Cameron's EU deal is far from fixed

Insight
Charles Grant
08 February 2016

The package of EU reforms unveiled by Donald Tusk, the President of the European Council, on February 2nd, satisfied few British eurosceptics. David Cameron is now working hard to improve the deal at an EU summit on February 18th and 19th.

Many British Conservatives and newspapers were disappointed with the embryonic deal on EU reform that emerged on February 2nd. They are right that the deal fails to transform the nature of the EU or the UK’s relationship with it. But to those who know how slowly the EU moves, and how resistant to change it tends to be, the deal is towards the upper end of what British Prime Minister David Cameron could have achieved.

In any case the deal is not yet fixed. The draft texts consist of a decision of the heads of state and government, plus a clutch of statements and declarations from the European Council and the European Commission. When the European Council meets in Brussels on February 18th and 19th, it is unlikely to make dramatic changes to these documents. Cameron will probably win some improvements. At the same time, however, France and Belgium, and the European Parliament, will be trying to water down current drafts.

The documents contain sections in square brackets, meaning that they have been left open for discussion. Several of these are likely to change in ways that suit the UK. For example, Britain hopes that in the section on the relationship between the eurozone and the non-euro countries, the ‘emergency brake’ allowing ‘outs’ to delay decisions could be triggered by a single country, rather than several acting together. And if the brake is pulled, decisions could be reviewed by the European Council, as the UK would prefer, rather than by lower-level meetings of finance ministers. There could also be a promise to incorporate this section into the EU treaties, the next time they are changed.

As for the controversial ‘safeguard mechanism’ (also known, confusingly, as an emergency brake), which will allow a country to refuse in-work benefits for EU migrants for up to four years – if certain conditions are met – its duration could be extended for a number of years. Cameron will also try to put the section which more-or-less exempts Britain from an ‘ever closer union’ into a future EU treaty.

But the British run the risk that the final deal will in some respects be worse than the draft of February 2nd. The French have particular problems on the euro ins-and-outs section, on which there is likely to be a row at the summit. They – and others, like the Belgians, Austrians and Germans – are suspicious that the British are really after a de facto veto for the City of London over EU financial regulation. Such paranoia dates back to Cameron’s December 2011 refusal to sign the fiscal compact treaty, because the other member-states would not agree to minor changes on voting rules affecting some City interests.

Nothing in the current text justifies these French fears, but they may well insist on changing one part. This states that the banking union rulebook “may need to be conceived in a more uniform manner when it is to be applied [by Eurozone institutions] than when it is to be applied by national authorities of member-states that do not take part in the banking union. To this end, different sets of Union rules may have to be adopted in secondary law.” Paris worries that this could permit looser regulations in London, giving British firms a competitive advantage over those in the eurozone.

Belgium, the most federalist country in the EU, could well make trouble over the section on ever closer union. Belgian leaders agree with David Cameron that these words have totemic significance. The Belgians are unhappy that the draft decision says “the references to ever closer union among the peoples are therefore compatible with different paths of integration being available for different member-states and do not compel all member-states to aim for a common destination.” Nor do they like the UK getting special treatment: “It is recognised that the United Kingdom, in the light of the specific situation it has under the treaties, is not committed to further political integration into the European Union.” Belgium is not the only country to worry that Poland, Hungary or other eurosceptic governments could also demand equivalent special treatment. However, most other member-states do not care hugely about these words and will probably persuade the Belgians to grin and bear it.

The European Parliament may prove a bigger problem for the British. At least three parts of the deal require MEPs to pass legislation: the safeguard mechanism on in-work benefits, the reduction in child benefits that are paid overseas and new rules allowing a member-state to restrict the rights of EU citizens to bring in non-European spouses. The first of those will be the most controversial. Many MEPs dislike the Commission’s draft declaration that the UK already satisfies the criteria for applying the safeguard mechanism on migrant benefits. They think the Commission is jumping the gun: Parliament still has to agree to the criteria (which Tusk’s draft defines as EU migration putting pressure on a country’s social security system, labour market or public services).

Nor does the Parliament like the ‘red card procedure’: if 55 per cent of the votes allocated to national parliaments are cast against a draft law, the Council of Ministers will block it “unless the draft is amended to accommodate the concerns expressed”. Countries such as Spain, France and Germany were unwilling to give this to the British, but in the end softened their opposition in the expectation that the procedure will seldom be used; they doubt that so many national parliaments will often oppose a measure that their governments support. But MEPs, who generally think that national parliamentarians should stick to national business, worry that the red card undermines the Commission’s power to initiate laws, as well as their own role in EU legislation.

Many MEPs, like many federalists, see the whole draft decision as indicative of an alarming trend for the EU to move towards ‘inter-governmentalism’, that is to say towards the member-states (and the big ones especially) driving decisions more than EU institutions. Visiting London on February 5th, European Parliament President Martin Schulz gave vent to some of these frustrations. He said that though the UK “often tests our patience” he wanted it to remain in the EU. He added: “Many of my colleagues say behind closed doors: 'Don't stop a rolling stone. If the Brits want to leave, let them leave.'” He then said that nothing in Cameron’s deal would be irreversible.

Despite this bluster, many MEPs say that there is a good chance that they will pass the relevant legislation, perhaps in only a few months, which for the EU would be extremely quick. But they add that Cameron and his ministers will need to take the Parliament seriously and spend time cultivating MEPs.

Cameron must certainly avoid provoking the Parliament. But there is a risk that Britain’s pivotal relationship with Poland could lead to such a provocation. Poland, like the other Central European countries, has been reluctant to accept restrictions on in-work benefits for its citizens living in Britain, on the grounds that this would discriminate against non-British EU citizens. However, Cameron and his ministers have invested time and effort into winning round the Poles to the safeguard mechanism. When the British prime minister visited Warsaw on February 5th, Jaroslaw Kaczynksi, Poland’s de facto leader, blessed the deal.

But that is not good enough for the British. The centrepiece of Cameron’s deal, as far as British public opinion is concerned, is the four-year in-work benefits exclusion (the CER was among those arguing that Cameron should not focus so much on in-work benefits, but he took other advice). The problem is that the safeguard mechanism is open to legal challenge. Several EU governments, while not objecting to the mechanism, believe that it is at least indirectly discriminatory. The EU’s own lawyers can make the case that the mechanism is compatible with the treaties’ provisions on non-discrimination, since it is exceptional rather than permanent; since the mechanism ‘tapers’ (the longer an EU migrant resides in a member-state, the more benefits he receives); and since a number of conditions have to be satisfied for the mechanism to operate. But EU lawyers also admit that a challenge before the European Court of Justice on this issue is quite likely at some point.

Therefore Cameron needs a promise that the mechanism will go into the EU treaties, so that it becomes absolutely watertight legally. Donald Tusk’s draft decision made no such a promise, even in square brackets. Poland’s Law and Justice government – with which Tusk, from an opposing political family, has a difficult relationship – insisted that the draft say nothing about embedding the mechanism in the treaties. Can Cameron persuade Kaczynski and Beata Szydlo, the Polish prime minister, to soften their stance? This was not clear after Cameron’s visit to Warsaw.

In an effort to curry favour with Poland, the British may offer to help stave off Commission action against Warsaw under EU rule of law procedures (the Commission is concerned that some of the Polish government’s decisions challenge democratic principles). Were Cameron to defend Law and Justice overtly, he would risk losing the support of the European Parliament’s Socialists and Liberals, who want a firm line against what they view as Law and Justice’s illiberal tendencies.

If Cameron can achieve a promise of treaty change on the safeguard mechanism, so that it is legally set in stone, he would have a rabbit to pull out of his hat at the EU summit and impress at least some Tories. He is working on another rabbit, in the form of some sort of British declaration or act on the sovereignty of Parliament. There is a limit to how far such a declaration can go: since the 1960s, the ECJ’s jurisprudence has made EU law superior to national law. Indeed, the single market would not exist if national laws were allowed to trump EU rules.

One idea being floated would give the UK Supreme Court the power to vet the compatibility of EU laws or ECJ rulings with Britain’s constitutional order. Another would ask the Supreme Court to rule on whether EU laws and ECJ rulings exceeded the powers conferred on the Union by its own treaties. Thus the British court would take on a comparable role to that of the German constitutional court. Based in Karlsruhe, this court has never formally accepted the superiority of EU law. But though it has often asked difficult questions about EU laws and treaties, it has never rejected any of them. The point of all this would be to reconcile Boris Johnson, the popular mayor of London, who talks about the need to assert British parliamentary sovereignty, to EU membership.

If Cameron can win over Johnson, and other fence-sitters like Michael Gove, the justice secretary, then the Out campaigns will have few well-known Tories at their head. But so far neither the lack of heavyweight leaders, nor acrimonious rows between them seem to have harmed the various Out campaigns. On February 5th a YouGov opinion poll put the Outs nine points ahead.

Even if Cameron pulls several rabbits out of his hat on February 19th, they are unlikely to shift public opinion significantly towards In. Cameron’s difficulty has always been that the best possible deal available was not going to look exciting. This is partly a problem of his own making: his line has always been that the EU is pretty awful but that his reforms would make it much better. The CER has not been alone in urging him and his government to make the case for the EU per se, and then add that reforms can lead to useful improvements. Soon the deal will be forgotten and the issue will be In or Out. Rather than spending a lot of time and energy defending the details of the deal, Cameron should start making the case for membership, as he promised in his Bloomberg speech of 2013, “with all my heart and all my soul”.

Charles Grant is director of the Centre for European Reform.