How to reform the EU? Win over François Hollande and Angela Merkel

Just the two of us. EPA/Soeren Stache

EU reform is proceeding apace – but it seems David Cameron didn’t get the memo. The reform deal suddenly doing the rounds in Brussels is a Franco-German package to foster tighter co-operation within the eurozone, and Britain’s fingerprints are noticeably absent from it.

The significance of the proposed changes is open to question as what is being circulated consists mostly of discussion papers that will form the basis for an EU summit in Latvia on June 25. Nevertheless, this development perfectly illustrates the way the EU works today – and it bodes ill for David Cameron’s attempts to renegotiate the terms of membership in Britain’s favour.

In the EU, not all roads lead to Brussels. Regardless of party differences, governments in Berlin and Paris remain wedded not just to closer union but to actually determining in tandem what course this should take. Wining and dining the president of the European Commission at Chequers is certainly a good idea, far better than fighting a doomed rear-guard action to oppose his appointment. But if Cameron wants to set the seal on real EU reform, a Franco-German agreement will be necessary.

State within a state

Another lesson from this episode is that Britain’s concerns about the eurozone being a kind of “state within a state” are probably warranted.

The primary factor driving EU reform, at least as far as France and Germany are concerned, is the need to stabilise the eurozone and enhance macro-economic co-ordination inside it. Being outside the club, the UK’s priorities are evidently somewhat different, and the EU needs to accommodate both euro “ins” and euro “outs”.

Here, the UK’s allies are actually the European Commission and (to a lesser degree) the European Parliament, both of which have been cut adrift from government-led reforms in the past few years.

A deal done? EPA/Julien Warnand

Above all, Cameron and his advisers should be extremely wary of being outmanoeuvred. Just because the UK is trying to do its own deal does not mean that other countries ignore the question of EU reform.

The biggest problem, though is that UK leadership is weak, and its political capital in the EU badly depleted.

Heavy price

This deficiency was clearly in evidence back in 2011 during the European Council’s negotiations over the so-called Fiscal Compact link. Under the stewardship of Angela Merkel (and with the acquiescence of then-French president Nicolas Sarkozy), the council adopted a new treaty for shoring up the euro through an inter-governmental procedure separate from EU law.

This departure from convention was driven by the need to bypass UK objections. Cameron had unsuccessfully tried to drive a hard bargain, making the UK’s acceptance of treaty changes dependent on re-working of the Working Time Directive and on the re-introduction of unanimous voting for financial regulation.

So ahead of what will be a tough attempt at renegotiation, the UK government now has a much better grasp of the terrain. Treaty reform is not necessarily off the table; as the think tank Open Europe has argued, when there is consensus between the French and German leaders reform can in fact be swift. But being excluded from the Franco-German core of today’s EU carries a heavy price – one that might even result in a Brexit if Cameron can’t deliver on his promises.