Britain and the EU: a crisis looms

British politicians are too complacent about Germany’s plan to salvage large parts of the EU constitutional treaty. They assume that other countries will reject the German presidency’s scheme, so sparing Britain from isolation. Indeed, there is now a consensus that stretches from UK treasury officials to Conservative leaders to The Economist, arguing that the EU should forget about treaty change, focusing instead on crucial challenges such as the Doha trade round, reform of the EU budget, international negotiations on climate change and the Lisbon agenda of economic reform. However, if the EU wants to tackle these important issues, it must first clinch a deal on treaty change.

The Germans want the June European Council to approve both a timetable for a conference to amend the existing treaties, and the outline of an agreement on what the changes should be. The new treaty would not be ‘constitutional’: the references to flag and anthem would go. But it would include the main institutional provisions of part one of the constitutional treaty (the foreign minister, numbers of commissioners, new rules on voting, and so on), and the bits of part three required to make them work. Part two, the charter of fundamental rights, would be dropped, along with the rest of the over-long part three. The Germans say the institutional deal is not negotiable, since it was a delicately crafted compromise: if one government tried to amend one bit, others would try to cut the bits they disliked.

It is becoming clear that most member-states, and not only the 18 that have ratified the constitutional treaty, will back the German plan. Nicolas Sarkozy has indicated that if he wins the French presidency he will support the Germans and ratify the new treaty in parliament (of his rivals, François Bayrou would back the Germans, while Ségolène Royal’s views are unclear, though both would hold referendums on any new text). The Dutch government will oppose any treaty that looks like the one voted down in 2005, and will try to avoid another referendum. The Czech Republic and Poland, which have eurosceptic presidents but pro-EU electorates, are unpredictable. However, the British would be unwise to assume that others can be relied upon to thwart Chancellor Angela Merkel’s plans. She is emerging as a powerful and effective leader, and has dominated recent EU summits. Heads of government will think twice before vetoing the deal with which she wants to crown the German presidency.

All this poses huge difficulties for Britain. It is probable that Tony Blair will represent Britain at the June summit, but that Gordon Brown will become prime minister a few days later. Some Blairites argue that Britain should accept most of the German package and then ratify it in Parliament. They say the Brown government should simply ignore what will be a Tory and tabloid campaign for ratification by referendum. They point out that if EU governments ratified the treaty in 2008, it would be out of the way and forgotten before the British general election expected in 2009. But some Brownites believe that if Britain signed up to anything more than the most minor institutional adjustments, it would be impossible to resist calls for a referendum, which could easily be lost. So they want to block Germany’s plan. They worry that Blair will endorse it and then try to bounce Brown into accepting the deal. Brown’s supporters say that he would not.

Suppose that Britain alone, or with one or two allies, vetoes a treaty that most others want. Being blamed for the ensuing rancour, Britain would lose influence across a swathe of policy areas. The first casualty would be further EU enlargement. Most governments are adamant that the EU should not take in new members without first adopting significant institutional reforms. They believe that ‘deepening’ (creating stronger institutions) and widening go hand in hand: if the EU stops deepening it must stop enlarging, lest the institutions become ineffective. In fact the entry of 12 new members over the past three years has weakened the institutions in some ways (the foreign policy machinery, including the rotating presidency, is particularly ramshackle). Without a deal on a new treaty, Croatia may be able to join anyway, since its accession talks have made rapid progress. But the other Balkan applicants and Turkey would have to forget about membership.

A less influential Britain would find it hard to win the arguments due to start next year over how to reshape the EU’s budget and farm policy. And its voice would count for less in areas such as economic reform and climate change.

In an EU stricken by institutional paralysis, with Britain marginalised, many member-states would expect France and Germany to provide leadership. Merkel and the new French president would have no choice but to oblige, and they would set the EU’s agenda. France, Germany and others would probably push ahead with ‘variable geometry’ – leadership groups that do not involve all EU members. The Euro Group could develop stronger institutions, while further avant-gardes in justice and home affairs would also be likely.

None of this would be in Britain’s interest. It should therefore strive for a compromise with its partners. It should accept large parts of Merkel’s package, but ask her to remove the provisions that transfer new powers to the EU, since they would oblige the government to hold a referendum. Much of part one of the constitutional treaty does not give the EU new powers. However, the extensions of majority voting do. The more sensitive extensions should be dropped – unless it is practicable for Britain to opt out of the area concerned (which would be the case in some parts of justice and home affairs).

Of course, Germany and its friends will be reluctant to make such concessions. They will point out that the British government signed the constitutional treaty, and then published a white paper claiming (with much truth) that it had achieved its objectives in the negotiations. But unless maximalists and minimalists can find a way of meeting in the middle, bitter institutional arguments will dominate the EU. They would prevent the Union from moving ahead on important issues like enlargement, economic reform, budget reform, climate change and foreign policy.