It Would Have Been A Disaster For Britain to Join the Euro

Do Great Britain and the EU have a common future? Former British Foreign Secretary Jack Straw thinks so. His take: the UK was wise to stay out of the Eurozone. And it will be wise enough to stay inside the EU.

The European: The negotiation for the long-term budget 2014-2020 has been abandoned without any outcome. What is your position regarding that matter?
Straw: I think the Labour Party is right to go for a cutback. The circumstances are very different now from what they were in 2005. The Commission is demanding serious cuts in many member states as a condition of bailout and all member states are practicing severe effort of restraint. You can’t have the EU expanding its budget. It’s simply unacceptable. It implies an institutional arrogance which is unacceptable.

The European: Some people would argue that the increase of the budget is a kind of solidarity with poorer regions.
Straw: I know, they always argue that. There needs to be a lot of changes: in the common agricultural policy, for example.

The European: Britain has always been more Euro-skeptic than other countries. These days there seems to be a new wave of Euro-skepticism?
Straw: There is some considerable skepticism about the European project. Now that’s not a sentiment exclusively felt here, by the way.

The European: Where is this Euro-skeptisism coming from?
Straw: It has two causes. One is the chronic problem of unnecessary interference by the institutions of the European Union in domestic affairs of the member states. There’s a real frustration with these European institutions and the culture inside them. Frustration at the failure of these institutions to do what was promised, which was to implement a proper program of subsidiarity. First you look at the Laeken Declaration, which the European Council agreed to in December 2001, that talked in terms about how to reduce the interference by Brussels to ensure that much more power went back to individual member states and democratic governments. Then you compare that to what has happened in the last eleven years. The reverse has taken place. The other cause is the crisis of the Eurozone. It has been exposed that the introduction of the Euro was a political decision, which defied all known economic laws. You don’t need to be a skeptic or an enthusiast for the EU to understand that it is almost impossible to run a single currency outside a single country. Unless some of those outside the single currency are willing to see their sovereignty go. If you want to keep the Euro together, you now have got to have not only a monetary union but also a fiscal union.

The European: You talked about the lack of confidence in the EU institutions. How can that be restored?
Straw: I think it’s by doing less and by doing better. It goes back to the issues of subsidiarity and interference.

The European: You suggested a reform of the European Parliament.
Straw: Yes. First of all, if you want to save money, have the parliament in one place, not in two. It’s just ridiculous. I think the most sensible place to have it would be Brussels, but if they want to have it in Strasbourg: okay. There are other federal states which have parts of their institutions in different places. In South Africa the parliament is in Cape Town and the federal government is in Pretoria. Germany has its constitutional court in Karlsruhe. I also think the European Parliament would work better if it were composed of representatives of the national parliaments, which is what it was originally, until the late seventies, early eighties. There isn’t a European polity and there won’t be. This means that the members of the European Parliament – many of them are extremely good and dedicated – are too detached from their own publics.

The European: Are you happy that Great Britain did not join the Euro?
Straw: Yes. I’m very happy about it. I think it would have been a disaster for our country to join the Euro. The Euro turned out to be highly beneficial for Germany, it came at the right time for Germany. It has given you an exchange rate, which led you to be very competitive.

The European: Do you feel vindicated today?
Straw: We have no Schadenfreude, as the Germans would say. Schadenfreude is not a policy. Great Britain and the members of the Eurozone are interdependent. We would be crazy to want to see the Eurozone fail.

The European: What do you think of the situation in Europe right now?
Straw: I worry not only about its immediate health but about the medium- and long-term health of the Eurozone. Unless there was a medium-term growth path for the Eurozone, in which the underperforming economies could achieve a level of growth, performance, and productivity comparable to that of Germany and the Netherlands, the Eurozone would be locked into the chronic problem of fiscal transfers from Germany and the richer countries to the less prosperous, less productive countries. That in turn, of course, would create very large conflicts between the member states. We’ve seen it with Germany and Greece, which is unpleasant for both sides. You can see the beginnings of this in Spain and Portugal.

The European: Do you think that there will be two European Unions?
Straw: With 27 member states you’re bound to get a greater level of heterogeneity than with six or nine or even fifteen members. I personally think it is important that decision makers are imaginative in ensuring that heterogeneity can be accommodated. You can see the Eurozone inevitably becoming more institutionally strongly. The non-Euro states in the periphery are active on questions where common interests dominate but not on others. To achieve happy coexistence, the Commission and the Court have got to start to make a reality of subsidiarity. I also think there has to be a treaty change. The current treaty that forces all member states apart from the UK ultimately to become members of the Euro needs to be abandoned.

The European: Prime Minister Cameron mentioned the idea of a referendum.
Straw: I certainly don’t think a referendum of the kind that Mr. Cameron is talking about, which is a referendum on some renegotiated basis, would lead anywhere. If there were to be a referendum, it would have to be the big question: Do we want to stay in or do we want to go out?

The European: If that was put to the electorate it could be that you Britons vote to leave the EU. Wouldn’t that mean isolation for Great Britain?
Straw: It would be challenging and potentially disruptive, but the realities of trade would continue. Germany, for example, runs a huge balance of trade surplus with the UK. You are unlikely to see German firms in the vanguard calling for punishing the Brits, because that would simply stop them from importing German goods.

The European: Aren’t you concerned that the majority of the Brits vote against the EU?
Straw: The British population voted by two to one in favor of staying in Europe in 1975. It is my belief that if there was a referendum, there would still be a majority for staying in the EU.

The European: How likely is a referendum in the next five years?
Straw: I think it’s more likely than not.

The European: Cameron doesn’t seem to really want a referendum.
Straw: If there were a referendum, it would quite seriously split the Conservative Party. The dynamics of a referendum would be the opposite of what happened in 1975, when the big split occurred in the Labour Party. That’s why Cameron is so scared.

The European: And the Labour Party is still a pro-European party?
Straw: Yes. Some people in the Labour Party would say we should leave the EU. But most people would say we should stay in. The Liberal Democrats would say that, too.

The European: In 1997, Tony Blair said that Great Britain has to be at the heart of Europe. Where do you think the country should be today?
Straw: We are not in the heart of Europe, for sure. The Eurozone crisis makes this inherently more difficult. But I certainly think we should be much more in the heart of Europe and by that I mean cooperating actively with European partners, treating them as partners. What was obvious to me when I was doing both my jobs as interior and justice minister, but also as foreign minister, is that if you show proper respect to European partners and talk to people without using the megaphone, you can make a lot of progress. That was famously Tony’s approach, but it was also mine, too.

The European: Where do you envision British-EU relations ten years from now?
Straw: I think we will still be in the EU. There will be a tighter and more closely coordinated Eurozone, if the Euro survives, which I think has to. We will be in the periphery, but we will be involved in the EU in a lot of issues – particularly on the single market and on foreign and defense policy, where we want to see enhanced cooperation.

The European: Cameron wants to bring some powers back to the national level, particularly in domestic and legal affairs. Do you agree with that?
Straw: I am very worried about that. I haven’t come to that final view. I haven’t gone through all the analysis and I want to talk to colleagues in Brussels about the likely reaction. But overall, Britain has benefited by the cooperation that has been achieved on justice and home affairs. My starting position is different than that of the government.

The European: You said you weren’t sure which points you would renegotiate with Europe.
Straw: Here’s my problem. I think it is not about renegotiating the instruments – apart from the requirement that all non-Euro member states except the UK should join the Euro that needs to be abandoned. It’s not in the interest of the Eurozone to have a weak country to join. It would just make it more complicated and more inherently unstable. What’s the point of that?

The European: In Europe they call this cherry-picking. Can you understand the worries that term engenders?
Straw: Yes, of course. I don’t think that the debate is enhanced by the use of prejudices and labels, like cherry-picking. It’s open to any member states to say whether they like an instrument or not. I think in an EU of 27 there has to be greater accommodation of national differences.

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