The British are bowing out. Now the EU is a battle between the French and German visions.

The European Union dominates British politics at the moment – but in a rather superficial way. It is focused on the short-term implications of the country’s relationship with it, and not on the institution itself. And that is true especially of continuing Remainers. They concentrate so much on stopping or diluting Brexit that they avoid tackling questions about what the Union is, and what it is turning into. More thoughtful Leavers will no doubt suggest that the focus on Brexit is a displacement activity from more uncomfortable questions about the EU. So it is worth taking a step back from the kerfuffle about Brexit to think about the Union itself.

I think it is helpful to view the debate over the EU as a conflict of three visions. I will characterise (or caricature) these as the British, the German and the French visions. The British vision is of the union as a free trade area; its fundamental purpose is economic, and to bring to its members the manifold benefits of free trade. The British are divided on whether this necessarily includes the free movement people, or, rather, labour (as opposed to temporary visitors, which most people are happy with). Many older people (and probably a majority) think emphatically that it doesn’t, and that goods are fundamentally separate from labour. Younger voters tend to say that it does – seeing free movement as a way to expand their personal horizons. Some are muddled – wanting all the benefits of retiring to Spain and using its health service for free, while stopping people from moving into Britain. But all sides treat this as a fundamentally economic question. and think of it individualistically – how does it benefit me?

The Germans feel that the fundamental point of the EU is to create transnational order. This affects trade, so that manufactures and services are based on common rules, and that countries don’t get an unfair trading advantage through lax labour or environmental laws. But it goes deeper; they see nothing wrong with rules that secure fundamental political principles, such as human rights and the democratic order. Britons tend to resent this as an unnecessary intrusion, feeling secure in their own country’s institutions – different histories do much to explain the different attitudes. Britons have learnt to trust domestic institutions; Germans (right up to 1990 in the East) have learnt that trust can be abused. The Germans’ outlook is more collective than the Britons’ – but they share Britons’ distaste for political meddling from EU institutions.

But the French, on the other hand, emphasise the political union. To them it is a joint political project, in which their country must take a leading role. They tend to see the EU as a counter to the giants that stalk the world stage, and in particular to the US – but also to Russia and China. Internally they advocate a greater use of political mechanisms to resolve the problems and conflicts within the Union itself. This is the most collectivist view. If Europe as a whole advances, the logic goes, then we all do as individuals. The British tend to view it the other way round.

It is tempting to suggest that these three visions are all right, and that some form of reconciliation or compromise must be found. But I find it more helpful to see the three visions as varying stages of understanding of what the European project implies. A free trade area cannot reach its potential without transnational rules, including some form of transnational arbitration. And you cannot have such a transnational system of rules in the long run without common political processes to manage them. The North American Free Trade Area (NAFTA) was often held up as an example of what “just” a free trade area might look like – but it first lost momentum and is now in imminent danger of collapse, as it has been unable to handle the  political tensions it has created. The French understand the implications of the EU the best, the British the least – which, of course, is the main reason why Britain is leaving. Most of the British public do not want to accept the political implications of the EU; many of those that voted Remain were in denial, and voted that way to maintain their own short-term economic prospects. The whole Remain campaign last year was based on little more – one reason that the more thoughtful Leavers feel that it is they that hold the high ground.

With Britain on the way out, the driving tension will now between the German and French visions. The British view was shared by other members, especially the Scandinavians (as a matter of principle) and the eastern members (as a matter of political convenience). Brexit not only removes the British view’s biggest advocate, but also it points to the ultimate destination of countries that follow it.

The Franco-German tension could ultimately destroy the union. The Germans are easily the union’s most powerful member; but the French are ultimately right – the Germans are simply postponing an inevitable reckoning. This tension is most easily seen in the management of the Eurozone. The EU’s treatment of Greece, for example, was brutal and surely misguided – even if I find most of the pleadings by Greek politicians such as Yanis Varoufakis to be self-serving and evasive. To the Germans, the Greeks simply broke the rules. They lied about their economy to get it into the Euro, and then milked the Union for all they could get with no attempt to make their economy more productive or less corrupt. The crisis was a reckoning, and it must be played out according to the rules. That Greek voters approved of gobbling up their neighbours’ resources as an easier alternative to fixing deeper problems at home did not make what they were doing democratic. But this view is also self-serving and evasive. German banks contributed mightily to the Greek bubble, and German businesses where happy to sell things to people who could not afford them. There must be a principle of caveat emptor. Instead the German taxpayer bailed out their banks, and their government is trying to blame the Greeks. It is a political mess that requires a political solution, and that means some of the rules must be changed. It is clear, for example, that much of the Greek government debt must be forgiven. The country also needs financial aid to help its economy to grow on a financially sustainable path. But that implies accountability from the Greek government.

And yet the French view, which is now being vigorously pursued by its new president, Emmanuel Macron, leaves hard questions at its core. It requires stronger and deeper transnational institutions, whether at the EU or Eurozone level. But are the democratic institutions up to the job? And is there democratic consent for them? And how deep must these central institutions go? The type of problem posed by Greece persists: member states trying to take the rest of the union for a ride – to take the money, but without any any serious attempt to develop an open and efficient economy, buttressed by democratic institutions, based on the rule of law applied without corruption. Challenges aren’t just being presented by such countries as Hungary and Poland, but by countries closer to the heart of the picture, like Italy. And France. And even Germany with its destabilising surplus savings. Mr Macron’s strategy is to boost France’s credibility by reforming its economic institutions. But what will make other countries follow this path?

What will happen next will be the usual European muddle and fudge. That muddle and fudge will either lead to disintegration, or to something that looks much more like a federal state. Or both – if more countries leave but a more integrated core remains.

And that poses a challenge to British Remainers, who either want to reverse Brexit, or to rejoin the union at some later stage. If Britons remain wedded to what I have called the British view, this will end badly. Britons must accept that they are signing up to a political project that reduces the sovereignty of the British state. Liberal Democrats, in particular, need to understand when there will be too much European centralisation, and when they would say no. After all their other rallying cry is the decentralisation of political power.

And me? Fundamentally I am a Frenchman on this. Proud though I am of my British and English identity, I also have a strong sense of European history and identity. I long to be part of a joint European political project. But not even I have thought through the full implications – and I am in what looks like a small minority. For that minority to grow, more persuasive arguments must be made.

 

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6 thoughts on “The British are bowing out. Now the EU is a battle between the French and German visions.”

  1. Pretty much correct except for one detail:

    The French understand the implications of the EU the best, the British the least – which, of course, is the main reason why Britain is leaving

    It’s not that the British don’t understand the implications, it’s that we do understand, and don’t want them. We can see where the EU must inevitably end up, if it is not to collapse, and we simply want no part of that.

    That’s not lack of understanding. It’s a decision based on full understanding.

    1. No – that’s not very well put on my behalf. I don’t actually think that Britons do understand the EU very well – but that’s not the issue here. Most British don’t accept what I have called the French position – but that is more because they are understand that it is right and don’t want to be a part of it (the Leave position), than they don’t accept it and are in denial (the position of many Remainers).

  2. @Matthew,

    There seems a fair bit of Greece bashing still implicit in this discussion. True, the Greek Government ran a deficit prior to the 2008 crash. So did the UK and USA ! On the other hand countries like Spain and Ireland ran budget surpluses before the GFC. That really didn’t put them in any better position afterwards.

    Having made the decision that they are going to have a common currency the EU has to move quickly to becoming a single country. It’s not just that the Greek debt needs to be forgiven – it needs to be forgotten about too. If we believe Yanis Varoufakis , Germans bailed out their own banks and then loaded the calculated Greek cost, which was mainly from bad debts to the Greek private sector, on to the Greek taxpayer. The Irish were wanting to let their banks go under after 2008 but were told by the Germans that this wasn’t going to be allowed.

    The future EU will have to consider the level of Greek debt in exactly the same way as the USA considers the level of debt run up by the State of Georgia. Who has any idea what that might be? Who cares even?

    The EU PTB, which really means the German government, have to stop whingeing and sort out the problems of the common currency themselves. For starters they need to tell the IMF they aren’t needed. The EU is a wealthy region and in no need of IMF loans! If Greece, or anywhere else, need finance then it really should be no problem at all.

    But the mentality of the Germans is that it is a big problem. I’m not sure about the French. They don’t seem to be saying much in public. Maybe they’ll be more enlightened. I hope so. Someone will have to be otherwise the EU will have no future at all.

    1. You seem to be substituting German bashing for Greece bashing. But I have to admit that I don’t really disagree. The Germans have learnt a little – about governments bailing out banks for example – but not nearly enough. I’m more optimistic about the French, mainly from a review in the Economist about the Franco-German clashes over running the Euro. But I do sympathise with German frustration with some EU countries that refuse to carry out substantive reforms to their economies.

      And yes, I think the EU should adopt some form of resolution mechanism for renegotiating government debt, not unlike the US one, which currently Puerto Rico is being allowed to use (at least I think that was on track, though it requires Congress to pass a law to enable it). Puerto Rico’s case bears some ressemblance to Greece’s. The IMF was involved not because of the money, but because it was thought that the EU institutions lacked the clout, experience and credibility, whereas the IMF have a lot of form on resolving this sort of thing. They eventually came to suggest that Greek debt should be written off – no doubt much to the annoyance of the Germans, for whom this seems to be a red line.

      The Greek crisis is quite different to Spain, Ireland, Portugal or Cyprus. In these it was the domestic banking systems that brought their countries low, while the budget balances were quite well managed. In Greece is was rotten government management – where the social contract seems to be worthless state jobs and generous pensions for the left, and rampant tax evasion for the right. Little progress seems to have been made on the latter, I hear, in spite of an allegedly left-wing government. It’s much easier to blame somebody else and do nothing, I suppose. I’m afraid I can’t quite get the Greek bashing out of my system – but most ordinary Greeks are hard-working and blameless. Which makes the whole thing really difficult as it they who are paying the price.

      Greece

  3. I’m not sure the Greek crisis was really that different.

    In the eurozone, when everything is going well, Government revenues are high, they have more to spend and they feel that borrowing a bit extra isn’t going to cost that much. The size of the common currency zone protects them from inflation. They don’t have to bother about exchange rates. When things are going badly their revenue drops and no -one wants to lend them any extra except at high interest rates – which they don’t control.

    When an economy is overheating the Government, in a sovereign currency issuing government, should spend less/tax more and maybe put up interest rates to cool things down. When it is overcooled it should do the opposite. But there’s no real incentive for any individual government, especially a small country government, in the EZ to want to cool anything down and when the economy needs warming up they don’t have the ability because they aren’t in control of the currency.

    Now I’m not saying that there aren’t problems of tax evasion in Greece. It could well be that they are worse than in say Spain, Portugal and Ireland but when all four countries have similar problems after the GFC, perhaps we should think about treating them as separate problems rather than one being the cause of the other.

    1. Actually a rather good explanation of why the Germans are so keen on the Stability and Growth Pact – something I’ve been rather sceptical of. But its objective is damage limitation rather than efficient macroeconomic management – and I think you are right that fiscal policy should play a much bigger role in this. I don’t think that the record of Ireland and Spain was so irresponsible on fiscal policy though (especially Spain) – the scale of the capital movements into their banking system overwhelmed them. But it was free movement of capital that did that – something similar happened in the UK and Iceland. The designers of the Euro hadn’t understood that risk at all. The banking union has changed the picture now.

      Personally I think the differences between the four initial Eurozone bailouts are as revealing as the similarities. The most important similarity was that they all needed bailouts by other zone members – and the mechanisms to do so were woefully short.

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