Notebook: Imperfect is the enemy of the good

Rejoining the EU, European elections, and fiscal rules

Headlined “Britain won’t rejoin the EU for decades — if ever” (10 December), a Financial Times column by Martin Wolf successfully click-baited the Remain/Rejoin movement’s intellectual wing. On Substack alone, David Aaronovitch and Tom Hayes gave it a parsing – one more sympathetically than the other.

I agree with Wolf that a bid to rejoin the EU would consume an entire parliamentary term, re-enflame the 2016-19 culture war and that the terms of return (lost opt-outs and budgetary rebates) would be politically onerous. I don’t know about “if ever” but a British return to the EU isn’t coming for a long, long time and I’m not even sure it should.

If the UK rejoined the European Economic Area (EEA) and formed a customs union with the EU, the self-inflicted economic damage would be repaired. Inside the EEA but outside the EU, the UK would miss out on the common policies for agriculture (CAP), fisheries (CFP), and foreign, security, justice and home affairs. It would have no MEPs, no European Commissioner, and no nationals on the staff of the union’s institutions. That may sound to some like a bad deal but the CAP and CFP have never been popular in the UK and who wants MEPs? Also, just because people are fellow countrymen doesn’t mean they represent your interests – check out the diversion of high-speed rail funding earmarked for northern England back into London. As the micro-stories in Peter Foster’s What Went Wrong With Brexit spell out, it’s the loss of free movement of goods, services, capital, and people that hurts. Of the rest, some are gravy and some are not even that.

What about the loss of political influence in Europe at a historically crucial moment? People who ask that are fetishising the EU’s common policies and are thinking in pre-2022 terms. Even under Vote Leave governments, the British have been deeply involved in joint (and tangible) responses to the war in Ukraine. The next British government won’t rejoin the EEA but it will formalise this common front and is pushing at an open door in its argument for a “security union” to stack up against the banking and capital-markets unions.

What about the EEA’s “democratic deficit”? This should have been put right years ago; Norway and Iceland should be able to negotiate and vote on single-market legislation. With an EEA member the size of the UK and with such a developed financial sector, this change becomes essential. Fortunately, the Fondation Robert Schuman came up with a solution eight years ago. Through an amendment to the EEA agreement, the EEA council (comprising EU and non-EU states) instead of the EU’s council of ministers would become the competent authority for negotiating and approving directives and regulations governing the internal market.

None of this will be easy but it will be a lot easier than rejoining the EU. The much bigger point is that - however it decides to return to Europe’s economic and political architecture - the UK will be rejoining something profoundly different to what it left. And I don’t mean the NextGenerationEU programme Wolf cites; that’s just a bigger version of UK-era borrowing schemes. I’m talking about the war, the institutional overhaul needed to accommodate Ukraine, the shifting balance of power and influence in Europe, and the revolution in European defence and strategic autonomy. By the time the UK is ready for a fully-fledged Rejoin push, it may well find that an outer circle inside the single market and a security union suits it best.

Made in Strasbourg

“I think the European elections could be more dangerous than the American one”. So said Josep Borrell, the EU’s high representative for foreign and security policy (21 December), and I can’t find enough face-palm emojis.

Next November, a minority of Americans may re-elect an isolationist, dictator-loving, anti-Ukrainian president with an entourage committed to institutional destruction. Next June, as they always do, voters will use the European Parliament elections to support far-right parties in France, the Netherlands, Austria and Sweden. This time, they may do the same in Germany, Portugal, Spain, and – if they can find a suitable vehicle – Ireland. There will be the usual headlines about a fascist wave and, soon after, the establishment centre-left and centre-right parties will restore their majority in a parliament that has little to do except delay single-market legislation.

Apart from showing a typical lack of perspective, Borrell is missing the point about Europe’s parliament. Incubating extremist parties is one of its unintended functions. Electorates use them as protest votes in elections that don’t matter but this provides them funding – legal and shady – plus a four-year platform to beam themselves back into their domestic politics. That’s the danger and has been for more than 20 years.

A simple game, complicated by idiots

By the way, I’ve always liked this quote (“football is a simple game, complicated by idiots”) from Bill Shankly, Liverpool’s legendary manager (1959–74). But, like almost any famous Churchill quip, it turns out to be imaginary. The true quote is: “Football is a simple game based on the giving and taking of passes, of controlling the ball and of making yourself available to receive a pass. It is terribly simple”.

For FinTwits, Olivier Blanchard is a master of the tightly written thread. His latest (21 December) on the fiscal-rule camel created by the euro area’s finance ministers is a perfect example. Created in the 1990s to protect Germany against free riders in the euro project, the fiscal rules quickly became an unworkable paper mountain. The need for a post-pandemic reform allowed the European Commission to start from “first principles and achieve[…] an intellectual revolution,” as Blanchard says.

Agreed, although I’d go back one step to the pre-pandemic 2018 proposal from the European Fiscal Board. This stripped the rules down to one operational target governments can see and control – nationally financed public spending minus discretionary revenue measures and the costs of debt interest and cyclical unemployment – and a longer-term debt/GDP target.

To get there, the commission would carry out tailored debt sustainability analyses for each euro state. But, because the German government hasn’t trusted the commission to play the role of referee for 20 years, it insisted on year-by-year debt and primary-deficit targets. Berlin won but, like the first set of targets set in the 1990s and the second lot imposed in 2012, these will be missed and the commission will spend years writing reports explaining the special circumstances to justify the misses. As Blanchard tweets: "I am no gambler, but I am willing to bet this will not happen. Almost surely, after a few years ... the rules will prove unworkable. They can and probably will be adjusted, but it would have been better to get them right from the start".

Pick of the pods

In contrast to last week’s network-quality Tortoise Media product, I bring you two low-tech but essential podcasts for understanding the war in Ukraine.

Mark Galeotti takes pride in the “reassuringly low production values” of In Moscow's Shadows – an invaluable guide to Kremlinology, what passes for Russian strategy, Putin the man, and the jockeying to replace him. Episodes 114, 117, and 120 were especially enlightening on elite manoeuvres.

While Galeotti gives the view from the top, Ukraine-born American think-tanker Michael Kofman and his straight men provide granular tactical analysis at War on the Rocks often based on field trips to the front line. His best stuff is saved for The Russia Contingency, which requires a subscription ($150 at the moment but look out for offers; I got mine for $50). The recent three-part Post-Mortem on Ukraine’s Offensive with Rob Lee and Dara Massicot and the two-part Fires and Observation with Jack Watling were outstanding. For a freebie taster, you can hear Kofman from mid-November on Brian Whitmore’s The Power Vertical podcast.