David Cameron is in Brussels today trying to resolve the European financial crisis. If the Euro fails then it won’t only cause massive damage to the Euro block, but every other economy in the EU. French Europe Minister Jean Leonetti said “The situation is serious - the euro can explode and Europe unravel …That can be a catastrophe not just for Europe and for France but for the world.” Even the most Euro-sceptic pundits accept that this is the case, so it is only right that our Prime Minister is talking to the other leaders concerned and trying to formulate a way forward.
But what is the way forward that he is arguing for? If one were to listen to those on the right of the Tory party, such as backbencher Bernard Jenkin, the right outcome would be some sort of referendum on our membership of the EU before we commit to anything. However, this is a nonsense - the Euro crisis is time critical, and every day that passes without a resolution makes matters worse. How long would a referendum take to organise? Even if the actual voting was organised quickly, such an important and multi-faceted topic such as our membership of the EU cannot be argued sufficiently in a short space of time. The decision reached in such a referendum would have a lasting impact in almost every facet of British life. So no, we cannot have a referendum, but those calling for it know this - they are just scoring easy political points with those on the Right.
Germany and France are suggesting changes that will enforce financial discipline with penalties for those Euro-zone nations that fail to operate within set constraints. They are hoping that all 27 countries can agree to them, but if not, they may propose a more unified set of ‘core’ countries. The failure of Britain to engage properly with Europe for the last few decades mean that we will almost certainly find ourselves in the ‘slow lane’. So what will Cameron argue for? He has said that he wants the “best deal for the UK”, and by this he really means the financial sector, where he has pledged to resist any attempts to introduce a transaction tax. How far he will go in holding the position is yet to be seen, but if he doesn’t he’s unlikely to be popular with his party or supporters in the City. But is Cameron’s defence of the financial sector worth the losses we all suffer every extra day that the markets lose confidence in Europe? And is there any evidence that a transaction tax will actually weaken London as a market? If the rules apply in all of Europe then any trading is unlikely to move elsewhere in the EU, and are we really meant to think that traders would abandon Europe altogether? More importantly, if they did, would it really be a bad thing?
While Britain’s economy is overly dependent on the financial sector as the recent crisis has shown, it still contributes under 10% of our GDP (around 8% in 2009). Despite this it is unique within industries with the ease in which it can relocate, and therefore hold national governments to ransom if they don’t pass favourable legislation. Other industries that are important to the economy do not receive such favour from the coalition government. For example, the creative industries contribute over 20 billion annually, yet this government has scrapped the (profit making) UK Film Council and scrapped plans for tax breaks on the games industry which would have created nearly 10,000 high-value jobs. Cameron’s mission in Europe should be simple - come to the speediest conclusion of the Euro crisis without holding-out for special exemptions for the UK. We’re all in this together and it’s in our interest to work together. Cameron’s mission shouldn’t be to work for “what’s best for the UK” but to work for what’s best for everyone.