn’t require the participation or consent of the UK. The participants chose a venue that gave Cameron a chance to make unrelated demands — it’s not like Cameron tried to shoot down the proposed deal because he thinks its a bad idea. It’s essentially the policy he’s pursuing domestically. The net effect of this was that the participants just got pissed off, and changed venues.

Is isolating the UK really that bad? It seems to me that that makes it easier for the UK to reverse austerity policies, if they ever get new leadership. No one believes that Cameron did the right thing for the right reasons. It’s more that, when he gets replaced, he hasn’t committed the UK to continuing his disastrous policies.

“I don’t agree that the 26 can do all that much to us with QMV, and I think that the “if you’re not at the table you’re on the menu” line was also made in the 1990s about EMU itself and hasn’t been borne out.”

Exactly. And above all, its too soon to tell, because the people who didn’t want the UK to do what it did are trying to make what fuss they can, but that fuss is a very poor measure of the tangible consequences, adverse or otherwise. It’s far from clear that UK influence will be undermined and French and German enthusiasm for not meeting Cameron’s demands may well wane over time.

No, because the UK is outside the euro, it makes no difference either way.

Okay…not getting it. Everyone seems to think the treaty is crazy, and I agree with Mandos. I’m still not seeing the problem. What does the “isolation” consist of?

This is over-the-top denigration of Cameron, who’s odious, but not because of this. The UK’s European policy has basically been nonsense for awhile now (under the previous government as well)–as long as it took the line that it would sign any agreement that minimized the British contribution to the EU budget and shielded the City from European oversight, it removed itself from any substantive contribution to EU policy debates, since it could be bought off in any deal that Germany and France reached. That has a certain logic with respect to British politics, but it means that the EU went off on its own (vastly misguided) path to oblivion, without any constructive input the UK could have offered. Had Merkel and Sarkozy offered a major revision, Cameron would have been shortsighted had he refused it to protect the financial sector, but they didn’t, so he wasn’t. The policy is disastrous; Cameron is responsible for moving the UK as far away from it as possible.

You might be right that there’s a host of smaller countries ready to follow the UK’s lead toward better EU policy in a different European paradigm. But the status quo is that those countries allow themselves to be ruled by Franco-German consensus, with the alternative being ad-hoc distancing, not something different and coherent. In the existing context, the best strategy for everyone is to distance as best they can. That’s what Cameron’s done, consistent with his predecessors.

[I believe there were those who argued, as you do, that the UK should have joined the Euro to preserve some of this mythical influence. Of course we have no observation on the counter-factual, but I don’t think that looks good in any cost-benefit analysis at this stage.]

“the UK has pissed off (and mystified) the Swedes, the Danes, the Dutch, the Baltics, the Poles”

What is the evidence for this?

But many countries are only following the Germans’ lead with reluctance. The agreement only came about because investors are shunning the bonds of ailing euro-zone countries, and because even the strong countries are facing the possibility of having their creditworthiness downgraded by the rating agencies.
…
According to Barroso, Merkel and Sarkozy are trying to impose their views on everyone else, even though they themselves can hardly agree on any issue. The fact that the majority of countries bowed to the German-French duo in the end shows how dependent the EU is on its two biggest financiers. Cypriot President Dimitris Christofias described the dilemma in a nutshell: “We really ought to engineer a revolution against Merkel and Sarkozy, but each of us needs the two of them for something.”

That doesn’t sound to me like a long-term prospect for happy families and Britain may actually benefit in the long-term where relations with the other 24 are concerned. Certainly the Irish government – for their own selfish and strategic interests – are anxious to keep ties as strong as possible. I don’t think they have any illusions about the respect that the smaller countries are going to get shown by Merkozy.

Several different strands to this… Cameron’s veto makes it slightly harder for the 26 to develop and implement their plans, because they’re going to have to waste time dealing with the argument that they can’t use EU institutions, personnel or buildings to do so; this may or may not be trivial in the greater scheme of things – risk of yet more delays to action, hence of spooking markets further, I guess – but it’s yet more grounds for everyone else feeling deeply irritated with the UK. Whether or not there would have been any positive influence on the development of those plans if the UK were still involved seems doubtful, certainly under the current regime, but it’s not impossible; Sarkozy clearly wanted to exclude the UK, but it’s not clear that this was a universal view; various smaller countries, esp. those hovering outside the Euro, might have welcomed a counterbalance to the French-German axis.

As far as UK interests are concerned, given that the proposed controls on state budgets etc. would have applied only to Eurozone countries, it’s difficult to see what the country would have lost by continuing to play a part in negotiations, and clearly it is in the UK’s economic interest for the Eurozone to get its act together – staying involved might not have helped, but it wouldn’t so blatantly have hindered. The gain from Cameron’s veto is solely domestic and political, gaining him loud applause from Eurosceptic backbenchers and the right-wing press – but with the risk of serious tensions in the coalition, and the fact that the aforementioned backbenchers see this not as a great victory but as the first step towards complete disengagement. Cameron has if anything shown his weakness by this alleged show of strength. The risk, for those of us who prefer to think of ourselves as Europeans, is that this is the first step on a slippery slope to complete disengagement on the most idiotic of grounds – note the shift in public opinion on Europe cited in John Harris’ article in the Grauniad this morning – Europhobia.

My worst-case fantasy scenario has Cameron calling a snap General Election on nationalist themes

For someone who doesn’t think being eurosceptic is a valuable electoral proposition…

Steve, the thing is that right now Cameron didn’t affect the outcome at all. Britain is not in the euro, so the terms of the treaty don’t affect it. They were only party to negotiations because the euro is politically part of the EU. If Cameron had killed the deal as part of saving Europe from itself, then he might have had a positive impact. Now the only effect is that he made the UK look bad.

(This assumes that the new debt limits don’t apply to non-euro-zone countries, such as the UK. )

Walt, opposing the treaty in any way possible, however little effectual, is still the right thing to do, and anyway in the admittedly unlikely event that it can be killed by the death of 1000 cuts, every cut will have played its part. Nobody has made a credible case that he could have exerted any influence to improve it (it’s unimprovable anyway since it’s founded on crazy ideas) so nothing was lost. And I’m always deeply unimpressed by arguments about things like how stuff looks or how one likes to think of oneself.

And I’m always deeply unimpressed by arguments about things like how stuff looks or how one likes to think of oneself.

Apparently people took Italy seriously when for years they had some vulgar and embarrassing nitwit heading the government.

Having actually met Cameron I too think he’s ghastly (many years ago but it has saved time since then). However, this isn’t in fact true:

“David Cameron’s use of the veto in the recent EU summit”

He didn’t use the veto because there is no veto at such meetings. There is a veto at Intergovernmental Councils (IGCs) but not at European Council meetings.

Yeah, yeah, I know boring pedantry, but this is how the EU works, through boring pedantry. Cameron didn’t veto anything as there is no veto available at the type of meeting he was at. Check out his Commons speech on the subject if you like: he does not say that he vetoed anything.

Steve, though you and I think the treaty is the wrong thing for the EZ, as far as Cameron is concerned the treaty he vetoed is the right thing for them!

Hence Mandos/Paddy saying, “Right choice, wrong reasons.”

This Yes. Minister quote seems appropriate:

” Sir Humphrey: Minister, Britain has had the same foreign policy objective for at least the last five hundred years: to create a disunited Europe. In that cause we have fought with the Dutch against the Spanish, with the Germans against the French, with the French and Italians against the Germans, and with the French against the Germans and Italians. Divide and rule, you see. Why should we change now, when it’s worked so well?”

Can anyone explain to me what the hell was the point of the Euro to begin with? I mean it was a great convenience for me when I backpacked across Europe after my undergrad to not have to change money in each country but I am assuming that making things convenient for MPAVictoria was not the goal of the Eurozone. So why did all of these countries give up control of their currency to join in? And why don’t they just leave now that the Germans have shown that they basically want to take over Europe from the inside?

If I lived in one of the countries whose governments are considering signing on to this tyranny I would be freaking out. Why should some unelected, incompetent and unaccountable bureaucrat be able to tell a duly elected government how they can run their country? I also find it kind of amusing that many of the comments here are still being a little condescending towards the eurosceptics when it appears to me that they have been at least partially right all along.

“(I could be wrong about this, if the treaty in some way made it possible to enforce balanced budgets on non-eurozone countries, but I’m pretty sure that this isn’t so.)”

I was under the impression it required signatories to pass a balanced budget amendment into national law i.e. including non-eurozone countries.

#49–withdrawing from the Euro would produce utter chaos–for example, if Greece introduced the drachma, nearly all Greek firms would become insolvent, because they would owe in euros but be earning (mostly) in devalued drachmas. Also, bank accounts would have to be frozen to prevent a run, etc. Of course, two years or so of chaos may be preferable to what appears to be endless austerity with little prospect of growth.

Whether Cameron vetoed or not made no difference at all to whether the shitty treaty went ahead, so in itself that makes no difference to what he should have done. All he’s managed to do is to isolate the UK, which, ceteris paribus, is a bad thing.

Isn’t it a bit like the question “if your friends all jumped off a bridge, would you jump too?” Nobody disputes the value of friendship, but…

I mean it was a great convenience for me when I backpacked across Europe after my undergrad to not have to change money in each country but I am assuming that making things convenient for MPAVictoria was not the goal of the Eurozone.

Well, in a weird way, I think it was; not aimed at you specifically, but the idea that it would make things convenient for a large class of consumers and tourists, which you happened to be temporarily a part of, *was* one of the selling points, IIRC.

Social democracy is thereby effectively rendered illegal in the Eurozone in both its “social” and “democracy” aspects.

Ah, here, that’s nonsense that belongs on Fox News for its level of rhetoric. Starve the Beast bollox in reverse. Yes, the treaty is stupid and the budget controls too sever but, if nothing else, why would the Swedes and Danes like it if it killed social democracy? Please don’t predicate arguments for social democracy on a requirement for a budget deficit. Social democracy is much more politically and economically sustainable in a budget balance sense.

No, because the UK is outside the euro, it makes no difference either way.

(I could be wrong about this, if the treaty in some way made it possible to enforce balanced budgets on non-eurozone countries, but I’m pretty sure that this isn’t so.)

The UK is part of the Stability and Growth Pact. Not quite balanced budgets, but no more than 3% of GDP deficits and no more than 60% of GDP debt levels. (Look how that one worked out.)

Still waiting for an answer to Otto’s question (#28). It seems unlikely that Sweden will join the treaty.

“The really smart people couldn’t have gotten it wrong” seems weak at this point.

with the inside 26 being bound by a treaty among themselves, which in turn makes it highly unlikely that the UK will be able to organize effective blocking minorities under QMV

I still don’t see this. As I say – does this treaty mean that Germany is an olive oil producer now? On all issues except fiscal policy (and even on fiscal policy, because the treaty doesn’t actually abolish the business cycle variance), the “inside 26” have exactly the same difference of interest on EU matters that they did before, some of which they share with the UK and some of which they don’t.

In the long term Enda. In the short term it is supposed to run deficits to stimulate demand if conditions warrant.

Less so. Reasonable demand management is justified/excusable by a chunk of apolitical modern macroeconomics, not just social democracy. I think social democracy is much, much more about how a society spends its resources in general (govt composing 36% or 45% of GDP) rather than reasonably marginal alterations (0.5% deficit or 3% deficit) over the business cycle.

I can’t see a country that would presumably have to have an ‘and’ in its name lasting that long. Though I suppose Trinidad and Tobago has been going a fair while now.

How can it be called a “veto” if the treaty goes ahead without Cameron’s agreement?

I’m mystified as to how this makes Cameron look ham-fisted. The UK is not part of the Euro and has always adopted a slightly-outside-the-union kind of policy, and the treaty is a disaster, so Cameron’s You-won’t-believe-it’s-not-a-veto “veto” is surely just consistent with that. I mean, if you refuse to give up your currency to faceless bureaucrats in Brussels, why on earth would you give up any controls over fiscal policy? He’s acted in a manner consistent with tory policy, rational economics, the desires of the voters, his own party’s domestic political goals, and the history of British policy on Europe. Sure, he’s pissed off a bunch of people in the EU – but they’re not looking like the strongest and most effective organization in the world right now.

Simultaneously, Cameron pleases his euroskeptic backbench, pulls a few votes away from UKIP – which, no matter how bad the Tories currently are, is a Very Good Thing for Britain – and further weakens Clegg, which from his point of view is excellent[1]. With Labour still confused and running under the Iron Rule of the Head Prefect, the Liberal Democrats on the slow, tumbling flightpath to the dustbin of electoral history, and UKIP increasingly being outflanked by Tory nutters, this action seems like an electoral goldmine.
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fn1: also, isn’t Chris Bertram’s stated policy w.r.t Clegg that he’ll support almost any level of odious nonsense from the Tories if it pisses off Clegg? ;)

Soru: so has “The United Kingdom of Great Britain and Northern Ireland.”

“What does ‘Less so’ mean?”

That (imho) you’re not incorrect, but missing the point. You said “In the short term [social democracy] is supposed to run deficits to stimulate demand if conditions warrant.” That’s true, but it’s only a small part of social democracy.

The way I see it, the general level of state intervention/social safety nets provided are an order of magnitude more important to social democracy than the provision of fiscal stimulus. Restricting deficits to (an admittedly foolishly small) percentage of GDP is a restriction on a small part of social democracy. There’s nothing (afaik) in the treaty about the level of government expenditure – you can still have it as 80% of GDP if you want.

Enda, the rest of social democracy will have a hard time surviving the absence of that part, as we’re seeing right now. Without countercyclical policy, recessions lead to decreased revenue, hence decreased spending, hence further downturn, in a vicious spiral that cuts government expenditure with each cycle around. At the end, you have no social democracy, and have to try to rebuild from scratch with each recovery, a hard slog. This is why the conservative governments support austerity despite the apparent economic irrationality of doing so, in my opinion. They are playing a longer game and for ideological goals.

It’s hardly moot, Chris – that part of the comment was a request for information. How is a treaty that puts additional demands for balanced budgets on individual governments not equal to “give up controls over fiscal policy”? These aren’t rhetorical questions, btw. I want to understand why Cameron is being an incompetent opportunist (in this case).

That means QE to me. And QE means last resort lending if it comes to it. Merkel also recently said that the BCE should act autonomously etc. So basically the Germans are giving in on inflationary risks in exchange of austerity. Not a terrible deal in the circumstances.
But it’s highyl peculiar kind of expansion, where the ECB can prop up banks but not governments. We keep the situation where banks are kept afloat at all costs, but people in the streets are left to drown. The first might perhaps be the right thing to do under the circumstances, but the second comes awfully close to making social security-cutting the only officially allowed policy of the eurozone. I sure would have liked a vote on that.

Recessions coupled with the need for balanced budgets do.

Not permanent. Temporary. And rightly so: if you think that government expenditure should rise when GDP does, you should think government expenditure should fall when GDP falls. The (exaggerated) social democratic decision then comes down to whether you cut military expenditure or unemployment benefits.

Backing up my assertion that the declines are temporary: Here’s America’s GDP per capita over time – http://www.acus.org/files/u3/USA-GDP-1810-2010.png – dips are noticeable, but the trend is very clear. GDP rising.

Here’s America’s government expenditure over GDP – http://tinyurl.com/6q3rpur. Post-1945, it’s hovered around 15-25%. If the denominator (GDP) has been rising, the numerator has been rising similarly. Government expenditure has been rising and rising.

Here’s America’s federal debt level over GDP: http://upload.wikimedia.org/wikipedia/commons/thumb/d/d5/US_Federal_Debt.png/350px-US_Federal_Debt.png. Excluding the war, it’s remained comfortably under 50%. They’ve largely balanced their budget.

And this is America, the developed nation you would most expect to cut spending severely during a recession. There’s just no evidence that recessions cause permanent drops in government expenditure over GDP. And seeing as stimuli are very rarely more than 10% of expenditure, I consider this (quite literally) an order of magnitude of greater importance than stimulus.

Social democracy is about providing for the less well off, and the corresponding decision about how much you should tax the wealthy. This holds at all times. I’d be sad to see social democracy so strongly associated with running deficits.

“I’d be sad to see social democracy so strongly associated with running deficits.”

Enda I am still confused. No one is saying a social democracy has to ALWAYS run deficits. I am saying that a social democracy has to be permitted to run deficits during a recession/depression like event. How is a government supposed to maintain the same level of services without running a deficit if tax revenues are dropping due to a recession?

They’re not. When GDP is $1bn, the state can afford unemployment benefit of $x. When GDP is $2bn, the state can afford unemployment benefits of $y. If GDP falls back to $1bn, you move back to $x.

Oh please.

No, it makes no sense.

Edna wrote:

“Here’s America’s federal debt level over GDP: http://upload.wikimedia.org/wikipedia/commons/thumb/d/d5/US_Federal_Debt.png/350px-US_Federal_Debt.png. Excluding the war, it’s remained comfortably under 50%. They’ve largely balanced their budget.”

That’s not what the chart means. In the 66 years since WW2, America has run deficits every year but 6. For each decade of deficit, there has been 1 year of surplus. What your chart shows is that the yearly percentage increase in debt has on average approximated the percentage increase in GDP (actually, I don’t think it really shows this either, as the ratio at the end of the chart is more than twice what it was at the beginning, but that seems to be your claim), Since, the increase in GDP was typically positive, so was the increase in debt, which means deficits were being run. Under a balanced budget requirement, absolute debt would always decrease as old debts were paid off without new debts accruing. If any growth were possible under this scenario, debt/GDP would decrease even faster – the numerator would be decreasing while the denominator increased. The chart shows instead that debt/GDP has doubled (from less than 20 to over 40) with a lot of fluctuation over the course of the chart. Some argue, including Quiggan if I follow him correctly, that a stable debt/GDP ratio – which implies deficits on average whenever there is growth on average – is what really matters and what we should mean by fiscal responsibility. But that is not what “balancing the budget” as a legal obligation means in any context I’ve encountered. What Europe has been asking for but not enforcing was something in between: deficits constrained to an percentage of government spending (not GDP). If we are now talking about American Republican style balanced budgets, that’s even worse. Neither of these are what America has historically done.

As for the historic impact of recession, between now and the Great Depression, the worst recession in the US was that of the late 70’s-early 80s (a double dip), which has indeed led to a so-far permanent change in the distribution of wealth, largely through changes in the tax code to make it less redistributive, and also through weakening of the welfare state and the labor movement. See Reaganism.

I said:

“What your chart shows is that the yearly percentage increase in debt has on average approximated the percentage increase in GDP”

Let me make something more explicit, since the chart is not literally showing the delta. If the cumulative debt/total GDP ratio is constant, then percentage fluctuations in debt must equal percentage fluctuations in GDP.

okay… but isn’t this what people do all the time in political negotiations? I can hardly imagine someone like Merkel or Sarkozy concluding that this was an example of Cameron genuinely trying to mangle the EU. They’ll just think “oh, he had nothing to lose and everything to gain” and know where he stands next time.

Or are you judging Cameron’s opportunism from the fact that this treaty would superficially appeal to his austerity ideals? Because I don’t think he’s that shallow.

Sorry Chris haven’t checked in on CT for the last little while. Clegg isn’t the foreign minister. Lib Dems don’t really have much influence in this area of coalition policy, and the overwhelming opposition of the UK press oligarchy to the European project makes making it a ‘red-line’ that would force the collapse of the coalition strikes me as unimaginably electorally stupid and futile. Frankly I think your ‘Texas on Thames’ fantasy is, well, just that. Other than that I’m back home in Ireland now and my, perhaps self-interested, position is that the further driving of the UK out of Europe can for the time being only be a positive development. I think the undoubted democratic deficit in the EU can only be solved by enhancing political integration alongside economic. The UK has become an unthinking, reactive impediment to all such movement in this direction. Its impossible to have a rational discussion about the EU in the UK mass culture, such is the hysterical indoctrination by the tabloid press of the populace. So overall, I’d love to see it leave.

“England (shorn of the Celtic fringes) as a second Switzerland, with Swiss levels of prosperity and generalised small-c conservatism as a function of a combined withdrawal from Europe and devolution.”

Really? Devolution as a conservative policy, with huge regional and municipal autonomy, popular votes on everything? That seems far-fetched to me.