Cameron in Brussels (2): some unanswered questions and a few answers

Immediately after the nocturnal UK veto and decision on a new non-EU Eurozone agreement in the early hours of 9 December, it was difficult to assess what it all meant when we had so little hard information about it.  Nine days later, we know quite a lot more, with some new disclosures undermining earlier assumptions (probably including some of Mr Cameron’s at the time). But even now many puzzling questions remain unanswered. This is a rather lengthy post, even by my own regrettable standards, but I think the issues it explores and perhaps clarifies will be thought to justify it.  I have tried to expose some other fallacies in the received wisdom on all this in an earlier post, such as that whatever else he may have done on 9 December, Mr Cameron certainly didn’t veto an EU treaty, despite numerous assertions in the media that he did.  I hope I have not gone over the same ground again in this one.

New facts and insights are belatedly available from three especially valuable sources:

1.  A painstaking full-page reconstruction by the Financial Times of 17-18 December of the events of the night of 8-9 December and the fortnight leading up to them is essential reading, here (“Following numerous interviews with participants, the Financial Times has pieced together what happened in those two weeks“).    As well as shining a pitiless light on the performances of the protagonists, this includes some glorious nuggets:

Mr Sarkozy was characteristically blunt. “David [Cameron], we will not pay you to save the euro,” he said, according to one account. He went on to rebuke Helle Thorning-Schmidt, the freshly elected Danish prime minister, for the temerity to speak up for a deal at 27. “You’re an out, a small out, and you’re new. We don’t want to hear from you,” Mr Sarkozy said.  [The Danish prime minister is perhaps better known over here as Mrs Stephen Kinnock. — BLB]

The FT account makes it clear, among many other striking things, that Mr Cameron had ample advance warning from, among others, Mrs Merkel, President Sarkozy, the British ambassador in Berlin, the British embassy in Paris, and even the prime minister’s own Chief of Staff, Ed Llewellyn, that his conditions for refraining from exercising his veto would not be acceptable to the key players at the summit meeting, although the FT notes, tellingly, that Cameron might not have been aware of “the warning lights flashing in Whitehall” (were both the FCO and No. 10 asleep?).  But he must have heard the warnings by Mrs Merkel and Nicolas Sarkozy, and presumably from his own Chief of Staff, from their own lips, even before his aircraft took off for Brussels.

This prompts the question: why did the prime minister lay down his demands at the summit when he knew they were bound to be rejected?

There are two possible answers to this.  One, the more respectable one, is that he was convinced that in the end the UK would not be able to sign to the proposed new EU treaty,  and he may have judged it better to make that position plain at the outset, before any treaty had even been drafted, rather than precipitating an even greater crisis in UK-EU relations by vetoing the treaty after it had been negotiated and approved by, probably, the whole of the rest of the EU, or by failing to secure parliamentary approval for it, or because a UK referendum that would probably be unavoidable if HMG and parliament had approved the treaty would almost certainly result in its rejection.  These would have been honourable reasons for putting the boot in before the game had even begun.  But their validity would have depended far too heavily on a host of extremely shaky assumptions about the future, some them already pretty well exploded.

The other possible explanation is much less defensible.  Since taking office, Mr Cameron and the eurosceptic William Hague, his foreign & commonwealth secretary, who accompanied Mr Cameron at all the key meetings on the eurozone crisis, had sought to appease the 80 or more eurosceptical and europhobic back-benchers of their own party by promising that if there should be another EU treaty proposed, the government would use it — by implication irrespective of its contents or merits — to force the EU to “return to Britain” some of the powers currently “surrendered” to the EU.  How to achieve this improbable turning back of the European clock? By threatening to veto the new treaty unless the rest of the EU acceded to the UK’s demands.  Perhaps Mr Cameron (and more probably Mr Hague) believed that this blackmail strategy would work, despite the several warnings that it would not.  More likely they both feared the wrath of their Europe-hating foot-soldiers on the back benches if they returned from Brussels having “agreed to a new treaty” but without having secured the repatriation of a collection of EU powers to Britain as a condition of that agreement.  By launching their demands and then, when the demands were rejected, carrying out the threat to ‘veto the treaty’, they were able to claim that they had honoured their promise; and that although they had not been able to repatriate any powers, at least they had stymied any new treaty (and thus by implication prevented Brussels from snatching yet more powers).  This line has been triumphantly successful, at any rate in the short term, with Cameron hailed by the europhobes as a conquering hero on his return from Brussels and his government propelled by general patriotic pride in his supposedly Churchillian stance to a position some way ahead of Labour in the opinion polls.  But this line of defence also depended on a series of extraordinary misunderstandings or misrepresentations, deliberate or otherwise, of what had actually happened.  Read on.

2.  The second new source of information to have come to light in recent days is the publication by the Daily Telegraph of somewhat indistinct photocopies, possibly pictures taken with a mobile phone, of a two-page ‘annex’ listing in detail the specific demands made by Cameron and circulated to his astonished EU partners at around 2am on that fateful Friday morning.  These can be both seen and, with some difficulty, read, here.  It’s surprising that this spectacular Daily Telegraph scoop has received, as far as I know, almost no attention.  It certainly seems to deserve the description of “exclusive” (“this is the UK’s protocol demand to the EU – obtained exclusively by The Telegraph’s Bruno Waterfield in Brussels“).  Well done, Bruno!  What a pity that we still don’t have the document to which these two pages were an Annex, unless that too is buried somewhere on the Web or in some published government paper; if it is, I have failed to find and exhume it.

The UK demands, essentially Britain’s conditions for not vetoing a proposed treaty that had not yet been drafted and whose likely contents were known only in vague outline on the morning of 9 December, mainly comprised moving a number of subjects from the category of decisions currently made by ‘qualified majority voting’ (qmv), and so not subject to any member state’s veto, to the category of decisions requiring unanimous agreement, and thus susceptible of being vetoed or otherwise rejected (eg by a national parliament or referendum) by any one or more EU governments.  As you can see from the Daily Telegraph’s photocopies of the two pages, the whole Annex is headed “Financial Services” and the entire list of items proposed to become subject to the veto concerns aspects of the regulation of financial services.  Some of these are so technical and detailed as to appear almost comically trivial:  the “Location of the European Supervisory Authorities“, for example, and the “requirement for executive powers of ESAs to be clearly set out and not replace the exercise of discretion by member states’ competent authorities.”  No doubt such matters are significant in the eyes of those affected by them, but the other EU heads of state and government receiving their blurry photocopies of demands like these for the first time at 2 o’clock in the morning could be forgiven for exhibiting a certain impatience, especially when they were supposed to be staying up late to devise a rescue plan for the Eurozone which had nothing whatever to do with the location of  the European Supervisory Authorities, or even with the regulation of financial services.

This remarkable document prompts another question:  did Mr Cameron (or Mr Hague, or the LibDem leader and deputy prime minister Nick Clegg, who had approved Cameron’s strategy in advance without apparently imagining that Cameron would go ahead and use his veto that very night if his demands were rejected) really believe that unless vetoed in advance, the proposed EU treaty would include provisions that would damage the interests of the City of London or indeed that would be binding on the British government and on the City? (If so, on what evidence, available on the morning of 9 December, did they base that belief?) Or was this just a case of using any proposed new treaty, whatever its subject and however innocuous in terms of British interests, in order to try to wrest back powers from Brussels to Westminster? In the latter case, they must surely have foreseen that trying to exploit an emergency euro rescue meeting at the EU’s highest level, in the middle of the night, to indulge the neuroses of a handful of cranks and obsessives in the British parliament, was more likely to cause massive exasperation than to win friends and influence people.

3.  We now also have a third source of illumination, almost as difficult to track down as the Daily Telegraph’s Annex scoop and, as far as I can see, equally little noticed by our media: namely, the text of the first draft of the proposed agreement of the 26 EU members (i.e. all except the UK), a draft agreement outside the formal framework of the existing EU treaties (because of Mr Cameron’s ‘veto’) designed to impose such fiscal discipline on the 17 members of the eurozone as to reassure the all-powerful markets and ratings agencies that past misbehaviour by the more fiscally challenged members would not be repeated, and that if it was, the miscreant would be promptly summoned to Mrs Merkel’s study for a dose of traditional punishment, pour encourager les autres.  The first draft of the proposed agreement is published in full here.  The Reuters news agency has published a useful summary of its main provisions (here).  A few especially interesting features are also worth noticing, subject to the important caveat that this is only a first draft, not yet even discussed by the member states, and certain to differ substantially from whatever text may eventually be agreed.  But it can be assumed to correspond pretty closely with drafting instructions received from Mrs Merkel, President Sarkozy and perhaps others.

The proposed agreement was drafted only after the EU summit at which Mr Cameron has been assumed to have ‘vetoed’ it.  Questions:  Since no draft treaty was on the table at the summit on 8-9 December, what exactly was the document or proposal that Mr Cameron ‘vetoed’? If his was a true veto, it must have been the kind of document or proposal that could be adopted only by unanimity:  would that really have applied to a mere proposal to commission a draft treaty for future consideration and negotiation with just a rough indication of the kind of provisions it should contain?  What would have been the problem with his eurosceptic followers if the prime minister had returned to Westminster with the news that he had agreed to the drafting of a new EU treaty which he would have no hesitation in vetoing, much later when negotiations on a draft began, if it proved to constitute a threat to UK or City interests or to entail a fresh surrender of powers to Brussels, or if it failed to take into account safeguards that Britain would insist on including in the text in the course of the negotiations? In other words, did Mr Cameron spectacularly jump the gun?

Another question: If all that Mr Cameron did on 9 December was to promise that he would veto at the appropriate stage any new EU treaty to establish a eurozone fiscal union, regardless of its contents or implications for UK interests, purely because his 2am demands on financial services regulation had been rejected, why didn’t the other 26 merely tut-tut, take note, and express the hope that when he saw the terms of the new treaty Mr Cameron would find all his concerns satisfactorily addressed, and then proceed to instruct the Commission to produce a draft EU treaty for consideration by all 27 EU members some time in January? Such an outcome would have been approved by 26 votes to 1 and no question of a veto should have arisen.  I know of no explanation for this.

Immediately after the 26 EU summiteers had agreed to go ahead with an inter-governmental agreement outside the EU treaties’ framework (Cameron having refused to agree to an EU treaty) to form a eurozone fiscal union and define its rules and sanctions, David Cameron insisted publicly that he would not agree to any of the EU’s institutions or facilities being used by the 26 for drafting, negotiating, finalising or enforcing their proposed non-EU agreement.  He seems to have believed that he could prevent the Commission from drafting the new agreement and participating in discussion of it, EU conference facilities being used for the negotiations and, most serious of all, the European Court of Justice from enforcing compliance with the new eurozone fiscal rules, on the grounds that these institutions and facilities “belonged” to all 27 EU member states and could not therefore be used by a group within the 27 except with the consent of all 27;  and he made it clear that such consent by the UK was not forthcoming.   Such deliberate sabotage not only smelled nasty, disruptive and vindictive, but also looked unlikely to be achievable. It was immediately challenged by the Commission’s lawyers, although Cameron’s initial assertion of a legally water-tight ban was allegedly based on advice from the head of the legal service of the Council of Ministers, the splendidly named Mr Hubert Legal, who, however, appears to have changed his mind later.  Whatever the legal situation might have proved to be, the really significant thing is that Mr Cameron quickly dropped his wrecking tactics and has now agreed to the full use of all EU institutions and facilities for the working out and enforcement of the agreement of the 26, as explicitly confirmed by Nick Clegg in his Guardian interview published on 18 December — and indeed by the text of the draft agreement of the 26, itself apparently produced by the EU Commission and replete with references to the close involvement of the EU and its institutions. Moreover the preamble to the draft agreement actually has its eventual signatories

BEARING IN MIND that the objective of the Heads of State or Government of the euro area Member States and of other Member States of the European Union remains to incorporate the provisions of this Agreement as soon as possible into the Treaties on which the European Union is founded

— which is about as clear a rebuke to the UK coalition government in a draft legal instrument as can be imagined.

Questions:  What was the purpose of the prime minister’s doomed attempt to complicate the preparation, operation and enforcement of the agreement of the 26 by denying them access to EU institutions and facilities?  What possible UK interest did he hope to promote by this apparently vindictive strategy?  And in particular, what were his reasons for abandoning it within days — pressure from his LibDem coalition partners, legal advice from the legal advisers of the Commission, the European Council or the British government, or belated remorse?

I think we should be told.

Publication of the first draft of the agreement of the 26 answers a number of questions raised by the events of 9 December, including some questions that have surprisingly rarely troubled the commentariat.  For example, —

Question:  Will the disciplinary rules of the new eurozone fiscal union established by the agreement of the 26 apply to all signatories of the agreement, including the nine EU members which are still not members of the eurozone, or only to the 17 eurozone members?
Answer:  It won’t apply to non-eurozone members at all, until and unless they join the euro — and indeed it won’t necessarily be binding on eurozone members either, unless and until they ratify the agreement.  The agreement will come into effect only on “the deposit of the ninth instrument of ratification by a Contracting Party whose currency is the euro” (Art. 14.2).  In other words, the agreement comes into effect even if only nine of the 17 eurozone members have ratified it, and even then it won’t be binding on the eight eurozone members who haven’t ratified it, until they do (if at all), and however many of the 26 may ratify it, it will only be binding on those who both use the euro and have ratified the agreement.  But the agreement allows non-eurozone members who sign and ratify it to opt to be bound by its provisions in advance of joining the euro, if they wish.

Question:  Will the agreement interfere in any way with the operation of the EU single market?
Answer:  No.  The draft includes provision that everything in the agreement must be compatible with the single market and other EU law, and in the event of conflict between the provisions of the agreement of the 26 and those establishing the single market, the latter will prevail.  (This appears to demolish one of the alleged excuses for Mr Cameron’s ‘veto’.)

Question:  Will the signatories to the agreement of the 26 form a legally established separate and distinct bloc within the EU?
Answer:  Yes.  The draft agreement provides for regular meetings of the heads of state and government of the signatories of the agreement of the 26 along with the Presidents of the EU Commission and the European Central Bank, under a separate President whom they will themselves elect.  This has potentially dire implications for the UK, which could well find itself the only EU government not eligible to attend these important meetings, where matters other than those directly affecting the eurozone will almost inevitably be discussed and agreed.  At regular meetings of the European Council, Britain may in consequence regularly find itself confronted with faits accomplis negotiated and agreed in advance in a “Euro Summit meeting” of the kind established in Art. 13.1 of the draft agreement.

Many other questions remain unanswered:

Question: Will Britain have any say in the negotiation of the agreement of the 26 and any opportunity to ensure that there is nothing in it that could damage UK interests, including those of the City of London?
We don’t know.  Mr Cameron has (surprisingly?) accepted a conciliatory invitation to the UK to be represented as an observer at the forthcoming talks on the text of the agreement of the 26, but it’s not clear whether this will entitle the UK observer to propose amendments or additions to the draft text or even to speak at those meetings.  Obviously the UK will have no vote at the meetings.  In the words of the Reuters commentary,

“In the coming weeks, representatives from the 26 countries expected to take part in the pact will meet to refine the details, with a final agreement expected in January. European Council President Herman Van Rompuy, who chairs EU summits and has overseen efforts to get countries to commit to the new pact, has called another summit of all EU heads of state for late January or early February, by which time officials hope the compact will have been ratified by a quorum of states.”

Question: What was the basis for Mr Cameron’s fears, confirmed by Mr Clegg in his Guardian interview, that if he had consented to the proposal at Brussels to have a new EU treaty without getting compensatory concessions over repatriation of powers to Westminster, he would not have been able to get that consent approved by the parliament at Westminster?
Mr Clegg claims to foresee a situation in which a combination of Labour opportunism and Tory europhobia might make it impossible to get any UK agreement to the preparation of a new Treaty approved by the house of commons. This is utterly mystifying.  There would have been no requirement for Parliament to approve a decision merely to allow a new EU treaty to be drafted and then negotiated by all EU members, with the possibility of a UK veto if the treaty’s terms proved unacceptable or if it had not proved possible to satisfy any demands made by the UK in the course of the negotiations.  Nor could the question of a referendum on such a decision have arisen, until (a) a treaty had been finalised, (b) the British government had signed it and proposed to ratify it, and (c) ratification had been approved by parliament.

Question: If the only proposal on the table at the summit on 8-9 December was whether to commission a draft EU treaty designed to form a eurozone fiscal union with tight fiscal disciplines binding only on eurozone members, why did Mr Cameron not go along with it, reserving his decision whether to veto it until he knew what would be in it, preserving Britain’s right to take a full part in its negotiations, and presenting his demands regarding EU powers on regulation of financial services, if relevant, to a later stage when the contents of the draft treaty were known?

Perhaps Mr Cameron will tell us the answer to that question one day.

Question:  Is an agreement of the 26 that requires, e.g., the approval of a majority of other eurozone governments for every eurozone country’s budget, if any single eurozone government (think Germany) challenges it, likely to be approved by the parliaments of a minimum of nine eurozone states, and even if it is, how likely is such a requirement likely to be approved in a referendum in any of those nine states?
In other words, is it all likely to happen anyway?

Question:  Even if the whole thing can be approved and brought into operation within the next three or four months (which seems unlikely), will it be enough to satisfy the markets and the ratings agencies that the eurozone is restored to health and triple-A ratings can safely be given back to Greece and the other eurozone countries currently under siege?  Will the promise of a future eurozone fiscal union with draconian rules and subject to ferocious sanctions be enough without international funding on a massive scale to avert sovereign defaults within the eurozone?
What do you think?

And, finally,

Question: For $64,000:  Will the medicine of cuts and austerity, deflation and deregulation, which the proposed agreement of the 26 is designed to institutionalise and set in legal concrete, be likelier to cure the patient, or to kill him?
One irony among many is that Mr Cameron and Mrs Merkel are both committed to the kind of pre-Keynesian, neo-liberal hair-shirt remedies for the debt crisis that are so far failing spectacularly in Britain — and which indeed are at this point making a bad situation measurably worse.  But Mr Cameron believes that ‘there is no alternative’ to them, and that they need to be applied throughout Europe, exactly as Mrs Merkel’s EU treaty, or failing that the agreement of the 26, is designed to do.  And who has made it impossible for this to be accomplished in a binding EU treaty and for Britain to play any part in bringing it about, being relegated to the sidelines as a mere observer in splendid isolation from the rest of the EU?

There would have been one excellent reason for refusing to go along with the kind of treaty now actively in preparation, in the form of the agreement of the 26:  a fundamental disagreement with the kind of economic remedies, as proposed in the agreement, that brought about the recessions and eventual slump of the 1930s, culminating in uncontrollable social unrest and eventually a world war. But even if Mr Cameron had embarked on his campaign of veto and obstruction for that extremely cogent reason — which of course he did not — the time for obstruction would have been much later in the process.  The verdict must be a simple one:  he did what could turn out to have been the right thing but for utterly wrong reasons: and even then, he acted so prematurely that Britain’s influence on these great events is now likely to be close to zero.

Footnote:  You may well know of other evidence now available that will answer some of these unanswered questions but which, through lack of diligence or research staff or both, I have failed to track down.  If so, it would be a great kindness if you will append it to this as a comment, with chapter and verse as necessary.  These are matters with great potential consequences for us all, and the more we know about them, the better.

Brian