Brexit : looking through the spin

by George Hatjoullis

Cameron has set himself the task of ‘reforming’ the EU. He is not however trying to reform the EU but rather demanding it change direction or else the UK might leave. The EU will not change direction. It began on a path of ever closer union right from the beginning and it will continue. Cameron wishes to limit the single market in labour. The EU may offer cosmetic changes but ultimately it will not hamper the free movement of EU citizens across the EU. One issue that does seem sensible is to block the ability of the eurozone to caucus (i.e. gang up on) against non eurozone EU members. This makes sense if the UK is to remain outside of the eurozone. However, this raises some fundamental questions about the relationship between eurozone and non eurozone member states.

It was always intended that all member states would ultimately join the single currency. This is after all is what ever closer union implies. The derogations were never intended to be permanent. If Cameron succeeds in establishing a relationship between non eurozone and eurozone member states that protects the former then he will have halted ever closer union, de facto, and set up a two speed European Integration Project. This is also a change of direction. It will be resisted.

The fundamental flaw in the EU is not the single market. It is the eurozone. Labour movement is a two way flow and not really a long run issue. The recent UK experience of positive inflows of workers has been partly cyclical and partly a problem with the eurozone. The eurozone is struggling to create jobs and the UK is doing rather better. So EU citizens come to the UK to work. The cyclical flow with reverse at some point but the structural problems within the eurozone may take a while longer. Indeed as currently structured the eurozone will struggle to create sufficient jobs for a long time. The part of the EU that needs reform is in fact the eurozone and Cameron has no way of influencing this entity. To remain in the EU with an unreformed eurozone is the problem that the UK faces and nothing in the negotiations will improve this situation.

Cameron will ultimately fail to achieve anything material in his negotiations. The referendum will thus partly hinge on his ability to spin and the implications of leaving. In many respects it is impossible to leave and continue to have a preferential relationship with the EU. Norway and Switzerland have preferential relations but on the EU’s terms. All they have achieved by being outside is the loss of a seat at the table and a voice in the council and parliament. The EU’s terms are much the same as being a member state but without a voice.

The UK could leave and abandon its preferential relationship with the EU. It then becomes a single economy negotiating with the world. It is unclear how this will work out but the assertion of the Brexit campaign that the UK will thrive in this context is not self evident. It just an assertion. The benefits of being in the EU, and the problems, are not in dispute. So Brexit is a gamble. Do we feel lucky?