As the recriminations continue over David Cameron's blocking of an EU treaty deal designed to overcome the euro crisis at last week's EU summit, observers are split over whether Cameron's move was planned or the result of amateurish incompetence in EU bargaining and diplomacy. Either way it has marginalised the UK in the European Union more than any other single event in Britain's 38 years of membership and brought the UK as close to the exit door as it has ever been. At the same time, it has ensured that while the UK remains a member of the EU, its influence has never been more limited.
As a strategy supposedly designed to protect British interests, Cameron has failed spectacularly; but it is hard to see how he can dig himself out of the rather large hole he is now in. In a brief but pointed remark, Germany's leader Angela Merkel commented: "I really don't believe David Cameron was ever with us at the table."
The last time a Conservative-led government held the EU to ransom was the sad comedy in 1996 when they blocked all EU business for three weeks after the other EU member states had the temerity to block imports of British beef during an outbreak of 'mad cow' disease. Cameron's veto of a new EU treaty puts this in the shade – for once history is repeating itself as tragedy.
Saving the euro?
The central issue – for the UK as well as for the eurozone – of whether last Thursday to Friday's summit did enough to stop the euro imploding, with potentially hugely damaging political and economic effects across Europe and beyond, remains open. Planned tighter eurozone rules on national budgets may turn an acute crisis into a still damaging but less explosive chronic crisis. But once again, all eyes will be on the twin actors of the financial markets and the European Central Bank in the days ahead to see whether the market panic about the solvency of Italy and other eurozone member states subsides, and whether or not the ECB acts through stronger monetary easing and clearer backing of Italian bonds to decisively promote an end to the panic.
A parallel EU?
The UK's veto means that in the coming weeks, the eurozone – together with at least six of the ten non-euro member states (with Hungary, the Czech Republic and Sweden consulting their parliaments) – will have to figure out how to put together a new intergovernmental treaty to implement their commitments to fiscal discipline. Such a treaty will have in most cases to be put to national parliaments, and possibly in the case of Ireland even to a national referendum. So there is a lot of short term politics to come in implementing the Franco-German led austerity-route to solving the euro crisis, even without considering how European politics is going to develop through years of the no or low growth and high unemployment which the 'austerity-solution' is imposing. One of the many ironies of the UK's position is that Cameron and Osborne's austerity economic policies closely mirror those of the eurozone. A UK veto poised to challenge the eurozone's repetition of policies that failed Europe so badly in the 1930s would have been a very different story.
The 23 (or 26) signing up for this intergovernmental treaty hope to still use EU institutions, including the European Commission and the European Court of Justice to monitor their activities. Whether Cameron, having antagonised all his fellow EU leaders, will step back and at least allow this to go ahead smoothly or will attempt to block this too remains to be seen. That the member states of the EU are scurrying around looking for novel ways to agree to manage the euro, rather than doing so solidly within the EU's existing treaties, due to the UK's veto, is quite an extraordinary political sight. It will resonate strongly in the period ahead, not least as the UK was not and is not part of the measures the 'eurozone plus' group are now undertaking.
Was there ever a strategy?
Back in the UK, the coalition is deeply divided as Nick Clegg rows back from his initial backing of Cameron and starts to express the outrage felt by most LibDem politicians. Ed Miliband has joined in the criticism too, while ensuring that he emphasises British business and jobs. While the eurosceptic Tory cabinet members and backbenchers are delighted, there are many in British business and diplomacy who are aghast. Sir John Kerr, former head of the Foreign Office, and former UK ambassador to Brussels (with a track record of top level EU negotiating) put it with masterly understatement: "I am very puzzled that we chose to pick up the ball and leave the pitch before the game started. I'm very uneasy because I'm very worried about the empty chair."
Cameron claimed his strategy was to defend the City of London financial services sector, but his actual strategy has quite possibly undermined the UK's ability to defend the City in any future EU bargaining. While delighting eurosceptic backbenchers, it is hard to imagine that this was the intended strategy. Cameron made a number of key errors in the run up to, and at the summit, many of them those of the amateur – which raises not least the question of where his political and foreign office advisers were: did he simply ignore all those who actually understand the EU which include his chief of staff, Ed Llewellyn, and the highly experienced UK ambassador to the EU, Kim Darroch, or was his backbench eurosceptic approach to the summit something he had always planned?
Cameron's five follies
In torpedoing the UK's position and influence in the EU, Cameron committed five follies:
1. Losing influence, destroying alliances: Even before the summit, Cameron had undermined the UK's relationship with many of its EU partners and thrown away influence in the process. As one of the largest three economies in the EU – and with the UK strongly impacted by the euro crisis – Cameron could have given the UK a serious and influential role in discussing the economic strategy to manage the euro crisis, even without being in the euro. Instead he chose not only to stand back and stay out of the room but also to lecture from the sidelines. This antagonised many others in the process – not only France and Germany but even those like the Swedes who do not intend to join the euro but who, unlike the UK, put all the more emphasis as a result on being in the room and having as much of a voice as possible.
2. Choosing the wrong moment: There have been many late night EU summits down the years with one or other member state playing hard ball. Cameron may have thought he was following in this tradition. But this was a serious misjudgement. With the euro crisis in its most acute phase so far in the last two months, with the future of the euro and even of the EU being openly questioned, this was a summit focused on taking measures to defuse the crisis. It was not a moment of wide-open treaty negotiation. It was not a moment when all 27 brought their favourite hobby-horses to the negotiating table. Cameron alone chose to bring issues along that were not in fact relevant. For the other member states this was at the least inappropriate and unhelpful, at the worst it was a crass attempt at holding the eurozone to ransom – Cameron's stance essentially said 'give me exceptions or I will stand in the way of your efforts to solve your worst-ever crisis (even though it affects the UK too)'.
3. Attacking the Single Market: While much of the British media claimed Cameron was defending the City, the summit – and the Merkel-Sarkozy proposed treaty changes – were not about the single market or financial services. The proposed treaty changes were focused on balanced budgets and fiscal compliance for the euro members alone. Cameron – despite the UK usually defending the level-playing field of the single market above all else in the EU – wanted exceptions and changes made to normal single market rules for the UK's financial services sector, including reintroducing unanimity in some areas, when majority voting had been the rule for decades. Some said that Merkel understood Cameron needed some small bone to take home for his eurosceptic backbenchers and might have offered him something on the working hours directive that has long grated on the sceptics. But a wholesale change in normal single market rules was not what any other member state was ready to consider. Failing to get his inappropriate demands, Cameron deployed a veto on the whole treaty –creating a profound turning point in its relations with the EU.
4. Negotiating is not for amateurs: Cameron seems to have broken many of the most obvious and basic rules of effective EU negotiating. Deals in the EU are usually done through lots of advance discussion and offers of 'you scratch my back, I'll scratch yours" around different issues. But when Cameron unveiled his financial services demands on Thursday night, he clearly had no other member states lined up to support him, with many apparently baffled as to his strategy.
More crucially still, he does not appear at any point to have modified his demands – while the whole art of EU bargaining depends on a staged series of compromises from both sides. When on the Thursday night it became clear that Angela Merkel couldn't carry the other member states with her on agreeing a whole new treaty to implement eurozone budgetary discipline, European Council President Herman van Rompuy proposed instead amending a protocol (protocol 12) of the Lisbon Treaty which rapidly got support of all the member states but the UK. At this point, van Rompuy apparently asked Cameron if he would modify his list of demands, given there wasn't now going to be a whole new treaty but a new protocol to the Lisbon Treaty. Any non-amateur would at that point have given up his least important demand while hanging onto the rest, and seeing what the others then offered in return.
Cameron hung onto his full set of demands, and the eurozone states decided if he wasn't going to play ball, they would move to their intergovernmental treaty fall-back position. The UK was scuppered – in EU terms, Cameron had lost, game, set and match. Sarkozy had gained – always preferring an intergovernmental deal over Merkel's preference for greater integration through the treaties.
5. Undermining the UK in future single market negotiations: For now, the UK is still in the EU of 27 and so the UK will be in the room when new single market laws and directives are negotiated. But Cameron's blocking of treaty change has ensured that 23 – and possibly 26 – of the EU's member states will now set up an intergovernmental treaty to manage eurozone fiscal policy, so meeting to discuss a whole range of economic policy issues without the UK in the room. By the time the 26 are discussing with the UK in full EU session, many of the issues and compromises will have already been decided by the 26.
EU negotiations on new directives also depend on alliances between member states – it's a rolling game, where if one country helps another on an issue important to one of them, the favour will be returned another time. If you don't have alliances or friends, it's hard to play the game well. Despite qualified majority voting being the rule for most single market issues for many years, it has also been the EU tradition to look for consensus where possible. The UK government benefited from this ten years ago: when it was going to be outvoted on the EU's 'information and consultation' at work directive, many changes were introduced to weaken the directive (to the dismay of the UK trade unions), so the UK finally signed up to a weaker version rather than having a stronger version imposed on in it. It's not necessary to be an EU expert to see that Cameron will have hugely undermined the good will that lies behind such an approach.
A parting of the ways?
The euro crisis will continue to dominate the headlines in the weeks ahead, but as the eurozone wrestles with producing an intergovernmental treaty to bind its members into greater fiscal discipline, the UK's behaviour will not be forgotten. Cameron has ensured that the UK’s already shrinking influence is now not only minimal but also visibly so. It has always been hard to have a serious and well informed EU debate in the UK given the distortions of eurosceptic media and politicians alike. But perhaps now, even as the eurozone and the entire EU struggles to survive, there will have to be a serious debate in the UK about the EU.