David Cameron is caught in an impossible conundrum. What he says he wants to happen in the eurozone is not what he must really want in his heart of hearts. Nor can he think it is sustainable. Yet a move to fiscal, political and banking union has the best chance, in the short to medium term, of staving off the economic collapse that would almost certainly bring defeat for the Tories at the next election.
Conversely, a break-up of the euro fits far better with Conservative views on national sovereignty and the undesirability of creating a United States of Europe. And – after the initial trauma – it would give the member states greater long-term economic and political stability. But the process of getting there would be nearly as painful for Britain as for the rest of the eurozone, which would make the 2015 election almost unwinnable.
No wonder the Prime Minister looks as if he is talking out of the side of his mouth when he urges the eurozone to integrate further. The idea couldn't be more foreign to him. But he is terrified of a eurozone failure dragging Britain down with it. And he is equally unwilling to advocate break-up for fear of being blamed by the rest of the eurozone for precipitating it.
So he is watching aghast as events outside his control threaten his hold on power. He can't control the decisions eurozone leaders take, let alone the decisions of their voters. He can do all he can to try to stimulate growth in the British economy, but it could all be reversed by mayhem in the eurozone. And he can try to renegotiate Britain's position in the EU as part of a new treaty, but again he can't control the outcome of those negotiations.
He could, however, be doing more. Cameron has the advantage that this country is remarkably united – more so than it has been for decades – in its attitude to Europe. Nobody is now openly advocating British participation in a more integrated EU. No one here, unlike in Germany, says the answer to our problems is more Europe. Some may be happy to let the eurozone get on with becoming one country, while others fear it, but we all – apart from Peter Mandelson – agree that we don't want to join it.
The only question that now divides British politicians and voters is whether we would be better off out of the EU altogether. That's not a question that can be answered until it becomes clear what the inner core of the EU will look like, and what relation the outer rim will have with it.
Last week, David Owen, a former Labour Foreign Secretary, set out his proposal for a closely integrated inner European Union and a more free-floating outer European Community, whose members would be in the single market, but not the eurozone union. It is a vision that should be attractive to all but the most Eurosceptic Conservatives, as long as the voting mechanisms can be designed so that the inner EU bloc isn't able always to outvote the EU periphery.
But why are the interesting ideas on the future of the EU coming from Lord Owen and not from Cameron? The Prime Minister seems happy to comment on what the inner core should be doing, when we are not even a member of it, but has nothing new to say on our part of the EU. Britain is the biggest, and potentially the most influential, of the non-euro members; it should be taking a lead.
For as Cameron discovered last December, it's no use going into a treaty negotiation with demands for new legal safeguards unless you have softened up your negotiating partners first and built alliances with countries that have a common interest. If he is to have the faintest chance of, say, repatriating powers on fisheries or employment regulation, he needs first to set out a good argument on why it is time to reassess the accumulation of powers in Brussels, and then to find allies that are fed up with EU regulations in other areas and might want to repatriate them.
Having done all that diplomatic legwork, he can then explain to his counterparts that any new treaty will have to be approved by British voters in a referendum. That will concentrate minds around the Council of Ministers' table. And, if absolutely necessary, he can remind them that he has a veto and he's not afraid to use it.
For it's becoming increasingly obvious that Cameron will have to offer voters a referendum on the EU, even if the new treaty does not involve a significant transfer of power to Brussels. Naked politics demand it: Conservative members are defecting to Ukip in droves and the Tories will surely have to promise a referendum in time for the 2014 European elections. But it is also obvious to voters of all parties that this is the right thing to do when the shape of the EU is changing so dramatically.
Ed Miliband has hinted that a referendum might be in Labour's next manifesto, and his appointment of the Eurosceptic Jon Cruddas to head his policy review makes that more likely. Nick Clegg has often promised a referendum in the past, and would find it hard to wriggle out now.
The referendum would not strictly be an in/out one, but a poll on any proposed new treaty. If this is a treaty which keeps the UK well away from more EU integration, protects us from being outvoted and reduces regulation in a few key areas, then the British people will probably support it, albeit with little enthusiasm. But if Cameron fails to secure strong-enough safeguards, he will suffer a humiliating defeat, which could presage our leaving the EU.
So, as ever in Europe, a British Prime Minister's fate is at least partly in the hands of others. If the eurozone breaks up, Cameron will have to deal with the bloody consequences. If it tries to become one country, he will have to persuade its members to cut us some slack. Either way, though, he needs to set out a vision for a new Europe and then do some serious diplomacy if he is to have any chance of influencing the result.Reuse content