European Movement UK

Britain's future is with Europe! Join the debate and put your opinion forward!

by Vicky Pryce, chief Economic Advisor at the Centre for Economics and Business Research and former Joint Head of the Government’s Economic Service. ///

Cameron’s decision to oppose Jean-Claude Juncker’s nomination to be the new head of the European Commission has been viewed with bemusement in some quarters and with disbelief in others.

With bemusement because it was clear from the word go that the fight to keep out a person who he considered a “non-reformist” and therefore hostile to the UK’s interest while offering no credible alternative was doomed to failure. And with disbelief – and horror by industry and most observers – at the manner in which the Prime Minister was left isolated.

After a series of personal attacks on Juncker, which backfired spectacularly, the move from the centre-left European Parliamentarian grouping to drop their support for their own favoured candidate, Martin Schulz, and to back Juncker in return for Schulz being re-elected leader of the European Parliament was the killer blow to Cameron’s manoeuvrings.

The final humiliation was the result of the vote that Cameron forced the European Council to take on their preferred candidate. In opposing Juncker, Cameron was in a minority of 2, along with the ultra-nationalist Hungarian prime minister.

What does it mean for the UK? The opinion polls initially showed that Cameron benefited from his uncompromising stance. But recent polling by the Tory Lord Ashcroft suggests that there is no real Juncker bounce for Cameron.

Opinion polls come and go, but in the process two things have happened. First, the UK seems to have moved a step closer to leaving the EU. This sends a worrying signal to international investors who have traditionally seen the UK as a gateway to Europe. And second, the whole episode has made it harder for Cameron to sell any weak compromise his “renegotiation” produces, which might have been acceptable a few weeks ago.

The stakes have been raised. If re-elected as Prime Minister, either as head of a majority government or a coalition, he will need to win and to win big. If not he may split his party and the chances of Britain leaving the EU, either as sleepwalkers or under the pressure of rising anti-EU populism, rise considerably.

No-one in Europe really wants that. There was a hint straight after the Juncker vote that the aim of an ‘ever closer union’ might be toned down a notch or two. Maybe. The Strategic Agenda adopted by the European Council is also a signal to the UK that its priorities form an integral part of the direction other EU leaders want to take.

The focus now is whether the EU may be prepared to offer the UK a lifeline in the form of a strong influential post for the UK commissioner whoever she or he ends up being. The next European Commission has a big job to do in delivering the ambitions of EU leaders. A high profile, constructive and effective Commissioner from the UK could play a crucial role in that effort. But the UK government must nominate the right person.

A better more efficient European Commission is a good thing. As are proper impact assessments and better national scrutiny of regulations that emanate from the Commission and the European Parliament.

Interestingly the belief in European institutions seems to have recovered somewhat in most countries, even in places like Greece, which has had to go through years of IMF, ECB and Commission-inspired harsh economic reforms. But that faith could quickly evaporate. The forecasts for this year are for little over 1% growth in the Eurozone as a whole, with France but also now Germany showing renewed signs of weakness.

Austerity itself has had very little impact on the long term competitiveness of most of the periphery economies. The protest votes and the message sent through the European election results made it clear that the population has had enough of years of poor economic growth, unacceptably high number of people out of work (25% in Spain and 27% Greece), especially record youth unemployment numbers (53% and 58% respectively).

Of course reform still needs to proceed apace. Both in individual countries through the opening up of markets and reshaping the balance between private and public sectors as well as the social contract of the state with its citizens but also in completing the internal market. What is more important in the short term is for demand measures to be strengthened, with the ECB accelerating if anything its process of monetary easing. We need to rethink the balance between austerity and reform in the countries still suffering from high and unsustainable debt levels.

These are the things that really matter. The UK should be spending its efforts on ensuring that it influences the way growth returns to Europe.

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Vicky Pryce’s paperback edition of ‘Greekonomics’ was published by Biteback Publishing in 2013

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