Could eurozone integration damage the single market? by Charles Grant
Can Britain be at ease in a European Union that is increasingly focused on the euro and its troubles? Britain’s eurosceptics think not. The eurozone’s many problems require it to integrate more closely, and that will be bad for Britain, they say, since the euro countries will start to act as a bloc and manipulate EU institutions for their own benefit. Therefore Britain should quit this euro-centric club and negotiate a new and looser bilateral relationship with the EU. David Cameron’s government has begun technical talks with its partners on reforms to the EU, prior to an in-or-out referendum. His officials say that though arguments over EU migrants’ access to benefits will generate more political heat, the relationship between the eurozone and the wider EU is the most important substantive problem. Both George Osborne, the chancellor, and many business leaders see this issue as a priority. Their worry is that the 19 euro countries could caucus and impose their wishes on the 28-country single market. The euro countries can do so since new voting rules – introduced by the Lisbon treaty – came into force last year: their votes combined make a ‘qualified majority’ in the Council of Ministers. British ministers are particularly concerned about the City of London: other EU countries that know little about finance – or which seek to favour their own financial centres – could vote for rules that harm its competitiveness.
The recent furore over the European Financial Stability Mechanism (EFSM) has reinforced British worries. The eurozone wanted this fund, to which Britain has contributed, to make an urgent loan to Greece, to prevent it defaulting on payments due to the IMF and the ECB. Britain tried to stop the loan, reminding its partners of an earlier European Council decision that the EFSM should not be used for the eurozone bail-outs. But eurozone governments had a qualified majority in favour and pushed ahead. Since Britain could not block the loan, it decided to vote in favour, in return for guarantees against potential losses. To British officials, this is a clear example of eurozone putting the currency’s needs ahead of legal niceties or the interests of the euro-outs. Therefore one of David Cameron’s key demands in the renegotiation is ‘safeguards’ for the single market. Unfortunately for Britain, however, few EU governments show much understanding for British concerns. Even a country such as Poland, which is many years away from joining the euro, is