Lim Yin Foong: The UK in 'splendid isolation' after vote for closer EU

EVEN FOR THE leader of an island nation, the isolation from Europe that David Cameron appears to be risking seems extraordinary. In the past few days, the British Prime Minister has been derided in news reports and commentaries for his veto of a European Union treaty that could help save the eurozone.
He might well have been trying to ensure that the new compact treaty, aimed at achieving deeper fiscal unity among its members through greater EU control over the national budgets of the 17 eurozone countries and tighter financial regulation in all EU nations, would not adversely affect business in the City of London. Yet, with the UK now left standing alone after 26 of the 27 EU nations agreed to pursue the initiative, Ca meron is being accused of having unnecessarily driven a wedge between the country and a major trading partner at its doorstep at a crucial moment in history.

Cameron’s veto decision has also infuriated pro-European Brits such as his Deputy PM, Nick Clegg, and other leaders of the Liberal Democrat party, causing political dissent that could threaten the stability of his coalition government. Many are worried about the impact of the UK’s isolation within the EU bloc as “one against 26”. In two-speed Europe, the Guardian columnist Jonathan Freedland says the UK is in a slow lane of one.

 

There are worries that strained relations with Europe resulting from Dec 9’s events may sideline the UK, one of 10 non-euro nations in the EU, and put in jeopardy its automatic right of access to the single EU market. By saying no to the proposed treaty, the UK will also have little say in the shaping of future European economic policy that will affect its own economy.

 

The idea of the UK’s losing its influence at the “top table in Europe” has fuelled fears about its becoming a second-class member of the EU. This, in turn, may affect its relationship with the US; commentators say that Washington values the UK’s leading role in the EU and its ability to assert influence in Brussels. Reuters’ Hugo Dixon writes in the Breaking Views column that persuading foreign businesses to base themselves in the UK will be a challenge if the nation had only second-class access to the single market. 

 

It is this fear of isolation — and the pragmatic view that their future lies with stronger European integration — that has seen the other nine non-euro EU countries agree to the treaty’s proposals and support the 17 eurozone countries despite their reservations about adopting the common currency. Denmark, for instance, appears to be leaning towards seeking inclusion in the new agreement and has been invited to sit in on continued discussions on the inter governmental treaty, The Copenhagen Post reports. Prime Minister Helle Thorning-Schmidt has also expressed confidence that the proposals will help stabilise the euro, while admitting that they would also be of huge interest to Denmark, which pegs its currency to the common currency.

 

The UK has always had a strained relationship with the EU however and, despite Cameron’s insistence that its EU membership is “vital” to the nation’s interests, some also see his actions as signalling the start of the island-nation’s eventual departure from the European bloc. Charles Grant, director of Londonbased Centre for European Reform, told German magazine Der Spiegel that he expects the UK to sever its ties with Brussels for good in a decade’s time at most.

 

Still, the road towards closer European integration — even without the UK — is far from smooth. The 26 EU nations that have agreed to the pact aim to sign and ratify it by June. However, the legalities for enforcing the treaty’s debt and deficit rules still need to be put in place. And, the treaty’s proposals still need to be fully accepted by the relevant governments. For instance, non-eurozone countries such as Sweden, Hungary and Czech Republic will still need to seek parliamentary approval before they are able to give their full support.

 

Moreover, it is unclear whether the treaty will adequately address the eurozone’s sovereign debt crisis and help avert a possible disintegration of the euro. Writing in The Daily Telegraph, Capital Economics managing director Roger Bottle says there is still no attempt to deal with the eurozone’s two underlying macro problems: a lack of competitiveness in the periphery and slow growth of domestic demand in the core.

 

The UK might well have a great deal to lose by not being part of the EU as it moves forward. Its continental partners account for some 3.5 million jobs in the country and about half of its trade. Yet, whether a return to its “splendid isolation” of 100 years ago proves to be a good idea really depends on what happens to Europe itself throughout this current crisis. And, that’s still far from clear now.