Let there be no doubt: the fact that the UK has been forced to veto a proposed European treaty is a diplomatic defeat, not a success, both for the UK and the rest of Europe.
But it is hard to see what alternatives David Cameron had. The pass was originally sold by Gordon Brown, who in return for allowing his Labour party crony, Cathy Ashton, to be given the largely symbolic post of EU Foreign Policy Representative, let the somewhat unsympathetic French politician, Michel Barnier, become the crucial EU Commissioner in charge of regulating financial services. Since then it has been one provocation after another. The three most serious are: the proposal being pushed by the ECB to move the trading in euro based derivatives which have typically been traded in London until now to the Eurozone; the proposal to ban the short selling of government debt; and the proposal for a financial transactions tax which would have been disproportionately paid by the City of London.
With the EU not only ceasing to try to protect the City of London, which for all its failings remains one of the UK’s vital national interests, but actually trying deliberately to undermine it, it was never going to be easy for the UK to have a comfortable relationship with the other EU Member States.
I suspect that David Cameron will pause for reflection (and to catch up on his sleep). But the rest of us will have to think about whether General De Gaulle was right after all that the cultural differences in thinking between the UK and the Continent are so vast that it is difficult for the UK to be an EU Member. The troubles of the Eurozone are blamed in much of Continental Europe on the financial markets and so the City of London is seen as the enemy. Obviously most British analysts see it differently – the attempt to force a single currency on a zone that is not suited for it was bound to create difficulties which have now presented themselves in a lack of competitiveness, property booms and busts, the disappearance of growth and the emergence of unrepayable deficits.
For the UK to go down the route of renegotiation with possible withdrawal from the EU will probably break the Coalition, though one suspects that in any subsequent election the Tories would be winners. It is rarely pointed out by commentators that the single issue party UKIP is now neck and neck in the opinion polls with the Lib Dems and in any election fought on European renegotiation their votes would probably go Tory.
The UK leaving the EU would not be a great result for the rest of the EU, however blithely they may react at present. It will reinforce the message which I have been picking up in my travels in the Middle East and Far East over the past week that Europe is a rapidly fading star. They see Europeans as condemned by excess expectations to live well beyond their now shrunken means.
But it will reinforce the message that the UK is also in a very difficult situation. We are also desperately uncompetitive and equally living beyond our means. If we are to go it alone, we will need to change our economic policy so that every aspect is pro-growth, with lower top rates of taxes, Irish Corporation tax, easier planning permissions, better education, lower welfare payments and a value of sterling that is as competitive as we can make it without boosting inflation excessively. President Sarkozy was not entirely joking when he pointed out that at present rates of tax it would make economic sense for many French people living in London to return to France.
I am reminded of the day in August 1965 when Singapore got thrown out of Malaysia. Lee Kuan Yew had to devise a new strategy for going it alone. And while the authoritarian aspects of his government are neither desirable nor appropriate for a country like the UK, his approach to economic policy has a lot to be said for it. Perhaps in 50 years’ time, 9 December 2011 will be celebrated as the UK’s equivalent of 4 July or Bastille Day. But for that to happen, the whole nation will have to detune its expectations and be prepared to work harder for less immediate reward.
