Bill Cash MP: The clear and present danger… fiscal union

The EU is a compression chamber which is now reaching a dangerous level – the only solution is for the United Kingdom to hold a Referendum, as recommended in my pamphlet. This would release the democratic safety valve. I am writing my pamphlet as the Franco-German summit at the Elysee Palace of 16 August confirmed a step towards greater fiscal union of the Eurozone countries, following the economic collapse of bankrupt Eurozone countries in the economic crisis. The German Chancellor, Angela Merkel, and French President, Nicolas Sarkozy, vowed to defend the failing single currency project and form a real economic government for the Eurozone formed by an Economic Council of Heads of State and Government. This includes the proposal to elect a stable president for that purpose for two-and-a-half years beginning with Herman Van Rompuy (the current President of the European Council). On top of all this there are proposed draconian common tax policies for Germany and France, including a socialist-style financial transaction tax and a joint corporate tax rate by 2013 and the too-little-too-late deficit limiting laws. Now it is time for the Coalition Government to wake up to the dangers that this grave step to full fiscal union poses to the UK’s national interest.

So what will Eurozone fiscal union and economic governance do for the Eurozone itself, for the European Union and for the United Kingdom?

It is apparent that not only the Government but a number of others believe that it is in the interests of the Eurozone, the EU itself and the United Kingdom to promote the idea of fiscal union and economic governance of the Eurozone, led by Germany and France. This is a dangerous gamble – the balance of judgement for which must be thrown against the project, certainly for the UK, just as the opt-outs at Maastricht did not prevent the creation of European government, which has failed, with damaging consequences for the United Kingdom. There are a number of reasons why fiscal union will not work either for the Eurozone or for the United Kingdom.

The claim that there is a “remorseless logic” avoids the fact that it is the deeprooted causes of the structure of the Treaties and the attempt to create unity out of diversity, with overregulation and employment laws, which actively prevent growth and therefore prosperity and employment. Apart from Germany there is no evidence of growth in the Eurozone and Germany itself is insisting on conditions which would have to be complied with but given the state of the other European countries the evidence is that it will not succeed.

The sovereign debt countries of many of the Eurozone Member States’ including the original PIGS and now including Italy is evidence enough. There is no prospect of them retrieving the situation without growth but this will only come with the repeal of the employment laws, redundancy laws, the social laws and other impediments to increasing the prosperity to small and medium sized businesses. There is therefore a certainty that the Eurozone will not be a trading entity and therefore our own stability will not be enhanced by their fiscal union and economic governance. There will be further debt-crises which will be followed by the need for further bailouts but there will be no money to pay for them and Germany’s conditions will not be met – this is a chaotic fiscal union within the Eurozone and it would be better to recognise this immediately as a matter of realistic “remorseless logic”. Furthermore, when the implosion comes there will be even greater probability of the rise of the Far Right because the electorate will simply not put up with the burdens they would be expected to carry under such a debt/transfer union.

As far as the United Kingdom is concerned, the solidarity in relation to the Single Market within the Eurozone would lead to the Eurozone countries who are part of the fiscal union voting together, as Professor Roland Vaubel of Mannheim University has indicated the prospect of raising rival costs and “regulatory collusion” would do immense damage to our ability to compete and the Single Market itself would be in disarray. Apart from that, the United Kingdom’s trade deficit with the rest of Europe has increased by £40 billion in one year alone and a Eurozone with fiscal union would be even worse.

There is an Alice in Wonderland fantasy around that the idea of a fiscal union would be a possible runner or in any rate, a short term fix but unfortunately this judgement overlooks the fact that it is doomed to failure and we would be better off keeping ahead of the curve by avoiding the inevitable implosion and sitting down with those from other Member States or those who are prepared to discuss with us the want to avoid the implosion. The idea we would be able to discuss opt outs ignores the fact that we are now enmeshed in European government, but with two Europes, now built on sand. In order to remedy the situation we would need so many opt-outs, not only in terms of social and employment laws but also in relation to home affairs and justice, arrest warrants, immigration, energy (which through the Renewable Obligations will destroy the British landscape), the City of London and the whole overregulation of British business which must be repealed.

Adopting the idea of agreeing to, let alone promoting, fiscal union is shorttermism at its worst and also pandering to the determination of France and Germany to maintain the political will of the union, which will lead to the predominance of Germany which in turn will be faced with monumental difficulties in the struggle to maintain an unworkable Eurozone. We are told that these proposals would be put into effect under Article 136, which involves a Treaty, but under Section 4 of the European Union Act we would be denied a Referendum, and told that it would not affect us and only affect the Eurozone – this is a dangerous fiction.

Furthermore, the justification for the Coalition Government is said to be the reduction of the deficit. This will not be reduced without growth where 50% or our trading is with a moribund Europe, and bearing in mind our trade deficit we carry with the rest of Europe. The Coalition Agreement is said to determine our European policy – according to the question I put to the Prime Minister – and it is the Liberal Democrats who have put an end to renegotiation and repatriation of powers. This is a dead-end policy. This will be made even worse if we acquiesce in the creation of fiscal union because the Eurozone will not only fail to grow, it will implode. The rise of the Far Right is a serious prospect as the electorate of Germany and elsewhere begin to react accordingly.

There is a further concern that Maastricht itself lies at the root of European governance and which gravely exacerbated the dangers of the move to political and economic union. The acceptance by the Conservative government of Maastricht and now of Lisbon, leaving aside the smaller Treaties of Nice and Amsterdam have created a political problem embedded in the Coalition Agreement which significantly departs from the principles of Conservative policy. After all, the Conservative Party was united against Lisbon and for a referendum. The current arguments in favour of fiscal union appear to be seeking to justify the acceptance of both Maastricht and Lisbon when Maastricht is a self-evident failure and Lisbon was rightly opposed by the Conservative opposition in every respect.

It is a major strategic failure to claim that the policy of the Coalition is to reduce the deficit when so much of the policy that is needed to achieve this cannot be sustained without having a clear and definitive policy of disentangling our relationship with the European Union without dealing with the problems which it presents to the UK, let alone the EU itself.We are being marched into the black hole of economic chaos. There are those in Germany such as Hans-Olaf Henkel, former head of the Federation of German Industries (BDI) (“Having been an early supporter of the euro, I now consider my engagement to be the biggest professional mistake I ever made…”), who understand the dangers of all this for Germany and those such as Michael Sturmer who have been issuing warnings about the Maastricht Treaty and the current economic and political chaos which has evolved. They clearly do not want a fiscal union because Hans-Olaf Henkel, for example, is arguing for Austria, Finland, Germany and the Netherlands to leave the eurozone and create a new currency leaving the euro where it is, because they know that Germany is facing an ever-escalating stream of further financial commitments, including the impossibility of bailing out Spain and Italy, let alone the PIGS. There simply isn’t the money to do it.

We are at a cross roads and we are taking the wrong turn by endorsing fiscal union and creating two Europes without renegotiating Europe, without renegotiating the Treaties and without creating an association of nation states – an EFTA-plus – led by the United Kingdom, which is turning a vision of Europe into chaos.

Allowing Eurozone Member States to go ahead towards fiscal union and economic governance creates two Europes, to which the United Kingdom would remain bound by Treaty and law, though they are built on sand. It will have profound economic, political and constitutional consequences for UK vital national interests. This will fundamentally change the UK’s relationship with the whole of the European Union, not only our relationship with the Eurozone. We must have a Referendum in the light of such a profound change in our political relationship with Europe. The Franco-German summit joint letter states “The aforementioned proposals should be implemented in such a way as to serve the cohesion of the European Union as a whole.” It therefore fundamentally affects the UK. It also sets out how it will be achieved: under Article 136 and enhanced cooperation i.e. by Treaty without a Referendum but by Act of Parliament. Enhanced cooperation is being misused.

These new proposals would create a critical mass and an unlevel playing field with existing massive overregulation. We are talking about a two-tier low growth area already showing signs of inertia which makes a nonsense of Britain’s ability to grow on the back of European growth. We have to start trading vigorously and independently with the rest of the world and our strategic economic and foreign policy to be geared to these objectives. After all in the 18th and 19th Centuries, we did this with enormous success and in a global economic world, the opportunities are there to be taken but not if we are hamstrung by a simple trade policy dictated by the EU.

A new Treaty will be required to achieve these objectives but regardless of how they achieve fiscal union, a Referendum is now essential. It is therefore the British people who will save their Parliament.

This latest step hallmarks the failure of UK foreign policy for decades. The letter from the German Chancellor and the French President to Van Rompuy following the Franco-German summit of 16 August ultimately involves elements of EU-wide policy which those acquainted with foreign policy and EU-policy making will observe is deliberate. They threw in the push for the EU-wide common consolidated corporation tax harmonisation, knowing perfectly well that it would be rejected because it is by unanimous vote and that the UK Parliament would never accept it.What this amounts to is that, with that rejection, the UK leadership would be left agreeing to an EU Treaty or enhanced cooperation without a Referendum because they have evaded this under Section 4 of the European Union Act – despite my attempts to remove this provision and the commentary on it by the European Scrutiny Committee – where they claim or assert that such a Treaty applies only to the Eurozone.

The proposals for European economic government require a Referendum because the whole package involves a fundamental change in the relationship of the United Kingdom to the European Union. Thus, Cameron and Osborne will claim a victory asserting that they have repudiated the single currency and that the “remorseless logic” of the Eurozone policies leads to Eurozone fiscal union and economic government. Such a victory would be pyrrhic indeed – it would give the appearance of resolution, but in the words of Winston Churchill, the Government “go on in strange paradox, decided only to be undecided, resolved to be irresolute, adamant for drift, solid for fluidity, allpowerful to be impotent.” Indeed, as I warned Michael Heseltine at the time of his bid for the Conservative leadership election – what is the point of being Prime Minister of nothing?

The Coalition Government are acquiescing in ever deepening European integration. At Prime Minister’s Questions on 24 November last year I asked the Prime Minister to “… explain why at every turn-the City of London, the investigation order, economic governance of Europe and the stabilisation mechanism – the coalition Government under his premiership are acquiescing in more European integration, not less? And there is no repatriation of powers.”

As I stated to the Chancellor on 11 August, during the emergency parliamentary session, even Edward Heath would have vetoed, let alone called for, such a fiscal union of the other Member States. This surrender is nothing short of appeasement.

It is impossible to conceive against this background that the creation of a critical mass of a fiscal union and other coordinated policy making within the Eurozone will do anything but irretrievably damage the United Kingdom – nor will it stabilise the European Union, as the riots and protests, the PIGS crisis, the failed Lisbon agenda, the overregulation, the low-growth and the breaking of the rules constantly shows. Nor will the fiscal union prevent further bailouts which will create a deeper black hole, triggering German insistence on compliance with the conditions they are imposing. When this does not work then there will be political upheaval in Germany, as they seek to control the Eurozone, followed by total implosion. The reason this will happen is because the fundamental structural problems in the EU as a whole and the Eurozone of overregulation and uncompetitiveness in so many of the Member States and therefore excessive public expenditure without growth means that the conditions, as with the Stability and Growth Pact, are part of the Eurofantasy. The PrimeMinister and the Chancellor of the Exchequer’s fatal acquiescence is an act of appeasement to the Euro-integrationists. There is no reciprocal advantage to the United Kingdom whatsoever.

The announcement to the House of Commons by the Chancellor of the Exchequer on Thursday 11 August – which he slipped in whilst attention was riveted on the UK riots, during the emergency parliamentary session – that the Prime Minister has urged France and Germany to accelerate fiscal union in the Eurozone, is both historic and disastrous.

The Chancellor, replying to my objection to his statement on 11 August, argued that “The remorseless logic of monetary union leads towards fiscal union, and that was one of the reasons that I opposed joining the single currency. However, it is now in our interests to allow that to happen more in the Eurozone, because it is in our absolute national economic interest that the Eurozone is more stable. It is clear that that means that they need to have more fiscal powers to reduce instability. That means, of course, that Britain must fight hard to ensure that its interests are represented and that we are not part of this fiscal integration.”

The Chancellor has completely missed the point. Fiscal integration of the Eurozone would have the most profound impact upon the United Kingdom.

There has clearly been no attempt to discuss or consult on all this in Parliament or any of its committees or the British people. Nor has there been any attempt to obtain any reciprocal advantage to the United Kingdom such as renegotiation of the Treaties or the repatriation of social and employment legislation or any other powers, which are needed for UK growth.

It is impossible to conceive against this background that the creation of a critical mass of a fiscal union and other coordinated policy making within the Eurozone will do anything but irretrievably damage the United Kingdom – nor will it stabilise the European Union. The Coalition Government’s policy is based on a dangerous doctrine, as I put it to the Prime Minister after the Chancellor of the Exchequer’s statement on 11 August. There is no reciprocal advantage to the United Kingdom whatsoever.

A Referendum for the United Kingdom voters is indeed now a matter of “remorseless logic” and the question which must be put, given that the status quo is untenable, must be whether by a simple majority the British people decide either to leave the European Union altogether or to renegotiate all the existing Treaties and to form a trading arrangement with political cooperation but no more.

But it will only be the British people who can and will do this with the help of those of goodwill who are prepared to follow this through. We saved the UK and Europe through two World Wars. Now we have the greatest economic crisis that Europe and the UK has faced in generations and a breakdown in our own society. The cause of the economic crisis (not the symptoms, such as Greece, Portugal, Spain, Ireland, Italy, etc) is the construction of an undemocratic and unworkable European Union, most recently through the enactment of the Lisbon Treaty, but stemming from the unrealistic aspirations for political union provided in the Maastricht Treaty. This created European government and which set the course for a greater Germany, both peaceful but unacceptably dominant at the same time.

We only have to look, as my pamphlet does, at the impossible trade balance, between 2009 and 2010 – which has risen by as much as £40bn in one year against us – and the fact that the fiscal union dominated by Germany and which the Government has conceded, will massively increase this trade deficit, destroying British businesses and British jobs. Such treatment will be obvious to those concerned for what happened with the Bombardier plant in Derby, through the misuse and the machinations of the Public Procurement Directive.

As my pamphlet demonstrates, it is also about the massive unemployment generated by employment regulations which destroys small businesses and people’s lives, the transfers of power over UK financial services and the City of London – meaning that it is no longer only small businesses that are being cut off but the wilful acquiescence of conceding jurisdiction to the EU over the City of London as well. For a mammoth 1 trillion Euro budget, the British taxpayer is now being asked to increase our already substantial contribution by £1.4 billion every year for the next seven years until it reaches £23.1 billion. European overregulation has cost us £124 billion from 1998 until last year, meaning that EU regulation in the past eleven years has cost every UK household an average of £4,912.

Think of how much money we could spend on schools, hospital, defence and the wellbeing of our own people rather than bailing out failed European states, much of which is their own fault and the rest is the fault of the failed European project which has passed laws which prevent growth. With 50% of our trading with the European Union as a whole, we are trading with a bankrupt, low-growth Europe – the only exception being Germany. At the same time we allow our basic industries and utilities to be bought up by Germany and French companies (which they do not reciprocate) repatriating their profits at the taxpayer’s expense in the pursuit of so called European obligations and gaining control over our energy. This cannot be allowed to continue. There is no room for argument about the status quo.

This is an excerpt from a pamphlet, ‘It’s the EU, Stupid’, written by Bill Cash.

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