David Cameron and George Osborne refine their EU referendum lines

Inside Westminster: The PM and Chancellor believe the current phoney war involves two camps preaching to the converted

Andrew Grice
Friday 06 November 2015 17:39
n the next few days, Mr Cameron will
set out the areas in which he seeks reform
n the next few days, Mr Cameron will set out the areas in which he seeks reform

Over a dinner in Berlin on Monday lasting more than two hours, the deal that might just persuade the British public to stay in the European Union took shape. Wolfgang Schauble, the German Finance Minister, invited George Osborne for a tete a tete at his favourite Italian restaurant to discuss the grand bargain at the heart of David Cameron’s EU renegotiation.

In return for Britain allowing the 19 eurozone countries to integrate further, the non-euro countries would win safeguards to prevent the 19 ganging up on them on EU-wide matters. It sounds dry, but a “two-speed Europe” is very important. The concept has been talked about for years, and we already have a “multi-speed” EU. The crucial difference is that a “two-speed Europe” would now be written into EU law for the first time. Member states have been wary of setting it in stone because it implies that those in the slow lane will remain in the second division forever, with a permanent loss of influence.

The following day, Mr Osborne told German business leaders that the deal would be: “You get a eurozone that works better; we get a guarantee that the eurozone’s decisions and costs are not imposed on us.” He was delighted when Angela Merkel, the German Chancellor, told the same conference: “The Europe of today is no longer of one speed.”

Ms Merkel’s good working relationship with David Cameron is well known, but the Osborne-Schauble partnership could prove important in nailing down the detail. It could become even more important if, as some in her own Christian Democrat party fear, Ms Merkel is forced out by the public backlash against her open door approach to the migration crisis. Although that looks unlikely, Mr Schauble could be drafted in to lead the country until its 2017 election.

The bargain would give Mr Cameron something to “sell” to eurozone countries who want to integrate to prevent a re-run of the Greek debt crisis – notably France, which is much less inclined than Germany to grant the UK any special favours.

In the next few days, Mr Cameron will set out the areas in which he seeks reform, rather than the fine print of his every demand as Eurosceptics crave (so that they can declare that he has failed when, inevitably, he does not secure all of them). It will come in a letter to Donald Tusk, President of the European Council – the 28 EU leaders, who will discuss “the British problem” at their summit next month. The Prime Minister had hoped to get a deal by then but it looks increasingly unlikely. Although Mr Osborne’s visit to Berlin showed that progress is being made, EU leaders have understandably been focused on the refugee crisis. So the talks are likely to continue into next year. “It looks like a long haul,” one minister admitted.

In Berlin, the Chancellor tried out some lines ahead the referendum on the UK’s new membership terms. Remaining part of a reformed EU would give Britain “the best of both worlds”, he argued. Membership would be good for “people’s jobs and people’s wallets”, without “the burdens of the eurozone.” We will hear a lot about “the best of both worlds”.

Yet how much clout would Britain really enjoy in an outer tier? Doubts will be raised in a well-timed book this month by Roger Liddle, a former Downing Street adviser to Tony Blair and a European Commission official. Although he is a committed Europhile who wanted Mr Blair to take us into the euro, The Risk of Brexit: The Politics of a Referendum is a sober analysis rather than starry-eyed propaganda.

“An informal two-tier Europe is what Britain has in practice opted for by its self-exclusion from the euro,” says the book to be published by the Policy Network think tank. “This may be for good reasons, but there are limits to how much, in reality, Britain can secure the benefits of being both an insider and outsider at one and the same time...Britain is raising large issues but in its renegotiation is likely to achieve small results beyond strengthened guarantees against non-discrimination.”

Lord Liddle warns that Mr Cameron is unlikely to enjoy a “game, set and match” moment, as John Major could claim in 1991 when he secured opt-outs from the single currency and social chapter in the Maastricht Treaty. The book advises Mr Cameron to copy Harold Wilson’s 1975 EU renegotiation, by admitting he has not achieved everything he wanted but insisting he has won enough to recommend continued membership.

Mr Cameron and Mr Osborne believe the current phoney war is between two camps – those who would stay in at any cost and those who would come out even if Britain secured all its demands—preaching mainly to the converted. The two men judge that the referendum will be won or lost among the majority in the middle who have no love for the EU but do not put it at the top of their list of concerns, and who will make up their minds when they see Britain’s new deal.

True enough, but I suspect Mr Cameron will still have his work cut out to persuade this crucial group to vote to remain in the EU. The danger of the grand bargain is that it might look like a dressed up status quo rather than real reform with tangible gains for Britain. An opt-out from “ever closer union”, an “emergency brake” or safeguards for the City of London would not exactly get them cheering in the Dog and Duck.

Although such issues matter, they are not on the TV news bulletins every night, and the eurozone’s troubles have eased, for now at least. What is on the telly is the migration crisis. And that is why Mr Cameron will need to win something to reassure the public about EU migration in order to win his referendum. It will be the toughest nut to crack in his renegotiation.

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