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Open Europe briefing: Right speech, right time? Can Cameron tackle the tough questions about Britain and Europe?

22 Jan 2013

David Cameron will tomorrow make his long-awaited speech on Europe and Britain’s role within it.

Today, Open Europe publishes a new briefing setting out why this is the right time, for Britain and Europe as a whole, to tackle the three fundamental questions facing the EU: how to reconcile euro and non-euro member states to EU membership, how to revitalise European economies, and how to reconnect European cooperation with national democracy.

These are the questions that David Cameron must answer in his speech tomorrow.

To read the briefing in full, click here:

Key points:

The UK can no longer freeze the issue. Two forces mean the “do nothing” option is no longer viable for the UK. First, Eurozone integration is changing the rules of the game. Britain needs to secure its existing rights as a non-euro member state, and create a space in Europe for those who do not wish to join the single currency. Second, without changes, the UK electorate, which according to some polls is already in favour of leaving, is far more likely to throw the baby out with the bathwater, and vote for an EU exit if they are finally asked.  When voters are offered the option of staying in but on new terms, this option consistently attracts the highest level of support. Renegotiation followed by a referendum – though not risk free – is therefore one of the few viable ways to square developments in Europe with UK public opinion.

The EU faces three existential challenges. This is too often presented as a UK-specific debate. The Eurozone crisis, the EU’s declining global competitiveness –  the EU’s share of world GDP is expected to be 60% of its 1990 level within five years – and the urgent need to reconnect the EU with voters means that there’s a compelling case for EU-wide fundamental reform. To address these challenges, the EU needs to do more of what it does best: facilitate trade, internally and externally, while rolling back where its one-size-fits-all model is actively fuelling popular discontent and / or hampering the EU economy.

The UK can drive change in Europe. Despite claims to the contrary, the UK has leverage in Europe:

Future treaties and fundamental changes: Though EU leaders will want to see various elections behind them before embarking on institutional changes, talk of EU treaty changes will almost certainly re-emerge before too long.  There are currently seven broad proposals floating around for more Eurozone integration – most of which need EU treaty changes to be fully completed.  Fears that the Eurozone can circumvent the UK through inter-governmental treaties or “enhanced cooperation” are valid but overstated, as Germany, in particular, is nervous about ad hoc-arrangements lacking firm constitutional grounding.

An economic asset: If the UK were to leave, the single market would shrink by 15%, with £261.4bn in annual European exports (up from £165.25bn in 2001) potentially facing extra costs, while the EU budget would be some €14bn light. At a time when the eurozone is searching for sources of external growth, the UK’s annual trade deficit with the EU of £52bn remains important.

Balance of power in favour of freer trade: Without the UK in the EU, the Northern, liberal bloc would lose its blocking minority in the Council of Ministers, radically tipping the balance of power in favour of the Mediterranean – more protectionist – bloc. For example, if the UK left, Germany could find it very difficult to block proposals for “reciprocity” to be included as a tenet of EU trade policy – which could seriously hurt its exports.

Global reach and ‘hard’ power: The UK, along with France, is one of the EU’s two major military powers and has a global network of diplomatic contacts. The UK accounts for 24% of all EU spending on defence, more than any other member state.

The “do nothing” option will generate even more uncertainty. Those who see uncertainty in negotiating for fundamental EU reform miss the point: the UK’s discomfort with the EU is already a fact of life and the “do nothing” option is in itself feeding uncertainty. A recent YouGov poll highlighted that 35% would vote to leave compared to 31% to stay in – this is already a very real issue. As John Longworth, Director-General of the British Chamber of Commerce, has argued, “If Britain does nothing to renegotiate its position now…That raises the spectre of an ‘in/out’ referendum in future that no pro-European campaign could realistically hope to win.”

Notes to editors:

1) For more information, please contact the office on 0044 (0)207 197 2333, Mats Persson on 0044 (0)779 946 0691 or Raoul Ruparel on 0044 (0)757 696 5823.

2) Open Europe is an independent think-tank calling for reform of the European Union. Its supporters include: Lord Leach of Fairford, Director, Jardine Matheson Holdings Ltd; Lord Wolfson, Chief Executive, Next Plc; Hugh Sloane, Co-Founder and Chief Executive, Sloane Robinson; Sir Stuart Rose, former Chairman, Marks and Spencer Plc; Jeremy Hosking, Director, Marathon Asset Management; Sir Henry Keswick, Chairman, Jardine Matheson Holdings Ltd; Sir Martin Jacomb, former Chairman, Prudential Plc; Lord Sainsbury of Preston Candover KG, Life President, J Sainsbury Plc; Michael Dobson, Chief Executive, Schroders Plc; David Mayhew, former Chairman, JP Morgan Cazenove; Tom Kremer, Chairman, Seven Towns Ltd.

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