Britain's negotiating hand in Europe has never been as strong before
Events are moving very fast in Europe, overtaking the debate in Britain
By Ambrose Evans-Pritchard
9:55PM GMT 11 Dec 2013
The case for British exit from the EU is diminishing. It is no longer self-evident that this country must withdraw from the EU Treaty structures to ensure self-rule and to safeguard our democracy.
Germany's fateful decision to side with China and Russia against France (and the UK, Italy, and Spain) over Libya in 2011 - even after the Arab League had called for military action - was an inflexion point in EU affairs. Paris was shocked, for the diplomatic manouvering showed how little Berlin really care about a joint EU foreign policy - whatever it claimed - and how little it valued France itself. François Heisbourg, head of the International Institute for Strategic Studies, said Berlin had walked away from an ally trying to "stop another Srebrenica massacre". It is no surprise that the Franco-German military brigade launched with such fanfare in 1989 is to be disbanded on French orders.
My point is not whether the Libyan war was right or wrong (the aftermath is clearly a colossal mess), nor to suggest that Germany should have sent in forces (nobody expected that). My point is that it had profound effects on internal EU loyalties. The episode was repeated over Mali, when Germany refused airlift support. France and Britain worked in tandem as close allies in both theatres, as they have in spirit over Syria.
Prof Heisbourg, a pro-European, has since published La Fin du Rêve Européen (End of the European Dream) calling for the euro to be broken up to save the European Project. "The dream has become a nightmare. We must face the reality that the EU itself is now threatened by the euro," he said.
He proposes an orderly return to national currencies - "putting the euro to sleep" - arguing that everything changed when French and Dutch voters rejected the EU Constitution in 2005. It was clear from then on that there could be no popular support in any of the major EMU states for the sort of the fiscal union or European government required to make the euro work.
It looked for a while as if the euro crisis would force EU leaders to create a superstate machinery, though that would be to compound the folly. "You cannot create a federation to save a currency. Money has to be at the service of the political structure, not the other way around," he says.
Yet the great leap forward has not happened. The German elections have changed nothing. There are no eurobonds, no debt redemption funds. The EMU banking union is eyewash. There is almost no sharing of real risk. Sovereign states are still on the hook if their banks go bust, leaving them prone to the same vicious circle that threatened EMU implosion in July 2012.
The Dutch and French "No" vote in 2005 was indeed the watershed, though the elites tried to ignore the result and force through the Lisbon Treaty without popular votes by executive Putsch. Our own Gordon Brown refused to sign the treaty in public with the others, retreating to a private room.
Yet in reality, "Project triumphalism" peaked much earlier, a decade ago when the EU ultras ran amok, pushing for an EU army, intelligence service, diplomatic corps, justice department and supreme court, all spearheaded by monetary union. This was an assault on the nation state as the organising foundation of our democracies.
Since those were more or less the same the five years that I was the Telegraph's Europe correspondent in Brussels, it caused me to develop a visceral mistrust of those in charge. No Burkean can stand for such revolutionary attempts. Yet the danger has subsided. Perhaps naively, or prematurely, I am broadly persuaded that this atttack has failed. The threat has not disappeared entirely, but it looks dated now, a 20th century relic.
France is the pivotal country as the drama unfolds. All signs are that the Socialist leadership is deeply alarmed by the prospect of a perma-slump under a fixed-exchange system that offers no hope of cutting unemployment. They know that the Socialist Party itself could be destroyed, going the way of Greece's PASOK if it accepts its fate passively. Huw Pill from Goldman Sachs says France will have to endure a 40pc decline in relative living standards against Germany to rectify imbalances within EMU, a task that becomes much harder as the eurozone flirts with deflation. If he is right, I cannot see how Franco-German rupture can be avoided.
This is playing into the hands of Marine Le Pen's Front National, now leading the polls with calls for a return to the franc and economic self-rule, and pulling votes from Socialist working class bastions. A Polling Vox survey found that 42pc of French voters are willing to consider backing the Front National. She has shaken off the stigma.
Jacques Attali, a Socialist luminary and former head of the European Bank for Reconstruction and Development, lashed out at Berlin last week, claiming that contractionary EMU policies imposed by Germany were pushing France over the brink. He explicitly compared the state of French society with Germany in 1933 when the National Socialists took power.
This is hyperbole. A new book by Senator Jean-Pierre Chevènement, a former French presidential candidate, is closer to the truth when he compares the mood in France with the deflation years of Pierre Laval in 1934 and 1935 before the Gold Standard blew up, warning that unless Germany changes course, southern Europe will be forced to pull out of the euro to prevent their industries being hollowed out irreversibly.
The dam is bursting in Italy as well, a eurosceptic country these days, its people all too aware that they are trapped in a slump with an over-valued currency, youth unemployment of 41pc and a debt to GDP ratio that has jumped from 119pc of GDP to 133pc in three years despite harsh austerity and the biggest primary surplus in the developed world.
"It is a failed policy," said Romano Prodi, the former head of the European Commission and the man who launched the euro. He is now losing faith in the EU as a treaty organisation of sovereign peers. "Today there is only one country and only one in command: Germany. France, Italy, and Spain should together pound their fists on the table, but they delude themselves that they can go it alone," he said.
The "Five Star Movement of comedian Beppe Grillo has not gone away. It is still running at 24pc in the polls, and calling for a referendum on the euro. It is likely to join Britain's UKIP, the Front National, Wilder's Freedom Party and a host of radical groups from Austria, Scandinavia and the Balkans in sweeping the European Parliament's elections next May.
Italy's premier Enrico Letta fears a "disaster" as the firebrands seize the stage, and speak for the new Europe. Some would retort that it looks like a splendid outcome, a thundering slap in the face for elites who thought they had a teleological mandate to run ahead of their democracies.
It is in the midst of this maelstrom that David Cameron has threatened to pull Britain out of the EU. The first reaction of the old guard was to scoff at British suicide. Spain's foreign minister Jose Garcia-Margallo said the UK economy would be "reduced to rubble".
But as calmer heads prevail, the greater fear is that Europe's ideological edifice may be reduced to rubble. Germany's Wolfgang Schauble said a British exit would be a "catastrophe", asking how it would be possible to convince Asian leaders that the EU has a future when a key player is pulling out in frustration.
Brexit would play havoc with the EU's internal chemistry. The three-legged stool would topple over on just two legs. German hegemony would become overwhelming, a nightmare for German leaders who wants no such thing. France's loss of parity would become untenable, forcing it into a Latin bloc alliance that would ultimately split Europe in two.
Some argue that Britain would be shut out of the single market, or forced into limbo for years. Quite why that should be so when Tunisia has tariff-free access to the EU is rarely explained. I notice that nobody raises the identical point about Scotland, which would be in the much same position at first since it has to leave the EU before reapplying as a new state.
But of course, everybody knows that the EU would in fact arrange matters so as to ensure that Scotland never missed a beat. Clever lawyers in the Commission's legal services would find a way, as they always do.
If the argument is that Europe would retaliate against the UK alone, it is hardly plausible given that Britain is the eurozone's biggest single market and the biggest net importer. Nor is it compelling as a campaign argument within Britain since it implicitly sells the EU case on the basis of fear alone, suggesting that we are locked into a bear hug with thugs, like poor Ukraine with Russia's Vladimir Putin. There is no mileage in such argument. Nor is it true.
Unless the events were grotesquely mishandled - always possible - France and Germany would bend over backwards to find a workable formula, keen to avert trade damage, and if possible to maintain the fiction that Britain that remains an EU member whatever the actual status.
Britain's hand in Europe has never been as strong as it is right now. This should not be abused. But it can be celebrated gracefully. We may be moving into a Europe of "multiple geometry" where integrationist elites no longer hold the whip hand, different groups of states cohere as they see fit, power flows both ways, and perhaps even where can take charge our own fisheries and farm.
If that is so, it is surely an EU we can live with. I have never felt as cheerful before about our role in Europe.