Opinion

David Cameron and the EU’s Waterloo

The United Kingdom, whose new majority Conservative government has pledged to hold a referendum on European Union membership by the end of 2017, perhaps even next year, is not the outlier that it is often portrayed as being. 

By: Date: June 14, 2015 Topic: European Macroeconomics & Governance

Two hundred years ago this month, at the Battle of Waterloo, Napoleon Bonaparte’s defeat at the hands of an allied army, led by the Duke of Wellington, reshaped Europe’s future. Britain may now be poised to do so once again.

The United Kingdom, whose new majority Conservative government has pledged to hold a referendum on European Union membership by the end of 2017, perhaps even next year, is not the outlier that it is often portrayed as being. Indeed, it is at the vanguard of the EU’s institutional atrophy. Even if it does retain its EU membership, the UK will continue to move steadily away from Europe. With more attractive commercial opportunities elsewhere, most European countries will follow suit.

For the EU, meeting the UK’s demands – to restrict benefits for migrant workers, limit financial regulation that could hurt the City of London, and disavow the goal of “ever closer union” – would require a fundamental transformation, including utterly unfeasible changes to the treaties that underpin European institutions. The discussion has thus turned to the possibility of providing the UK with a special status or allowing it to opt out of more EU provisions.

But, given intensifying doubts about the benefits of integration, even that solution would risk unraveling the EU. By emphasizing that Europe no longer offers an economic dividend, the UK’s move away from the EU will spur ever louder calls for change elsewhere. Simply put, talk of “Brexit” has exposed Europe’s economic and political fault lines – and there is no going back.

Talk of “Brexit” has exposed Europe’s economic and political fault lines – and there is no going back.

Robert Peston, in his 2005 biography of then-Chancellor of the Exchequer Gordon Brown, described Brown’s “pragmatic view that the EU was a good thing only insofar as it delivered practical benefits of peace and prosperity to Britain.” While the British have been particularly open about the nationalist nature of their support for European integration, other EU members have been no less mindful of their domestic interests.

In the wake of World War II, European countries’ national interests were aligned. Nonetheless, efforts to establish political unity through a common army failed in 1954, highlighting that economic common ground was the key to European integration. And, indeed, the 1957 Treaty of Rome, which opened national borders within the new European Economic Community, enabled the rapid proliferation of intra-European trade, thereby contributing to a shared economic recovery. The material gains of these commercial relationships fostered empathy among Europeans, fueling increased support for – and trust in – shared institutions.

This process began later for the UK, which joined the community in 1973; but it followed a similar trajectory, with British citizens responding to economic gains by supporting increased integration. Prime Minister Margaret Thatcher, by advocating the 1986 Single European Act, sought to maximize those gains. In the spirit of the Treaty of Rome, she ensured that the act focused on developing an open and competitive common market, in which all members participated on equal terms.

By contrast, her German counterpart, Chancellor Helmut Kohl, often regarded as one of that generation’s preeminent European champions, offered only lukewarm support for the Single European Act. He preferred to help steer Europe toward monetary and political union, just when its economy had begun to fall behind the rest of the world.

The result was the 1991 Maastricht Treaty – the point when European integration went into overdrive. But the Treaty’s architects were so busy playing internal power games that they failed to recognize that monetary union could not stem Europe’s decline, especially as the United States was experiencing rapid productivity growth and Asia’s economic rise had begun. With Europe’s post-war recovery long complete, the logic of integration had to be rethought. Unfortunately, that did not happen.

As a result, intra-European trade and support for European institutions, having soared in the previous two decades, began to decline practically before the ink on the Maastricht Treaty was dry. The eurozone’s protracted crisis, which began in 2008, has exacerbated this trend, with member countries still struggling to restore economic and financial stability – and likely to continue to lag behind the rest of the world in terms of GDP growth.

No institutional framework can survive unless it serves the material interests of its constituency. In the nineteenth century, when the Tunisian craft guilds failed to adapt to industrialization, they became irrelevant, and the amins, or guild masters, were left as figureheads in shell institutions. Today, European institutions could face the same fate.

No institutional framework can survive unless it serves the material interests of its constituency

Unencumbered by the euro, and benefiting from long-standing commercial relationships beyond Europe, Britain is in a particularly strong position to push back against EU institutions. This may be self-serving, but it should not be a surprise; in fact, with businesses throughout Europe seeking markets elsewhere, Britain’s approach may well herald similar developments elsewhere.

European integration in the shadow of WWII was a wise and magnificent achievement. But, with that historic task now complete, European institutions need a new rationale. And with the EU, unlike other federations, lacking a common political destiny, that rationale must center on material benefits.

The EU must return to the fundamental driver of its success, pursuing a renewed single-market agenda that reflects the rationale of the Treaty of Rome. Unfortunately, Europe is so divided nowadays that the ability to achieve such an outcome is not promising, with new initiatives along these lines facing “increasing political resistance.”

If Europeans merely invoke the lofty mantra of “an ever closer union,” their institutions will atrophy. Without a new unifying objective – one based on shared material gains, not on fear of Vladimir Putin’s resurgent Russia – the European amins will soon be out of business.

This was reprinted with permission from Project Syndicate. To secure the rights to this commentary, please contact Project Syndicate here .

This was reprinted with permission from Project Syndicate. To secure the rights to this commentary, please contact Project Syndicate here.

Read more from Ashoka Mody:

Europe’s Integration Overdrive

Kohl’s Euro

Europe has Wasted a Good Crisis

Germany relishes role of hegemon, but is not able to play the part.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint.

Due to copyright agreements we ask that you kindly email request to republish opinions that have appeared in print to communication@bruegel.org.

View comments
Read article More on this topic More by this author

Blog Post

Green bonds: who is to certify ‘sustainability’?

Poland’s issue of a green bond earlier this month was the country’s second financing of this type, and the first ever repeat issue by a sovereign. It has revived the debate as to whether there should be a single regulatory standard to certify the environmental quality of financial assets. This will be a key issue for the EU’s sustainable finance strategy which is due to be released shortly.

By: Alexander Lehmann Topic: Finance & Financial Regulation Date: February 19, 2018
Read article More on this topic More by this author

Podcast

Podcast

Brexit consequences for EU climate and energy policy

Bruegel fellow Georg Zachmann joins Richard Tol, professor in the Department of Economics at the University of Sussex, and Pieter-Willem Lemmens, head of analysis at the climate policy think-tank Sandbag, for this episode of 'The Sound of Economics', to discuss the impact of Brexit on climate and energy policy in the European Union.

By: The Sound of Economics Topic: Energy & Climate Date: February 15, 2018
Read article More on this topic More by this author

Podcast

Podcast

European Parliament: More representative post-Brexit?

Bruegel director Guntram Wolff features in this episode of 'The Sound of Economics', highlighting how a reallocation of seats in the European Parliament following Brexit provides the opportunity to make the institution more representative of EU citizens.

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: February 5, 2018
Read article More on this topic More by this author

Blog Post

Difficulties and opportunities in reallocating European Parliament seats after Brexit

The European Parliament must carefully consider the reallocation of seats after Brexit, allowing for a potential shift in political alignment and working within parameters already agreed with Member States.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance Date: February 5, 2018
Read article Download PDF More on this topic

Blueprint

People on the move: migration and mobility in the European Union

Migration is one of the most divisive policy topics in today’s Europe. In this publication, the authors assess the immigration challenge that the EU faces, analyse public perceptions, map migration patterns in the EU and review the literature on the economic impact of immigration to reflect on immigration policies and the role of private institutions in fostering integration.

By: Uuriintuya Batsaikhan, Zsolt Darvas and Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: January 22, 2018
Read article Download PDF More on this topic

External Publication

Analysis of development in EU capital flows in the global context

The monitoring and analysis of capital movements is essential for policymakers, given that capital flows can have welfare implications. This report, commissioned by the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union, aims to analyse capital movements in the European Union in a global context.

By: Grégory Claeys, Maria Demertzis, Konstantinos Efstathiou, Inês Goncalves Raposo, Pia Hüttl and Alexander Lehmann Topic: Finance & Financial Regulation Date: January 15, 2018
Read article More on this topic More by this author

Blog Post

Bad News and Good News for the Single Resolution Board

A first report on a key plank of the European Union’s banking union reflects on shortcomings thus far, but also suggests that recent improvements might ultimately lead the SRB to be successful in its critical missions.

By: Nicolas Véron Topic: Finance & Financial Regulation Date: January 15, 2018
Read article More on this topic

Blog Post

Does the European Parliament miss an opportunity to reform after Brexit?

While Brexit negotiations are beginning to progress, the European Parliament is preparing to vote on the possible reallocation of seats following the UK's departure. With many of the current proposals reflecting Member States' concerns about losing seats, this paper advocates for options that could better achieve equality of representation even within the constraints of the EU treaties.

By: Robert Kalcik, Nicolas Moës and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: January 10, 2018
Read article Download PDF More by this author

Policy Contribution

European Parliament

Bank liquidation in the European Union: clarification needed

Critical functions and public interest. What role do they play in Member States’ decision to grant liquidation aid? The author of this paper looks at how resolution and liquidation differ substantially when it comes to the scope of legislation applicable to the use of public funds and how the diversity in national insolvency regimes is a source of uncertainty about the outcome of liquidation procedures.

By: Silvia Merler Topic: European Macroeconomics & Governance, European Parliament, Finance & Financial Regulation, Testimonies Date: January 10, 2018
Read article More on this topic More by this author

Opinion

Opportunities and risks in Europe in 2018

The new year could very well see the positive story of 2017 continue in Europe – but a number of looming policy and political problems cannot be ignored.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance Date: December 30, 2017
Read article Download PDF

External Publication

European Parliament

The Impact of Brexit on the EU Energy System

What will be the impact of Brexit on the EU energy system? With or without the UK, the EU will be able to complete its market, to achieve its climate and energy targets with feasible readjustments, and to maintain supply security

By: Gustav Fredriksson, Alexander Roth, Simone Tagliapietra and Georg Zachmann Topic: Energy & Climate, European Macroeconomics & Governance, European Parliament, Testimonies Date: December 19, 2017
Read article More on this topic More by this author

Blog Post

Optimistic UK business confidence indicators predict smooth Brexit

UK business confidence indicators hardly fell after the Brexit vote in 2016 and have been increasing steadily since. The most likely reason is an expectation of smooth Brexit deal, especially for industry, while there is more uncertainty for services.

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: December 19, 2017
Load more posts